To outmaneuver and avoid grave errors, take into account
the following common pitfalls when purchasing:
1. Paying too much
Without the aid and assistance of a professional
Real Estate Agent, purchasers often pay far more than fair market
value. It is not uncommon to hear horror stories where thousands
of dollars were wasted because the market was unknown. Market
areas differ - what you sold your last home for does not necessarily
equate to equal pricing structures in your new neighborhood. Your
Real Estate Agent will know what is locally considered good value
for investment dollar. If you are relocating to a new city, engage
the services of a local Real Estate Agent who intimately understands
the fluctuating market trends and will provide a comparative market
analysis on the home you wish to purchase.
2. Too much of a fixer-upper
You've heard the stories or maybe even made the
comments yourself, "It's only superficial, and It won't take
too much money to fix that, we can renovate on the weekends, or
I didn't realize it would consist of hiring a structural repair
artist."
Nightmares happen when you take on more than you can handle. Purchasing
a fixer-upper can equate to replacing everything and still ending
up with a very expensive brand new old car!
3. Wrong type of neighborhood
Once you locate a home that appears to fit everyone's
needs, take a second look! If you originally viewed the property
on a weekend, drive by during weekday rush hour. Check with the
local municipal authorities to see if a major highway plan is
in the works - one that will produce a backyard oasis of incessant
noise. Investigate airport extensions and shopping center improvements.
Heavy traffic blaring into your quiet serenity can destroy your
solitude.
Consider your outdoor lifestyle. Do you hold family
barbecues, enjoy sitting outside, or invite family and friends
to vacation with their recreational vehicles in your backyard?
In many cases, excessive traffic noise can hamper a quiet conversation
by the creek. You many also find out for the first time just how
lightly you sleep. There are also the potential toxic fumes leaking
from vehicle exhaust. Do you want your children and yourselves
breathing this in? It may take only a month or two to realize
the grave mistakes you've made.
4. Buying outside of your Budget
We are all familiar with more funds going out than
what is coming in. Kids these days always want the best regardless
of whether they can really afford it or not. It is easy for a
Real Estate Agent to nod their head and make the quick commission,
fully realizing that one-year later when the marriage is on the
rocks that they will be earning another commission as the property
is on the market again.
Careful budgeting is the order of the day! First
time purchasers be warned that it is very easy to buy beyond your
means, as you count on dual incomes until the new baby arrives.
It is better to buy the home you need and con comfortably afford
than experience being forced to sell and buy down. House rich
and cash poor is not the way to experience life!
On the opposite end of the scale is purchasing a
home that offers less function and feature than what you really
need. Inevitably, you will end up purchasing the right home and
have to bear the cost of reselling and moving again.
5. Over or Underestimating Your Housing Needs
A $10,000+ mistake can occur when you purchase with
only the immediate timeframe in mind. You opted for no family
room, and three months later are delighted to learn your first
child is on its way. Or your children all leave home in the same
year and now you find yourself rambling around in empty rooms!
On the other hand, when parents downsize too early, they find
their adult children have rebounded with a few extra additions!
Consider all your options carefully. Saving your hard earned money
is a definite plan!
6. Retirement & Condo/Apartment Living
You are now both retired from the workplace and
are beginning to contemplate that a smaller residence is just
what the doctor ordered. No more high maintenance yard work, shoveling
snow or too many rooms to clean. A year after moving to what was
once just the right size for the two of you, you find yourself
missing those workshop projects that the family loves to receive,
or tending the garden you spent years creating. Perhaps you are
now facing widowhood and the condo walls speak too many memories.
Purchasing a condo or apartment too early for your lifestyle is
a grave error that can be avoided.
Determine your needs realistically:
- Are the retirement activities in
line with your lifestyle?
- Are the local amenities close by?
- Is the strata council open to family
members, especially children, vacationing?
- Do you prefer a 55 and older building?
- Do the strata rules forbid small
pets?
- Are you in the same age bracket
as the current residents?
- Is it a couple oriented building,
or singles only?
- What are the noise restrictions?
- Can hanging baskets and lawn chairs
decorate your balcony?
- How many parking stalls per unit?
- Can you perform minor car repairs?
- Is the personal and building security
systems to your liking?
