April 18, 2012
Help Is At Hand For Property Virgins
Practical and financial implications can be daunting, but an organized approach takes the sting out of that first purchase
Buying a home is a big decision — and buying your first home can be downright daunting. It’s easy to get swept up in the excitement of it all, and even easier to lose sight of why you’re jumping into the real estate game in the first place. Chances are you’ve got MLS bookmarked on the iPad, you’ve popped into more than a few open houses, and spent many weekends checking out the latest new home developments.
But whether you start your search online or peruse your favourite neighbourhoods in search of For Sale signs, it is important to stay focused. This purchase, as you’ve heard many times, will likely be your single largest investment. Fortunately, there are many great resources for homebuyers, including a 38-page guide from the Homeowner Protection Office entitled Buying a Home in British Columbia: A Consumer Protection Guide. It’s designed to help steer B.C. residents through the purchase of their next home. You can find the guide, and more valuable information, at www.hpo.bc.ca
The home-buying process for first-time buyers can be so confusing that it’s even spawned an HGTV show, called Property Virgins, which aims to help newbies understand the process. You’ll also find practical advice on HGTV.ca., where writer Claire Sibonney has put together the following list to help with your house hunt:
Do you dream of a place to really call your own? Before you start picking out colour schemes and kitchen cabinets, there are many practical factors to consider first.
Make a wish list
Before shopping for a home, you need to determine your needs and wants. Develop a predetermined shopping list of features you are willing to compromise on and ones you aren’t. To properly prepare a home-buying strategy, you must examine your lifestyle and budgeting priorities. The decision between a condo or house, detached or semi-detached could have just as much to do with personal preference as it does with expense. Once you have figured out exactly what you want in a new home, your next important step is to ensure that you are financially qualified to make such a substantial purchase.
Particularly for a first-time homebuyer, it’s absolutely critical to find out what kind of mortgage you can afford, even before you start looking. Too often, arranging a mortgage is left to the very end, forcing borrowers to scramble for financing.
The down payment
The first question to ask yourself is how much of a down payment can you afford. Depending on the interest rate environment, you may be able to spend a lot more (or less) than you imagined. But it’s vital to remember what you have saved isn’t necessarily what you want to use, as there are extra costs that come in to play as you go through the entire purchase, including emergency funding. A conventional mortgage down payment is 20 per cent of the value of the home.
After you’ve considered how much you can afford for a down payment, the next step is contacting a bank or mortgage broker about getting qualified. Based on personal information you provide such as your income, debt and assets, you can receive a pre-approved mortgage, including an interest rate commitment for a set length of time.
Don’t forget to work with the lender to find the right type of mortgage that suits your needs. You’d be surprised to discover what’s negotiable. Once you receive a pre-approved mortgage, you can confidently negotiate the purchase of a home. It’s a no-cost, no-obligation deal that lets you know before you go house hunting how much you can afford to buy based on how much you can afford to borrow.
Finding the right agent
When looking for a home, one of the most important factors you’ll have to consider is location. Once you’ve determined a few options for where you want to live, the next step is finding the right real estate agent. Real estate agents are like matchmakers; bringing buyers, sellers and homes together. Agents must be on top of the market — in terms of sales, listings and house prices in the area. But most importantly, real estate agents need to make their clients feel at ease. To find a good agent, let the referrals speak for themselves. Ask friends and family to recommend agents they’ve dealt with.
Making an offer
A good real estate agent will also be an experienced negotiator, with an understanding of how flexible a certain seller will be. But before making an offer, do your research. Find out how long the property has been on the market. If it’s a new development, find out how much others have been selling for.
In many cases, a deposit is made and you may be advised to sign a “conditional” offer. When buyers and sellers strike a deal, loose ends often need tidying up before the buyer will proceed, such as financing or selling your existing home. For resale homes, you should never make the offer final without a proper home inspection, conducted by a licensed engineer to look for any major problems with the house that could end up costing you down the road.
Once these conditions are met, you should be prepared to make the offer “firm and binding.” If not, the deal is off and you get your deposit back.
Finding the right lawyer/notary
Don’t wait until after the deal is struck before choosing a lawyer/notary. Then you lose the valuable input he or she can provide scrutinizing the offer before you sign the deal. When looking for a lawyer/notary, make sure he or she is a real estate specialist. To find the right one, remember that quality and experience are the key, not just the price. Since a lawyer/notary’s role is part adviser and part confidant, a good rapport with him or her is a must. As with finding a good real estate agent, ask friends and family if they have anyone to recommend.
Closing the transaction
Unfortunately for first-time home buyers, closing costs are often an unwelcome surprise. Besides the basic purchase price, you will face a long list of expenses before taking possession of your new home: legal fees, land transfer tax, title insurance, disbursements, adjustments and insurance policies, to name a few. For a resale home, these “extras” can easily add two per cent on to the basic purchase price. For brand new homes, that figure can easily reach 2-1/2 per cent. The time to check out these charges is before the offer is signed, not afterward.
When it comes to buying a house in Metro Vancouver, where prices often leave first-time buyers struggling to get a foothold in the property market, it pays to get some expert advice. The Greater Vancouver Home Builders’ Association will hold its 18th Annual Seminar for First-Time Home Buyers next Tuesday, April 3 at the Bell Performing Arts Centre in Surrey, where housing experts — from bankers to lawyers — will discuss a range of topics, including information about B.C.’s recently announced $10,000 first-time new-home buyers’ bonus.
The seminar is free, but pre-registration is required. Visit www.gvhba.org for more information. Buying a home for the first time can be one of the most unnerving — yet thrilling — experiences of your life. But if you do your homework, you’ll be making the right move.