Buying a home is exciting but it can also feel overwhelming. You don’t know what you don’t know and you get lots of advice from parents, family and friends.
If you’re a first-time buyer, there are mortgages, deposits, inspections, closing costs, lawyers, conditions and dozens of other things to think about. As your Realtor I will explain the process step by step and explain the reasons for specific processes.
And if you’ve bought before, you may think you already know the process. But the market, financing environment and negotiating strategies can change considerably from one purchase to the next.
Whether you’re buying your first home, moving into something larger, or downsizing into a home that better fits your current lifestyle, understanding #1 how the process works, #2 where you have flexibility . . . can make a significant difference in the outcome.
Here’s a practical look at the process and some things buyers should be thinking about before making an offer.
The Home-Buying Process: A Quick Road Map
While every purchase is different, the process generally looks something like this:
1. Get Your Financing in Order
Before you start seriously shopping, understand what you can comfortably afford.
This means speaking with a mortgage professional, reviewing your income and debts, understanding your down payment and getting pre-approved where appropriate.
But remember: what a lender says you can afford and what you are comfortable paying are not necessarily the same thing.
Your monthly payment should leave room for property taxes, utilities, maintenance, insurance and the other costs that come with owning a home.
2. Determine What You Actually Need
It’s easy to fall in love with a beautiful kitchen or a large backyard and lose sight of what you actually need.
Think about:
- Location
- Type of home
- Number of bedrooms and bathrooms
- Commute
- Schools and amenities
- Yard or outdoor space
- Parking
- Renovation tolerance
- Future needs
For first-time buyers, this is particularly important. Your first home doesn't necessarily need to be your forever home.
For upsizers and downsizers, the question is often different: What does your next home need to do for you that your current home no longer does?
3. Start Watching the Market
Once you know what you're looking for, start paying attention to comparable homes.
Look at what homes are listed for, but more importantly, look at what similar homes have actually sold for.
This is where having a Realtor who understands the local market can be extremely valuable.
4. Find the Right Property
This is the fun part but try not to rush it. On the other hand, don’t over think it either.
The right property isn't necessarily the newest listing or the one with the best staging. Sometimes an overlooked home can represent an excellent opportunity.
Which brings us to something buyers should keep in mind in today's market...
Don't Let the Listing Price Intimidate You
One of the biggest mistakes buyers can make is assuming that the asking price is the property's actual value or that a home is automatically out of reach because of its list price. In today’s market the “list price” is just that.
The listing price is a starting point, not necessarily the final sale price.
In today's market, it's not unusual to see properties receive price reductions, sometimes more than once.
But what does a price reduction actually mean?
It can mean several different things.
Sometimes the seller simply priced too aggressively.
A seller may have had an expectation of what their home was worth and listed accordingly. If buyers don't respond, the seller may eventually adjust the price.
Sometimes the market has changed.
Real estate markets move. Interest rates, inventory, buyer demand and local conditions can all influence what buyers are willing to pay.
Sometimes the property isn't attracting the right buyers.
A home may have an unusual layout, require updating, have been poorly presented or simply not be generating enough interest.
And sometimes... a price reduction creates an opportunity.
This is why buyers shouldn't automatically dismiss a property because the listing price initially seems too high.
Instead, ask:
What are comparable properties actually selling for?
That's a much more useful question.
Don't Be Afraid to Make an Offer
One of the biggest misconceptions buyers have is that they need to offer close to the asking price or that making a lower offer will somehow offend the seller.
The reality is that an offer is a conversation.
You may discover that the seller is motivated.
You may discover that there is little competition.
You may discover that the seller has already reduced the price and has very little room left.
Or you may discover that your offer simply isn't going to work.
But you won't know until you have the conversation.
Of course, making an offer doesn't mean throwing out an unrealistic number. Your offer should be based on the property's condition, comparable sales, market activity, your financial position and the terms you're proposing.
And remember that price isn't the only negotiating tool.
Closing date, deposit, conditions, inclusions and other terms can all affect the attractiveness of an offer.
A slightly lower offer with clean, well-structured terms may sometimes be more appealing to a seller than a higher offer with complicated conditions.
This is where strategy matters.
First-Time Buyers: Don't Try to Figure It All Out Alone
For first-time buyers, the process can feel like learning a completely new language.
What is a deposit?
What's the difference between a pre-qualification and a pre-approval?
What are conditions?
How does a home inspection work?
When do I need a lawyer?
What happens after my offer is accepted?
What are closing costs?
These are all normal questions and I will answer them for you when we meet, and remind you when we get there.
A good buyer's agent should be helping you understand the process before you're standing in front of a property you love trying to decide whether to make an offer.
Your Realtor, mortgage professional, home inspector and real estate lawyer all have different roles, and understanding who handles what can make the experience considerably less stressful.
