Home buying tips

House hunting? Buying a property advertised as “For sale by owner” can save you money. But you have to be careful guiding your own transaction: it takes work, and some sage advice. Here’s what you need to know.



Ask Bold Questions
When you’re ready to visit houses, don’t be shy. Ask outright why the owners are moving and what the neighbours are like, suggests LeBlanc. But be aware that “they don’t have to tell you,” warns CanEquity Mortgage president Anthony De Almeida.

“The most important question is: Has there been any damage to the home?” says De Almeida. Sellers may be aware of problems that are “hidden from view”—like unreliable wiring, a basement flood one spring or persistent mold temporarily wiped clean. While sellers are legally obliged to disclose certain defects, the rules differ from one province to the next and “not everyone knows the rules, especially if it’s a private sale,” he adds. Contact your provincial real-estate regulatory agency to find out what the disclosure rules are where you live.

When making an offer, be sure to specify a closing date (usually within 30 to 60 days of signing) and what you expect to be included in the sale—appliances and fixtures, for example. In a hot market “don’t hold back: make your offer quickly, and be flexible,” says LeBlanc. “If the sellers have children and want to wait until the end of the school year to move, can you wait the extra month or two?”

If so, tell them. It might make your offer more attractive than other, higher offers.

Worth the Price?

When should you walk away? When the seller stalls or won’t cooperate on a house inspection, or can’t be firm about a closing date. Or when the seller suggests doing anything odd with the numbers: inflating or deflating the price and having you pay more than what’s written in the agreement, for instance.

If the seller suggests an ultra-fast closing of, say, 10 days, find out why, says De Almeida. Ditto if they refuse an inspection. “If you have no professional representing you, you have to be more careful,” he advises. “The seller must provide ample time” for the buyer to learn about the property.

When it’s time to close the deal, consult a mortgage broker to get the best interest rate. They take your mortgage application to 25 banks, which compete for your mortgage. LeBlanc says that it can save you two to five percent throughout years of payments.

Those savings easily finance the real estate lawyer you’ll need to hire. The lawyer checks for liens, verifies ownership and facilitates the transfer of the property.

Ready, set, research

Once you're ready to take the plunge, figure out what you can afford. Many lenders prefer that your housing costs -- mortgage, property taxes and homeowners insurance -- amount to no more than 33% of your monthly gross income, but some will go much, much higher.

If you're buying in an inflated market, a fixer-upper is a good choice. (See "7 creative ways to buy your first house.")
You can buy anything from slum dwellings to upscale homes if you're looking into the foreclosure market. Don't count on massive cost savings. (See "The safest ways to buy foreclosures.")
Select an experienced, full-time real-estate agent before you begin your search. Ask friends and family for referrals. Check newspapers and Web sites to see which agents are working hard to market homes.

Interview at least three agents. Contact references and verify the agents' record of integrity with the state licensing board.
Realtors -- agents who are members of the National Association of Realtors -- must abide by a code of ethics. Realtors also have access to the Multiple Listing Service.
Make sure you can work with your agent. The average home shopper looks at 15 houses before buying.
Know who your real-estate agent represents. Unless you have a buyer's agent, your agent will be working for the seller.
Shop for a loan.

Compare the APR -- annual percentage rate -- detailing the interest and fees you'll be charged to get the loan. Those who participate in first-time-homebuyer programs should beware. Is the loan officer paid a commission after steering you to a particular program? You can get a rough idea of what you monthly payments will be by using a mortgage calculator.
Compile a home wish list. How many bedrooms do you need? Are good schools and access to public transportation priorities? Do you need a large fenced yard?

Most people purchase a single-family home. Other options are available, like condominiums, tenancy in common (see "Tenancy in common questions and answers"), stock cooperatives and co-housing. (See "Co-housing.")
When you find your dream home, do more homework.

Talk to residents about what they like and don't like about the neighborhood.
Observe traffic patterns.
Check the zoning on vacant lots.
Ask your real-estate agent for a written comparative market analysis to see if the asking price is fair.

More steps for your protection
If you're satisfied, it's time to present an offer listing the purchase price, earnest money, the closing and move-in dates and other details. You can offer less than the asking price, but be careful.

Once negotiations are complete, take several steps before you go to closing, the final meeting where you sign documents and take possession of the house.

Get a home inspection, preferably by a member of the American Society of Home Inspectors. Attend the inspection and read the report. If the home has problems, ask the seller to agree in writing to make the repairs.
Compare rates for homeowners insurance. An additional policy is needed for a home in a flood zone or earthquake-prone area.
A home warranty may make sense if you're buying an older home. Read the fine print to learn what the policy will cover. Note that warranty companies prefer to repair rather than replace broken items. (See "A home warranty is no guarantee.")
If you're planning to sell your house, keep the following in mind:

Set a reasonable asking price. If the price is too high, your home won't compare well with similarly priced houses, and you won't even get shoppers, let alone a buyer.
Hundreds spent on landscaping, paint and deep cleaning can add to its value by thousands. (See "Speed your home sale with these fast fix-ups.") Bake cookies before you show your home.
Make sure your real-estate agent has a detailed marketing plan that includes Internet exposure. Or explore ways to reduce the agent's commission. (See "3 ways to pay lower real-estate commissions.")
Desperate to sell your house but now owe more than you can get? Persuade your lender to take a "short sale."