The Eight Secret Rules to Buying a Condo
Rule 1: Decide on Where You Want to Live
One the biggest mistakes someone can make when buying a condo is to not being prepared to lay down roots in that location for at least five years. Being transient and being a condo owner don't go hand in hand. If your employment isn't stable enough to commit to an area for a minimum length of time, then it's important to analyze whether or not being an owner is right for you. When you break out of a closed term mortgage you will incur penalties. You will also incur real estate commissions, as these are paid for by the person selling their unit and not the buyer. If you can, make the commitment to be in your condo for five years at a minimum.
Rule 2: Keep on Top of Your Credit Score
Every day actuaries and mortgage professionals look at the risk associated with providing loans to home owners. After all they are in business, and they need to minimize risk of default. The government has become involved in recent years, with interest rates so low their goal is to make sure property prices don't sky rocket in other parts of the country. Vancouver is pretty immune to a potential spike in prices currently, but the changes in legislation still affect your ability to borrow if you are a questionable risk. Make sure your monthly payments are all made on time, and make sure you don't borrow beyond your means.
Rule 3: Have Realistic Expectations
Everyone wants a magnificent condo on the seawall with a beautiful ocean and mountain view. But going into the process with realistic expectations is very important. Just because you want two bedrooms and a den doesn't mean it's going to happen with a $350,000 budget. The market dictates where prices are at, so do some initial research or let me help you understand what you can afford. A good rule of thumb is to budget 35% of your monthly take home pay for condo related expenditures. Spend any more than this and your dream condo could lead you strapped for personal living expenses.
Rule 4: The Larger Your Down Payment The Better
When it comes to your down payment, size matters! You can avoid the CMHC insurance fee if you able to put 20% down, with the lowest down payment option generally available at 5%. Start putting some money away, the more you can save the better. RRSP's are a good option, you can borrow against your RRSP's up to $25,000 within the rules of the first home buyers plan.
Rule 5: Work With a Great Real Estate Agent
Access to information is at an all time high, with the internet home buyers have access to a ton of relevant data. Even though the information is available, analyzing it and making a smart decision is always easier with the advice of a competent professsional. An experienced REALTOR® will be diligent in making sure you negotiate a great price for your future home, as well as terms that are comfortable. One thing that a lot of people don't realize is that using a real estate agent to help you find your perfect condo doesn't actually cost you anything. The entire commission is paid for by the seller of the unit.
Rule 6: Get Your Rate Guaranteed Via Pre-Approval
It's still only at the pre-approval stage, but getting your rate guaranteed for 3-6 months can provide you some price range security. If the rates go down in the interm, don't worry the mortgage lender will give you the lower rate. This will gives a good budget range to work with, as long as you are honest and upfront about your current financial wherewithal.
Rule 7: Knowledge is Powerful
Another great resource a REALTOR® brings to the table is the ability to analyze what comparable units have sold for in the area, or even the same building you are looking at. This information is proprietary to the real estate board, so only a licensed professional can provide you this data. Anyone can find out what a condo was listed at, but there are privacy restrictions involved with finding out what the property actually sold for. Making sure you have all the bases covered is important when entering the negotiating process.
Rule 8: Property Conditions
When you offer to buy a condo, the standard conditions to put in the offer are that you need to finalize your financings, the property needs to be inspected, and we need to read over the strata documents. Financing should be a slam dunk unless something has changed since your pre-approval or you weren't 100% honest at that time. Rainscreening and mould is often an issue in Vancouver condos, which would come up during the inspection. Going over the strata documents is very critical at this stage to get a firm understanding of any issues facing the building. Does the strata have a healthy contingency fund? Is there anything in the condo minutes about your unit that hasn't been disclosed? Both important issues that will come to light when we get access to this information after having the offer accepted.
Do you think you know what is involved with buying a condo? There are a few things you can do to make the process as painless as possible, most come down to being informed an using the services of a professional real estate agent. Knowledge is powerful, so pay attention to the following tips because they will help you now and moving forward in life.
Know Your Location
Do you currently live in the neighbourhood you want to buy in? What areas have you identified as a good possible target for buying a condo in? It's important to be comfortable with the area you are buying in, because the longer you can stay in one home the better it is for your property equity. As a rule of thumb you should use the term of your first mortgage to figure out how long you should plan to be in one location, as a bare minimum. Anything less will incur plenty of fees, starting with breaking your mortgage.
Having dreams of a penthouse condo with a rooftop garden and low strata fees with no restrictions all sounds great, but as a Realtor® it's often my job to bring reality into the equation. With mortgage rates at record low levels the temptation to buy at your financial maximum is often too tempting to pass up. I always recommend my clients look at how much the mortgage payments would be after your initial term at 5%. Often times this will reign in the budget and bring the dreams back down to earth. Being home/condo poor isn't fun, and often leads to making more bad decisions.
Working With A Real Estate Agent
Often times consumers find it tempting to go it alone, but there are plenty of road blocks in place to prevent this. Understanding the market is a huge advantage, this knowledge can save you a significant money in the right circumstance. Buyers are well protected by real estate law in British Columbia, but understanding the regulations will generally require a professional designation. From negotiating to understanding a depreciation report, a good Realtor® is worth it even just as an insurance policy. Buying into a condo that is falling apart can destroy your ability to advance on the property ladder in the future.
Never Forget That Knowledge Is Power
Working with a team of professionals always helps in making a great buying decision, but don't forget to do as much research as you can on your own. Familiarizing yourself with your target neighbourhood and the basics of the real estate process will give you confidence you are making the right decision. Don't go in blind, go in with your eyes wide open. Ask the tough questions, make notes, keep an eye on properties that interest you and find out what they sold for. The market is constantly evolving, stay informed!
If you'd like to start the process of purchasing a condo please feel free to get in touch anytime on 604-773-2948.