The real estate market has been booming for years, but the truth is that not everyone understands exactly what that means. Trying to buy a home unprepared can be a dangerous game for your finances. Your home purchase may be the biggest investment you’ll make for years to come, so understanding how the buying process works can save significantly on time and headaches.
Unfortunately, with everyone talking about real estate but not everyone understanding purchases and sales, there are several common myths that will often confuse buyers and sellers in the real estate transaction process. We wanted to debunk 5 common myths that are out there to help buyers and sellers stay ahead of the curve before they start exchanging offers.
Myth Number 1: Find The Dream Home, Then Worry About Pre-Approval
Fact: Finding that dream home, and then realizing that you are unable to afford it can be crushing. Remember, for most buyers the purchase price of their home is far more than they have currently in the bank, and thus they’ll rely on a mortgage lender to finance the bulk of the deal.
A pre-approval is a process where a mortgage broker or lender will review your finances and determine how much money you can borrow safely to purchase your home, and the interest rate that you’ll pay on that money. Once you have that information handy, you can then look for homes that are securely within your price range, and can avoid over-bidding beyond your maximum budget. A pre-approval can last for a few months (usually 3-4) so you’ll be able to search comfortably and start making offers without worrying about whether or not you can afford it.
Myth Number 2: Skip The Home Inspection and Financing Conditions
Fact: In a competitive real estate market, there may be serious pressure to make an offer with ‘no conditions.’ This means that you’re entering into a legally binding contract to buy that home on the closing date regardless of no matter what happens or of the condition of the house. Unfortunately there are two key things that can go wrong where most buyers should still be cautious.
The first is financing – if you agree to buy that home without having your financing secured (see Myth number 1), you may be in serious trouble. If you are unable to obtain the money that you said you would pay on the closing date, the seller can sue you for breaking the deal, and you can wind up in a costly mess.
The other important condition is the home inspection. For everything that you can notice with the naked eye touring the house, there are other details that you might not catch such as structural issues. A home inspection (usually only a few hundred dollars) can catch these before you firmly agree to buy, and ensure that either the seller fixes the issues before they go, or that you can walk away from the deal. Otherwise they can become expensive headaches!
Myth Number 3: All Agreements Say The Same Thing
When buyers and sellers review real estate documents on their own, they can look like a simple wall of text. Many key documents, such as the Agreement of Purchase and Sale, will use standard forms that look like boilerplate, and are hard for an ordinary person to understand.
These documents may look similar, but each one is unique and contains the exact details of your deal. As the old saying goes, the devil truly is in the details. Your real estate lawyer will walk through all of the paperwork with you including the buyer’s and seller’s obligations in the deal, the mortgage obligations on either side, and anything else that has to get done to ensure a smooth closing.
Myth Number 4: The Purchase Price Is The Final Cost
Fact: When you’re paying a high price for a home, it’s tempting to stretch every last dollar of your budget on the final purchase price. This can be a dangerous game, since the final purchase price is never the exact total.
The purchase price of your home does not include key expenses such as closing costs, legal fees, insurance, property taxes, and even moving costs. These can total a few thousand dollars or more, but are necessary to close on your property, and your transaction will not move ahead until those amounts are covered. Keep that in mind so that you’re not draining your bank accounts completely when you crunch your numbers.
Myth Number 5: Real Estate Lawyers Don’t Help Much
Fact: There is a common misconception that real estate lawyers are really just in place to sign paperwork and do a quick walk through of the documents. There’s a reason for this – if everything in your deal runs smoothly, then the real estate lawyer can often look like the wizard behind the curtain.
The truth though is that real estate transactions can be slippery, and lawyers are an important safeguard to prevent things from going wrong, or take action in case they do. Real estate lawyers are crucial for preventing fraudulent transactions, registering title on property (changing the legal ownership properly), reviewing any liens against the property (if anyone else may have a claim in part against the property), and helping to take action in case a problem arises on closing. What seems simple can be quite complicated behind the scenes, but a great real estate lawyer will walk you through every step of your transaction and keep you informed of the steps that you need to take to help ensure that things go as smoothly as possible.
We help purchasers and sellers all throughout Southern Ontario in the Windsor-Essex and Chatham-Kent regions. Contact us today when you’re ready for your next real estate transaction to learn more about how we can help set you up for success.