9 Traps to Avoid
Whatever angles are considered, the purchase of a house is a major investment in your life. For many buyers, it could be a process that will be more expensive than it should because many of them will get into it head first and will fall into traps such as:
Paying too much for the house they want; Losing their dream house to the hands of another buyer; And (this is the worst), buying a house that does not correspond to their needs.
Buying a house using a systematic approach will help you avoid falling into these frequent traps. Not only it will save you money but also you will buy the house that really meets your requirements. This rubric presents the 9 most common and expensive traps. It will inform you on how to identify them and how to avoid them.
9 Traps for the buyers
What price should you offer when filling an offer to purchase? Is the asking price too high or does it seem to be a good investment? If you did not do any research on the market to assess the value of similar houses, you will make an offer blindly. Not knowing the market conditions might lead you to offer too much or you might miss an opportunity to make a competitive offer on a house that is a really good deal.
Buying the wrong house
What are you looking for in a house? A simple question that might lead to a complex answer. Too often, buyers get excited and overwhelmed when buying a new property and become an owner of a new house that ends up being too big or too small. Maybe the travel distance to work is too long or more important repairs than expected are needed. Take the time to define your needs and your expectations. Write everything down and use this list to assess each house you will visit.
Make sure that you will obtain the irrefutable proof that the sellers own the house right from the beginning of the negotiation process. Make sure also that the house is not mortgaged and free of any other type of legal lien and that a title search will be performed. The last thing you need to discover is that there is a legal hypothec on the house or other type of priority lien, or you find out there are other owners in the picture or leases were already granted.
In your offer to purchase, make sure you request a current certificate of location that describes accurately the limits of the property. If this document is not the exact reproduction of the actual reality, for example, if the expansion of the balcony or the addition of the pool is not there, this certificate will not be accepted by the bank. Be very clear and firm on these issues.
Repairs not mentioned
Don’t expect the seller will provide you with a comprehensive list of everything that needs to be verified or repaired. You as well as the seller expect to maximize the investment. Make sure you perform a thorough inspection of the house quite early in the process. Consider hiring an independent inspector who will examine the house objectively and ensure the purchase contract is conditional to the results of the inspection. The contract should include in detail all the elements of the house and all the required repairs.
Not being pre-qualified
A pre-qualified mortgage is fast and easy to get. And free. When you’re pre- approved for a mortgage, you take the stress away while you shop and you feel more secure knowing that you will be ready to move when you’ll find your dream house.
If a seller does not comply strictly to the contract by neglecting to do repairs he/she promised to do, or by changing the nature of the contract in any way, this can lead to the postponement of the signature. Agree on a compensation amount ahead of time if, for example, the repairs are not completed as expected. Prepare a list of items both parties agreed on and follow up closely on each of the items.
Make sure you identified and found all the costs resulting from the sale – small or big – as early in the process as you can. When a transaction is concluded, sometimes unexpected fees suddenly “appear” after the total amount has been established: discharges, contributions, etc. Ask the seller to indicate in writing the total costs and charges for which you are responsible.
Rush the signature
During this step, it is crucial you take your time and insist on analyzing all the documents the day before the signature. Make sure the documents reflect your understanding of the transaction perfectly, that nothing was added or removed. Is the interest rate exact? Everything has been covered? If you rush through it, you might end up in a dead end at the last minute and with no solution at hand, you might compromise the transaction.
11 Expenses to Expect
Whether you are considering buying your first house or are looking for a bigger one, there a many expenses over and above the purchase price that you need to plan for right from the moment you start looking for a house. These additional costs can take you by surprise and turn the signature of the contract into a nightmare if you are not well informed and prepared to deal with them.
Some of these costs are to be paid only once while others might be on a monthly or annual basis, and are over the ones you expected to pay. All these costs do not apply to all situations but it’s better to know what they are ahead of time in order to prepare a realistic and complete budget.
Remember that buying a house will constitute the central point of your financial situation.
Whether it’s your first, second or tenth house, several details must be considered all along the process. The last things you need are unplanned expenses that are revealed to you too late in the process, meaning at the moment of taking possession of your new house.
Read the list of the following items carefully and make sure you include everything in your budget while planning the purchase of a house.
The last things you need, are unplanned expenses revealed to you too late in the process, meaning at the moment of taking possession of your new house.
1. Evaluation fees
The lending institution will probably ask for the property evaluation of the house you wish to buy and you will have to pay these fees. The cost of such an evaluation varies from $175 to $400.
According to the amount of cash you will put down, the lending institution might decide to add the amount of property taxes (municipal and school) to your mortgage payment. And even if you repay them to the actual owner as part of the notary adjustments, you will have to start immediately to pay them together with your mortgage payment to build a reserve for the next payment date.
3. Land surveying fees
When you buy an existing house (as opposed to a new one), the bank can require an updated version of the certificate of location. If your offer to purchase did not already include it as being the responsibility of the seller, you will have to pay fees ranging from $500 to $800 for such a document.
4. Insurance for the property
Home insurance covers the reconstruction of the property (replacement value) in case of destruction and covers the contents (theft and fire). Your lending institution will require proof of insurance before releasing the funds for the signature at the notary.
5. Legal fees
Even the simplest transaction must be duly signed at the notary and registered at the Publicity of Rights Office. Inform yourself about the fees charged by various notaries. Costs will vary based on the complexity of the file and the
If you do not deposit the required minimum amount in cash to get a “conventional” loan from the bank you will have to pay an insurance premium. This premium represents from 0.5% to 3.5% of the total amount of the mortgage. Payments of the premium are usually added to your monthly payment.
7. Mortgage brokerage fees
A mortgage broker has the right to require to be compensated for analyzing various offers from lending institutions. However, it is important to “shop” since many brokers will offer this service for free because they are compensated by the lending institution.
8. Moving fees
The costs of professional moving companies average between $80 to $125 an hour for the truck and 3 men. The cost increases from 10 to 20% during the 1st of July period. If you plan to move over 40km away to your full-time or parttime employment, this move could be very smart!
9. Condo fees
The co-owners must pay monthly fees for the maintenance of common spaces, stairs, landscaping, snow removal, etc. These costs vary according to the property and the decisions of the co-property syndicate.
It is important to know if a special tax relating to exceptional infrastructure expenses (sidewalks, aqueduct, sewers, paving) will apply to the property you’re interested in buying. These infrastructure fees might amount to thousands of dollars in addition to municipal taxes for a predetermined number of years.
11. Transfer tax and others
This tax applies evenly in all municipalities for the transfer of title to property, whether for a house or for land. Commonly referred to as a “welcome tax”, it must be paid within three months of the signature. In some municipalities and in some circumstances, a “green tax” can apply for an important expansion requiring a new cadastre.