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These errors could wind up costing you more than the coveted key to your first home

Amy Fontinelle – Investopedia.com

Are you gearing up to buy your first place? Shopping for a home is exciting, exhausting and a little bit scary. In the end, your aim is to end up with a home you love at a price you can afford. Sounds simple enough, right? Unfortunately, many people make mistakes the prevent them from achieving this simple dream. Arm yourself with these tips to get the most out of your purchase and avoid making 10 of the most costly mistakes that could put a hold on that sold sign.

1. Not Knowing What You Can Afford

As we’ve all learned from the subprime mortgage mess, what the bank says you can afford and what you know you can afford or are comfortable with paying are not necessarily the same. If you don’t already have a budget, make a list of all your monthly expenses (excluding rent), including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings and so on. Don’t forget major expenses that only occur once a year, like any insurance premiums you pay annually or annual vacations. Subtract this total from your take-home pay and you’ll know how much you can spend on your new home each month.

If you end up looking at homes that are outside your price range, you’ll end up lusting after something you can’t afford, which can put you in the dangerous position of trying to stretch beyond your means financially or cause you to feel unsatisfied with what you actually can afford. You may even learn that you can’t afford the type or size of home that you desire and that you need to work on reducing your monthly expenses and/or increasing your income before you even start looking.

2. Skipping Mortgage Qualification

What you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income, so make sure to get pre-approved for a loan before placing an offer on a home. If you don’t, you’ll be wasting the seller’s time, the seller’s agent’s time, and your agent’s time if you sign a contract and then discover later that the bank won’t lend you what you need, or that it’s only willing to give you a mortgage that you find unacceptable.

Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, like finance a car purchase. If you cause the deal to fall through, you may have to forfeit the several thousand dollars that you put up when you went under contract.

3. Failing to Consider Additional Expenses

Once you’re a homeowner, you’ll have additional expenses on top of your monthly payment. Unlike when you were a renter, you’ll be responsible for paying property taxes, insuring your home against disasters and making any repairs the house needs (which will occasionally include expensive items like a new roof or a new furnace).

If you’re interested in purchasing a condo, you’ll have to pay maintenance costs monthly regardless of whether anything needs fixing because you’ll be part of a homeowner’s association, which collects a couple hundred dollars a month from the owners of each unit in the building in the form of condominium fees.

4. Being Too Picky

Go ahead and put everything you can think of on your new home wish list, but don’t be so inflexible that you end up continuing to rent for significantly longer than you really want to. First-time homebuyers often have to compromise on something because their funds are limited. You may have to live on a busy street, accept outdated decor, make some repairs to the home, or forgo that extra bedroom. Of course, you can always choose to continue renting until you can afford everything on your list – you’ll just have to decide how important it is for you to become a homeowner now rather than in a couple of years.

5. Lacking Vision

Even if you can’t afford to replace the hideous wallpaper in the bathroom now, it might be worth it to live with the ugliness for a while in exchange for getting into a house you can afford. If the home otherwise meets your needs in terms of the big things that are difficult to change, such as location and size, don’t let physical imperfections turn you away. Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you.

6. Being Swept Away

Minor upgrades and cosmetic fixes are inexpensive tricks that are a seller’s dream for playing on your emotions and eliciting a much higher price tag. Sellers may pay $2,000 for minimal upgrades or staging that you’ll end up paying $40,000 for. If you’re on a budget, look for homes whose full potential have yet to be realized. Also, first-time homebuyers should always look for a house they can add value to, as this ensures a bump in equity to help you up the property ladder.

7. Compromising on the Important Things

Don’t get a two-bedroom home when you know you’re planning to have kids and will want three bedrooms. By the same token, don’t buy a condo just because it’s cheaper when one of the main reasons you’re over apartment life is because you hate sharing walls with neighbours. It’s true that you’ll probably have to make some compromises to be able to afford your first home, but don’t make a compromise that will be a major strain.

8. Neglecting to Inspect

It’s tempting to think that you’re a homeowner the moment you go into escrow, but not so fast – before you close on the sale, you need to know what kind of shape the house is in. You don’t want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. Keeping your feelings in check until you have a full picture of the house’s physical condition and the soundness of your potential investment will help you avoid making a serious financial mistake.

