Amin Vaziri - COMPLETE GUIDE TO BUYING A HOME

COMPLETE GUIDE TO BUYING A HOME

Amin Vaziri

Table Of Contents

How Real Estate Agents Help Home Buyers

Owning vs. Renting

Buyers' Needs and Desires

Real Estate Horror Stories To Learn From 29

Searching for the Right Home

Buying a House: Negotiation Dos and Don'ts 43

What to Know About Home Inspections

Shopping for a Home Loan

Organizing Your Move

About the author- Amin Vaziri I’m Amin Vaziri, a civil engineer by training, with an MBA degree and nearly 25 years of hands-on experience in the real estate market overseas and Canada. Throughout my career, I have been deeply involved in various projects, from residential and commercial developments to large-scale infrastructure ventures. My engineering background has given me a strong technical foundation, while my business education has allowed me to approach real estate with a strategic and entrepreneurial mindset. This blend of skills has shaped my perspective and fueled my passion for building, investing, and helping others navigate the real estate world. Over the past two and a half decades, I’ve built my career on a commitment to integrity, hard work, and results. Through this book, I aim to share the insights and lessons I've learned along the way, to inspire and empower others to achieve success in real estate and beyond. All the information in this book is based on my knowledge, experience, and effort. However, it remains the reader’s responsibility to conduct further research and seek additional professional advice if any information appears unclear or requires further validation.

CHAPTER 1 How Real Estat eal Estate Agents e Agents Help Home Buyers

At the start, I’ll tell you I’m a real estate agent — proudly so! Nice to meet you! I’m not trying to sell you anything, but I’m pleased to be of service. Generally, real estate agents for buyers are paid out of the listing agent’s commission. So, I’m not looking to part you from your money. Instead, I’m giving you the benefits of experience and advice I have gleaned throughout my career selling houses and being in real estate transactions, for both sellers and buyers. We can talk if you want me to help you find a home. Call me if you need me. Technology has changed the way homes are sought and bought today. In this “Information Era,” most buyers are first introduced to the house and eventually purchase it via the internet, through sites like Prelist.org and Realtor.ca. So that means there’s no need for a buyer’s real estate agent, right? Using a real estate agent is to find a home and show homes available for sale, right? If a buyer can find and visit a home on the web alone, why involve another party?

WHY HOME BUYERS NEED A REAL ES UYERS NEED A REAL ESTATE AGENT

Ah, not so fast, friend. The reasons to use a real estate agent today are as valid as yesterday. The ease of online transactions and proliferation of services to assist buyers in handling their real estate transactions came about recently, over the last decade. This 1

has caused buyers to wonder if using a real estate agent is no longer necessary or an expense that can be avoided. While doing the work yourself can save you money if you buy a “For Sale By Owner” (FSBO) house and the seller agrees to reduce the price by 1.5% (half of what a listing agent would almost receive), for many, a do-it-yourself home purchase might be pricier than a real estate agent’s commission in the long run. Besides, a buyer generally doesn’t directly pay an agent any commission on a house purchase. On most home sales, there is a listing agent (the agent the seller engages to sell the property) and a selling agent (the agent who introduces the eventual buyer into the transaction). The selling agent is sometimes called the “buyer’s agent” because they are often working on a particular buyer’s behalf, and it’s easier than explaining that the selling agent is not the listing agent but the buyer’s agent. Some real estate agents market themselves as “buyer’s agents,” “exclusive buyer’s agents,” or “buyer’s representatives.” These real estate agents have chosen to make a business of finding homes for prospective buyers and handling the negotiations and transactions attendant to the purchase. These agents want to accentuate why buyers shouldn’t go directly to the listing agent when they purchase real estate. A buyer who goes directly to the listing agent and allows that agent to “manage” both sides of the transaction deals with an agent with conflicting responsibilities. Their job is to get a reasonable price for the seller, and they might not ambitiously represent the buyer’s interests. Those who market themselves as buyer’s agents indicate they only work for the buyer in a real estate transaction. The buyer’s agent's commission is paid by the seller, except in rare cases. They either get paid directly by the seller or set up the transaction so that the seller provides a “credit” to the buyer

for the real estate commission, and then the buyer pays the commission. A maxim in real estate is, “No matter how it’s set up, the buyer still walks away with the house and the seller still walks away with almost 96.5% of the purchase price.”

MORE ACCESS TO THE REAL ES O THE REAL ESTATE MARKE TE MARKET

A real estate agent will have better access to the market and exceptional knowledge of local conditions. The agent is a full- time liaison between sellers and buyers. An agent will have ready access to other properties listed by different agents. Buyers’ and sellers’ agents know how to negotiate a real estate deal. A real estate agent will track down homes that meet your criteria, contact sellers’ agents, and secure appointments for viewing the homes. On their own, buyers have a more difficult time with these things. This is even more so when a buyer moves due to relocation or employment opportunity and does not engage a buyer’s agent to handle matters.

