If you have been looking this year to buy a home, you are likely all too familiar with just how difficult the market is for buyers right now. Bidding wars, unprecedented prices, and record low interest rates have characterized the market in Vancouver and outlying areas for most of 2015 and there appears no end in sight.
Although the current market conditions are unavoidable if you are looking to make a move any time soon or get into the market before it (possibly) soars even further out of reach, paying attention to the tips we have compiled below should make the process more manageable.
- Get Your Financing in Order!
We cannot emphasize enough the importance of being pre-approved for a mortgage or at least being assured in writing that you will get the financing you need to purchase the home you are hoping for. In these fast moving times, it is essential that buyers determine with some precision what they can afford. Further, long conditional contracts are often too difficult to negotiate for the best properties, which means buyers will not have much time to shop around for the best deals, complete appraisals, or do anything else that a lender requires.
Depending on your financial situation and your appetite for risk, being pre-qualified or approved for a mortgage may allow you to bid on a property with a “subject free” offer, increasing your chance of being accepted, even in competition with a higher priced offer that is conditional.
Sometimes it will be necessary for buyers to sell their existing home prior to purchasing another to ensure they will have the appropriate financing. This can be uncomfortable for people who are worried about not having a place to go if they do not find a new home quickly. This may be a risk worth taking though to allow you to make an unconditional offer. Further, it may be possible for your realtor to negotiate terms into your sale that allow you to stay longer or close the deal earlier depending on your needs on the purchasing side.
Be in touch with your mortgage broker as soon as you can. If you do not know a good broker, ask for a referral from your realtor or someone else you trust.
- Don’t Forgo an Inspection
If you are buying a property that you plan to live in for years to come, make sure you do not buy a lemon! With the increasing pressure to make offers unconditional in a competitive environment, many buyers are foregoing the traditional “subject to inspection” clause, which would allow them to do a thorough inspection of a property before they decide for sure whether they can live with whatever problems are inevitably going to be present.
An inspection, albeit not perfect, is an invaluable tool to discover any defects with a property, which may not be apparent to a lay-person’s naked eye, or even perhaps a… realtor’s eye! An inspector is usually a person with an extensive background in construction and maintenance and the best ones have at least some knowledge in all aspects of residential building. Again, a referral from another professional in the industry can be valuable.
- Use a Real Estate Agent
While this recommendation may seem somewhat self-interested given our profession, the truth is that for most people most of the time, but especially in this market, it is essential to have your own real estate agent acting on your behalf. For starters, 99.9% of the time, the buyer him or herself does not have to actually pay the agent. Instead, the buyers’ realtor’s commission is paid as a portion of the commission that the seller’s agent receives for selling the property. It does not cost the buyer anything out of his or her pocket.
Retaining a realtor can provide the buyer with immediate notification of any new hot listings that come on the market. In the current market, some of these hot listings are sold before they even hit the public site, making a realtor’s information invaluable. Active realtors are also out in the market seeing homes and potential clients every day (yes, even weekends) and their knowledge of comparable properties and people who may be interested in selling even if not on the MLS can greatly enhance your buying experience.
A further reason to retain a realtor is to have someone to advocate on your behalf alone. That person can negotiate on your behalf, make recommendations for professionals to assist you (mortgage brokers, inspectors, lawyers etc.), and generally guide you through the process, which process can often be overwhelming and emotional (particularly with competitive bids and/or “hot” properties).
The real estate profession of late has been formalizing the role of the buyers’ agent, with some agents using Buyers Agency Agreements to clearly delineate the role of the agent for the buyer. Such agreements formalize the relationship, explain the obligations and expectations of each party, clarify how the agent will be paid, and define the circumstances under which the relationship may be terminated. Look for these types of agreements to gain popularity in the coming years, as they are already standard in other provinces of Canada.
- Be Prepared to Act Fast
When a good property that is priced well comes on the market these days, it is often gone within a week or two. This does not leave time for a lot of hemming and hawing, consulting with friends and family members, measuring furniture, etc. The best advice is to know as much as possible what your priorities are, know what you can or are willing to afford, know the size of your furniture, decide whose opinion is important to you and make sure they are available to come with you to first showings if possible.
Although it is difficult for many people, it is also helpful if your employer can offer a bit of flexibility during this time as it can be in your best interest to see a property you are very interested in as soon as it is available to be shown, and sometimes that can be during regular work hours.
- Location, Location, Location!
For people trying to get into the market, or trying to move up in the market, say, from an apartment to a detached home, the temptation can be strong to buy something that feels nice inside that you can afford. Be careful about purchasing a home that has characteristics that would make it traditionally very hard to sell – in particular, a poor location. The current market conditions may not last forever, and unless you are sure you are happy with the property long term, you probably do not want to be stuck with a home on a very busy street, with poor accessibility, in a “bad area” or otherwise lacking in location.
- Try to Look Beyond the Surface
Sometimes the properties that do not move as fast are simply less appealing on the surface to an average buyer. Perhaps the home is vacant, which can make it difficult to visualize how your own furniture would be arranged, or alternatively the owners have stuffed the home full of oversized furniture making the space seem cramped. A lack of landscaping, clutter, actual mess, or tenants who don’t particularly care about a home looking presentable are other common issues for sellers that can result in good buys for buyers. Although you are more likely to want a thorough inspection on a home that does not appear “well cared for”, try to see past these surface issues to what the home could be if you lived there.
- Practice Patience and Don’t get Discouraged
We have seen buyers in this market miss out on their dream home, or perhaps 2 or 3 or 4 of what they thought was their dream home (for example, a house that I – Christine – was interested in a couple weeks ago in North Vancouver had 18 offers on it and sold nearly $300,000 over asking price, leaving a few disappointed prospective buyers in the wake). With properties going to multiple offers, sometimes you do not even get a second chance as a buyer to increase your bid or soften your subjects. Try not to have any regrets when making your offers in a competitive situation but balance that with trying to make sure you do not overpay. Your dream home may not be your dream home anymore if you pay double what it is worth…
Be committed and diligent but stay patient because your time will come.