9. Not Choosing to Hire an Agent or Using the Seller’s Agent

Once you’re seriously shopping for a home, don’t walk into an open house without having an agent (or at least being prepared to throw out a name of someone you’re supposedly working with). Agents are held to the ethical rule that they must act in both the seller and the buyer parties’ best interests, but you can see how that might not work in your best interest if you start dealing with a seller’s agent before contacting one of your own.

10. Not Thinking About the Future

It’s impossible to perfectly predict the future of your chosen neighbourhood, but paying attention to the information that is available to you now can help you avoid unpleasant surprises down the road.

Some questions you should ask about your prospective property include:

• What kind of development plans are in the works for your neighbourhood in the future?

• Is your street likely to become a major street or a popular rush-hour shortcut?

• Will a highway be built in your backyard in five years?

• What are the zoning laws in your area?

• If there is a lot of undeveloped land, what is likely to get built there?

• Have home values in the neighbourhood been declining?

If you’re happy with the answers to these questions, then your house’s location can keep its rose-coloured lustre.

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Contact the Jeffrey Team for more information  -  416-388-1960

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By Tony Wong – Toronto Star

Next to public speaking, buying or selling a home is at the top of many people’s fear and loathing list. It’s understandable. A home is the biggest investment you’ll ever make and while exciting, the potential for things to go wrong is pretty big. That adds up to enough stress to keep you awake at night thinking about all the what-ifs. But it doesn’t have to be that way. Here are 10 things to consider when buying a home.

1. The housing market isn’t really a market

At least not in the way you might think. While housing analysts like to compare real estate returns to stock market returns, it is a misleading comparison.

The first big difference is that a stock market is a place where you can by and sell immediately. In the real estate market you can wait months for the home you want to come on the market and just as long to find someone who wants to buy yours. The price you expect may not bear any resemblance to the one you get.

The long run return on stocks is also a lot better. The average stock in the Standard & Poors 500 index, a basket of blue chip U.S. stocks, has returned about 7.5% a year after inflation in each of the last 25 years. The average increase in the value of a Canadian home over the same period petty much tracks the rate of inflation which during the same period was 2.5%.

A home is also more than an investment. It has all kinds of intangible qualities, including a neighbourhood you want to live in, a spot with a particular view or landscape, a type of architecture that you enjoy. So, while it’s tempting to think of your primary home as a profit centre ripe for a flip, that shouldn’t be the main purpose.

Besides, your Microsoft stock can’t keep you warm at night. (Unless you bought it when Bill Gates was still working out of his garage. In which case, you probably have your own heating company.)

2. It’s always a good time to buy

No it isn’t. People who bought at the height of the market in the 1989 real estate bubble, didn’t break even until prices bounced back in 2002. That’s 13 years. And even then they didn’t make their money back. Factoring in inflation, they actually lost money. House prices don’t go up forever. Buy when your circumstances dictate, not because your neighbor the agent says it’s a good time to.

3. Location, Location, Location.

Yah, they’re right. You’ll pay more initially, but investing in a property in the good neighborhood close to transit will pay dividends down the road when it comes time to sell

4. Buy the cheapest house on the street

Some people argue you shouldn’t, because the home will compare poorly to the other homes when you sell.

I say go for it. It may already be discounted because it looks like a shack compared with other properties and provides far more upside if you spruce it up in the future. A rising tide can also help to lift all boats. As the street gentrifies, infill housing will continue to keep property values high. Getting your foot in the right address is half the battle. Hello Park Place!

5. Do I need an agent?

No, you don’t. While a good realtor can be a huge asset, not everyone needs professional advice. If you have time, selling your own home can save you a ton of money on commissions. With the advent of the internet, and the opening up of the Multiple Listing Service there are many more services for the do it yourselfer to choose from.

6. If you want an agent…

If you don’t have the time, or would rather use professional advice, a good realtor can be a boon, because they know the neighborhood and can potentially get you top dollar. But like any other service, the results will vary. So make sure you interview several before choosing.

7. Renovating will give me huge return

Stop watching all those television shows where some fancy designer redos the entire house in a week with faucets that cost more than your BMW. Okay, I like them too, but that doesn’t mean you have to gut your kitchen to sell your home.