NEGOTIATING IS HARDER ON YOUR OWN

A real estate agent will keep the transaction “at arm’s length,” so personalities and emotions do not become involved. Price negotiations take a special skill and understanding of the psychology of offering and counter-offering. Agents keep the transaction dispassionate and rational. For example, a buyer (you) might like a home but despise its wood- paneled walls, shag carpet, and lurid orange kitchen. When you work with an agent, you can express your opinions on the current owner’s decorating skills and complain about how much it will cost to upgrade the home without insulting the owner. Your agent will translate that to the seller — that you very much like the property but can see having to spend a certain amount on decorating costs, and thus can offer much less.

CONTRACTUALLY SPEAKING…

There are many contracts and documents involved in purchasing a house. The stack is more than an inch thick. Unless you’re a real estate lawyer or title agent, these documents will be foreign to you. Yet, they require detailed and accurate completions. Buying a property is not necessarily a “fill-in-the- blanks” transaction. One mistake, let’s say in title work, could haunt the buyer well down the line after purchase. This very situation happened. A property that sat on a double lot was put on the market. The neighbour bought it to carve off a bit of the second lot to expand his yard. The seller then returned the home to the market, and it sold. Months later, through a property tax notification, it came out that, in preparing new deeds for the properties, the expanded yard area was correctly in the neighbor's name; however, the house had been transferred to the home buyer. The new homeowner now owned both houses, and the neighbour owned his expanded driveway and yard. Fortunately, they were good neighbours and settled the matter with a few signatures. An experienced real estate agent deals regularly with these contracts, conditions, and unexpected situations and is familiar with which conditions should be used, when they can safely be removed, and how to use the contract to protect you.

YOU WON'T NECESSARIL N'T NECESSARILY SAVE MONEY

The point of not using a real estate agent would be to save money. Otherwise, why would someone turn down professional assistance in finding a home?

However, it’s unlikely that both the buyer and the seller will reap the benefits of not paying real estate agent commissions. It works like this: An owner selling on his own (FSBO) will price the house based on the sale prices of comparable properties in the area. Many of these properties will be sold with the help of an agent; therefore, the seller retains the percentage of the home’s sale price that might otherwise be paid to the real estate agent (usually 3.5%). Buyers looking to purchase a home sold by an owner without an agent may believe they can save money on the home by not having an agent involved, so they look solely at FSBO houses. They might expect money to be saved and make an offer accordingly. Unless the buyer and seller agree to split the savings, they can’t both save the commission, and that’s if the commission amount did not already lower the listing price to make it more market-attractive. Here’s a short list of the advantages that using a real estate agent can bring to your buying experience:

• Education and experience • A buffer between you and the seller • Neighbourhood knowledge • Price guidance • Market conditions information • Negotiation skills and confidentiality • The ability to handle paperwork • The ability to handle closing questions • Relationships for Future Business

It’s essential to know the “ins and outs” of real estate agents before you bring one along to help in your search for a home, just so that you might know what to expect and what will be expected of you. 5

Who is A REAL ESTATE AGENT? GENT?

Simply put, a real estate agent is licensed to list and sell real estate, including homes, multi-family properties, commercial, and industrial buildings. A Realtor®, however, is somewhat different. A Realtor® is a member of the Canadian Real Estate Association®. While an agent is always a real estate agent, a real estate agent isn’t always a Realtor®. As mentioned, real estate agents who work in the buyer's best interests are called buyer’s agents. All listing agents represent the seller. In contrast, buyer’s agents work on commission, which is contracted in the listing agreement. When a buyer’s agent brings the buyer, the listing agent must split the contracted commission with the buyer’s agent.

HOW TO CHOOSE THE BEST AGENT FOR YOUR NEEDS UR NEEDS

You might be urged to pick the first real estate agent who appeals to or approaches you, but that’s something to avoid. As with any professional, there are degrees of professionalism, dedication, and experience. The “wow factor” will wear off. Meet with prospective buyers' agents in their offices. A good buyer’s agent will want to know whether you’re preapproved for a loan by a lender, what kind, and the loan terms you’re getting. They should spend adequate time discovering what you’re looking for in a house. They should listen as much as talk and ask questions. Watch to see if the agent makes notes. If the agent doesn’t broach the topic, ask for an explanation of his understanding of agency relationships and obligations to you. The law requires agents to explain whether they’ll work for the

