Buying a Home Should be Stress Free
"Did you hear about the guy that bought a 2 storey house? He got one story before he bought it and another story after"
~Phil Dunphy, TV Realtor
Buying a home follows a predictable script. If you know what comes first, second and last you'll get the house you deserve at a price you can afford. Stumble off script and you might end up disappointed.
The following are answers to the most common questions I get from the average buyer.
I've written this list in a (somewhat) chronological order allowing you to easily scroll through and get the information you're looking for.
Here we Go!
You: When can I start looking at homes?
Me: When your pre-approval is complete you can start looking at homes. Not before. If you aren't in a position to buy, it's unfair to take a REALTOR'S® Saturday afternoon and doubly unfair to have the seller clean their home and leave for an hour if you have no intention of buying.
You: How do viewings work?
Me: You tell me what homes you want to see and I book appointments with the sellers. If the house is vacant we may be able to go immediately but if the owner lives there we will need several hours notice. If a home is tenant occupied we need 24 hours notice. It's best if you let me know what houses you want to see the day before.
You: I want to see 10 houses today!
Me: That's too many. By the time we get to house 7, you won't remember house 2. Make a list of 3 or 4 and take it from there. Catch your breath, think about what just happened and make a plan for the next time out.
You: How long does a viewing take?
Me: I schedule my appointments 30 minutes apart. If you don't like a house there's no sense standing around, let's move to the next one. If you like a house we may stay longer.
You: How many homes do people usually look at before they buy one?
Me: The average is somewhere around 10. I've worked with people that buy the first one they walk into or look at 50 before settling on one.
You: I found a house I like, what now?
Me: Write an offer. When you find something that fits your needs and is within budget, write the offer.
You: But how will I know if there isn't something better out there?
Me: You won't. If you've found a house you like in the area you want and the price is reasonable, make an offer. Don't dwell on what might be. If you really can't decide, maybe it's time to reconsider buying a home right now and sit on the bench for a while.
You: Ok, let's write an offer. What now?
Me: We get together at my office, your place or at Tims and I go through all the details. Writing an offer can take between 30 minutes and several hours. We don't need to be in the same room, you just need an email address. You also need a cheque for a deposit and some ID.
You: I need a cheque, say what?
Me: A deposit cheque will always accompany your offer, you can't write one without it. The deposit is usually in the range of $5000.
You: Why do I need a deposit? I have lots of money.
Me: It shows a seller you are a serious buyer, and more importantly, it assures them you will complete the sale. There is always a period of time after a sale is finalized and possession day. If there were no money involved and an irresistible new deal came along, there would be little incentive to honour the first deal. With a non-refundable deposit at stake, buyers are unlikely to walk away.
You: Is my deposit the same as my down payment?
Me: No. A deposit is money that accompanies your offer and the down payment is the total you are paying upfront for the home—the rest is a mortgage. If your offer is accepted and you remove conditions your deposit forms part of your down payment. If you don't finalize the sale your entire deposit is refunded, without penalty.
You: What are are the main ingredients in an offer?
Me: Terms and conditions. Terms are what the parties are agreeing on and conditions are events that have to take place before the terms take effect. Common terms are price, possession date and what's included. Common conditions are inspections and financing. All offers contain terms. Most offers contain conditions, but don't have to.
You: I've heard of homes being conditionally sold. What's does that mean?
Me: A buyer and seller have come to terms (agreed) in writing and the sale is now subject to the conditions written into the offer. The buyer will now work to satisfy the conditions by carrying out inspections and arranging financing. If a buyer is unable to satisfy conditions the sale does not proceed and the home goes back on the market. This happens from time to time.
You: What conditions should I put in my offer?
Me: Financing and inspections. There can be others but these are the most common. I'll go through a list with you.
You: Wait, one of my conditions is financing? But I'm pre-approved.
Me: The lender looks at you one more time. They also review the property you are buying to make sure it's worth what you're paying.
You: So, my main conditions are inspections and financing. How long do I have to satisfy them?
Me: Conditions are inserted for 10 days. This is plenty of time to carry out your inspections and get financing finalized.
