No one should rush into purchasing a home, but if you are interested in buying and wait, you might miss out on a considerable amount of money.
Essentially, prices increase every season by at least 5%, so if you do not purchase, you could be wasting money equivalent to at least 1% of your budget for every month you wait. In most cases, buyers end up eventually buying a property a few months later, and consequently end up paying at least 5% more than what they would have paid if they had bought the property earlier on.
Before you begin the process of purchasing property, there are a number of steps you should take. The buying process can be divided into two phases, each with their own considerations: the learning phase and the hunting phase.
The Learning Phase
- Learn the market. The best way to learn the market is to tour your area of interest and view more than twenty properties - including some you may not like and would not consider making an offer on - and track them over time. By assessing what you could purchase with your budget, determining list vs. sold price, and determining how many days it takes to sell a home, you can adjust your expectations.
- Understand that the listing price does not necessarily reflect the market value of a property
- Be able to predict with reasonable accuracy the sold price of properties in your target market (your desired area, price range, and features).
- Concentrate on one area or neighbourhood, otherwise you will become distracted and may not be able to react in time.
- You should obtain a written mortgage pre-approval from a trusted financial institution or mortgage broker and ensure that it is valid when you submit your offer.
- Ensure that your agent sends you the sold prices of the past listings you have received and that you review them at least twice a month with your agent. Analyzing why a property sold for either a higher or lower price than expected, or why it did not sell at all, will assist you in understanding the market dynamics.
The Hunting Phase
If you are in the hunting phase, you have all of the tools you need to submit a winning offer and are ready to shoot - it is simply a matter of finding the right property.
- It is important that you view only the properties that you are serious about putting an offer on - at this stage, you should not waste time viewing properties that will not appeal to you or that you cannot afford. If you are not focused, you are likely to miss a significant portion of stage one, which involves learning about the market.
- Visit the properties during the week, not on the weekend, and during business hours (before 5:00 p.m.) to increase your chances of being the first offer on the table. The majority of people view properties during the weekend or after work - by doing the opposite we will have an advantage over our competitors.
- If you want to find the best deal in a hot market, where most homes have multiple offers and the listing price does not reflect the selling price, seek out properties that are priced at least $100,000 below your budget for condominiums and $200,000 below your budget for houses; otherwise, you will be viewing properties that are out of your reach.
- Stay on top of all the houses in the area where you want to live, even if you are not interested- it is imperative to stay informed about market trends. Additionally, you may realize that you need to revisit the learning phase and complete some more "learning tours”.
You should have your realtor set you up with the REALM app so that you can receive real-time alerts about properties - in a competitive market, seeing a home within hours of its listing could make the difference between buying it or not.
After completing the "learning" phase and moving on to the "hunting" phase, how do you determine whether you are really ready to purchase?
When you choose 4-5 properties to seriously consider making an offer on any one of them, that probably indicates that you need to be more focused. Likewise, if you are constantly changing your criteria - such as your preferred neighbourhood, the number of bedrooms you require, the level of renovations you need, etc. - you need to revisit your priorities and redefine your buying criteria. As soon as you change your criteria, you will need to re-learn the market, otherwise you may have a difficult time competing to purchase a property. If the listings you receive do not meet your expectations, you may want to review your criteria and expectations. In order for the market to match your expectations, you must first go through the "learning" phase before you can shoot!
To summarize, you should ensure that you have completed the learning phase, which involves viewing multiple properties, including some you may not like and may not make an offer on, and monitoring them over time, before you enter the hunting phase. Having determined the selling price and having all the tools necessary to submit a winning offer, you can then move onto the hunting phase by viewing properties during the week that are at least $100,000 below your budget, and only if you are seriously interested in making an offer on them. This two-phase formula is crucial to success when purchasing a property.
At In Black and White Real Estate Team, we are here to partner with our clients during their real estate transitions. We continuously strive to match their evolving needs by bringing insight that makes a difference. We provide innovation, expert advice and we enable our clients to focus on what is important to them.
If you are interested in buying a home, please give us the opportunity to show you all that we can do for you. Let us do the heavy lifting so that you can enjoy the experience.