How Not To Pay Too Much For Your Next Home
by Jo-Ann Tissington Whether you are buying your first home, a recreational property or investing, the process of buying a home is a detailed, time-consuming venture. At the same time, it’s an emotional period laden with difficult choices. You want to ensure that the home you purchase meets your needs now, and in the future. Each of these decisions often involves money. When you consider all that money represents, you’ll want to ensure that you don’t pay too much. This article helps you become a savvy buyer, by pointing out some of the pitfalls inherent in the home-buying process. These include such things as knowing what you want before you begin shopping, taking your time to shop, and remaining objective while viewing potential homes. With this information, you’ll be closer to finding your ideal property.
#1. Before you shop, develop a need vs. wants list
Everyone has a picture of an ideal home. This would include all the features you not only need, but also have long desired. However, when it comes time to buying a home, the desires cost more. While it’s nice to think about having a beautifully landscaped backyard, or a solarium, perhaps even some built-in appliances, these are usually considered luxury items, which can add considerably to the price of your home. That’s why it’s a good idea to develop a needs and wants lists. With this list, begin with items you really need like adequate space, garage and number of bedrooms. For most people, basic needs should be considered first. After that, you could consider additional desires, if you can manage these benefits financially. With such a list in your hands, you’re less likely to be caught up in the excitement of the pursuit. You’ll have a good idea of what you want, within your price range, and if you can afford those additional items. #2. Get pre-approved prior to shopping Visit your financial or lending institution “prior” to home buying. Quickly, you’ll know the amount of mortgage you’ll receive. Be sure to get a mortgage commitment in writing. Most importantly, you’ll tell sellers that you are a serious prospect. Depending upon market conditions, a seller will always lean towards an unconditional offer. You’ll have less negotiating power if you have to wait for mortgage approval. Banks and financial institutions have developed many programs especially for homebuyers, be that first-time buyers or those with equity in their homes. When you review your needs and objectives with a lending officer, you’ll be one step closer to purchasing your home. #3. Choose your winning team Buying a home is a complicated process, with many people involved. From choosing the right mortgage, to finding a home inspector, to viewing available properties, there are many steps involved for even the hardiest person. With a professional REALTOR® on your side, you’ll have access to these services, already in place, and highly recommended. A good REALTOR® has the knowledge and experience developed from many years of helping both buyers and sellers. During this time they have developed a network of people, from lenders, lawyers, home inspectors and movers, to assist both homebuyers and sellers. #4. Communicate clearly with your REALTOR®
Spending time with your REALTOR® will reap huge dividends. When you have a clear picture of the type of home you’re looking for, your REALTOR® can come closer to finding the home you want. You won’t waste time looking at homes that don’t match your needs. #5. It’s still true – location, location, location You’ve heard it so many times, that it’s probably starting to sound like a broken record. That’s because it’s true! A home is not a stand-alone item. Rather the value of a home is greatly affected by the surrounding homes. Don’t let your emotions determine your purchase. Think resale! The desirability and resale value of your home depends largely on location more than any other factor. People want a desirable community that includes character, quality of schools, access to work, major transportation arteries, recreational facilities, etc. On your viewing trips, take a careful look and ask the following questions: How does this home compare to others in the neighborhood? Are yards fenced? Are there many children playing in the streets? Are front and backyards and the exterior of the homes properly maintained? Walk around the neighborhood and get a feel for the people living in the area. You may want to speak with a few neighbors to get their comments. If you like the community, carefully examine the home you like. Generally speaking, extremely large homes surrounded by smaller homes tend to appreciate less than a large home among other large homes. Alternatively, the smallest home in the neighborhood tends to stand out by the other homes on the block. Sometimes, it could take a bit longer to sell a smaller home, as some people are reluctant to pay extra for the neighborhood. Additional factors that affect the property value of a home include traffic, sounds, smells, and zoning bylaws. Be objective. Don’t rely too heavily on your emotions. Be sure you are completely satisfied with the neighborhood. If you choose a neighborhood with problems, you likely won’t get as much as you hoped when it comes time to sell. #6. Use your REALTOR®s’ knowledge of the community Your REALTOR® is trained in all aspects of Real Estate, including understanding supply and demand, economics and the neighborhoods of the city in which they practice. As they regularly view homes as they are placed on the market, they are at the heartbeat of knowledge and information about housing trends and prices. They can save you time and money, by narrowing your prospects to only those that meet your requirements. It is a very time consuming process to view every home available that meets your needs. A professional REALTOR® can do much of the work for you, by reviewing your needs, reviewing the properties and then, advising you of a potential match. A comprehensive knowledge of the available homes in your neighborhood is one of your REALTOR®’s strongest assets. With the aid of computerized systems, a REALTOR® is notified within seconds of when a home becomes available. #7. Check your emotions, and shop with your head When people purchase a home on emotion, without an objective view of the property, problems may develop later. Shopping for a home is an emotional process. It could be costly. Using your head, along with asking for an objective opinion (from your REALTOR®) could help you avoid costly errors. #8. Pay attention to “red flags” When evaluating a home, be sure you know the difference between acceptable and unacceptable problems. Cosmetic items like peeling paint, worn carpeting or unattractive wallpaper can be easily remedied. Major problems, however, are clearly “red flags.” Look for items such as major foundation cracks, water damage, outdated electrical systems, and inadequate plumbing. These items could cost you dearly in the future. #9. Hiring a home inspector is a wise investment A home inspection is an inexpensive way to gain peace of mind, and guard your pocket book. A proper