You: I might need more time than that, can we make it 3 weeks?
Me: Not usually. You are trying to get your offer accepted by the seller. If you request a long conditional period the seller will wonder why you aren’t working hard to get your conditions met in the usual timeframe. This creates a negative impression of you in the seller's mind–we need them to like you!
You: Should I get a home inspection?
Me: Yes. It's your last chance to look at the home before possession day.
You: I'm buying a condo, should I still get an inspection?
Me: Probably, but not necessarily. Depending on the style, there's usually less to inspect in a condo but you still need to be comfortable. If you feel good about the present condition you can choose to leave the inspection out of your offer.
You: How do home inspections work?
Me: I let the home inspector in and he looks at the home for around 3 hours, then we all meet at the house and go over the report. You'll get a detailed copy of the report through an email link or in a binder.
You: Are home inspections expensive?
Me: They run around $425.
You: Shouldn't the seller pay for the inspection, it's his house?
Me: No. I get asked that from time to time. The home inspection is for you and you should pay for it.
You: What does the home inspector look for?
Me: Defects. Your inspector will climb in the attic, go on the roof, slip into a crawl space, test the appliances and report on the present condition of all of the home's systems including plumbing, wiring, structure, foundation.
You: So, my inspector will tell me if it's a good house?
Me: No, the inspector won't make a recommendation on the house, they just tell you what condition it's in—it's up to you to decide if it's a good house. They also won't comment on workmanship unless it's a structure or safety issue. The homeowner doing a lousy job of installing laminate flooring (common!) isn't something a home inspector will comment on.
You: Do I have to hire a professional inspector?
Me: No. If your Uncle Wilf knows a lot about houses and works for beer, give him the job. As long as you trust the person it's good enough.
You: Is there anything a home inspector doesn't do?
Me: It's important to note that your home inspector is not usually an electrician or a plumber by trade, but they know enough about the systems to alert you if further investigation is required. Unless there is an obvious reason for concern, rely on your home inspector to look at the home and give you his report. If he feels you need to get a certified trade in, then request further inspections from the seller.
You: What if the inspection is bad?
Me: You don't have to buy the house. Keep in mind though, every house has problems, even new houses. A house starts dying the day it was born. You have to balance the price range with the home's overall condition. If you have $250,000 to spend, you're going to have to deal with a few things. That doesn't mean you can't find a safe, sexy house, you just need to decide what you can live with and live without.
You: How do I know how much to offer?
Me: You don't. And I don't know how much a seller might take. Every seller is different, has different priorities and reacts to (what is) a stressful situation differently.
You: Pffftt...well, you're not much help.
Me: Ok, here's what I do know: Sellers with a home on the market for more than a week will usually look at something in the range of 5k less than asking. More than one month and that goes to 5-15k lower than asking, and some sellers will look at more than 15k less if the house has been for sale for 2 or more months.
You: But how will I know if I'm over-paying?
Me: You can make an educated case. You will already have an idea of what the competition is asking because you will have viewed several other homes for sale. We can also look at what has sold in the area recently to see what the actual sale numbers are. Keep in mind that there is no way to determine an exact value. In the end, value is subjective. What one person values another doesn't. Consider different buyers when asked if a house is nice—buyer 1 "yes!", buyer 2 "no!" As we can see, buyer 2 wouldn't be interested even if the price was lowered substantially.
You: Do "lowball" offers work?
Me: No. Well, just about never. All you do is make the seller mad. The seller may not have set a reasonable price in your mind but in their mind they have. Once you have insulted the seller they often choose not to deal with you at any price.
You: OK, we found a nice house at a fair price and wrote a decent offer. What happens now?
Me: I send your offer by email to the seller's Realtor. I also call them and explain the offer and tell them how awesome you are.
You: Awe thanks, but why would they care?
Me: People deal differently with people they like. If I shine a light on you—loves the neighbourhood, has 2 cute kids, loves gardening—the seller may be more receptive to your offer.
You: Really? I don’t know about that...