buyer or the seller whenever they have substantive contact with a customer or prospective client. Be sure that the agent will show you all listings or properties on the market that meet your requirements, not only those handled in-house. Buyer’s agents have the legal duty to put the buyer’s needs ahead of their own. Even when an agent will be paid more for selling an in-house listing, they must inform you about other available, suitable listings and take you to see viable prospects. A good buyer’s agent will provide a home-buying education. The listing agent will point out all the features of a home; a good buyer’s agent will point out the faults, or advise when they can be overlooked. Competent buyer’s agents help buyers think clearly as the home- buying process unfolds. For example, if a house is a good buy, a buyer’s agent might suggest looking past the dated bathroom and kitchen and looking at the space above the garage that will make the perfect art studio you desire. Likewise, a cute house with all the amenities but with knob-and-tube wiring or a 40-year-old roof might not be worth the asking price. If you decide to buy to build an addition, the agent should advise you to check the zoning before making an offer. Agree to sign a buyer’s agency agreement after you have met with an agent. Some people sign an agency agreement after attending a showing that the agent gives. According to an article by Amy Fontinelle of Forbes’ Investopedia, working unrepresented with a seller's agent is a mistake . Any information you reveal will become leverage the seller can use in a purchase negotiation. A buyer’s agent is legally required to maintain your confidentiality, disclose material facts, and maintain loyalty. These are fiduciary duties.

If you choose to use a real estate agent who’s also a member of

the Canadian Real Estate Association®, it will be a bonus. However, ensure they have credentials relevant to your need(s).

RESEARCH LICENSING

Your province will have a license board for all active Realtors® and real estate agents, which you can easily access. You will also be able to see their contact information, disciplinary actions, complaints, or any other information you’ll need to help influence your decision, especially since most information is now posted online.

GIVE THE “WHAT ELSE” TEST

A good agent will know about all the other properties in the area. Also, a good agent always does their research regarding the events in the current market, and those homes out there for the taking. In short, you want an agent who’s an expert in the current market and someone who constantly stays on top of things.

RESEARCH THEIR BUSINESS ACTIVITY

Learning the type of market presence a real estate agent has is the best way to figure them out. Ideally, you will want an agent specializing in one or two real estate markets and understanding which homes and amenities are available within your price range. If you're uncomfortable asking the agent directly, you can unearth this information by asking them or the provincial licensing authority. You’re better off with an agent who’s engaged actively in one area and price range — e.g., residential homes around the $1,200,000 to $1,500,000 range or the $1,500,000 and up range.

GOING THE BUYER'S AGENT ROUTE

So, you’re ready to take the plunge and look for a place to call “home.” To get the most out of it, use a buyer’s agent to avoid paperwork, stampedes of buyers competing for the same property, and other challenges. Home buying can be exciting but complex and stressful, so having a pro by your side can make an enormous difference. As discussed, you’ve probably heard of buyer’s agents, seller’s agents, listing agents, and so on. You’re a buyer, so what’s a buyer’s agent? True to the name, buyer’s agents assist home buyers every step of the way; they can also save you both time and money on the road to homeownership. When you find the right one for you, these real estate agents will work day and night to ensure all your needs and requirements are met when it comes to finding the right home.

WHAT BUYER'S AGENTS DO FOR YOU

Your buyer’s agent will have a vast knowledge of the current real estate market for the area, which will include neighbourhood amenities and conditions, the law, zoning issues, price trends, negotiations, taxes, financing, and insurance. Once you meet with the buyer’s agent, they’ll help you determine your needs and wants when finding a home and a neighbourhood. The agent will teach you what you can afford, help you set a budget, provide some insight on the current conditions of the market, and explain what you should expect while shopping for a home. During the shopping period, you’ll meet with your agent for tours of homes in which you might be interested. They will give you insight into the floor plans, the home’s pertinent selling points, and the overall crime rate of that neighbourhood. They will also give you the rundown for local

activities, restaurants, shopping centers, and schools nearby.

Your agent is responsible for ensuring inspections of the homes and the disclosures therein are complete. They’re also responsible for ensuring coordination and completion through the roof inspector, lawyers, lenders, and all other professionals involved in purchasing the home. You won't have to negotiate if bargains are needed over the price. Your buyer’s agent will do that for you and sign the final closing documents. They will be present whenever there are documents to go through and sign.

DUAL AGENCY: THE BASICS

A “dual agency” relationship occurs when a buyer is represented by a brokerage firm that controls the listing. Once an agent represents the seller and the buyer within the same transaction, the situation is known as “dual agency.” In multiple places, this is illegal because of the conflicts of interest that can arise regarding the broker. All agents are responsible for informing their clients of all potential risks that could arise due to conflicts of interest. Legally, In rare cases where there is limited agents, agents are allowed to work on both sides of transaction with full disclosure and full consent from the clients. Regarding dual agency, there are definite advantages for the seller. • Trust has already been gained with your listing agent, so representation for the buyer has been established. • Your agent brought you the buyer, knowing you’re selling,

even if your property has not yet hit the market. • Your listing agent will have already covered and researched your neighbourhood’s market to gain buyer inquiries, which means your agent will be working from all sides of the deal to sell your house faster and with more incentive. • Your agent works with corporate relocation buyers who need to find a house quickly, and they will ensure that it’s your house that is bought. There are also cons for the seller when it comes to dual agency, and they are: • You can’t be advised by your agent as thoroughly when they must act as a dual agent because impartial facilitation is required. • Your listing agent is not allowed to negotiate the best or highest price for you if you negotiate both the best and lowest terms for the buyer. • If the opportunity arises, earning a full commission may tempt the agent to coerce a deal you might not accept otherwise. • Your agent may inhibit all access to your listing through buyers with agents. To avoid surprises or missteps in a dual agency sale, ensure you have clarified essential details with your agent beforehand. You can use an exclusive buyer agency agreement or a listing agreement.

