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First Time Home Buyers – Tips To Avoid Regret On A Purchase
Of the many categories of property buyers in the market, the first time home buyer is the favourite target of sellers, agents, and developers.
They are a major force in the segment for buyers, they don’t know what questions to ask, they don’t know what they don’t know, they are more likely to negotiate less, they are easy to confuse, and they could very well believe everything anyone has to say to them about real estate.
But if you are a first time home buyer, don’t let that be an excuse for walking away from a deal as the loser. Even if you are bound to be on the lesser end of a deal, at least make a fight for it instead of submitting to defeat. The following are some important points to help you avoid getting battered in the ruthless world of real estate.
On living close to the city
The new generation of first time home buyers fully appreciate the value of living in the city. The variety of amenities is greater, there are more options of entertainment, transportation is more convenient, and far greater opportunities of appreciation. But of course, that comes with a high price that many people cannot afford, let alone a first time buyer.
The best alternative then is to buy a home in the outer suburbs. You get bigger space for less money, more natural landscapes, less crowds, and a lower cost of living. It could also be closer to friends and family. Just remember not to buy a place in the outskirts of the city when the costs of it is as good as living in the city.
Outer suburbs have drawbacks as well. You will want to get your money’s worth. Look out for flight paths vulnerable to noise pollution, busy roads right in front of your windows blowing exhaust fumes into your living room, availability of recreational facilities, availability of transport infrastructure like highways and subway stations. And since you are getting out of the city, the best buys are older homes with great potential for renovation facelifts.
It really depends on your budget and priorities. What is needed to buy a small apartment near the city can get you a house with 3 or 4 rooms a little further outside it. These room can be crucial in maintaining a harmonious family when you have kids around. They can get pretty territorial once they become teenagers.
The type of house with great capital gain potential
Even though you are not exactly buying a house for investment, why not kill 2 birds with 1 stone by getting one that will give you good gains in future when you sell it?
When you think about resale value, think about what the mass market wants. Sure, if the location you are buying is earmarked to become a regional centre in the master plan, it is going to appreciate whether you like it or not.
But you can take it further. This means avoiding small apartments and go for 3 to 4 bedroom homes. These house sizes are the most in-demand. Avoid homes with the afternoon sun coming directly into the living room. The bigger the living area, the more valuable the house will be. Look out for other things like built-in areas, modern kitchens, classy bathrooms, etc. These things can have a big impact on your resale value.
Your goal is really the second home
Your first home is usually one that you purchase out of need and affordability.
The second home is the one which you really want. From the experience of your first purchase, you will have a much clearer picture of what you desire. You will be much stronger financially by this time. And not only that, you will probably know by then what is needed to build your dream home. So keep this in mind.
This means that you do not really have to aim for the perfect house on your first purchase. You could very well be living there for only about 3 to 5 years. This makes shortcomings of the location a little more bearable and acceptable. No matter what, remember that shopping, transport, and entertainment will be attractive to the next buyer.
One of your key concern is whether your first home will be able to liquidate itself at a high price to fund that second home. This brings us back to the previous point of appreciation. It is something you should put a little focus on. Seldom will you remain satisfied with your first home after a few years.
The worst of the best location
Even if you have a penthouse, you probably won’t expect it to appreciate a lot when it’s in a bad neighbourhood. On the other hand, even if you have a house in 1970s condition, it will still be invaluable if it resides in a good neighbourhood. This is an undeniable law of real estate.
When you find such diamonds in the rough, you have basically found a money-churning ATM. You should be able to drive a hard bargain due to the condition of the house. Yet you will be able to drive up it’s value by remodelling it.
Location is without doubt, the most important aspect of the value of a property. Bear in mind that we are talking about the macro picture of location here. I’m not referring to corner units or one with the best view. I’m talking about the wider picture.
It could be a house anywhere along a famous street, an apartment in an unknown street close to a famous shopping belt, a place with close proximity to the beach, etc. Real estate values in such pockets can be driven up just from the value of the area itself.
Using property listing websites
The role of property websites is invaluable for anyone looking to save time and hassle. It is great that you can just log in on a desktop computer and browse through the thousands of available listings vying for your attention. Well… they work great as long as you find what you are looking for.
Because such websites are profit driven, agents, FSBOs, and developers can pay a fee for premium listing. And very often, their inventory is all you see from your search results. This is even when their properties have nothing to do with what you are looking for. It defeats the whole purpose of an internet real estate marketplace. This is why newspaper property classifieds are still surviving. Because there is a whole lot of junk on the internet.
On some websites, you are able to create alerts when properties in your desired areas are listed. So make good use of these free services. Don’t forget to read up the profiles of listing agents.
Working with agents
The world is not perfect. The majority of real estate agents work within a high level of ethical behaviour. There are also some who are only interested in pushing a sale through so that they can collect their commissions and move on to the next prospect.
As a buyer, don’t be surprised to find yourself hiring more than one agent to help you scan the landscape for suitable deals. You might even avoid hiring one should you go about house hunting alone. If you do hire one, make sure you make him or her work for their fees. Too many agents just do minimal work and attach themselves to buyers like a parasite to collect a commission.
The setting is different for a seller. Selling agents most often get sellers to sign an exclusive right of sale. This means that a sole agent is hired to market and sell a unit. Putting this into perspective, as a buyer, it is very possible that you will be dealing with a team in better sync compare to the team you have.
Nevertheless, here are some common questions you should ask the selling agent. How they answer your questions can be as revealing as what they answer.
- Why is the owner selling?
- How long has the house been available in the market?
- What defects does the house currently have?
- Are there any offers on the table?
- What was the last offer? (the assumption is that it was rejected)
- Have the owners already bought a new home?
- What is the asking price? And what is the number you think the owners will close at?
You are dealing with veterans
It would take some extraordinary circumstances for you to run into a seller who is involved in real estate for the first time as well. Because if they are in a position to sell you a house, they probably have experience in buying it in the first place.
So in effect, you are almost always negotiating against someone who has more experience than you. Think that your agent will help you? Half the time, they are just waiting in the wings for their commission cheques to clear.
Because experienced people would rather skip a meal than to be out-negotiated by a newbie, you would find a high resistance of them conceding ground. The best move you can make is to act like a fool but move like a pro. Catch them off-guard and move in for the kill when they expose their weaknesses. And if push comes to shove, don’t be afraid to let them have it.
Another thing you can do is to get an experienced real estate player to help you out in your corner. You can leverage experience this way. The way a seller approaches negotiating with you can totally change if he knows that you have an experienced professional on your side instead of dealing alone as a rookie. It’s a reality that you can probably intuitively understand.
The key takeaway is that even when you are a first time home buyer, there is no law which says that you are required to behave like one. You are also best served looking for a place with resale value in mind. And as long as you are walking into the cut-throat marketplace, have fun while you are learning the trade. Your skills and experience will come in handy on your second home.