Top 10 mistakes first-time home buyers make

To help, here are the top 10 mistakes first-time home buyers make, along with some handy tips on how to avoid them.

1. You fall in love with home staging

Everyone knows this. Everyone trots this piece of advice out—particularly as they swear up and down that they can see past the old-fashioned wallpaper to the home’s potential. Then reality hits, as potential buyers start to see staged homes versus original decor.

In its simplest form, home staging is when the seller declutters and rearranges the furniture to make rooms look more appealing to buyers. These days, some sellers remove almost all of their belongings so that a staging company can come in and completely redecorate. The effect? Stunning displays of unblemished design perfection. Playful bedrooms, serene spa-like bathrooms and spotless kitchens.

The problem is there’s a big gap between this idealized way of existing and how we actually live in a home. For instance, stagers will often remove necessary appliances—such as coffee makers, microwaves and blenders—to make countertops seem more spacious. Some will even go as far as to remove doors to make older homes seem more airy and open. In addition to these tricks, stagers can use undersized furniture to make rooms seem bigger.

The trick is to not fall in love with what’s on display and to actually imagine where you would put your current belongings (or the furniture you plan on buying for your dream home). Do this by examining each room, including the built-in storage, to determine if it would actually suit your lifestyle and your furniture. And look for design elements that would require a great deal of money to change. For example, if the open-concept kitchen is near the front of the home, and you would prefer having it near the backyard, know that it would cost a lot for this renovation.

Most importantly, don’t forget to ask about the home’s key components, such as the foundation, plumbing, and furnace and A/C units. Decorative flourishes, such as light fixtures, furniture and paint, can be removed and updated at a relatively small cost, but repairing a roof or updating electrical components can be expensive, out-of-sight upgrades.

2. You shop distracted

I know it’s hard. You have children and they get bored as you visit house after house, peering into closets and underneath sinks. Every parent in the midst of house-buying knows: Kids add chaos to an already difficult home-shopping experience. (Same thing when buying a car.) I’ve had to reschedule viewings—or view homes alone—after parents bailed to take the cranky toddler back to the apartment for some much-needed rest and relaxation.

While house-viewing with kids in tow can mean you miss things, it can also lead to resigned behaviour—bidding, and eventually settling—on homes out of desperation rather than waiting to find the house that suits your needs. 

To avoid this, consider working with an agent who will take you on one night and your partner another night, or plan to have one parent visit while the other entertains the child in the yard. Of course, you could hire a babysitter or ask a family member to watch the kids for a few hours. Good, attentive agents will gladly step in to help with kids, especially for clients who are a single parent. You should be able to take your time and concentrate—paying attention to the most expensive purchase you’ll ever make.

3. You trust the floor plan

Most people, including me, would assume that if a listing states a room is 12-feet by 10-feet, that those are the measurements. But more often than not, the dimensions are a little off. It’s not that the seller or their agent is intentionally trying to deceive—errors can be introduced in a number of ways.

For example, I’ve seen measurements copied number for number from building plans—without accounting for the last-minute changes the builder had to make to accommodate issues behind the wall. I’ve seen agents enter imperial measurements using a metric setting. Next thing you know, the room is a lot smaller or larger than you thought. 

It’s a lesson Ken Grunber, who works at a video production house in Toronto, learned after he bought his condo in 2007. Despite being advertised as a 700-square-foot, one bedroom plus den, Grunber was shocked to find out his condo actually measured 560 square feet. (First-time home buyer tip: Bathrooms or outdoor space do not count as part of the square footage.) For those looking at newer-build condos, be warned: It’s not unusual for condo sales staff to include balcony or terrace measurements as part of the total square footage. Regardless of how it happens, the best way to avoid later surprises is to actually measure the rooms yourself.

4. You don’t investigate the neighbourhood

Do you know someone who moved into a fabulous home only to discover they hated the area? That’s exactly what happened to Mikala and Thomas Hees (we’ve changed their names to protect their privacy). After buying a beautiful bungalow in Toronto’s Danforth Village, the couple realized how much they missed downtown. “We soon realized we missed the hustle and bustle of downtown living and dreaded the half-hour transit ride,” says Mikala.

The many people who moved out of the city into smaller towns during the pandemic may soon find themselves in a similar position (some are even staying put or moving back). Even before the pandemic, more than a third of Canadians felt their commute was too long, according to a 2019 survey. And more people favouring cars over public transportation could mean even longer-than-normal commutes in the future. What happens then? 

To avoid similar regrets, make sure you investigate the neighbourhood thoroughly before buying. Check out the local commercial area, talk to neighbours about schools and community centres and walk around to find daycares, coffee shops and the closest take-out grub (you know you’ll need it). Also, keep an eye out for tell-tale signs of residents. If you’ve got a family, look for kids’ toys swing sets on lawns, for example. Chances are the more you connect with your neighbours, the more you’ll love living in your home. Also, check the MoneySense annual feature: Where to buy real estate in Canada.

5. You don’t ask for comparables

I can’t imagine a single real estate agent that wouldn’t give a potential buyer a list of comparables—that is, a list of homes that have sold recently in the neighbourhood or area you’re considering. However, not all agents are totally forthcoming with information.

