Get a pre-approved mortgage
If you get pre-approval for a mortgage before looking at any homes you will know what price range you can afford. As well as saving you time it also puts you in a better bargaining position with the seller. Your chance of successfully purchasing a home when competing with another buyer may be greater if the seller knows you are pre-approved.
Get the most recent sales
Before you make an offer on a home research the recent sales to find out what similar real estate properties have sold for. You can access this information through the Multiple Listing Service. Your realtor can assist you.
Three Important Influences
Three criteria are factored into the real estate comparables. They are location, condition and market conditions
1.) Location :
This plays an important role in determining how much you will pay for a real estate property. Generally properties with views or backing onto greenbelts will bring in more money. Also properties on quiet streets such as cul de sacs will usually sell for more than properties on busy streets. If an area of homes is located where rezoning to commercial or multiple housing units is possible there may be a future real estate value on the property. Find out if there are pending changes to the area which would affect the real estate value. Having a major thoroughfare or high rise would definitely affect the value of the homes in that particular area. The information on any future development or changes can be obtained from the planning and engineering departments of the local municipalities. Your realtor can assist you with this.
2.) Condition :
The amount of improvements made on the home definitely affects the real estate price. Similar homes in the same area can have a significant price difference because of improvements made. Some can be worth their full real estate value but some improvements will be discounted. An example of this would be if the homeowner builds an addition. The major problem in this scenario is that when a homeowner has for example a 1200sq.ft. home and builds a 400 sq. ft. addition, the total square footage of the home would be 1600 sq.ft. but it would not be proportionally the same as an existing 1600 sq.ft. home. That is the size of the rooms would still be proportionate to a 1200 sq.ft. home not a 1600 sq.ft. home so the improvements would be discounted. Your realtor can assist you with all the aspects of pricing real estate property according to its condition.
3.) Real Estate Market Condition :
The condition of the real estate market affects the price you will pay for a property.
Sellers Real Estate Market
In a “hot” real estate market when prices are on the rise you may have to pay close to asking price, the asking price or even more than the asking price. If you are competing with other buyers for the same property knowing the most recent comparables may be of little use. The seller may determine the price based on how many buyers are competing for the property and what they are willing to pay.
Buyers Real Estate Market
In a buyers market when prices are falling and real estate properties are taking longer to sell you usually have a large selection of homes to view. You may have to do comparables for up to a year to get an accurate reading on the prices so you know what to offer.
Stable Real Estate Market
Usually this type of real estate market the prices have leveled off and there is a fairly large selection of homes to view. You should be able to use the recent comparables up to 6 months depending on when the market stabilized.
Competing with other buyers
You may find yourself in a situation where you are competing with another buyer for the same real estate property. If this happens try and find out what may influence the decision of the seller as to which buyer will be successful. Price is often the motivator but possession date may also be a factor.
What is the seller’s motivation?
The main factor no matter what the real estate market is the seller’s motivation. The seller may be motivated if they have purchased another home already or have been transferred. They may not want to reduce the price if they are just speculating.
How much should I offer?
There are no set amounts of what to offer however the condition of the real estate market usually indicates what offer may be accepted. In a hot real estate market the offer will have to be close to the list price or sometimes even over the list price if you are competing with other buyers. In a stable or depressed real estate market the seller may accept a lower offer but caution is advised. If you offer too low the seller may be insulted thereby lessening your chances of negotiating a fair price. If possible determine the seller’s motivation before you proceed. The most favorable results will be obtained when both buyer and seller compromise.
What is the amount of deposit required?
Generally speaking you will require a minimum deposit of $5,000.00. The size of your deposit sends a message to the seller regarding your seriousness to purchase.
Comparable sales for town homes and condos
For recent comparable real estate sales it is best to use the units sold in the same complex where you wish to buy. Each individual complex differs in value because of specific factors such as amenities offered, size and location. Strata fees may also factor into the value. Find out what is included, some units may include some or all utilities or may have some amenity that will not be worth as much as the other condos. Your realtor can assist you to determine the true value.
How important is an Inspection?
An inspection is extremely important because it could save you thousands of dollars in future repairs. When hiring a home inspector make sure they carry errors and omissions insurance. This is very important in order for you to have recourse if something was overlooked in the inspection. A reputable home inspector will thoroughly inspect the property and advise you of any serious concerns. If it is an older home it is advisable to have the furnace inspected. Fireplaces both gas and wood burning should also be inspected. Any fireplace that is not installed properly could void your insurance if there is a fire.
Buying an acreage
If you are buying an acreage insert a condition with the offer to have the water tested and septic tank inspected. This is extremely important as it could save you thousands of dollars in repairs at a later date. The water and septic tank must comply with the British Columbia provincial standards.
Buying a new home
The builder will provide you with a warranty for your new home so find out the details before you sign the offer to purchase.
Do a walk-thru on Possession Date
A walk-thru on an existing home with your realtor is an excellent idea to do as a precaution. If the home you are purchasing is not in the same condition as when you viewed it prior to writing the offer you will have your realtor as a witness if further action is necessary.
New home walk-thru (Deficiency List)
Before taking possession of a new home a representative of the builder will do a walk-thru with you. At this time you will be able to make a list of deficiencies which will include items that need adjustments or repairs.