Worried about making a mistake with one of the largest purchases in your lifetime? What can you do to avoid them? In this episode, we discuss the top five mistakes when buying your first home and how to avoid them. We look at pricing and financing mistakes as well as how much research should you do in addition to relying on trusted advisors, such as a realtor.
Subscribe to our YouTube channel:
Prefer to listen?
Hi everyone, I'm Karl. Welcome to another Homebuyer's School video, a channel where you get the latest strategy, tactics, and tips from home buying experts. Remember if this is your first time on this channel, and you want to get the latest strategies from the experts, hit the subscription button below, hit the little notification bell so you don't miss anything.
Today I'm joined [00:00:30] by Kevin French, Kevin French, Realtor with RE/MAX. What we're going to talk about today is:
Mistakes that first-time home buyers make
I'm sure over your years of being a realtor, you've seen a ton of mistakes.
What are some of those that you've seen that are common, and then what would some advice be, in terms of making sure that first-time home buyers don't make those mistakes?
Getting too emotional about buying a home
First one. Getting emotional at the purchase, and I mean emotional excitement. [00:01:00] Of course, it's a positive thing, and you should be excited about it.
Of course the first visit to the property that you ultimately purchase should be a good feeling, and you should be very happy.
But don't let that cover up the realities of the situation. You still need to be very, very detailed, and do your homework.
For example, if you're purchasing a condo, that you do your condo document review, you understand what you're getting yourself into.
Then when negative news comes back, whether it be from either the property inspection, or maybe the lender on the property, [00:01:30] to make sure that you readjust.
Don't get too caught up in that one purchase and let it ruin the experience. It's obviously supposed to be an exciting experience, and it should be, but don't let emotion make the purchase, ultimately.
Make sure that you're doing all your homework and working with a trusted advisor, typically a real estate agent, to guide you through the process to make sure you're not making any bad decisions.
In addition to emotion, what other mistakes are you seeing?
Understanding your lifestyle
Look forward to the future and think about the realities of your life. [00:02:00]
Purchasing a one-bedroom condo when you're a young professional is going to work great for your current life, and maybe your current life is what you intend your life to be for another decade.
But if you're in a new relationship, or you're looking at having children, think about that so that you're not moving again in two years when you need more space, or when you may need less space.
Even with downsizers, they can often purchase a home that's... they live in a 3,000 square foot home, and then they purchase a 2,400 square foot downsize, which they [00:02:30] then realize is not really a downsize.
Karl Yeh: How about pricing?
What are some pricing mistakes you've seen in the past?
Kevin French: On the purchasing side?
Karl Yeh: Yes.
Not understanding what the market is, and this goes back to when you're shopping.
I think that it's important to look at a lot of options. It might be exhausting and tiring, but doing that homework then will make you, the buyer, the expert ultimately when it's time to purchase.
[00:03:00] Then you know what the price should be for a property, and you know that you're not overpaying.
When you allow emotion to get involved, and you don't really understand the market, then you might overpay for something.
Ultimately the seller sets the price for the home.
You could have five sellers charge $500,000 for a property, and you could have one seller with the exact same home charge $540,000.
If that home is staged and shows very nicely, you can fall in love and say, "Okay, well let's offer X percentage under list. Let's offer 520," when really the home's only worth 500 [00:03:30] still.
So understand the facts and look at as many properties as you can that are within the realm of what you're looking for, so you that you understand the purchase that you're making, and you're comfortable with it in the end.
In terms of having knowledge yourself,
How much would you rely on a realtor, versus how much would you actually need to do your own homework?
I would say that you should rely heavily on your realtor, because they should be the trusted advisor that you're working with, but ultimately you're the one who has to make [00:04:00] the decision.
You're the one who's going to be paying for the property.
One of the biggest mistakes that people can make is, and of course you don't know this when you first start shopping, but seize an opportunity when it comes up.
There's particular areas in the city that have heritage homes, and there are homes that are close to 100 years old. Eaglewood and Ramsey are a prime example.
Those properties either sell typically within the first week, or months and months and months down the road, because they start at overpriced [00:04:30].
When you understand that property type, and when you understand the market, when that property comes onto the market, take action and purchase the home.
Don't think about it for too long.
When you've looked in an area and you understand the market and the product and the price point that you're looking in, when that home comes up and it's the perfect opportunity, seize the opportunity and take advantage of it, because those opportunities don't last.
