Every real estate website has a long list of buyer tips. Instead of inundating you with a couple dozen, we’ve narrowed down to the top four most important parts of a real estate transaction. If understood, you could save yourself great stress and literally thousands of dollars.
If you read and truly understand these tips, you’ll be ahead of most Buyers.
Know Your Budget
Talk to an expert about your finances, how much you are comfortable spending and how much you’ve been approved for. Remember that when assessing your budget, it’s important to look at the monthly payments more than the overall amount you’ve been approved for (ie: $200,000 or $400,000 etc).
Sometimes people neglect what the “big number” translates to in monthly payments and end up making payments that they can barely afford. You don’t want to be house poor… On the other hand, some people are daunted by the big number but don’t realize that when broken down into monthly payments, it fits well within their financial comfort zone.
“Who should I talk to?”
You can talk to a mortgage specialist that works for a bank or an independent mortgage broker. We personally recommend using a mortgage broker because they have access to all the lending rates from different lending institutions and are more likely to get you the best rate (unlike a bank that will try to sell their rate and their rate only). They are also compensated by the lending institution that “you” elect, so you don’t pay for their services.
Be sure that you TRUST whomever you decide to work with. Are they providing you with useful information? Are they clearly laying out your options? Do you feel they’re really making an effort to understand your needs? Do they answer all your questions thoroughly?
We’ve personally worked with a number of mortgage brokers and find that, like in any profession, their skills, knowledge and integrity vary greatly. We are now committed to one broker, Dorie Stewart, who we’ve been working with for years.
The banker or mortgage broker you’re working with must give you approval for a specific amount, IN WRITING, before you embark on your search for a home. If it’s not in writing, you haven’t really been approved – no matter what they tell you.
Knowing what amount you’ve been approved for and what monthly payments you’re comfortable with are important measures to take, as they will protect you from a number of potential problems, including:
- Buying a property that you cannot afford and potentially losing your deposit
- Settling for a property that you’re just “content” with when a much more appealing property was actually within your budget
- Time wasted searching for the wrong properties
The last thing you want is for a banker to give you a reality check on your budget when you’ve found the perfect home. Nothing is more frustrating for buyers, and this can easily be avoided with approval in writing.
Work with a Realtor that you can trust
There are always two agents to a transaction: The agent representing the Seller (the Listing Agent) and the agent representing the Buyer.
If you find a good, competent agent that you can trust, you will have someone working hard on your behalf. An agent will arrange property viewings, discuss details with listing agents (and filter out the ‘sales pitch’ for you), advise you on how to get the most competitive price for a property and what fair market value is (this is important because Sellers and their hired agents can have a warped perception of “fair market value.”)
Another benefit of being represented by a realtor, is that you don’t personally have to communicate with listing agents (representing the Seller). The Listing Agent owes their client, the Seller, their best interests and will do whatever they can to convince you to purchase the property, regardless of what’s best for you.
It’s also important that your agent “knows” the particular market you’re interested in. We know and specialize in condos and lofts in midtown and downtown Toronto. We started out working exclusively in condos until we sold our first loft at 19 River St. (Vinegar Lofts). Since then, we have shifted my focus to lofts, as they always seem to fascinate us – in terms of both their history and architecture.
Finally, Buyers don’t pay realty fees. The Buyer’s agent is compensated by the brokerage representing the Seller.
How to Handle an Offer Situation
It’s hard to comment on this as every offer situation is so different and requires a unique approach, or strategy. There are a few general principals that I strongly recommend.
- Stay grounded and keep your emotions in check. Like any veteran investor will tell you, it is absolutely paramount that you make decisions based on facts and logic over emotion. Emotional investors lose money! And lots of it… A good agent will put numbers and facts in front of you and explain them in plain English. If you don’t feel truly informed, you shouldn’t submit anything.
- Clearly map out the strengths and weaknesses of your offer. Try to find a middle ground. You want the best deal for yourself but if it’s not a “reasonable” offer, it usually won’t be accepted. A good agent will put together several arguments on your behalf and make a strong case for you.
There are a number of variables to consider in every transaction. A good agent will help you weigh these variables and make the best decision.
That covers some of the most important parts of a real estate transaction. Have any questions or comments? contact us. We’d be happy to help!
Robert Van Rhijn