HOW REAL ESTATE AGENTS ARE PAID

The Canadian Real Estate Association® 2023 Profile of Home

Buyers and Sellers states that approximately 6% of homeowners opted to sell their homes in 2023 without using a real estate agent or Realtor®. A handful of For Sale By Owner (FSBO) transactions dealt with sellers and buyers who previously knew each other or were directly related. Real estate agents and Realtors® — unlike professionals in different categories who bill by hourly rates or earn a salary — get paid through a transaction (commission) at the end of each sale. For example, if an agent has worked with a seller or a buyer for months, they don’t get paid for the time spent if there is no transaction during that period. Agents receive a commission once the transaction goes to settlement (closes) based on the home's selling price. At that point, the commission is earned. The commission is usually negotiated between the seller and the agent. Typically, an agent will earn a commission of 3.5% from the sale price, but some brokerages have commission discounts for the sellers with whom they work. Essentially, the listing agent and the buyer’s agent will split the commission. That can bring forth some issues. For example, sometimes the split might not be negotiated evenly. A seller could have agreed to pay a commission of 3.5%, of which the buyer’s agent would receive 1.15% while the listing agent receives 2.35%. Even though some agents are associate brokers, or in general, all commission payments are instructed to go through the broker managing the brokerage where the agent works. From there, the commission is then split between the agent and the broker, according to the agreement that’s been made. The split will vary;

sometimes, newer agents earn a small portion of the commission compared to the experienced or successful agents who generally sell more expensive properties or homes.

PAYING THE COMMISSION ITSELF

The seller pays the overall commission during the settlement period. The fee is taken from the proceeds of the sale of the home or the property. However, the buyers pay the commission because they’re paying to purchase the house. At the same time, the sellers take the agent's commission into account while determining the price for the listing. From there, the commission is then divided during the settlement process between the buyer’s agent brokerage and the listing agent’s brokerage. Afterward, their brokers pay the agents who make the real estate sale.

CHAPTER 2 Owning vs. Renting

Owning your own home might be one of the defining qualities of the “Canadian Dream,” the ideals that include opportunity for prosperity and success and an upward social mobility for the family and children, achieved through hard work. Home ownership is surely ingrained as one of the strongest representations of that vision — 66.5% of Canadians own their own home, and more hope they will or wish they did. Something about home ownership plucks a strong chord with Canadians. Financial security, permanency, status, and pride are values many of us seek. Lifestyle plays a significant role in the decision to own versus rent. Home buying is often driven by household formation, such as marriage and a growing family. Less than 47% of people under 35 own homes, 70% of people over 35 own homes, and more than 74.6% of people 65 or over own homes. The Canadian homeownership rate has fluctuated between 60% and 66% since the 1950s. Most young people begin their independent lives renting an apartment, maximizing lifestyle flexibility, and minimizing the hefty upfront costs of purchasing a home. As they build careers, save money, and start families, many buy a house, recognizing that home ownership, as opposed to rental living, is more appropriate to their growing family needs. At the other end of the age spectrum are homeowners nearing retirement who may desire to sell their homes, downsize, avoid the maintenance and other obligations, and return to renting.

WHICH IS BEST?

Is it better to rent or buy a home? Most adults ask themselves this at some point as they form their goals and plan for the years ahead. Before you answer the question, here are some things to ask yourself. Owning and renting each have advantages, but what’s best for you depends on your circumstances. What will be the duration of your stay at home? Each market is different, but whether the time you plan to spend in the house warrants its purchase is possible to predict. Generally, it takes five years to break even on a home (i.e., where there has been enough appreciation to pay back the cost of the transaction and ownership). If you’re considering buying and selling a home in two years, buying is unlikely cheaper than renting. Do you think of or need your house as an investment in your retirement plan? Canadians are used to their homes being a store for wealth to liquidate in retirement when downsizing their lifestyle. According to Jacob Passy, a recent Federal Reserve Bank of New York study examined consumer preferences toward home ownership and how their perceptions have changed throughout the COVID-19 pandemic. Survey participants were asked to rate the better investment: a home or stocks. The results showed that over 90% of the respondents preferred owning their residence over investing in the stock market. Most survey participants also favored being a landlord over buying stocks, with more than 50% of the participating households preferring to own a rental property. Are you financially ready? Owning a home is a financial commitment that requires planning how home ownership fits into where your life is headed. Ask yourself about your budget and whether buying or renting would require you to stretch your finances. Crunch all the numbers. A frequent mistake of first- time home buyers is comparing a month’s rent to a month’s

