What can I do to protect myself as a first-time homebuyer?
November is Financial Literacy Month, and buying a home is an important transaction. Last week, I discussed some key tips to protect yourself when buying a home in a hot market, including the importance of hiring the right real estate professional, knowing what you can afford, and understanding the additional costs that come with purchasing a home.
While it may be tempting to do whatever it takes to get the home you want, you have to be sure you are providing yourself enough flexibility that you won’t be left in a tight spot later on. The buyer in our story from last week missed a number of key steps during the buying process, which unfortunately led to him losing his deposit and his dream home.
Here are some more tips to consider which will help you in your home buying journey.
Know your tolerance for risk
When the buyer signed off on the offer and declined to include financing and home inspection conditions, he put himself at risk. In his case, it was risk he should not have taken on.
Before making a decision on whether to waive certain conditions, ask yourself: Can you afford to fix a major issue with the home that an initial home inspection may have detected? Or potentially lose your deposit if your lender denies your financing? If not, then waiving financing and home inspection conditions are not the way to go. These conditions offer you added protection as a buyer. In a heated housing market, many sellers are looking for higher bids without conditions, but as a buyer, it is important to be sure that you are making an informed decision before making a higher offer on a home.
Read and understand everything you sign
The buyer said he wasn’t aware that the closing date was 45 days away. He thought he had 60 days and this was, in part, why he found himself with a financing problem. But the dates would have been written into the Agreement of Purchase and Sale that he signed.
Though the representative should have highlighted the change, the buyer could have taken extra care to carefully read and understand what he was agreeing to.
An educated consumer is an empowered consumer. If there is anything in an Agreement of Purchase and Sale that isn’t clear or you need further clarification, ask your real estate representative or real estate lawyer to help you. Same goes for the representation agreement that you sign with your real estate brokerage, including details such as how long you are committed to working with that brokerage.
Don’t sign off on anything until you’ve thoroughly read and understand what you’re signing, that way you won’t run into any surprises later on.
The home buying process can be daunting, but if you come in with a plan, and ready to ask a lot of questions, you will avoid any unwanted surprises.Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.