Buying Real Estate

By Team Michelle Yu

Congratulations! You have decided to purchase a home, or are thinking about buying one. You will realize that home ownership offers a number of benefits including building equity, saving for the future, and creating an environment for yourself or your family. When you own your own home, your hard-earned dollars contribute to your mortgage, not a landlord’s. The equity you earn is yours. Over time, your home will increase in value.

What are the differences of the current state of the market?

Before making an offer to purchase a home, establish whether the current market is a Buyer’s, Seller’s, or Balanced market. Team Michelle Yu is here to help you make an informed decision based on the current state of the market.

Seller’s Market:

A seller’s market is considered a “hot” market.  This type of market is created when demand is greater than supply—that is, when the number of buyers exceeds the number of homes on the market.  As a result, these homes usually sell very quickly, and there are often multiple offers.   As a buyer, you need to consider that many homes will sell above the asking price; in other words, you may have less room to negotiate, and may encounter competing offers.  Though most buyers want to get a home for the lowest price possible, reducing your offer could mean opening the door for another buyer instead. 

Buyer’s Market:

A buyer’s market is a slower market.  This type of market occurs when supply is greater than demand, the number of homes exceeding the number of buyers.  Properties are more likely to stay on the market for a longer period of time.  Fewer offers will come in, and with less frequency.  Prices may even decline during this period.  As a buyer, you will have more selection and flexibility in terms of negotiating toward a lower price.  Even if your initial offered price is too low, the seller will be more likely to come back with a counter-offer, so you can begin the process of negotiation.  

Balanced Market:

In a balanced market, supply equals demand, the number of homes on the market roughly equal to the number of buyers.  When a market is balanced there aren’t any concrete rules guiding whether you should make an offer at the higher end of your range, or the lower end. Prices will be stable, and homes will sell within a reasonable period of time. You will have a decent number of homes to choose from, and may encounter some competition for offers on the home of your choice, or none at all. 

What expenses should I expect when buying a home?

Budgeting for a new home includes many factors beyond mortgage instalments and the down payment. Let Team Michelle Yu help guide you through all the costs so you're prepared for closing day.

  • Purchase offer deposit.
  • Inspection by certified building inspector.
  • Appraisal fee: Your lending institution may request an appraisal of the property.  The cost of this appraisal is your responsibility.
  • Survey fee: If the home you’re purchasing is a resale (as opposed to a newly built home), your lending institution may request an updated property survey.  The cost for this survey will be your responsibility and will range from $700 to $1000.
  • Mortgage application at your lending institution.
  • 5% GST:  this fee applies to newly built homes only, or existing homes that have recently undergone extensive renovations.
  • Legal fees: A lawyer should be involved in every real estate transaction to review all paperwork.  Experience and rates offered by lawyers range quite a bit, so shop around before you hire.
  • Homeowner’s insurance: Your home will serve as security against your loan for your financial institution.  You will be required to buy insurance in an amount equal to or greater than the mortgage loan.
  • Land transfer (purchase) tax: This tax applies in any situation in which a property changes owners and can vary greatly.
  • Moving expenses.
  • Service charges: Any utilities you arrange for at your new home, such as cable or telephone, may come with an installation fee.
  • Interest adjustments.
  • Renovation of new home: In order to “make it their own,” many new homeowners like to paint or invest in other renovations prior to or upon moving in to their new home.  If this is your plan, budget accordingly.
  • Maintenance fees: If you are moving to a new condominium, you will likely be charged a monthly condo fee which covers the costs of common area maintenance.

What are some of the common mistakes I should avoid when buying a home?

You’ve been saving for awhile, weighing your options, looking around casually.  Now you’ve finally decided to do it—you’re ready to buy a house.  The process of buying a new home can be incredibly exciting, yet stressful, all at once.  Where do you start? Let Team Michelle Yu guide you through the entire process!

Use the following list as an initial guide to help you avoid the most common mistakes.

1. Searching for houses without getting pre-approved by a lender:

Do not mistake pre-approval by a lender with pre-qualification.   Pre-qualification, the first step toward being pre-approved, will point you in the right direction, giving you an idea of the price range of houses you can comfortably afford.  Pre-approval, however, means you become a cash buyer, making negotiations with the seller much easier. 

2. Allowing “first impressions” to overly influence your decision:

The first impression of a home has been cited as the single most influential factor guiding many purchasers’ choice to buy.  Make a conscious decision beforehand to examine a home as objectively as you can.  Don’t let the current owners’ style or lifestyle sway your judgment.  Beneath the bad décor or messy rooms, these homes may actually suit your needs and offer you a structurally sound base with which to work.  Likewise, don’t jump at a home simply because the walls are painted your favourite colour!  Make sure you thoroughly the investigate the structure beneath the paint before you come to any serious decisions. 

3. Failing to have the home inspected before you buy:

Buying a home is a major financial decision that is often made after having spent very little time on the property itself.  A home inspection performed by a competent company will help you enter the negotiation process with eyes wide open, offering you added reassurance that the choice you’re making is a sound one, or alerting you to underlying problems that could cost you significant money in both the short and long-run.  Your Realtor can suggest reputable home inspection companies for you to consider and will ensure the appropriate clause is entered into your contract.

4. Not knowing and understanding your rights and obligations as listed in the Offer to Purchase:

Make it a priority to know your rights and obligations inside and out.  A lack of understanding about your obligations may, at the very least, cause friction between yourself and the people with whom you are about to enter the contract.  Wrong assumptions, poorly written/ incomprehensible/ missing clauses, or a lack of awareness of how the clauses apply to the purchase, could also contribute to increased costs.  These problems may even lead to a void contract.  So, take the time to go through the contract with a fine-tooth comb, making use of the resources and knowledge offered by your Realtor and lawyer.  With their assistance, ensure you thoroughly understand every component of the contract, and are able to fulfill your contractual obligations.

5. Making an offer based on the asking price, not the market value:

Ask your Realtor for a current Comparative Market Analysis.  This will provide you with the information necessary to gauge the market value of a home, and will help you avoid over-paying.  What have other similar homes sold for in the area and how long were they on the market?  What is the difference between their asking and selling prices?  Is the home you’re looking at under-priced, over-priced, or fair value?  The seller receives a Comparative Market Analysis before deciding upon an asking price, so make sure you have all the same information at your fingertips.

6. Failing to familiarize yourself with the neighbourhood before buying:

Check out the neighbourhood you’re considering, and ask around.  What amenities does the area have to offer?  Are there schools, churches, parks, or grocery stores within reach?  Consider visiting schools in the area if you have children.  How will you be affected by a new commute to work?  Are there infrastructure projects in development?  All of these factors will influence the way you experience your new home, so ensure you’re well-acquainted with the surrounding area before purchasing.

7. Not looking for home insurance until you are about to move:

If you wait until the last minute, you’ll be rushed to find an insurance policy that’s the ideal fit for you.  Make sure you give yourself enough time to shop around in order to get the best deal.

8. Not recognizing different styles and strategies of negotiation:

Many buyers think that the way to negotiate their way to a fair price is by offering low.  However, in reality this strategy may actually result in the seller becoming more inflexible, polarizing negotiations. Employ the knowledge and skills of an experienced realtor.  S/he will know what strategies of negotiation will prove most effective for your particular situation.

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