Are you thinking of jumping into the pool of hopeful Toronto homeowners in the next couple months? My husband and I thought the exact same thing, this past January, when we decided to finally take the plunge. I’ve been renting for 5 years and my husband has been renting for almost 8. After moving almost every year, this winter we decided that it was time to put some roots down in the city, and stop throwing our money away by paying someone else’s mortgage.
Although we’d done some research online, and I’d read a few real estate books, we still couldn’t have been prepared for what we experienced when we got started. Not only is Toronto’s current real estate market abnormally hot, my husband and I may have had some inflated expectations from watching too many shows on HGTV.
We’ve pieced together a list of the 5 surprise discoveries we made during our first month of house hunting. Hopefully it helps you prepare for your own journey to homeownership. Check it out:
1. When you decide you want to buy, see a mortgage broker first, not a realtor
“So, where do we start?” my husband asked me, after we made the decision to buy a home. The natural first step in my mind was to find a realtor, but apparently I was wrong. Before doing anything else, you need to find a mortgage broker and get pre-approved for a mortgage. Not only will you find out how much home you can actually afford to buy, you’ll learn what type of mortgage makes the most sense for you – and a mortgage broker will take the time to educate you on how it all works.
One interesting fact we found out in the pre-approval process was that it doesn’t matter how much money you have in the bank. If you have $1 million in the bank but only rake in $15,000/year, you won’t get pre-approved for a very big mortgage. What matters are your credit score and your income from the past 2 years; our mortgage broker taught us that.
2. You’ll need to sign a Buyer Representation Agreement
A Buyer Representation Agreement (BRA) is a contractual agreement between a buyer and realtor that is meant to protect both parties. The buyer agrees to only use that realtor for a specified amount of time and the realtor agrees to act in good faith and disclose any personal interest conflicts. You’ll likely be presented with this contract, when you’re ready to make your first offer on a home – so don’t be surprised, when it comes up! It’s totally normal. Just read the fine print and make sure you’re comfortable with the agreed upon amount of time, before you sign, as it is a legal contract that you must abide by.
3. You don’t have to pay your realtor
This was a nice surprise to learn, when interviewing our eventual realtor. I knew that realtors were paid a commission, but I was never sure who actually paid it. Turns out, it’s the seller who pays both their realtor and the buyer’s realtor – not you (the buyer)!
4. House hunting is mentally and physically exhausting
The prospect of becoming a homeowner was so exciting at the beginning, but once we started going to showings multiple times per week, the excitement quickly faded. House hunting is definitely not for the faint-hearted. You will end up seeing more homes than you ever thought imaginable. You’ll use up some of your vacation time to do home inspections and walkthroughs on weekdays. And the bidding wars. Oh, the bidding wars. House hunting takes up all your spare time and energy, so don’t be surprised if it leaves you feeling drained.
In Toronto, specifically, be warned that once you decide to start shopping for a house, it’s all or nothing. My husband and I thought we were just going to “see what’s out there,” only to find ourselves fighting for a tiny bungalow in a 4-way bidding war 2 weeks later.
5. What you think you want at the beginning of your property search may not be what you want at the end
After one month of house hunting, you may be wondering where we are at now. Have we bought a house? No, we have not. After looking at dozens of homes, we’ve decided to take a break and reanalyze our priorities. Although we were adamant about wanting a detached house in Toronto, at the beginning of our property search, we no longer think it’s realistic with our budget and the current market. When we restart our property search, we’re going to focus more on condos and townhouses in the downtown core – and it’s not uncommon for buyers to shift their goals and priorities, like this.
Until then, we’re going to continue to pay our landlord’s mortgage and cross our fingers that the next time we put an offer on a place, the term “4-way bidding war” won’t be involved.
Flickr: Hidden Houses