​​First-Time Home Buyer in Canada? The 5 Most Common Mistakes To Avoid

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A man and a woman sitting down and sorting through cardboard boxes | Willful
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    It’s important not to get too caught up in the excitement of buying your first home that you overlook the things that can go wrong. Nobody wants to wake up in their new home with buyer’s remorse, so it’s important to be aware of the common mistakes made by many first-time home buyers in Canada. It’s good to learn from your mistakes but it’s better (and less expensive) to learn from others’ mistakes. 

    1. Buying on your own

    Many first-time buyers attempt to cut costs by purchasing their home without the help of a trusted real estate agent. This can result in unexpected problems and thousands of dollars in expenses down the road. A real estate agent can help you understand home inspector reports, legal contracts, and financing - important parts of the home buying process that can get complicated on your own. While a real estate agent’s commission might seem high, they can help you negotiate a better offer and provide important services that will save you more money later on. 

    2. Skipping the home inspection

    Many first-time home buyers quickly get emotionally attached when they find their dream home. Letting your emotions get in the way can make rational thinking difficult. It’s crucial not to take risks like skipping over the home inspection to secure the home before others. The home might look great at first glance, but you can easily miss less visible problems like asbestos, flood damage, HVAC system leaks, termite damage, or even structural and engineering issues. Finding these problems after you’ve made the purchase can quickly turn your dream home into a nightmare. 

    You can find an agent who includes an independent home inspection in their fee or you can pay for a pre-sale inspection before you make an offer. If the home passes the inspection, you can waive the inspection contingency afterwards since you’ve already had it inspected. Avoid relying solely on the seller’s inspection, unless they work with a reliable real estate company. Sellers often order their own inspection before listing their home on the market, often to fix any issues beforehand and show buyers the house is sound. However, the seller’s inspector is only liable to the sellers, which means that if any issues are missed, you have no recourse.  

    3. Not purchasing mortgage insurance

    Opting out of mortgage insurance can leave you vulnerable to potential debt and credit damage. Having mortgage insurance provides more flexibility in financing and offers you available equity to pay off debt. It’s likely that the most expensive purchase you’ll ever make is your home, so it’s important to protect it with mortgage insurance. 

    4. Take extra precautions with fixer-uppers 

    You might find a fixer-upper with the right price tag, but be aware that there’s a risk that it turns into a money pit once you start renovating. A real estate agent familiar with fixer-uppers can help you negotiate for an extended due-diligence period so that you can get estimates from contractors. This gives you the ability to back away from the deal if the cost of renovating is more than your budget. The real estate agent can also offer a home inspection and walk you through the inspector’s report to help you fully understand the challenges you’ll be taking on.

    Be sure to thoroughly research contractors. Always look at their licenses and background before hiring them. An experienced real estate agent has a network of reliable contractors they can recommend. You’ll also need to find a suitable lender experienced in dealing with fixer-uppers, so speak to your real estate agent about this too.

    5. Lack of research

    Many first-time home buyers begin the process without knowing the types of agent fees or commissions they’ll have to pay. Real estate agents have flat fees as well as a commission rate of about 5% that gets paid evenly by the seller and buyer. Do your research to find the right agency that charges reasonably.

    First-time home buyers are also often unaware of the financial assistance and benefits available to them from government home buyer programs. This is one of the costliest mistakes but luckily, one of the easiest to avoid. Some of the benefits that first-time home buyers are eligible for:

    •  a 15% tax credit on closing costs
    • Land transfer rebates (provincial and municipal)
    • A maximum of $4,000 in provincial land transfer tax rebate (LTT)
    • Municipal LTT rebate money

    General buyers and those purchasing commercial, industrial or multi-unit properties can also benefit from government programs. A reliable real estate agent can help you determine your eligibility and answer any questions you have about these programs. Your home is likely your most expensive purchase, so you should always do your research to make sure you save as much as possible. 

    6. Forgetting the important documents

    An AngusReid survey commissioned by Willful found that 1 in 4 home owners don’t know what would happen to their home if they pass away. Sure, signing your will isn’t as exciting as signing your closing documents, but it’s a key document to have in place to protect your new asset. Without a will, your home may not be left to the beneficiary or beneficiaries of your choice if you were to pass away. How your home’s ownership is passed on depends on whether you’re purchasing it as a sole owner, as a joint tenant or tenant in common - but it’s just as important to have a will in any scenario. 

    Do you know who would pay your mortgage, maintain your home, and do repairs if you were to become incapable of doing so due to an illness or injury? Many first-time home buyers don’t have an answer to this important question. When you buy your first home, it’s important to create a power of attorney for property to appoint someone you trust to manage your responsibilities as a homeowner in the event you were incapacitated. It’s a simple way to make sure that you don’t get behind on your bills or your home doesn’t fall into disrepair.

    The bottom line

    Take the time now to do your research, rely on professionals to help you, and don’t be afraid to ask questions along the way. Buying a home is one of the most complicated and expensive transactions you’ll ever make, so don’t cut corners that you’ll regret later on. 

    Justo is a fast-growing, tech-enabled real estate brokerage bringing excellent service, fairness and transparency to the Ontario market.

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