Which is interesting, because I'm sure there'll be times when you're going to be hemming and hawing. It's like, "Is now a good time to buy, [00:05:00] or should I wait for the price to go down, or can I outbid somebody?"
But I guess if you have the financial capital, you'd probably just go out and buy whatever you want to buy. I think what you're saying though is, you might want to do your research, but not wait too long?
Do your research, but when the opportunity comes up, you will know that it's right, and then take the necessary steps to purchase the home.
If you're getting competing offers, make sure that you know your top number.
Let's use [00:05:30] a simple number, 500,000. Don't go to 505 because it's 500.
If the home's worth 530, go with a number you're comfortable with.
Finding out that you lost a home over a few thousand dollars once the data's reported a few weeks later, you don't want to be disappointed.
You want to be at a number that you lost, and you're comfortable losing the property because you never would have paid that for it. Best foot forward.
With regards to the other question that you had asked about, taking your time, I would just say take advantage of the opportunities.
[00:06:00] A lot of people think that they're going to time the market, and, "I want to wait and I want to buy when it's lowest." Well, the thing about the lowest is you never know it was the lowest until it's gone.
Do you also see mistakes in terms of understanding your financing? First of all, you make the mistake of getting emotionally attached to a home that maybe you can't afford, and then you kind of stretch yourself.
Even though let's say you got approved, you stretch yourself to the point [00:06:30] where you become house-poor. I guess it comes back to lifestyle too, right?
Yeah, it comes back to lifestyle, but that's just a reality of how a lot of people shop.
If the bank says you can afford $750,000, some people want to spend $750,000.
To go back to making mistakes financially, first and foremost is get your lender everything that they require, and don't go on word.
A lot of people say, "I made X amount last year, and here's my debt." Then the lender plugs the numbers in and tells you that you can shop within this [00:07:00] threshold, but the reality is you forgot that you had this debt, or you're cosigned on something.
That obviously impacts your affordability.
So you don't end up in the situation that you're referring to, where you're shopping at 750 and really all you can afford is 640.
But then you end up buying at 750 and it [crosstalk 00:07:17]
Well, you can't if you don't get approval.
But if you do purchase at that price point, be prepared for the realities of what your monthly expenses are going to be.
If you do have enough time and you're not excited to get into a property tomorrow, and you can wait six, [00:07:30] eight months, maybe look at the realities of what that home would cost in terms of taxes, average utilities, and then your mortgage payments.
Put that money aside every month and see how comfortable you currently are. Or put the difference between your current rent and that aside and see if you're comfortable living like that.
If not, you probably shouldn't spend that much.
If you want to know more about the mortgage process, check out our playlist above and the description below.
Do you have any other mistakes that you want to mention, in terms of first-time home buyers?
Kevin French: [00:08:00]
I just think it's important to work with somebody who understands the market.
Ask as many questions as you possibly can, and feel comfortable with the answers that you get from them. And then become a little bit of an expert yourself.
You're spending, between Calgary, $200,000 plus, the sky's the limit. It's important to invest some of your time in this as well, and keep bugging the person that you're working with, whether it be a new home sales associate, or a builder, or a real estate agent.
Make sure that you're asking [00:08:30] them as many questions as possible and becoming a little bit of an expert, at least on your product type and area that you're working within.
Question of the day
Perfect. The question of the day I have for you is what mistakes did you make as a first-time home buyer, and how would you have addressed them now, looking back?
Let us know in the comment section below. If you want to know more about home buying, check out these videos here, as well as don't forget to hit the subscribe button to learn more from the experts. Thanks for watching, and we'll catch you on the next video.
Let us know if you have additional home buying related questions that we can answer by submitting them in the comments section below.
Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from home buying experts.
About Kevin French:
Kevin French is a Calgary and area based realtor with a client focus. He specializes in a stress free home selling process that is built on customer service. Understanding that your home is one of your largest investments, Kevin employs a marketing mix that ensures you will maximize returns on your home sale. Diligent market research coupled with an in-depth understanding of the Calgary and area markets, allows Kevin to pinpoint the perfect price for your home.
In addition to perfect pricing, Kevin offers a suite of additional services such as professional photography and an interior designer to ensure your home shows its best. Kevin French has become a trusted name in real estate because he is results driven and works closely with his clients to produce the best results.