14 Common Home-Buying Mistakes  

1.      Not knowing what you truly want or need - What are you looking for in house? A simple enough question, but the answer can be quite complex.  What neighbourhood suits you and your family's needs?  What size of home should you be looking for?  Often times, buyers get caught up in the emotion of a "dream home" without giving suitable consideration as to whether or not it will suit their purposes.  They may end up with something too big or too small or faced with a longer than desired commute to work daily.  Often they settle for a home that requires more repairs and attention than they had thought. Put your "wants and "needs" down on paper and use it as an effective yardstick with which to measure prospective homes.

2.      Letting your emotions affect reason. Buying a home is exciting, and often is an emotional decision. A realtor will help to remove the emotion from the negotiating process and provide you with balanced information and facts to help you make the right decisions.  A professional home inspection will ensure that your final decision is a well informed one.

3.      Failing to assess the market before making an offer.

Location, Location, Location. 

It is the most important factor to determine value of a home. Where the home is located is a big determiner in its value. Watch out for moving trends. The best advice is to buy a modest house in a more expensive neighborhood. This property is easier to resell. On the other hand the best house on the block may never repay the owner the money invested. 

Comparables also help determine the value of a home. Become very familiar with the selling prices of the homes in your area of interest. Or ask an agent for sales prices of comparable within a time frame. Other factors which effect price are conditions of the house, special financing available and general real estate market climate. 

Selling price is set by the operation of supply and demand and location. Remember, how much money the sellers have invested or how much they need to get out the home are their concerns, not yours. Before you make an offer to purchase, you should review the market value for similar homes in similarneighborhoods to ensure you do not overpay. Your agent should also explain recent trends in the differences between the asking and selling prices. This is the same information the seller uses when deciding on an asking price.

What price should you offer when you bid on a home? It is imperative that you know and understand the real estate market in the neighbourhood that you have chosen.  Is a seller's asking price too high, or would you be getting a good deal? If you do not go to the trouble of researching your market to fully understand what comparable homes are going for, placing an offer would be like bidding blind.  Without this valuable knowledge you may end up paying way to much for your purchase or let a bargain, slip through your fingers.

4.      Failing to use the services of an experienced realtor (optional). Some buyers avoid using a realtor falsely believing it costs them money. Some think they can negotiate a better deal directly with the seller or seller's agent. An experienced realtor can use their information network sources to select from a wider pool of houses (especially those just listed) and also use their experience from many successful negotiations for your benefit - at no charge to you! The buyer's agent can be paid out of the commission paid to the seller's agent by the seller.

5.      Not knowing who the agent represents. Buyers should understand for whom the agent helping with the house hunting is actually working. The agent may be representing the seller. If you are unsure, ask for clarification

6.      Failing to pre-qualify for financing before shopping. Pre-approval is fast, easy and free. When you have a pre-approved mortgage, you can shop for your home with a greater sense of freedom and security, knowing that you can your choice for a home.  Many people make the mistake of finding a dream home first, only to have that dream dashed when their financial institution turns them down for mortgage financing.  Whether you have pre-approval or not – you should ALWAYS make you offer to purchase conditional on financing.  This will protect you should the bank appraiser says that you paid too much for the home and the bank will not provide you will all the financing that you need.  If you require CMHC High Ratio Mortgage Insurance, a CMHC appraiser may indicate that certain repairs need to be done to the property before they will insure the deal. 

Knowing how much you can comfortably afford will ensure you are looking in the right price range and prevent later financial and emotional strain. If you got an interest rate guarantee, you are protected when rates fluctuate and know that your projected monthly payments do not suddenly jump.  Just because you pre-qualify for a certain size mortgage, doesn't necessarily mean that you should go out and buy a house requiring that amount of financing. (please see our article on mortgage considerations.

7.      Failing to recognize different negotiating styles and strategies. Many buyers think that the way to achieve a fair purchase price is by offering low. This strategy may polarize negotiations, lead to seller inflexibility, even a failed negotiation.

