Buying a Home
House hunting? Buying a property advertised as “For sale by owner” can save you money. But you have to be careful guiding your own transaction: it takes work, and some sage advice. Here’s what you need to know.
When you want to shave the price of a new home, consider buying one that’s being sold privately, by the owners.
“It’s not easy,” advises Ken LeBlanc, president of PropertyGuys.com, a national franchise that facilitates the process of selling homes privately. “But it’s not complicated, and you can save $12,000 to $20,000 on commissions.”
While you don’t pay commisions as a buyer, they are often built into the sales price of a house listed through a real-estate agent so that the sellers, after paying the agent’s fees, come out “ahead.”
So, with pre-approved mortgage in hand, it’s time to get a sense of whether your budget matches the house of your dreams. Start by investigating neighbourhoods that you’re interested in, to get a sense of average prices in the area, otherwise known as comps (short for comparables).
You don’t want to waste your time on homeowners who are merely toying with the idea of selling, counsels LeBlanc. And identifying them is simple, as their homes are routinely priced above neighbourhood comps. Quite literally, you should seek houses priced to sell.
Ask Bold Questions
When you’re ready to visit houses, don’t be shy. Ask outright why the owners are moving and what the neighbours are like, suggests LeBlanc. But be aware that “they don’t have to tell you,” warns CanEquity Mortgage president Anthony De Almeida.
“The most important question is: Has there been any damage to the home?” says De Almeida. Sellers may be aware of problems that are “hidden from view”—like unreliable wiring, a basement flood one spring or persistent mold temporarily wiped clean. While sellers are legally obliged to disclose certain defects, the rules differ from one province to the next and “not everyone knows the rules, especially if it’s a private sale,” he adds. Contact your provincial real-estate regulatory agency to find out what the disclosure rules are where you live.
When making an offer, be sure to specify a closing date (usually within 30 to 60 days of signing) and what you expect to be included in the sale—appliances and fixtures, for example. In a hot market “don’t hold back: make your offer quickly, and be flexible,” says LeBlanc. “If the sellers have children and want to wait until the end of the school year to move, can you wait the extra month or two?”
If so, tell them. It might make your offer more attractive than other, higher offers.
Worth the Price?
When should you walk away? When the seller stalls or won’t cooperate on a house inspection, or can’t be firm about a closing date. Or when the seller suggests doing anything odd with the numbers: inflating or deflating the price and having you pay more than what’s written in the agreement, for instance.
If the seller suggests an ultra-fast closing of, say, 10 days, find out why, says De Almeida. Ditto if they refuse an inspection. “If you have no professional representing you, you have to be more careful,” he advises. “The seller must provide ample time” for the buyer to learn about the property.
When it’s time to close the deal, consult a mortgage broker to get the best interest rate. They take your mortgage application to 25 banks, which compete for your mortgage. LeBlanc says that it can save you two to five percent throughout years of payments.
Those savings easily finance the real estate lawyer you’ll need to hire. The lawyer checks for liens, verifies ownership and facilitates the transfer of the property.
LeBlanc’s best tip? “Transparency. Show your cards up front. Whether you’re the seller or the buyer, it saves a lot of time.”