Me: It’s true! I see it all the time. The first question sellers ask when they get an offer is how much it is. The second question is who’s it from. Sellers react negatively when you insult their home. When a buyer's agent comes in aggressively with a list of things wrong with a home, sellers get defensive. If we tell them we love the home they sit up straight and smile. This plays into your hands. Of course, this isn't always the case, some people just want the bottom line, but if I can make you look great we have a leg up.
You: What are the seller's options when reviewing my offer?
Me: A seller can do 3 things with your offer, accept it as written, let the time frame for acceptance pass and the offer is dead, or send a counter offer to change one or more terms or conditions in the offer.
You: Sellers usually accept offers, right?
Me: Nope. Very rarely does an offer just get signed straight away, as written. If the home is well priced and shows A+, the offers will come in early and close to asking price, so one might get signed as written. However, most offers have some sort of counter involved. A counter is a request by the seller to change one or more terms or conditions in your offer.
You: When will I know if they accepted my offer?
Me: We inserted a deadline into the offer for the seller to make a decision. It's usually later in the day if the offer is written before 6 pm or noon the next day if you wrote your offer in the evening.
You: Let's assume my offer has been accepted or we agreed on a counter—what now?
Me: First off, congrats! Now that you've agreed on terms you have a conditional offer in place. You now have 10 days to satisfy the conditions you inserted into your offer. In that time, the bank reviews the home and runs your numbers again to approve (or reject) your loan, and you carry out inspections.
You: What happens if someone writes the seller a better offer while I'm working on removing my conditions? Can I lose the house?
Me: Sellers are only able to accept another offer as a backup offer. They are bound to your offer until such time as you remove all conditions or let the offer fall through.
You: Fall through?
Me: I for some reason you can't satisfy the conditions of the accepted offer you will send the seller a document stating conditions are not satisfied and the home goes back on the market. There is no penalty, you get your deposit back and we all move on.
You: Why would I let my sale fall through?
Me: There can be several reasons but the most common is a bad inspection or your financing doesn't get approved. It's important to be aware that the sale needs to fall through on a condition inserted into the offer. Unless you wrote into the offer "subject to the buyer getting cold feet", you can't just change your mind during the conditional period. You entered into a contract with the seller and need to do your best to satisfy the conditions of the original offer.
You: Alrighty. So, we're conditional, what should I do now?
Me: Some of this is on me and some on you. I will get all of the purchase documents to your lender and babysit the financing end of it for you. I don't have any influence with the underwriter (bank official in another city), but I'll communicate regularly with the mortgage specialist here in town to make sure we get it done on time and without hiccups. You will need to book the inspections.
You: Where can I find an inspector?
Me: I'll give you the names of 3 inspectors I've used many times and trust. Call all 3 and choose the one you are comfortable with. If you want to choose your own inspector, hit up Google, there are tons of great choices.
You: Cool, I'll book the inspection for tomorrow!
Me: Hold on :) It's always best to book the inspection near the end of the condition removal period. If you do it right away and we find out on day 2 your financing is an issue, you just wasted $425. Let's make sure financing is on track before we do any inspections.
You: I've had my inspection and the inspector found a few things wrong!
Me: This is usually the case, no home is perfect. You need to differentiate between maintenance issues and small repairs with big money items. If you feel there are too many things to handle we let the sale fall through and move on.
You: I don't want to let the sale fall through, I love the house. Maybe we can ask for a discount?
Me: In certain cases, you can negotiate the price from an inspection result, but not usually. An example is a bad furnace or sewer line. These are things that neither party knew about before the inspection. Buyers and sellers usually agree to split the cost of these items. You can't ask for a discount on a drafty door, old windows or juice stained carpets. These are examples of items a buyer could see before the offer was made and must be taken into consideration when writing the offer.
You: The house is ok, my financing is confirmed, I'll take it. What now?
Me: We send the seller a signed document stating we are removing all of the conditions and it becomes a final sale!
Me: Yay indeed, you did it. Between now and your possession date you will need to choose a lawyer to register your name in the title, get insurance on the home and arrange to have the utilities transferred into your name. I'll help you with all 3!
You: That was easy!
Me: Good for you—mission accomplished! You just made a change for the better and managed your stress throughout. You'll have the keys in your hands before you know it!
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