8.      Failing to use a competent home inspection company. Having a relative or friend check out your new purchase may lead to hard feelings later on- especially if they missed something important or expensive.  Buying a home is a major purchase often made with under half an hour looking at the home. An inspection can save you later surprises that may cost you thousands? Make certain that your choice is that of a qualified professional with an RHI (Registered Home Inspector) designation.

9.      Not knowing your rights and obligations in the Offer To Purchase. It is important to understand completely the terms of the Offer to Purchase. Wrong assumptions, poorly written or missing clauses can impact your purchase with increased costs or a void contract.

10.  Not making certain that title is clear.  Make sure very clearly on in the negotiation that you will own your free home free and clear by having a title search done or by purchasing title insurance.  Your solicitor will assist you in this process. The last thing you want to discover you're just about to close, is that there are encumbrances on the property such as tax liens, undisclosed owners, construction liens, easements, leases or the like.

11.  Not receiving a survey - As part of your offer to purchase, make sure you request an updated property survey from the current owner which clearly marks your boundaries. If the survey is not current, you may find that there are structural changes that are not shown (additions to the house, a new pool, a neighbours fence which is extending a boundary line, etc.).  If the survey is more than a few years old and the vendor will not cover the cost of obtaining a new one,  you will want to consider having them sign a "declaration" indicating that nothing on the old survey has altered – again your solicitor should be able to assist you. New surveys are costly and may run in excess of $900 depending on the size and location of the property. Vendor declarations for older surveys are often required by financial institutions prior to advancement of mortgage funds.

12.  Not discovering "undisclosed fix-ups".  Don't expect every seller to own up to every physical detail that will need to be attended to or to repairs that may have been made to the property. Both you and the seller are out to maximize your investment. Ensure that you conduct a thorough inspection of the home early in the process. If any substantial renovations are evident or disclosed, you will want to ensure that they were properly completed and that permits were obtained for their completion. Consider hiring an independent professional home inspector to objectively view the home inside and out, and make the final contract contingent upon this inspector's report. The amount you will pay for an accurate assessment of the home's condition will be minimal when you consider the cost and magnitude of your purchase. This inspector should be able to give you a report of any major defects that need to be repaired or replaced, and be able to discuss, health and safety issues and associated approximate costs for repairs.

13.  Not considering "hidden costs".  Make sure you identify and uncover all costs - large and small - far enough ahead of time. Do you have to make immediate purchases such as appliances, lawn mowers or furniture items? When a transaction closes, you will sometimes find fees for this or that sneaking through - fees such as loan disbursement charges, mortgage insurance, land transfer tax, underwriting fees, etc. Understand these in advance by having your lender project total charges for you in writing.  Also make a list of all additional costs and purchases that need to be addressed, prior to closing. ( Please see our article on this subject)

14.  Rushing the closing.  Take your time during this critical part of the process, and insist on seeing all paperwork the day before you sign. Make sure this documentation perfectly reflects your understanding of the transaction, and that nothing has been added or subtracted. Is the interest rate right? Is everything covered? If you rush this process on the day of closing, you may run into a last minute snag that you can't fix without compromising the terms of the deal, the financing, or even the sale itself.  Remember that you may only be able to pick up the keys to your new home – late in the afternoon of the day of closing, especially if the vendor is purchasing same day.  If you are selling a home yourself, it is a wise idea to avoid closing your purchase and sale the same day.  If you can afford the delay, it is always less stressful to purchase your new home a few days prior to the sale of your current property. This affords you the luxury of time for your cleanup of the new property (if necessary) and the moving of your belongings.  Your financial institution can provide a "demand loan" to tide you over until the proceeds of your current home sale (your equity) are available to be used towards the new purchase.  While this process may cost you a few days interest, it will save you considerable stress and anxiety in attempting to do it all in one day!

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