mortgage payment. Many people don’t have all the numbers. Additional fees are necessary to make a fair comparison: principal interest, property taxes, property insurance, and ongoing maintenance. Are you prepared for the down payment? This lump sum payment funds your equity in the property (how much of the property you own). Down payments vary; 20% is preferred and gets the best rates. Some loans allow down payments as low as 5%. Sometimes relatives help with the down payment. If you have a choice, take a gift rather than a loan because lenders will add the loan debt to other monthly obligations and potential mortgage payments to determine your debt-to-income ratio, which generally can’t top 43% to qualify for a home loan. Can you afford the monthly mortgage and its components? Generally, a mortgage includes the loan principal and interest plus property taxes. These items can affect the monthly loan-only payment by several hundred dollars. Are you emotionally ready? Can you handle the stress? A significant factor to consider when buying a home is stress. The Holmes and Rahe Stress Scale, a landmark stress study, ranks many events that accompany buying a home in the top 43 most stressful circumstances in life. Four events are specifically home- related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28), and change in residence (No. 32). If someone has recently made other life changes, such as marriage (No. 7), switching careers (No. 18), or having a child (No. 14), it might be wise to postpone buying a home. Stress overload can lead to missed payments, destroying credit, or even losing the house. It’s better to rent if your life is in flux and buy when your stress levels are lower. Are you ready for commitment? Are you prepared to make many decisions, from picking a real estate agent to picking paint

colours? Are you confident enough to choose a neighbourhood where you believe home values will continue to appreciate and that will serve your needs (i.e., proximity to schools, shopping, recreation, etc.)? Are you ready to devote time and attention to maintaining a home (i.e., leaf-raking, grass-cutting, appliance maintenance and repair, etc.)? Taking care of your most significant investment can be gratifying, but only if you’re ready.

ADVANTAGES OF BUYING YOUR HOME

Control over housing expenses. By selecting a fixed-rate mortgage, the homeowner assures that the housing cost will not increase for the next 5 years. Mortgages are renewed after 5 years at the current rate of interest. You build equity. Some of each monthly mortgage payment goes toward the loan’s interest. Other portions may go toward property taxes to the city. The remainder pays down the loan principal. Every dollar put toward your loan’s principal represents a dollar of equity and actual property ownership. Further, the property should appreciate each year, adding to equity (what the house could be sold for versus what is owed). Improvements increase your home’s value. A homeowner can also increase a home’s value through home improvements, thus making it more comfortable and enjoyable while growing its loan-to-value (LTV) ratio. For instance, adding a bathroom or finishing a basement substantially increases the property’s functionality and appeal, potentially boosting its value. Tax advantages of home ownership. There are significant tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home: Current mortgage rates are relatively low. Interest rates vary through the years. Several years ago, interest rates were higher,

and it was more expensive to obtain a mortgage. Since these costs have been reduced, owning a house is now easier and cheaper. Ownership rights and creative freedom. Your decorating and home-improvement choices are yours, provided they don’t break building codes or violate homeowners’ association rules. You can paint walls any way, add fixtures, update or finish your basement, or build a patio or deck. Changing your environment to suit your whims is a freeing aspect of homeownership. A sense of belonging to the community. Homeowners stay in homes longer than renters and are more likely to grow roots. They might join a neighborhood association, volunteer at a nearby community center, join a school group, or align with a business improvement district. Renters might not do any of those things, particularly if they know their lease is up in a year and they might move. An intangible pleasant feeling is attached to owning your own house — a sense of freedom and independence. Your home belongs to you, and you can do what you want. You aren’t daunted about increases in rent or losing the lease. You’re free to make improvements and changes. Also, owning your home gives your children the guarantee of attending the schools in the area more permanently; you never need to worry about a notice from the landlord to vacate your rented house or apartment for various reasons over which you have no control.

ADVANTAGES OF RENTING

It seems like a shorter list, but one man’s pro is another man’s con, and renting certainly has advantages that factor into your buy-or- rent decision. No responsibility for maintenance. Admittedly, this is a big one. You’re not responsible for home maintenance or repair costs as

a renter. If a toilet backs up, a pipe bursts, or an appliance stops working, you don’t have to call an expensive repair person — you call your landlord or superintendent. Renters in condos, townhouses, or apartments also don’t have lawn and grounds care obligations. Relocating is easier. When renting, relocating for work is easier. Though a sudden move may require you to break your lease, you can partially offset the cost by subletting your apartment or talking with your landlord. On the other hand, selling a home takes time and effort. If you have a short timeline to sell your home, you may be forced to accept a lower price and lose some of your investment. No real estate market exposure. Home values fluctuate and can decline over time. If you’re a renter, that’s not your problem. If you’re an owner trying to sell, it is.

