What to consider when buying a home in 2021
The process of buying a home can be summed up with these words — Expensive and Time Consuming. Whether you are a first-time homebuyer or selling one dream home for another, there are lots of things that you should consider before buying.
Aside from the obvious things, such as getting pre-approved, what do you need to know before signing on the dotted line? Even if you already own a home, you may still find some of the tips in this article surprising, insightful and helpful.
Homeownership is an exciting experience and one that should be enjoyed thoroughly, but the excitement can quickly turn to frustration if we don’t know all the ins and outs of purchasing a home.
Don’t learn the hard way — do your research before buying. Remember, sellers often make mistakes too!
Here are some things you may want to consider:
1. Buy a home that you can really afford
There is nothing worse than living in a glorious home that is devoid of furnishings because you are too broke to buy a couch. Getting a great mortgage rate can make monthly payments a little less harsh (and hopefully allow you to have some money left over for furniture).
There are numerous online borrowing power calculators that helps you estimate just how much you can really afford to borrow for that dream home.
You can also “try before you buy”. Essentially, before buying, try setting aside the monthly expenses for the home you plan to buy (minus what you are paying now in rent/mortgage).
If you can pull this off for a few months, then you have a little nest egg established, and you know that you can probably afford the monthly payments that come with the new home you want.
Check how your home loan compares
2. Buy in a top-notch school district, even if you don’t have kids
This is one idea that you have probably heard before, but it bears repeating. Buying in a well-known, highly-rated school zone is like investing in a sunscreen business in the tropics — a winning scenario.
Maybe you don’t have children and never plan to, but when it comes time to sell your home, the new buyers are likely to be looking for a great school for their children.
Homes in school zones are more likely to go up in property value and are more likely to sell faster. Start your home shopping in areas with top-ranked schools, but remember to stay within your price range.
3. Talk to the sellers
Most home buying transactions are done by the buyer and the selling agent. We don’t usually get to talk to the seller first-hand and negotiate, and that is OK, but wouldn’t it be nice to talk to the sellers of the home?
The sellers are the ones who know everything about the property and surrounding neighbourhood. Sure, they may not disclose that their neighbour stays up and parties all night, but they can tell you what they like about the house, neighbourhood and school.
They can share information about renovations they did, gardens or trees they planted, local clubs, neighbourhood dog sitters and babysitters etc…
If the sellers are not interested in talking with you personally, then maybe you could write out a list of questions for them and have their selling agent pass it on to them.
Sellers are by far the best source of knowledge — a source that most don’t think they can use, but why not? The worst they can say is, no.
4. Hire a tradie before buying
You have found your dream home and a tentative price has been negotiated through the selling agent. Now you need to hire a building and pest inspector to make sure there are no major problems with the home.
The inspector will likely find a few things that need to be repaired. Once this happens, hire a home building/maintenance professional and get quotes for the repairs and then use these as a tool to negotiate the cost of the house down or have the seller fix the issue prior to settlement.
5. Don’t be afraid to walk away from the deal
There are some tough negotiators in this world, and it can be hard to seal the deal when one person is unwilling to budge. Always remember when negotiating, in real estate, money is made when buying.
If negotiating has come to a standstill, don’t be afraid to walk away. Yes, you love the home and you already pictured yourself living in it, but it’s not worth it if you end up paying more than it’s worth to you.
Sometimes walking away is the best way to motivate the seller to agree to your terms. In the end, whoever is willing to walk away is the one that holds the negotiating power.
Go into the deal knowing what your final price is, and stick to it when negotiating.
6. Doesn’t have to be your forever home
You have negotiated a reasonable price, signed the contract and are ready to start planning the move.
If you are lucky and the market is right, then your home will exponentially increase in value as time goes on. Here’s the thing: you need to stay in that home for several years in order to hopefully gain a profit.
With all the costs of moving and purchase associated costs, there is little chance of making any profit on your home unless you stay in it for several years, allowing the market to hopefully work in your favour and increase your home’s value.
If you are trying to buy an older home it helps to see if the sellers have lived there for several years. They will know the condition, the neighbourhood and other key factors.
If you feel that your life circumstances are too unpredictable to guarantee staying in one place for several years, then maybe you should reconsider buying a permanent home and buy an investment property instead.
7. Wait before you decorate, buy furniture and do renovations
It is so tempting to jump into your new home with paint brush in hand. Nights have been spent dreaming of the furniture you want to buy, the colours you will paint the walls, and the remodelling you will do—but wait.
Knowing what works in your new home requires living in it for a while. Use this new space as it is, and you will begin to see what is missing.
Maybe you will discover that you dislike the kitchen layout and would prefer to spend renovation money on a kitchen renovation. Or maybe you will fall in love with a new bedding set and decide to paint your bedroom walls around its colour scheme.
8. Set aside money on a monthly basis for repairs and renovations
Budgets are tight and living costs are high, but when you take on the responsibility of owning a home you really need to save for a rainy day.
It can be tough trying to save if you are living pay check to pay check, but some money set aside is better than none. Sometimes home ownership means saying goodbye to buying lunches every day, weekly dinners out and nightly ubereats.
If your thoughts are lingering on buying a new home, then start saving immediately — even it means giving up some lavish lifestyle habits for a while.
You should aim to save 6 months’ worth of major living expenses. Try to make this your goal — it will be worth it in the end when you own the home of your dreams.
Home ownership is not for the faint of heart. It can end up involving a lot of stress and worry over money. The better prepared you are financially, the better off you will be when it comes to owning your own home.
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This article via Freshome does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.