Low interest rates and the desire for more living space in a remote-working world have encouraged some Canadians to stop renting in major cities and start buying property in smaller cities and towns.
But as markets outside the major cities heat up, homebuyers will be competing against multiple offers, bully offers that go well above the selling price, and wondering if they should put in firm offers with no requests for home inspections. Now more than ever, it’s important for first-time buyers to be savvy when entering the real estate market. Here’s what you need to know when buying your first home.
Choose your team carefully
You want to be working with the best of the best when making the biggest purchase of your life. Don’t go cheap with your realtor, lawyer, or home inspector because that could lead to expensive regrets down the road. A good real estate agent, for instance, will know the area, trends in market swings, the sales history of neighbouring properties, and they can also check on things like recent renovations and upgrades to homes on the market.
Understand all costs involved
The cost of the home is just the beginning, says Nasma Ali, the founder of real estate firm One Group. Other fees you can expect to encounter when buying your first home include closing costs, taxes, utilities, and possibly expensive home repairs. “If your partner is a first-time buyer and you're not, are you on the hook for the full land transfer tax? Will you have daycare costs as well in two years? Budget properly,” she says.
Stay within your budget
Bob Pichut, a real estate agent for Sutton Group-Heritage Realty Inc., says bully offers and multiple bids can make first-time buyers frustrated and sway them into making an offer they can’t truly afford. He recommends looking at homes below your budget in case you want to make a bully offer.
Be financially prepared
Make sure your credit history is strong, get preapproved for your mortgage, and have your deposit ready. This gives you the flexibility to make an offer and move up your closing date if that will help seal your bid.
Have liquid deposits
Ali recommends having cash available in your account for the deposit to secure the property so you don’t have to fuss with anything complicated. “When you make an offer in this competitive market you need to have the bank draft within a maximum of 24 hours of the accepted offer,” she says. “The standard is a minimum of 5% of the purchase price.”
Most lenders won’t give you a mortgage without showing proof of home insurance. (This is different from mortgage insurance, which is not mandatory if you can come up with a 20% down payment.) Home insurance will protect you and your home from damage. If you buy an old home, check the wiring as most insurers won’t cover knob-and-tube wiring.
Look for stains
When it comes to buying an old home, Pichut recommends buyers look up at the ceiling and down at the floorboards. “Look for stains in the ceiling that might indicate a leak, markings around cupboards that might suggest insects, or a new paint job around the baseboards [that might hide water damage],” he says.
Use your imagination
Hate the colour scheme? Dislike the curtains? Ali encourages first-time homebuyers to look beyond the finishes, clutter, and paint shades. “Very few buyers can see past these and recognize the potential,” she says. “If you are one of the few, this can save you a ton of money. Be willing to do what most won't. Don't run after the shiniest object on the market that will garner 20 offers and inflate the price.”