DISADVANTAGES OF OWNING

Maintenance. The renter’s most significant advantage might be the homeowner’s major disadvantage. While insurance might be available to protect against expenses from major catastrophes, usual maintenance items are on the homeowners’ dime. Maintenance and repair can be as simple as repainting the baseboards and as extensive and expensive as replacing a HVAC system or sewer pipe. The expense will vary from year to year; however, you can expect to pay about 1% of the value of your home annually toward these expenses. If you live in an $800,000 home for 10 years, that’s $80,000 over the period, and perhaps more if you must replace a costly, long-lived mechanical item, such as a furnace. Remember the usual homeowner’s lawn care chores, snow removal, gutter cleaning, and other regular home maintenance needs.

Upfront and closing costs. Buying a home entails numerous

upfront costs. Some are paid out-of-pocket after the seller accepts your purchase offer, while others are paid at closing. These include the deposit, down payment (typically 5% to more than 20% of the purchase price), home appraisal, inspection, and property taxes. Loss of relocation flexibility. It’s much easier to break a lease and move out of town than to arrange to sell a residence. Selling the home from out of town involves special logistics and financial matters, such as dealing with the mortgage while the house is on the market. Financial loss potential. Homeownership builds equity over time; however, equity doesn’t equate to profit. If home values in your area go down or remain stagnant during your time as a homeowner, the appraised value of your home could decrease, putting you at risk of a financial loss when you sell.

DISADVANTAGES OF RENTING

No equity building. The monthly rent you pay goes to the landlord. It represents the fee you pay for using the property. No matter how long you live there, you gain no ownership in the property. Home improvements go to the landlord. Any structural and decorative home improvements that renters make belong to the building owner and will have to stay behind when you move to a different place. Additionally, approval for the desired major redecoration will be necessary. After all is done, the decision to buy or rent depends on the prospective home buyer’s circumstances. There’s no denying that a home of your own is a sound financial and a significant emotional investment. An investment in a home can also mean an investment in your future.

There is much to consider when you want to buy a home. Switching from renting to homeownership is challenging, but an exciting and amazing decision.

CHAPTER 3 Buyers' Needs and Desires

After you decide to buy a home, what sort of home will be your next decision point? It’s a better approach to have a concrete vision in mind of what type, features, and amenities you want in your home, rather than a “shotgun look” at every listing that’s out there in your price range. Imagine your dream house. It fulfills both your needs and desires. It fits the need for a good roof over your head, a sturdy structure, modern fixtures and appliances, living space (i.e., bedrooms, living room), and functional rooms (i.e., kitchen, bathroom[s]). Your needs are fulfilled, and you turn to your desires. Perhaps you envision a home on the beach or in the woods, a gourmet kitchen, a wood-paneled den, a crystal chandelier over a banquet table in the manor-sized dining room, or an Olympic-sized swimming pool with a hot tub and sauna. Your priority in any home purchase should be meeting all your needs. Sometimes, you won’t find everything you desire in a home; if you do, you may be unable to afford it. It’s essential to prioritize the things you want in a house based on their importance in your search.

Decide your needs vs. your desires .

• Would you like a swimming pool? Is that enough that a home without one will not be looked at? • In what areas or neighbourhoods might the home be located? Where do you want to live? Where might you have to live for work commute or home price reasons? • What features would make it special? 23

• What can you afford, and what is out of your budget?

Budget usually constrains us the most when selecting a home. While some things are necessary for any home (as mentioned, a good roof and working appliances), others will stay on the list of desires for now (like the sauna).

MAKE A LIST; CHECK IT T ; CHECK IT TWICE

You may have an impression of what you want in your new home. Putting that on paper and having a complete checklist can be helpful. Before starting your hunt for a new home, it’s advisable to list all your basic needs and desires, then prioritize the desires, figuring that all needs must be met in any house under consideration. This will make the search easier and help weed out the ones that don’t meet the basics. Realize, however, that it’s nearly impossible to find a home that meets all requirements. Compromises will be necessary. It’s a good idea to work from outside-the-house factors to inside- the-house. For example, location is perhaps the primary concern, and both “needs” and “desires” factors might be involved. A “need” would be “must be within 25 kilometers of work.” A desire might be, “would like stanley Park” (a favored neighborhood), while a need might be “on the west side of the city” (because work, family, friends, and recreation activities are all located there). Location needs may include proximity to schools, frequently used recreation facilities, or mode of transportation (bus or suburban rail access). Whether an item is a need or a desire depends on the circumstances. Closeness to family might be a need for a couple with young 24

