How To Avoid Paying Too Much for a Home (24 Tips!)

Understanding how to avoid paying too much for a home is the goal of many Canadian home buyers. The housing market in Canada continues to rise as more buyers purchase existing or new construction. Toronto home prices have broken records in year over year increases and, the truth is, a home is the largest purchase most people make. Researching the ways to save money on a home purchase is relevant to achieving the best possible housing deal. Consider these tips before making a bid on a home.

Tip No. 1: Know what home you’re buying before initiating a search.

As home prices rise, Canadian home buyers must adjust expectations about how much home they can afford. For example, if you qualify for $250,000 in Ottawa, and the average resale house costs $370,000, start your search by getting a feel for home prices now. Imagining a perfect three-bedroom ranch home leads to disappointment if your budget affords a town house or condo.

Tip No. 2: Apply for a mortgage before starting a home search.

Home values are rising throughout Canada, so taking the time to qualify for a mortgage will ultimately save time and money when you find the best home for you. Having a written letter from the lender about your mortgage is important: don’t accept a banker’s verbal say so that you’ve got a certain budget. Sellers like to work with approved buyers. They’re more likely to negotiate with a buyer when the sale is likely to proceed.

Tip No. 3: Assemble a team to help you purchase a home.

Most sellers have a team of real estate experts to help them achieve the best sales price. Having your own expert team is only sensible: line up bankers, attorneys, inspectors, movers or designers now. Any professional you’re likely to need later is best sought today.

Tip No. 4: Talk openly to your realtor partner.

Communication is crucial to any working relationship. Your realtor won’t know about your home buying priorities unless you tell him. By the way, it’s a great idea to think about priorities (must have’s) for the new home. Understanding the differences between must have’s and nice-to-have’s will ultimately help you make the soundest financial decision.

Your realtor can offer valuable information about real estate market realities. Don’t imagine that a home seller will really take less than the asking price in a rising real estate market.

Tip No. 5: Location, location…

Yes, this isn’t just an old wives tale! The neighborhood in which your home resides is an important element in assessing current and future value. Schools, public resources, parks, or access to major thoroughfares needed to get to work are all reasons that one location or another adds value to the home.

Tip No. 6: Ask your realtor to make a short list of properties.

Home shopping can be an exhausting task. If you know that a fixer-upper is not for you, don’t spend home search time on these properties. If a certain neighborhood makes a work commute longer than you’d like, don’t revisit the decision about buying a ‘really good deal’ there. Your realtor knows the market and can pre-select properties to ease the search.

Tip No. 7: Evaluate the positives of every home you view.

Not every home on the short list is the home of your dreams. However, tone your home buyer muscles by evaluating the pro’s and con’s of every house, then share the assessment with your realtor. This process builds communication.

Tip No. 8: Go shopping with your head instead of your heart.

Rely on logic–and an assessment of your priorities (must-have’s) in a home purchase. The nice-to-have’s can prompt overspending on a home.

Tip No. 9: Heed the red flags presented by any home.

Cosmetic issues, like paint, wallpaper or carpets, aren’t as important as structural red flags (signs of damage, old plumbing and electric circuitry). Don’t underestimate the cost of fixing these issues. The seller hasn’t!

Tip No. 10: Engage the best home inspector you can find.

Hiring a home inspector isn’t one of the places to save money. The home inspector’s insight and great reputation can help you negotiate a better purchase price.

Tip No. 11: Not all fixer-upper homes are a handyman’s dream.

Some homes aren’t fixer-uppers: they are distressed properties! Bringing a distressed property back to life can be an expensive undertaking. Before bidding on any ‘fixer-upper,’ make sure your real estate expert team weighs in.

Tip No. 12: Think about the future.

A young couple with the desire to start a family differs from an empty-nest couple with grown children. Extra space may be desirable or unnecessary, depending on your future needs.

Tip No. 13: Prepare to act quickly upon finding the right home.

Buying a home in a rising market requires the ability to act with firm decision. That’s why pre-qualification from a lender is a key element in sealing the deal. Don’t waffle. Bid with confidence on the home that ‘speaks’ to your head, and your heart.

Tip No. 14: Ask questions about your agent.

Unless you’re working with an exclusive buyer’s agent, your realtor may represent the seller or both buyer and seller. That bit of information can save you money.

Tip No. 15: Request a written comparative analysis.

Knowing how a home compares to others in its neighborhood is an additional way to ascertain value. If a home you’re considering is for sale at lower prices than other recently sold homes in the neighborhood, ask questions. If the sales price of the home you’re evaluating is higher than others, use that information to negotiate or identify other properties.

Tip No. 16: What’s the seller’s motivation?

An already vacant house or boxed belongings in the home can signal a motivated seller. These sellers are often more willing to negotiate a lower purchase price with qualified buyers.

Tip No. 17: “Let’s talk about you.”

Avoid discussing your personal situation with a home seller. Knowledge is power. Use any interaction time to determine what will help you obtain a better purchase price.

Tip No. 18: Time may be on your side.

In a heated seller’s market, special situations (like seller timing) can help negotiate a favorable purchase price.

Tip No. 19: Leave your heart out of real estate negotiations.

Use logic to guide negotiations. Don’t overpay!

Tip No. 20: Don’t allow anyone to pressure you.

You’re the buyer and client. Walk away from anyone’s attempts to pressure you into making a decision.

Tip No. 21: Negotiate, negotiate.

Ask questions that guide the seller into a negotiation discussion. Haggling isn’t required to negotiate a favorable home price.

Tip No. 22: Written defects disclosure.

Buying a major asset, e.g. a home, requires a large financial investment. Get all identified property defects in writing, then consider your financial ability to correct defects in a timely fashion.

Tip No. 23: Don’t enter a bidding war with another home buyer.

Walk away, don’t overpay.

Tip No. 24: Know the ‘hidden costs’ of home purchase.

Many Canadians don’t budget for the ongoing costs of home ownership. Some new buyers don’t budget for necessary legal fees, title search and insurance, land transfer costso or inspections. They may overlook the eventual need to pay municipal taxes, fire/theft insurance, utilities and regular maintenance of the home may not be included in the home buyer’s budget. Some estimates suggest that new homeowners should budget an additional $500-700 per month to pay routine monthly expenses.

Have a tip to add? Share your thoughts in the comments!