For example, a colleague recently purchased a resale condo north of Toronto. Her offer price was based on a list of comparables that were provided by her realtor. But a mere 24 hours after signing the paperwork, my colleague was given a more complete list of comparables—one that included more sales of units that were similar to the one she bought. Based on new information, she felt she overpaid by $4,000. Not a significant amount, but enough to leave a bitter taste in her mouth.

A good way to avoid this is to request exactly what you’d like to see. If you’re shopping for a three-bedroom home with two bathrooms, ask to see sold listings that match these parameters. Then expand your search so you can properly assess the property and area. A good realtor will happily accommodate these requests—and help contextualize the rationale behind the sale prices. But at least you’ll know you are comparing apples to apples.

6. You don’t get a pre-approved mortgage

It’s so simple. You can even do it online (and compare rates, too). But there are still home buyers who don’t get pre-approved for a mortgage before they start shopping. For many, the reason is they want to see what’s on the market, first. My response: What if you do find the perfect home? You could lose out because you don’t have your financing in place? It does happen.

The easiest way not to get caught is to get pre-approved for a mortgage. It’s simple and usually 30 minutes of your time, if you have all of your paperwork in order. 

7. You use all of your savings as the down payment

One of the biggest aspects of buying a home is the down payment, which is the portion of the sale price you pay upfront. Your total down payment will be influenced by a number of factors—including the home’s purchase price and amount of mortgage you qualify for. But regardless of the final figures, you should never put all your savings towards this expense. 

Depleting all your savings to increase your down payment could make it very hard to pay for closing costs, which can add up to thousands or tens of thousands of dollars. You also run the risk of facing future cash-crunch problems. For instance, a temporary job loss can be overcome with emergency savings in the bank, but without savings you may be forced to find dramatic solutions, such as selling assets, including your home. 

Instead, aim to save three to six months’ worth of expenses in an emergency fund in addition to the down payment and your closing costs. 

This savings strategy could mean reducing your total down payment, which in turn could mean adding mortgage default insurance fees (a premium charged to buyers who put less than 20% down on a property). Nobody likes paying extra fees, but it’s better to leave yourself a financial cushion than be forced to take drastic action, such as borrowing even more money or selling your home. Keep in mind that many lenders save the lowest mortgage rates for buyers with less than 20% down on a home. (Since the mortgage is insured, the loan is considered less risky by the lender, so lower rates are offered.) Remember, a home is an expensive investment—to make it a smart one, don’t completely deplete your savings. 

8. You get ambushed by closing costs

When you sign and finalize a purchase and sale agreement, the down payment and the purchase price are not the only two costs to take into consideration.

As a buyer you will have to factor in other closing costs. A short list of what to consider includes:

• Land transfer tax varies from city to city and province to province and can even fluctuate based on the home’s purchase price)
• Mortgage set-up costs can include an appraisal, as well as mortgage default insurance premiums if you’re putting down less than 20%)
• Home insurance premiums should be included as you typically can’t get a mortgage without home insurance)
• Adjusted utility and property tax costs
• Legal costs
• Title insurance

To help you track these closing costs, consider using checklists and online calculators. There are plenty of online resources that are convenient and easy to use, from a guide to understanding closing costs to mortgage calculators that help you estimate mortgage default insurance premiums and land transfer taxes. 

If you can put a checkmark to all the costs associated with becoming a homeowner, then you’re likely ready to move. If, however, there are still costs to consider or work to be done, don’t worry. You can always keep saving. There’s no reason to rush into a decision. 

9. You don’t bother with a home inspection

There was a point in time where any buyer who didn’t get a home inspection was considered foolish. These days, in a sellers’ market, a request for a home inspection can mean the difference between winning a bidding war and returning to the house-hunt.

In a buyers’ market—where sellers scramble to attract buyers—always include a condition of inspection in your offer. The $300 to $800 you will pay is well worth it as, very often, inspectors will uncover maintenance issues that need to be dealt with before they become major problems.

Back to sellers’ markets: Consider booking a home inspection during a buyer viewing. Just ask your realtor to schedule a two-hour (minimum) buyer viewing and book a home inspection during this time. That way, when you go into the bidding war you already have a good idea what issues come with the home.

Also, if you think the seller is vying for a bidding war, ask your realtor to request a pre-sale home inspection. Quite often sellers will pay to have this inspection so that would-be buyers can come in with clean offers with all conditions removed.

10. You forget that everything is negotiable

Recently, a first-time home buyer with a lot of equity asked why I bother to negotiate on deals where the seller and buyer are so very far from the middle ground. My response: Because everything is negotiable.

While price is king in most real estate transactions, you can’t discount the other terms. Factors like closing date, the list of inclusions and exclusions (such as fixtures and appliances), and maintenance or repairs to be completed before closing day are all up for negotiation. As is a realtor’s commission. (Although, you’ll have to negotiate and settle on this before you actually go house-hunting.)

If you find yourself really stuck on one term, examine your purchase contract. Is there another condition that you can be flexible on? If so, let it go. Very often the best deals are the ones in which neither party walks away feeling like they won, but, instead, walk away feeling like they negotiated well.

MORE ON REAL ESTATE:

• Home-financing tips for 5 types of buyers
• 7 smart strategies for first-time home buyers
• When does it make sense to sell real estate in a larger city and buy in a smaller one?
• What home buyers should know about the Canadian mortgage stress test