Christian Debt Recovery

Total Debt Ratio Canada

January 7th, 2008 |

Author: Gavin

Top 10 Mistakes Made By Vancouver First Time Home Buyers

I understand this topic comes up a lot and that every other realtor will have it displayed as a “free download’ on their website in order to get your name and e-mail. Believe it or not these issues come up all the time – here are the top 10 mistakes Vancouver first time home buyers make:

1. Not knowing (exactly) how much the bank will lend you.

Another way of wording this title would be ‘Not knowing how much house you can afford according to how much money you earn.” Canadian lenders use ratios called gross and total debt service ratio of 32/40 to ensure that you are not spending any more that 40% of your total household income, plus expenses, on your housing obligations. This is where a pre-qualification comes in, so that you know exactly how much house you can afford. Your realtor should have this conversation with you on day 1, and don’t be surprised if he or she actually asks you to produce a written pre-approval from the bank or from a mortgage broker.

2. Get a good understanding of mortgage closing costs early

Home ownership comes with added expenses that you are typically not responsible for as a renter. It all starts with closing costs. Most lenders in Canada will require that you have at 1.5% of the purchase price set aside for paying lawyers, home inspectors, appraisers and the like. Pay attention to monthly budgeting when you are a homeowner as you will be required to pay annual taxes and take care of regular maintenance.

3. Not doing your research online before running out to the
suburbs to see a property

With so much information available online, it’s a real time saver for you to research as much as possible online before going out to see a property. This includes researching the neighbourhood as well. The property might have had some cosmetic renovations done and been staged to the point where it looks like a show-home but if it’s located next to a crack house or low-income rental high-rise, you can save a lot of your time by finding that out beforehand.

4. Expecting too much

Don’t let the little things deter you from moving ahead with what otherwise is a perfect home for you. Be flexible and have the long-term vision to understand that you can replace that awful wallpaper or carpeting. No one property is going to suit your taste in every way, not even a newly renovated one.

5. Not being specific with your realtor from the beginning

This is so important. The more detail you can give to your realtor about the house or condo you are looking for the more successful your house hunt is going to be. The MLS database that realtors use these days is a cutting-edge database that is searchable down to the most minute detail. Talk to your realtor about these minute details, especially in Vancouver’s condo market where there a lot of available properties to choose from.

6. Not prioritizing your purchase parameters

Make sure you are clear about what the most important factors are driving your purchase. Buying a one-bedroom because it has a beautiful view when you have a baby on the way is big mistake. Don’t make mental excuses for the most important reasons for your purchase regardless of how good something else might be.

7. Getting too emotional during the negotiating process

It’s best to treat the negotiating process as purely business. It’s tough to do but it’ easier on your emotions and will give the listing side less to go with in terms of your body language. When going though an open house, discuss things quietly between yourselves and get excited later when you get home.

8. Not getting a home inspection

This is one we hear every other day but it’s still important. The key here is to uncover something that might materially affect the value of the home or condo unit. It can also be beneficial to find something that you could negotiate into the price and potentially have the seller participate in the cost of fixing the problem.

9. Developing an ‘us vs. them’ mentality

This is a very dangerous attitude to adopt in any negotiation. The home seller will have an emotional attachment to their property and will naturally want it to go to nice people who are going to appreciate and look after it. Negotiate hard but also remember that everybody must be able to give and take a little to make a deal work out. Digging-in about small things is generally more of an ego-stroke than it is productive negotiation. It’s also something you will waste energy trying to justify to yourself after the deal has fallen apart.

10. Not protecting yourself (and your deposit) with clauses

In our current market, where buyers generally rule, take the liberty of protecting yourself with ‘subject to‘clauses. In a hot market, using too many of these will generally weaken your offer in the eyes of the seller as they are looking to get a deal done with as little hassle as possible. In a slow market, this is not the case and you might as well protect yourself and put time on your side in terms of subject removal and completion dates.

About the Author

I am a Vancouver realtor and mortgage broker who has been in the real estate industry for 12 years. My formal education includes a Bachelor’s of Commerce from the University of Natal and a diploma in Urban Land Economics from UBC

I enjoy many outdoor pursuits such as fishing, surfing, kayaking, windsurfing and camping.

Vancouver is a great place to live!