As housing market increases homebuyers need to be informed about costly oversights
TORONTO — December 13, 2011 — According to a recent RBC report, the number of homes for sale in Ontario is on the rise and affordability province-wide is stable. The rush to buy with more available homes on the market could mean more mistakes made by consumers.
A panel of experts from the Ontario Real Estate Association (OREA) board of directors advises against making hasty or uninformed choices by avoiding five common errors:
1. Not knowing what you can afford
Barbara Sukkau, president of OREA and a Realtor based in St. Catharines, says that mistakes made in a competitive environment can be costly and restrict lifestyle choices.
“Many people don’t know that there’s an easy way to calculate how much house they can afford to determine, regardless of competing bids, what lifestyle they want to maintain within the market,” says Sukkau. “In addition to the cost of the home, potential buyers should consider the land transfer tax, closing costs, moving costs and leave room for any unforeseen extras.”
In fact, Realtors often use a calculation called the Gross Debt Service Ratio. Sukkau explains how to calculate what you can afford at http://bit.ly/OREAaffordabilty.
2. Not preparing your finances, or getting pre-approved
“Many sellers will require a potential buyer to get pre-approved. When there are competing bids on the house of your dreams, pre-approval could give you the edge,” says Patricia Verge, OREA board member working out of Ottawa.
“Pre-approval can take up to a few days after you provide your bank with things like verification of income and down payment,” Verge adds.
If a buyer meets the lender’s requirements, then written confirmation of pre-approval will be provided. According to the Canada Mortgage and Housing Corporation, this pre-approval is time sensitive and is not a guarantee of receiving a mortgage loan.
Verge also cautions buyers against using their pre-approval as a final budget. “Potential buyers should balance their debt load and other financial commitments with what the bank is willing to lend,” she says.
3. Not knowing your must-haves
Tom Lebour, OREA board member working out of Mississauga, notes that his clients aren’t always sure about what they’re looking for.
“Clients often fail to consider what amenities are in the neighbourhood they’re looking to buy in, especially when relocating from the city to the suburbs. How ‘walkable’ is a neighbourhood to places like grocery stores, schools and banks? This feature is important to many homebuyers, but they can fail to think about it in the excitement about the number of bathrooms a house has. Create a list by thinking about a day in your life and the various things important to you and your family.”
4. Not getting a home inspection
“I always advise buyers to have their own home inspection done, even if the seller offers the results of a previous inspection and even if others are keen to put in an offer,” says Phil Dorner, OREA board member working out of Belle River.
“Ensure that you have a qualified and bonded home inspector perform a full inspection as part of your offer. An investment of a few hundred dollars could save you thousands down the road.”
5. Getting emotions involved in negotiations
Buyers and sellers will often let their emotions get the best of them, says Mike Douglas, OREA board member from Barrie.
“Emotions can get in the way of negotiations because sellers inadvertently assign real value to their memories, which don’t hold financial value for the buyer. We do our best to help our clients keep their emotions out of the equation,” Douglas says.
For more tips, visit orea.com and order your free books on home buying and selling. Or, check out Barb Sukkau’s video on what a Realtor can do for you.
About the Ontario Real Estate Association
The Ontario Real Estate Association represents 50,000 brokers and salespeople who are members of the 42 real estate boards throughout the province. OREA serves its REALTOR® members through a wide variety of professional publications, educational programs, advocacy, and other services.
The real estate panel members provided input on common home buying and selling mistakes over email from November 8 to November 22. The panel consisted of nine OREA board spokespeople including representation from St. Catharines, Timmins, King City, Barrie, Oakville, Belle River, Mississauga, London and Ottawa.