Upsizers & Downsizers Have Another Challenge: Timing
For buyers who already own a home, buying isn't always as simple as finding a property and making an offer.
You have another piece of the puzzle:
What happens to the home you currently own?
If you're upsizing, you may need to sell your existing home to complete the purchase of your next one.
If you're downsizing, you may be trying to coordinate the sale of a larger family home with the purchase of something smaller.
And nobody wants to find themselves in the position of having sold their home but not yet having somewhere to move.
This is where dates and planning become extremely important.
Closing Dates Can Be a Negotiating Tool
Buyers sometimes focus almost entirely on the purchase price and overlook the importance of the closing date.
But when you're selling one property and buying another, the dates can be critical.
Depending on your circumstances, you may want your sale to close before your purchase, or you may need the purchase to close first.
Sometimes the ideal solution is to negotiate a closing date that gives you enough time to coordinate both transactions.
There isn't necessarily one "right" answer.
The important thing is to discuss the timing before you make an offer so your Realtor and other professionals can help structure the transaction appropriately.
What About Bridge Financing?
Bridge financing can sometimes help solve the timing problem.
For example, imagine you've purchased your next home, but the sale of your current home doesn't close until several days later.
You may need temporary financing to bridge the gap between the two transactions.
A bridge loan can potentially provide that short-term financing, subject to your lender's approval and your financial circumstances.
However, bridge financing isn't something buyers should assume will automatically be available.
Talk to your mortgage professional before you make an offer if you think you may need it.
Understanding your options ahead of time can give you much more confidence when you're negotiating.
The Dates in Your Offer Matter More Than You May Think
When you're buying and selling at the same time, the dates written into your agreements aren't just administrative details.
They can determine:
- When you need to move
- When you need financing
- When you receive proceeds from your sale
- Whether bridge financing is required
- When you take possession of your new home
- How much time you have between transactions
This is one reason why upsizers and downsizers should have a plan before they start writing offers.
The goal isn't simply to buy the house you want.
The goal is to coordinate the entire move.
Don't Forget About the Conditions
Depending on the property and circumstances, buyers may want to consider conditions such as:
- Financing
- Home inspection
- Review of condominium documents
- Sale of an existing property
- Other appropriate due diligence
The right conditions depend on the specific transaction.
In a competitive situation, buyers may be tempted to remove conditions to make their offer more attractive.
But removing a condition simply because you feel pressured isn't necessarily the right decision.
You should understand what protection you're giving up before you give it up.
A strong offer isn't simply an offer with the fewest conditions.
It's an offer that makes sense for your particular situation.
Look Beyond the House
When you're buying a home, it's easy to focus on the property itself.
But before you commit, consider the bigger picture.
Think about the neighbourhood.
Visit at different times of the day. Consider traffic, noise, parking, nearby construction and access to the things you use regularly.
Think about the future.
Is the home likely to work for you for several years, or are you already anticipating another move?
Think about the costs.
The purchase price is only one part of home ownership.
Consider property taxes, utilities, insurance, maintenance, renovations and potential unexpected expenses.
Think about resale.
Even if you aren't planning to sell anytime soon, it's worth considering what makes the property desirable to future buyers.
And Finally: Don't Confuse "Affordable" With "Comfortable"
This may be one of the most important pieces of advice for any buyer.
Getting approved for a certain mortgage amount doesn't mean you need to spend that amount.
Your home should fit into your life not consume it.
Leave yourself room for the unexpected.
Leave room to enjoy your home.
And leave room for life to change.
Buying a Home Is More Than Finding a House
The home search is only one part of the process.
The bigger picture is understanding your financing, knowing the market, evaluating the property, negotiating the right terms, if you're already a homeowner . . . co-ordinating the sale and purchase so the pieces fit together.
For first-time buyers, the process may be completely new.
For experienced buyers, it may feel familiar but the market and your circumstances may be very different from the last time you moved.
Either way, having a plan before you start making offers can make a big difference.
And perhaps the biggest takeaway is this:
Don't let a listing price stop you from exploring a property that could be right for you.
Do your homework. Understand the comparable sales. Ask questions. Look at the entire opportunity and if the numbers and circumstances make sense, don't be afraid to make an offer.
You might be surprised by what a conversation with the seller can accomplish.
Thinking About Your Next Move?
Whether you're buying your first home, moving into something larger, downsizing, or simply trying to understand what your options look like in today's market, the best place to start is with a plan.
Before you fall in love with a property, let's look at your budget, your timing, your current home (if you have one) and what you're hoping your next move will accomplish.
Your next move doesn't have to be complicated. It just needs to be planned. Your next step can be meet with me for a coffee and chat about your real estate goals, let me know when and where, click here!