These are just a few of the questions that require
answers before you enter into a binding contract. Discuss these
questions with your Real Estate Agent, allowing their expertise
to guide you to just the right home - one that meets all your
personal needs, and one that also fulfills your dreams.
7. Overlooking Schools and Children
Is your new home close enough for the children to
walk to their new school, is there bus service just down the street,
does the school offer academics suitable to your children's needs,
or is it right next door and you've reached a point in your life
where you would prefer quiet solitude?
Caught up in the passion of your new home, it is
easy to overlook and undermine these questions. After six months
of taxiing your children to and from school, you may find yourself
experiencing the need for more freedom. By graduation, your children
may find that had they attended another secondary school, the
university prerequisites would have been fulfilled. You may thoroughly
enjoy sitting alone in your private backyard only to find recess
noise and the school's outdoor gym activities hamper your need
for solitude. Determine the answers with your Real Estate Agent
before signing on the dotted line!
8. Yard Maintenance
The thought of your own swimming pool, the manicured
lawns, or the beautiful English garden in full bloom. It's lovely
to look at, but do you want to spend the time required to keep
everything in top working order? Do you have the funds required
to hire a full-time landscape architect? In some cases, you may
be better suited for townhouse living where yard maintenance is
part of the contract, and the local recreation center offers swimming
and exercise programs tailored to your lifestyle needs.
9. Title Searches
Encumbrances, right of ways, easements, tax liens,
builder's liens, leases, an undisclosed co-owner....
Avoid all potential difficulties by having a title
search performed as early as possible. Protect your investment
by purchasing Owner's Title Insurance.
10. Property Surveys
Review the original property survey:
- Is the neighbor's fence where
is should be?
- Is the home too close to the property
line?
- Is there room for the addition
you are planning?
- Are zoning regulations violated?
Discuss these details with your Real Estate Agent.
Have visible survey posts inserted into the ground so you can
see if there is room for that new workshop or pool.
11. Municipal By-Law Restrictions
Educate yourself! Consult with your Real Estate
Agent and local municipal authorities to learn of any abnormalities
and restrictions that apply to the property. Do you intend on
converting the basement into an in-law suite? Can you run your
commercial business from home? Is there a senior's residence next
door that prohibits noise after 9:00 p.m.? Can you park your recreational
vehicle in that three-car driveway?
12. Structural Defects
Consider an independent home inspection. Careful
examination by a professional will remove all doubt! Is that tiny
crack in the foundation a repair nightmare or merely settlement?
Are the walls infested with termites? Does your budget have room
for thousands of dollars in reconstruction costs?
For a few hundred dollars you can obtain an extensive inspection
report that will point you to any structural defects in the building.
Ascertain the cost of repairs prior to entering into a binding
contract. Write your purchase contract subject to a satisfactory
home inspection so you can renegotiate if the repairs are beyond
your current budget. Or opt for another home more suitable to
your needs.
13. Unexpected Costs
It is not unusual to reach settlement stage only
to find that hidden expenses have occurred. Such items as real
estate taxes and homeowner association dues may be pro-rated,
while hazard insurance and taxes must be paid in advance. Avoid
stressful discoveries by asking for these figures in advance.
NOTE: Should your settlement date alter, so do some of the pre-paid
expenses.
14. Hidden Lender Costs
Avoid hidden and questionable costs at application
time - tax service fees, courier fees, underwriting fees, loan
disbursement charges, or mark-up on court documentation fees -
by asking your lender to list exactly what fees are included on
the federal settlement forms and what additional fees may be charged
at closing. (NOTE: Some fee can be negotiated down or waived if
you question them.)
15. Vendor Errors
It is not uncommon to find that repairs have not
been made, or other contractual obligations may delay settlement.
Plan a walk-through of the property, contract in hand, and check
off each item. It is advisable to arrange an escrow fund and set
a dollar amount for items that the vendor defaults on.
16. Closing Your Transaction
Occasionally the closing date will be jeopardized
just days prior to settlement. Arrange a 60-day locked-in interest
rate at application time.
Homeownership is the largest single investment you will most likely
make during your life. It's in your best interest to be educated.
Pay close attention to every detail and you will win at the real
estate game. Your Real Estate Agent's responsibility is to make
sure you succeed by avoiding the top sixteen errors purchasers
most commonly fall prey to. After all, your Real Estate Agent's
reputation depends on referrals generated from 100% client satisfaction!
