5 Steps to Focus on When Acquiring Your Home
Whether you are purchasing a home for the first time, upgrading to a larger home, or downsizing to a smaller place - the challenge of co-ordinating all the variables involved in a home purchase is one of the more important tasks you will face in your lifetime. Like most things in life, preparing a plan and educating yourself with the help of a Realtor can go a long way to help you achieve your goals with confidence.
Step 1: Prepare a Financial Plan and a Budget
"A home is where the heart is". While this saying is definitely true (you have to be happy where you live) you also have to remember that you are acquiring a financial asset. This asset maintains a place within a financial plan. It could represent the place that will provide shelter and comfort during your working years as well as your retirement years. It could also be an asset which you wish to pass onto your children in one form or another (gifting or estate strategy). Finally, it could provide the opportunity to upgrade or downsize to another place through growth of equity in the asset over time.
Most individuals will require some assistance when purchasing a home, usually in the form of a mortgage. The mortgage is the amount a creditor (Bank, Trust Co, Credit Union or some other lender) loans you to be able to acquire the asset, after allowing for your own contribution to the house in the form of a down payment. Loans involve payments, and you need to look at the payment in relation to your overall income and current liquid assets to make sure you can comfortably afford to make them. Quite often, purchasers acquire a home without really completing a budget and a financial plan, and it can make life stressful when money seems tight. Doing your homework first, allows you to focus on a purchase price that is reasonable when looking to acquire your home.
Step 2: Know What you Want in a House: Key Features
I have discussed with my clients, there is no such thing as the "perfect house". Whether it is resale or a brand new construction, there will usually be something that doesn't satisfy your taste or desires. Or maybe the features you desire don't fit your budget when searching for that home. But that doesn't mean you shouldn't have a checklist to try and ascertain what’s important to you. You should also go through the exercise of prioritizing your features, which will go a long way in increasing your comfort zone.
Ask yourself the following questions:
- Is this home purchase a long term or short term goal? Do I anticipate staying here a long time or is it a stepping stone to some other goal (upgrading or downsizing)?
- What price range do I desire now that I have completed my budget and financial plan?
- What kind of neighbourhood do I desire and why?
- What Area Services are important to me (for example Type of Schools, Churches, Amenities)?
- What type of house do I desire - detached, semi-detached, Townhouse, Condo?
- How many bedrooms and bathrooms do I need?
- What is the square footage of the house?
- Do I want a big lot and all the benefits (and work) that entails, or do I desire a smaller lot?
- Corner house, house in the middle of the street, or isolated property?
- Do I want a Swimming pool, Fireplace?
- How about Garage size (single car, double car)?
- Do I desire a basement with a walkout, separate entrance?
- How about a deck and the type of landscaping?
As you can see this list is certainly not exhaustive, but comprehensive enough to help when you start to search for homes. As a Realtor, my job is to help you work through this list of questions to create a more satisfying search process.
Step 3: Starting the Search Process
As a Sales Representative for Royal LePage Credit Valley, I love to help buyers find that home. It's a passion of mine. We take all the information we gathered from the first 2 steps and we enter the criteria into our Computer generated search system. Automatically, as listings are (or become) available we have property which we can email to clients to see if they want to physically visit the property for a closer look.
Now that process sounds simple enough, but it can be actually quite daunting. I have had situations where the clients have seen a number of properties, and actually start getting confused after comparing so many properties against one another. Develop a good cross section of choice and remember to critically scrutinize the list against the features you said you wanted in Step 2. By cutting down the number of visits to "serious" candidates it will make your decision easier when you are ready to purchase.
Step 4: The Offer
When it comes time to actually get down to purchasing the property you desire, my job is to represent your best interests and negotiate on your behalf. That means I need to be aware of the current housing market, comparable sales in the neighbourhood of the subject property, and giving you my honest opinion of what will be required in negotiations with the other side to get the deal done. Sometimes, you have to be prepared to walk away as the seller may be unrealistic in terms of what they want. Also, the market conditions may dictate the sellers have the edge and you may have to adjust your thinking to buy within that market place. Conditions are rarely static, and they are changing so my job is to give you that big picture environment that you are negotiating within.
The offer usually contains 4 key elements:
- Purchase Price - the price upon which the property is transferred from seller to purchaser
- Deposit - Your commitment to the seller with your offer, it forms a portion of the down payment
- Closing Date - The actual legal date the property is transferred
- Conditions - These are clauses inserted by both buyers and sellers which indicate conditions which must be satisfied before a deal can go through. There are lots of different conditions to cover different situations.
I would love to discuss this in more detail when I meet with the clients in person.
The Real Estate Transaction includes many additional costs that must be paid in order to finalize the transaction. We will discuss this in more detail in future articles (to be found under my "Jog Blog"), but for now take note of the following:
- Legal - fees and disbursements
- Property Tax Adjustment
- HST on Mortgage Insurance
- Home Inspection
- Land Transfer Tax - may be eligible for rebate if first time home buyer.
Again, there are other closing costs but the main ones are mentioned above. These costs are separate from the "down payment" referred to earlier. Some costs are flat, others vary in relation to the amount of the purchase price (e.g. Land Transfer Tax). Either way, it is a good idea to allocate $5,000 to $10,000 for closing costs on a home purchase.
Step 5: Referral Sources
When I first started in the Real Estate profession, I was amazed at how many businesses where attached to the transaction. This list is not comprehensive, and varies for individuals by need, but consider the following:
- Mortgage Specialists
- Home Inspectors
- Home Insurance specialists
- Tradespersons - plumbers, electricians, etc.
- Flooring companies - tile, hardwood, etc
Over the years, I have amassed a strong network of professionals and salespersons that I work with and would be more than happy to recommend to help everything that goes on with the Real Estate Transaction (before, during and after). One more way to improve the "Purchase Experience"!
The purpose of this page is to educate, stimulate and activate an action plan to help you purchase your home. The thoughts contained are like initial seeds being planted, to get them "to grow" we need to discuss further.
Looking forward to meeting you!