children or elderly parents to care for, or a desire if those factors aren’t involved. Items like these make a checklist most helpful. After location needs and desires are compiled, housing factors can be considered. Needs include having all essential house structures and systems in good working order. Accepting a house needing a new roof because the owner is willing to knock $7,000 off the listing price — but it will cost $10,000 to replace the roof in two years — is not a sensible deal. Needs might include a minimum number of bedrooms and bathrooms, no steps, a fenced yard, perhaps a first-floor laundry facility, and any feature the prospective buyers have decided they cannot accept in a home. Desires such as an upgraded kitchen, walk-in closets, and a main bedroom suite make the house more attractive or enjoyable. Of course, one buyer’s need is another buyer’s desire. The point is to know your needs and desires to assess potential properties and make the process smoother. Regardless, buying a house is not a simple process. Before contacting a real estate agent or looking at homes, much planning should be done. Work the costs as well as your budget. Choose a general location. Contact lenders well ahead of home shopping so that your offers aren’t tied up with getting financial approval. Having the image of your dream home is reality married with imagination. You may find that some aspects of the home you intend to buy are different. It’s not the same as what your dreams told you. Other people have different requirements. It depends on your thought processes, as well as your personality. We understand essential things and potential compromises differently. Needs are basic requirements that just can’t be ignored or compromised. On the other hand, desires can be left behind if the situation demands it. You must clearly distinguish between your needs and which items you would classify as

desires.

No matter how many desires you have unfulfilled now, they can be worked on later. A pool can be added, and paint colours can always be changed.

A NOTE ABOUT PETS

Consider your pets when shopping for your home. Home buyers who are pet owners have specific requirements — they must provide for their pets. A third of millennial-aged respondents (ages 18 to 36) who purchased their first home (33%) say the desire to have a better space or yard for a dog influenced their decision to buy the home, according to a survey conducted online by Harris Poll, on behalf of SunTrust Mortgage. Dogs ranked among the top three motivators for first-time home purchasers and were cited by more millennials than marriage/ upcoming marriage, 25%, or the birth/expected birth of a child, 19%. The neighbourhood where you’re going to buy a house must have no restrictions on pets or livestock, if that’s something you desire. Do you raise American Staffordshire Terriers, also known as pit bulls? Some neighborhoods ban this breed. What about goats? Vietnamese pigs? Have you always wanted fresh eggs from your chickens? Include your animals in location planning. Some pet owners choose wood or other hard flooring, not wanting to risk pet damage or odors. An appropriately sized fenced backyard is on the “needs” list for many pet-owning house buyers. Consider the arrangement of rooms and the house's structure to ensure it’s suitable for your pets, too. Traffic in the area could be another checklist item.

Pet services like veterinary care, grooming, and exercise should

be nearby.

LOCATION, LOCATION, LOCATION!

You must limit your search to a neighborhood that offers the closest possible match to the lifestyle you like and want to live. In addition, based on the 2024 NAR Generational Trends Report, 59% of homebuyers ages 22-95 prioritized the quality of the neighborhood as a reason for purchasing a home, and the primary reason for neighborhood choice. Location is so important that people are willing to give up “must- have” features to buy into their desired neighborhood — 72% would forget about a pool, 55% would lose a finished basement, and 33% would accept less square footage. What matters is living in a safe place with good schools. According to Trulia, 69% would drive through the neighborhood during different times of day to determine if the neighborhood was the right fit. You can’t go shopping for a home without choosing a location where you’d like to live. The most significant decision when buying a home is probably where it is. Location influences your everyday life. Your property is not a bubble; it’s part of a bigger community. It’s essential to find a neighborhood or area that suits your needs. Do you want the peace of a secluded woods, or the energy of a bustling city center? Do research before starting your search. Drive through the area and see if all the stores, activities, and features you want are there. Eat at local restaurants and walk through a nearby park. As price is mainly based on location and condition of the property, when someone starts looking for their house, it’s essential to consider

the location and how far it is from schools, shopping areas, and other facilities. Home means comfort, which can’t come if the location isn’t suitable.

CHAPTER 4 Real Estate Horror Stories To Learn From

You’ve seen frightening stories like this on TV. Perhaps you’ve heard about them from neighbors or co-workers, but still haven’t witnessed anything like them. Be warned. The first time is one time too many. Now that you’re in the market for your first home, or maybe a second or third, congratulations! Buying a new home is one of the most significant achievements for many people. Unfortunately, home buyers — especially first-time buyers — can be the victims of real estate horror stories. Absolute horror, from the buyer’s perspective. Here are a few examples. Alex was excited about making her first home purchase. Being in the Toronto metropolitan area, she was limited in pricing options, with many lower-cost homes around $550,000. She went to several banks and got preapproved for different amounts at lower interest rates. She found her dream condo, and, after some deliberation, she decided to go with the lowest rate of 4% offered by her lender. She completed her paperwork and submitted it with her 10% deposit. The rate wasn’t her only deciding factor. The personnel were friendly and great at communication, making her feel comfortable about the process. Until now, suddenly, it seemed as though all of the bank corporations dropped off the map. A closing process that should 29

