News from The Globe and Mail
House buying needs a plan of attack
Saturday, May 01, 2004
With mortgage rates floating around decades-low levels, the housing market in most areas of Canada is on fire as a wave of twenty-somethings seek to buy their first home, industry experts say.
In a hot market, the rules of engagement change, says Don Dixon, the president of the Calgary Real Estate Board. He's heard of houses being snapped up only hours after being put on the market, or selling for tens of thousands of dollars over the asking price as the lure of cheap money results in outrageous bidding wars.
That's why experts agree that new home shoppers must have a plan of attack in their back pocket or they will find themselves rapidly retreating and eventually surrendering. "You've got to pay full price or over asking just to be in the running on a lot of these properties," explains Alfie Doucette, a veteran agent with Toronto's ReMax Professionals Inc., who has helped many young shoppers buy their first property.
Mr. Dixon says the first step is research. Find out how much houses are selling for in the areas you want and what areas of the city are deemed trendy. (Popular areas often command a premium.)
Next, set a price ceiling for your purchase -- most banks' websites have mortgage calculators that will tell you what you will qualify for, but be sure you separate that figure from what you think you can afford -- and then get pre-approved for that amount, so that you don't have to put in offers that are conditional on financing.
In fact, in a multiple-offer situation in a high-demand area such as Toronto or Vancouver, bidders are advised to try to go in as "clean" as possible -- meaning few or no conditions at all.
When making your offer, go in with your highest bid possible, says U.S.-based real-estate news website realtytimes.com. "Most sellers who receive multiple offers only seriously consider those at the top of the price heap," the website notes.
Mr. Dixon agrees: "Nine times out of 10, it's the dollars that make the most difference to sellers."
Other tips for new buyers include:
Unless the house is brand new, make your offer conditional on a formal property inspection or conduct one before the offer is submitted.
Put down a "healthy deposit" -- at least 5 per cent of the purchase price -- to show the seller that you are serious about your offer. It will also increase the seller's confidence that the offer will go through smoothly.
Shop in the winter or summer, not spring -- the housing market's busiest time of the year. Fewer shoppers means fewer offers, which means a greater possibility of getting the house you want without large bidding wars.
Listen to your agent. Realtors have gone through this process with hundreds of clients before you and have seen thousands of homes.
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