Three Common Mistakes to Avoid When Buying Your 1st Home

Buying a home is a privilege. We are fortunate to be in Canada, all layers of governments have implemented set of rules and regulations to ease home-ownership. With the help of our government back mortgage insurance, we Canadian can buy our first home with lower down payment. Moreover, there are many programs available

Three common mistakes to be avoided when purchasing your first property

such as tax credit, home owner assistant program, financial aid and much more to help own and maintain our property. However, owning the wrong property can not only be a problem but can be hurting our pockets. In order to make your hard working dollars receive most in return, I am sharing three common mistakes rookie home buyers often makes so you can avoid it on your future investment.

Incur an asset, not a liability

When purchasing your future home, make sure you are incurring an asset and not a liability. Purchasing an eye catching home is not necessary inexpensive. Therefore, 1st and the most important part of a real estate transaction is to stay within your means. If a property is outside of your budget, you may be better off browsing for one that is more affordable to you.  Remember, all cost including mortgage payment, taxes, common expense, insurance and energy cost should not surpass 32% of your household income. Furthermore, we often get sold over eye catching cosmetic improvements such as painting, new kitchen, washroom, floors, etc. You may save much more by purchasing a property and do such improvement and pay less for it. Ask your mortgage lender about purchase plus improvement program. Lenders often have such program to help homeowners to do necessary renovations after the purchase of an immovable. After all, it has a benefit for lender since property will have instant increase in appreciating value and higher debt to generate more interest. On the other hand, you save your hard working dollars and complete a renovation to your personal taste. A win-win solution for lender and homeowner! A last, buying a property part of a co-ownership complex has common expense dues. Although fancy gym, indoor swimming pool, rooftop terrace has a luxury feeling to it, it may cost you a lot in common expense. In some cases, you may be paying a price of a second mortgage. So be careful, since common expense can be expensive, if you don’t need it, don’t bother with it. To summarize avoid going out of your budget at all time regardless of the interest you have on the property.

Submit a detailed conditional offer

Writing an offer to purchase is exciting but purchasing a property is much more complex so make sure to draft a detail promise to purchase based on your needs. A common setback in purchasing is having an unapproved mortgage. Therefore, when preparing your offer to purchase make it detailed to your purchasing requirement. If you don’t have a pre-approved mortgage, it can take up to 14 days to get an approval. The terms, amortization and condition, including interest rate may also be a factor. Therefore, state theses information on your offer to purchase that is suitable for your budget. In case you are unable to find a legitimate financing for the property, make sure you write out the condition that in such case the offer to purchase is “Null & Void”.  Financing is not the only condition to write, having a professional inspection completed on the property will give you good understanding of its current state. Such inspection with the report can take minimum of 7 days. Make sure the offer is also conditional to such inspection; in case the report is discouraging, the offer is once again null and void. At least state on your offer to purchase to verify any available documentation such as seller declaration, co-ownership documentations, certificate of location, leases if applicable, documents in relation to recent improvement completed by the current owner and more within a reasonable time frame. The purpose of drafting a conditional offer is to protect your interest and yourself from costly and lengthy legal battle that should be avoided at any circumstance.

Do the due diligence

Drafting a conditional offer to purchase will protect your interest but by taking the extra mile to do your due diligences are as well be necessary. To begin, make it mandatory on your task list to verify each and every document in details. A seller declaration will give you a snap shot on the condition known to the vendor(s) at the time of sale about the subjected property. The co-ownership agreement will explain the rules and regulations set by the syndicate to be respected by every co-owner. The minutes will show the past and future improvement scheduled of the common area. Such cost of improvement can have an significant impact on your common expense dues. A certificate of location contains information in relation to cadastral territory, parameter of the property and land, area, servitudes, use of right and much more. By studying the leases (if applicable), you can insure the accurate rent and the conditions stated on the agreement. Many homeowners do necessary improvement prior to placing a property in the market. By going over the documents in relation to the said improvements, which contains information about the legitimate contractor, task completed and any warranties if applicable, you can than free to contact the subjected contractor of any active warranty to see if they are transferable to the future owner. Moreover, you can as well get a second opinion on the on the cost of immediate improvement you are planning to complete after inheriting the property. Such improvements as window replacement, roofing, kitchen and washroom renovation, flooring or any other you have interest in doing so at a future time. Having a precise estimate will set you off with a projected budget you want to prepare yourself for. Finally, an important fact that you must not neglect is purchasing a property without a legal warranty of quality at risk of the future buyer. Under the civil code of Quebec, purchaser of an immovable is protected against existing, latent and hidden defects that can reduce the price of an immovable significantly. By accepting to waive such warranty will lose the right to claim damages caused due to any unseen defect at the time of purchase unless it was declared on the vendor declaration. If you are still comfortable to purchase without such warranty, make sure to have a detailed inspection before going forward. By doing the necessary due diligences, you will have a peace of mind in going forward.

When you have a property of interest, by submitting a conditional offer and doing the necessary due diligences you are simply insuring to inherit an asset and not a liability. If you are uncomfortable or unfamiliar with process, I always recommend working with a professional. A qualified real estate broker will guide you towards the right direction, and protect you from costly and lengthy legal battle. Therefore, do not hesitate to meet and asked your potential representative about their expertise. After all, most brokers provide free consultation without any obligation at first. I wish you all the best on your future investment!

Sudha Halder

Real Estate Broker

Commercial & Residential

1 (514) 945-0649