When you buy anything in a panic, you create lots of room for regret. Buy real estate in a panic and you may lose more than you gain.
Rumblings about interest rate increases, tougher mortgage qualification criteria and rising home prices may make buyers who act on emotion hit the panic button. Add the July 1 reality of new Harmonized Sales Tax (HST) in Harmonized Sales Tax (HST) in British Columbia and Ontario and the need for urgency is heightened for buyers who want their limited loonies to go into their real estate, not government coffers.
Here, our aim is to present the voice of reason, but expect media in all formats to fan the "gotta buy now or get shut out forever" flames in 2010. Local and regional economies may be far from out of the woods, but Canadians want to continue their recession-stifled love affair with home ownership. Buyers are ready to plunge in. Many are afraid that, if they don't act now, they may miss their real estate opportunity. This market pressure may cause some to act in haste and repent at leisure.
If you agree that this is a good, but challenging, year for you to buy, then, our point is: Be prepared to be a savvy buyer instead of an easy sell. Be prepared to act with confidence, instead of hesitating and missing out.
- The 500 plus articles in this column offer specific suggestions on many aspects of buying, including home selection and financing.
- Our site is a Knowledge Warehouse, so there's no need to feel unprepared for market eventualities.
- The federal housing agency, Canada Mortgage and Housing Corporation, provides a range of free information to get you started building your real estate knowledge: https://www.cmhc.ca/en/co/buho/index.cfm [bullet] Your Registered Retirement Savings Plans may contribute to your ability to purchase or build in 2010 through the Home Buyers' Plan. Get the facts on this and other tax advantages from the Canada Revenue Agency beforehand to ensure that the benefits are all yours. Here's a useful summary to start with: cmhc.com.
Off to a Solid Start One important tip for buyers, especially first-timers, is: Buy the least of the best. That is, buy the least house on the best street you can afford or a lesser unit in the best condo you can afford. This way, although improvements to your property will increase the value of your home, improvements made by neighbours will also improve the value of your property. Regardless of local market dips, your gem in the best location should remain saleable, so you'll have more resale flexibility and a shorter time to a break-even point and to profit.
With this value goal in mind, set yourself up for panic-free success:
- Search for a real estate professional who has experience and knowledge with the location and property type you value. Don't just go with the first professional you bump into.
- Keep asking "why?" Challenge your thinking and assumptions, and those of the professionals you work with.
- Get to know the neighbourhood(s) you want to live in, so you can evaluate which streets carry the highest property values and the greatest potential for value growth. Within each neighbourhood, there is a gradient of values. When abutting areas are of higher value, streets closer to this "better" neighbourhood will carry higher values. The opposite is true for adjacent lesser areas.
- Seek out a knowledgeable, reliable home inspector who can address quality of construction and property devaluators, such as out-dated electrical systems like knob and tube and aluminum wiring, and dangerous insulation like urea formaldehyde and Zonolite. Learn as much as you can about cost-to-correct for worn-out roofs, sagging eavestroughs and other standard home repair projects. This will allow you to estimate expenses over the first year or so of ownership. Your chosen real estate professional can also project potential maintenance and repair costs to enable you to accurately budget your purchase for sustainability.
- Pre-qualify with a mortgage broker who can provide access to funds beyond traditional lenders. Mortgage brokers can usually arrange better mortgage terms with traditional lenders than an individual buyer can, but these brokers may also have private and less-traditional sources of funding. Their lending criteria may not be as rigid and their scope of properties greater.
- Know what you "need" and what you "want" and how you'll prioritize the items on these two lists. Buying real estate is all about compromise. Doing this under pressure can be difficult. Taking the time to make these decisions beforehand can pay off.
Will you recognize the right house or condominium unit when you are shown it?
No home is ever perfect. The right fit is a combination of compromises that don't matter that much to you and the essential value evident to you.
Real estate value is deeply embedded in and unique to each property:
- Decor distractions: Watch some of the real estate make-over television shows. Notice potential buyers discussing the value of a home based on how the current owner has decorated and furnished the property? They ignore the fact that this is all superficial and easily-changed as the television shows prove. Although cosmetic alterations may cost only a few hundred or thousand dollars, buyers are ready to pay tens of thousands in reaction to these "improvements."
- Immovable object: Location remains the main value criteria as the property cannot be moved away from the bad things around it or toward the good things in the area.
- Useable, liveable space: The house or condominium unit could be made larger, but at the cost of considerable time, money and inconvenience. Your viewing question is, "How could the space be used more efficiently than the current owners are using it?"
- Expensive problems: Look beyond what you like or don't like. Consider what would be expensive to fix or replace. Which could you solve yourself? With the help of your real estate professional and the home inspector, search out the expensive, not-so-easily-solved problems and cost them out. Now, weigh the benefits of location against repairable problems and expensive repairs at the price set by the seller.
When you're well prepared, even a tight deadline won't rattle you. You'll reason out advantages and disadvantages for a property, calmly and without panic. You may never be 100% sure (that's the hindsight figure), but you can be more sure than unsure about the value of making an offer to purchase.