inspection will cover all areas of the house including foundation, electrical, heating, plumbing, floors, walls, ceilings, attic, roof, siding and trim, porches, patios, decks, garage and drainage. A professional inspector can give you an objective view of the property, with a written report, indicating the present condition and items that will need repair, now and in the future. #10. Be cautious with fixer uppers Some people may be inclined towards purchasing a home that needs some work. This could be a challenge and an opportunity to make money. Sometimes, a fixer-upper can be purchased below market value, and sufficient repairs made to bring it to a good sale condition with a profit realized. However not all fixer uppers will bring in the profits you might expect. It depends upon the price of the home, the amount of repairs needed and the market conditions at the time of sale. If the home is not priced low enough, you may not recover your investment of time, trouble and money. Before you purchase what looks like a quick way to profit, carefully consider the condition of the home and ALL the repairs that need to be made. Get several estimates. Complete a comprehensive budget. Also consult with your REALTOR®. She can give you an idea of what you can reasonably expect to recover when the home is put back on the market. #11. Consider your future needs Take a look at your lifestyle now and in the future. Will you need extra space for a home office, a child, or perhaps a child moving back home? Perhaps it may be easier and less expensive if you purchase a home that can meet these needs now, rather than moving up to a larger home a few years later. #12. Proceed quickly When you’re ready to buy, move fairly quickly. That’s because good properties usually sell fast. This is especially true when there is a shortage of homes available. However, when you work with a REALTOR®, you have access to the most current technology. As part of the MLS network, a REALTOR® has access to properties within minutes of when they are listed. Technology works to your advantage. When a REALTOR® knows your needs, they will notify you when properties that meet your criteria become available. You save time and effort, and you view only those homes that come closest to your needs. #13. Ask for a written CMA A Comparative Market Analysis (CMA) is an analysis of comparable homes in the neighborhood. It shows you the sale prices of comparable homes in the neighborhood, along with asking prices of other homes in the area currently on the market. A REALTOR® can request this report for any home and neighborhood. Ask for this report! With this valuable document, you’ll have the appropriate evidence for either a too-high asking price, or one that is a bargain. #14. Keep personal information to your self Be careful - information could be used to your detriment. Information about your mortgage, size of down payment, move-in deadline, or circumstances for buying, could be negotiating factors. While you want your REALTOR® to know these details, don’t reveal any of this information to the seller. #15. During negotiations, keep your emotions in tact In certain situations, emotion could cost you money. If you let the seller know how interested you are in the property, this might be seen as a financial opportunity. Recognizing that you are highly motivated, you could an easier target for a higher price. If you absolutely love the home, keep it to yourself. This is a definite advantage of working with a professional REALTOR®. Trained to be non-emotional, he or she can ensure you get the best price. #16. Ensure the deal is right before you sign While you definitely want to move quickly, once you’ve made the decision to purchase, you don’t want to cave in to pressure for a quick close. Someone who is trying to pressure you into buying a home is doing so for a reason. This could involve money, or a multitude of other reasons. #17. Exercise your negotiating skills Even if you prefer not to haggle, it’s worth it, especially when it’s your home and your future. Most people expect to haggle over the price. That’s often why the price is set a bit higher than the actual selling price. There is always room for negotiation. If you want to get the best home possible for the least amount of money, then negotiation is the only way to get a good deal. #18. Avoid bidding wars In some cases, the seller’s REALTOR® may use scare tactics to rush the sale or increase the price. Falling for this trap could cost you money. If there is another buyer, or some other reason this pressure is being applied, whoever wins also loses because they overpay. If there really isn’t another buyer, then it’s likely that the deal with fall through. #19. Be aware of your hidden costs There is more to a home than simply the mortgage. You could be responsible for other items including mortgage insurance, appraisal fees, legal fees, inspection fees, transfer taxes, title insurance, inspections, etc. Your REALTOR® can give you a good idea of the costs associated with buying a home that are beyond the final negotiated price of your home.
Current Real Estate Market in Grande Prairie, Alberta Let’s face it-it’s been a little scary for the past couple years. We have CTV, CNN, Banks, Mortgage companies, local, provincial, and federal governments: all telling us what they think is happening in the market place from generalized information and from many different parts of the country. Customers often ask me, “…But what is happening here in Grande Prairie?” So let’s look at the actual data for our area alone. It represents the only “true” picture of what has happened to us. If we look at history we know that markets by their very nature, are cyclical. So if the market is down… it will come back and vice versa! Our local Real Estate market is no different. So on a local level, for single family residential properties, we have seen MLS sales decline from a high of approximately 3017 units in 2006 to about 1747 units in 2009. Listings, on the other hand, have increased significantly to about 3 times the number of sales, producing our “Buyers Market”, where supply far exceeds demand in 2009. In regards to price, we have seen an average of a 10% drop. Correspondently, housing starts (new construction permits) has dropped significantly, from a high of about 1500/yr for 2006-2007 to 900 for 2008 and only about 500 in 2009. This past year, we’ve seen a stabilization of employment, interest rates at an all time low and buying incentives to spur activity. Prices appear to be stabilizing in Grande Prairie and if this continues, we will draw closer to a balance in supply and demand. If interest rates increase as projected we’ll see another jump in buyer activity. So for now, it is still a good time to buy and if you are selling you should receive fair market value for your home, you may just have to wait a little longer for that buyer. Disclaimer Statement: Content and information at time of publishing has been obtained from sources believed reliable and accurate, but should not be solely relied upon without further verification and are subject to change without notice. |