have taken 30 days or less turned into several months of waiting and a larger deposit of an additional $20,000. They ran her in circles until the seller told her, through the real estate agent, that the deal was over if she didn’t find another solution. Luckily, the seller’s real estate agent referred her to another lender and was able to help her obtain another loan (although at a higher interest rate) much more quickly. It turned out the first lender was a scammer. In another case, Ron and Jenna planned to upgrade to a new home. After a long search, they found it — or so they thought. The home seemed perfect with a bright and colorful kitchen, open living and dining areas, three bathrooms, high ceilings, a fireplace, and a covered porch. They were especially thrilled that the price was only $635,000. That was a steal. They signed the contract and were in the house more than a month later. Less than six months later, the horror story began to unfold. Jenna was cleaning one of the bathrooms when she noticed tiny ants with wings. Following Ron’s advice, she called the exterminator. When he arrived, he delivered the first blow — these winged ants were termites . The exterminator went under the house to assess the damage. He found that not only was the floor under the bathroom completely infested, but also the other two bathrooms, and the infestation was spreading to more of the house. The total cost of repair for this problem came to over $12,000! That’s an unbelievable amount of money to unexpectedly invest in a house you’ve only lived in for less than six months.

The key lesson here is to know the house you’re buying. You

should always hire an exterminator to investigate the house, particularly for termites. If you make such a considerable investment in a new home, the small price of precaution is worth it. The stories continue endlessly. I recently met a lady at a café with an incredible first-time buyer story. I overheard her conversation, so I decided to step in and ask about it. Sue and her fiancé were searching for their first home to buy before their wedding. They had been told about a great real estate agent in the city where they wanted to call home, so they looked him up to ask for help finding the right home. The problem was that the only praise they heard about him was from clients who had hired him to sell homes, not from home buyers. The agent met up with Sue and her fiancé to go over different homes he had on his list, and then it was time to take a trip around town to see them. There was one home that he talked profusely about, and so they went in person to take a look. Sue and her fiancé knew what good quality was, so they could immediately see problems. The basement doorway was weak. The upstairs bathroom floor bounced, and the light switches in the hallway seemed to pop and flicker. Although very nicely painted, this house didn’t fool them. When confronted with these concerns, the agent replied that they could fix them later. Although their gut told them not to move forward with making a purchase, they agreed to a $10,000 price reduction and took the house.

Big mistake! The problems they had noticed went much deeper. The weak basement doorway translated into unfortified walls leading downstairs. The bouncy bathroom floor had been wet under the linoleum and about three inches up two of the walls. The flickering light switches warned them of the outdated wiring that had to be replaced. Ultimately, their $10,000 savings only helped to give them a bit of consolation when they paid $27,000 for all of the remodeling! The five-bedroom house sat on pastoral acreage in the Canadian countryside. At less than $380,000, it seemed a steal. But it wasn’t a bargain. Ben and Amber soon realized the dream home they had purchased for their growing family was infested with hundreds of garter snakes. Throngs of reptiles crawled beneath the outer walls. The young couple said they would lie awake and listen to slithering inside the walls at night. It was like living in a horror movie. The home was most likely built on a winter snake den, or hibernaculum, where the reptiles gather in large numbers to hibernate. In the spring and summer, the snakes fan out across southeast Idaho, but they return to the den as the days get shorter and cooler. At the height of the infestation, the home buyer said he killed 42 snakes in one day before he decided he couldn’t do it anymore. He waged war against the snakes, and “they won.” Buyers had little recourse when they decided to flee the home. They had signed a document, noting the snake infestation. They said their agent had assured them that the snakes were just a story “invented” by the previous owners to leave their mortgage

behind.

The buyers filed for bankruptcy, and the house was repossessed. They left the home the day their daughter was born, just three months after moving in. The house briefly went back on the market. Now owned by the bank, it was listed at $244,900 a year later. The property has since been taken off the market, and the bank decides what to do. The moral of the story is to have a good inspection. A price attracted these buyers. They didn’t have a proper inspection of the home before purchasing. The real issue was the agent who cared more about selling the house than his clients.

HOME-BUYER PLAGUES

Although a home inspector passed on Justin’s and Kate’s home, he missed some problems. For instance, the previous homeowner supposedly installed and tested the sump pump in the basement, and it failed shortly after moving in, flooding the basement. Then, the sunroom was filled with termites, costing the couple $2,000 in repairs. After the termites were eradicated, they discovered the sunroom was entirely covered in mold, and there was no caulking around the windows to keep the moisture out. A better home inspector would have been able to see the signs of termites and mold. The inspector should have also checked the sump pump, but it could have failed after the inspection. Sump pumps can burn out, lose power, become clogged or misaligned, or malfunction in various other ways. It’s valuable to have a warning device installed to signal water buildup. These alarms can alert homeowners or neighbors to flooding, so it can be resolved before water damage occurs.

Be careful. Be smart. These horror stories are real and happen every day. Do your homework before signing paperwork or jumping into a new home. Too many people spend more time shopping for a car than on a house, a much larger and more permanent investment. You have time to educate yourself, and I hope this has helped you move forward in the right direction.

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