Most experts say you’ll get the best bang for your buck by redoing the kitchen and washrooms. But even for the most sought after features by homebuyers, the return on investment is anywhere from 75% to at best 100%. That means in many cases if you spend $10,000 you’ll only add that much vale at best and maybe far less.

8. It just needs a coat of paint

When it comes times to sell, you may have been living in your home for so long that you don’t notice the coffee stains on the couch and the Sponge Bob wallpaper in the washroom. Get a second pair of eyes to have a look around. This could be friend, relative or your agent and hopefully they’ll tell it like it is.

You may want professional help in the form of a home stager who can arrange your furniture and make your place look showroom ready. But you don’t need to pay big bucks. Start by asking a friend. She’ll tell you why Sponge Bob must go.

9. Don’t try to time the market

I know people who sold their home at the peak of the market, and rented a condo while riding out the crash.

After the crash, they repurchased near the same neighborhood for substantially less. This is the dream of every home investor. I also have friends who thought the market was going to crash, so they waited for four years to buy a home. Prices kept going up and they finally threw in the towel and bought at a higher price than they expected. Then the market crashed. Housing is a long term investment, and sometimes you just have to commit.

10. Keep your perspective

My friends think think their 1,500 square foot semi is worth a bundle, because they spent hours building the deck and hand painting the cute gold cherubs on the walls.

Being emotionally attached to your home means that when it comes time to sell, your objectivity is compromised. In a down market, with more competing listings, your home is going to be difficult to sell and the price less than you expect. Can you accept that?

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Contact the Jeffrey Team for more information  -  416-388-1960

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New data from Statistics Canada suggests that one in seven people of prime child-rearing age vacated Toronto, Montreal and Vancouver for the suburbs between 2001 and 2006

By Shannon Proudfoot, Canwest News Service

The suburbs around Canada’s largest cities are magnets for young parents in the middle of the income and education scales, while the urban cores draw those on the extremes, according to a new report from Statistics Canada.

People in the prime child-rearing age group of 25 to 44 were most likely to move out of Toronto, Montreal and Vancouver and into the surrounding suburbs between 2001 and 2006, the report says, with one in seven (14 per cent) making that move. In contrast, just five per cent in that age group made the move from the suburbs back to the city in Toronto and Montreal, and four per cent did so in Vancouver.

“I think a lot of what we’re seeing in these patterns are really associated with housing costs and availability of affordable homes. I think that’s a really big factor,” says Clarence Lochhead, executive director of the Vanier Institute of the Family. “That also explains the exception of the high-income folks who have a smaller likelihood of moving because they’re more likely to be able to afford some of the costs associated with housing in the core of cities.”

Families with incomes of $100,000 or more are less likely to move to the suburbs than those in the middle of the income scale, Statistics Canada says, suggesting they place a “higher premium” on being close to downtown amenities and can buy pricier central properties.

On the other hand, the lowest-income families who bring in $20,000 or less per year were least likely of any income group to move out of the city core. The agency speculates they might not be able to buy a vehicle, which is crucial to living in the car-centric suburbs.

Family status is another big influence in where people live, and in all three cities, people who became first-time parents between 2001 and 2006 were among the most likely to leave the central municipality. In Vancouver, 27 per cent of new parents left the city for the suburbs, while just eight per cent of people living alone made the same move.

Aside from housing costs, Lochhead suggests childcare may drive young families to the suburbs, where there are plenty of others like them and they’re more likely to be able to make arrangements for home-based daycare.

The propensity to move to the suburbs increases up to age 34 and then starts to wane in older age groups, the agency says, and when children are older and the family is “complete,” the odds of moving — short or long-distance — decline.

Single-parent families are the one aberration in the trend of families gravitating to the suburbs.

“What lone parents are basically facing is that the prospect of home ownership is a dim one,” Lochhead says. “Few people can actually afford the costs of home ownership and a mortgage on a single income.”

Education also exerts an influence on where people live. People with college or university bachelor’s degrees were more likely to move to the suburbs, Statistics Canada found, speculating they have more stable incomes that allow them to buy a home. However, people holding master’s degrees or doctorates tended to stick to the urban core, which the agency suggests reflects their focus on urban cultural amenities and willingness to pay more or live in “lower quality housing” to be near them.

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Contact the Jeffrey Team for more information  -  416-388-1960

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