Saturday, September 6, 2014

How we Bought our First House in Toronto in a Sellers Market-The Hunt

(Disclaimer, I am not an expert on this! This post is solely based on our own experiences, talk to Real Estate Agents, Banks, Lawyers, Mortgage Brokers etc. for information and advice specific for your needs.)...

Part 2- The Hunt

As detailed in our last post we spent almost 3 years planning to buy a house, starting with boring things like bank meetings and saving money, to fun things looking at houses and neighbourhoods. After we had narrowed down our options, we met with a realtor in April of this year to get real about the home search.

..Side note, these posts are coming across like it was all happy rainbows and unicorns and sunshine. To be honest, I was nervous about every step of the process. I was (still am) fully aware of the responsibilities of owning a home, and no matter how long we waited I would always feel nervous…but Mike on the other hand was super excited about everything so we balanced each other out. So with the first “real meeting” with the realtor, I was a nervous wreck, since this made it seem so much more legit…

Get a Realtor:
We used the same realtor, Rory Armstrong, who helped us find an apartment. We chose him because he wasn’t pushy, very laid back, and listened to what we wanted. We also liked that he always was quick with getting back to us, and answered our 100000 questions. Realtor’s are typically free for the buyer, so why not!! We signed a contract with the Rory (fairly straightforward), and started our home search on Easter weekend with my parents in tow (they were visiting from NB at the time). Lesson learned: east coast parents will be shocked by prices of Toronto houses.

Know the Market:
Even though we had looked at houses for fun, actually analysing the market was a whole other story. I signed up for sold listings through to see what the houses we viewed sold for, even if we weren’t interested. Some (aka Mike) may have called me obsessed with this email. Almost every house we looked at sold for over asking, except for the ones that were tear downs. Most houses were listed lower than value to drive up a bidding war. The market might have cooled slightly from last year, but for the price range we were looking at it was still a sellers market with every house going into multiple bid situations (aka a bidding war dunn dunn dunnnn). This makes house buying so much fun (sarcasm font).

Get the Stuff together:
Shortly into the process, we found house we liked! It was a big old semi detached with lots of character and funky paint colours.
First fav walls and all!
As we were driving home from the showing discussing if we should make an offer the next day, Rory called and told us that a bully offer had been made, 3 hours after the house was on the market, and then the bids were pushed up to be due 12 hours later.  Not enough time to get our stuff together, but it made us realize that we had to get all of our stuff together for the next potential house. That is where we got involved with a Mortgage Broker (referenced by our realtor) to get a mortgage. Once again this is a free services (typically paid by the lendor) so why not. We started providing her a ton of paper work (tax files, income statements etc.) so that she could get our pre-approval.

The War:
From April until July we saw a lot of houses, I can’t remember the exact number but I bet it was close to 50. A good house hunting check list is located here, but items that stood out to me were check the electrical panel, check the attic if possible, turn on taps and lights and open windows/doors, and check to make sure car can fit down the drive way if it is back parking space.

We saw some good ideas while we were house hunting:

Gorgeous backyard and screened in porch!

Nice beadboard!

Renovated bungalow...too fancy for us, but I loved the fireplace

I loved this floor and the cabinets!
We also saw some interesting stuff:

Funky built in murphy bed

This house had an intense security system...we are thinking just for this!
This house looked like a castle!

Worst kitchen ever, looked nice but the counters were too high, and the electrical panel was built into the COUNTER
Other exciting things we found, an empty house except for a jar of pickles in the basement (same room lead to this picture!), "central" air conditioning, a house full of mold with a creepy back yard, and LOTS of wood panelling!

We put in 3 failed offers in multiple bid situations that all sold way above our budget. This was a time consuming and stressful period. For each of those offers, I would be anxious all day waiting to see if we got the house or not. Lesson learned here was to not get too attached to a house. Mike and I are fairly logical people, so we stuck to our budget. Even if we really loved the house, we couldn’t go higher just because of emotions.

Because most of the houses went 15% over budget, we started looking at cheaper houses, so that in a bidding war situation we would be able to actually put in a fair bid.

The Offer and Conditions:
If you google “how to buy your first home” you will see a lot of great tips, however, those articles are not written for a multiple bid situation. For example, having your own home inspection is “required” by those articles, but in a bidding war, typically the inspection is provided to all bidders to try to limit the number of conditions at closing. For us to mitigate the risk of the home inspection missing something, we didn’t ever go to the top of our budget. That would allow us to have some savings left over for any “surprises” after we bought a house. Also, with our backgrounds in engineering, and a little bit of research we learned how to identify big problems such as mixed wiring, and potential asbestos, roof problems etc. And when we were given the home inspection we read it cover to cover to identify any issues.

In this market and for our budget, we quickly realized that every house was going to have some sort of issues (one we put an offer in smelled so bad of smoke, you could smell it outside the house), but as long as we budgeted for them we would be ok. We did our research on costs of repair (ie knob and tube wiring can cost up to 12K to fix, getting smoke out would require new paint, and new floors) and made decisions on how much to offer based on the repairs we would need to do.

We also tried to make our closing date as early as possible (30 days) to allow for a quick close, but we had to consider moving times, and giving 2 months notice for our apartment.

The Winner:
On July 26th, after a string of no luck with showings, we had a particularly good day. 2 out of the 3 houses were what we were looking for, and one was at the low end of our budget. We decided to put in the offer on the lower cost one, a tiny renovated bungalow, with income potential, and amazing back yard. Our realtor ran the comparables, and recommended a competitive price range. It was over asking because the house had been priced low to get attention for a bidding war. We went just slightly over the mid range of comparable prices.

The offers were due late on Thursday night (31st). This bid needed the offers presented in person by the realtor, and that required a hard copy signature (vs email like the previous houses we had bid on)…and of course after being relatively free all summer that night I had something I had to go to. Luckily it was in the same area as the house, so this was a bit chaotic having the realtor drive back and forth to get me to sign the papers. Mike waited at the house, and about 15 mins after the bid was submitted, the seller’s agent came out to tell him and Rory that we had got the house. Apparently the bids were close, but we were slightly over with a quick closing date so we were the winners.
I got the phone call around 9 that night, and was picked up to go sign some final papers and meet the sellers. They were a young(ish) couple moving out to Mississauga to be closer to work, and had done most of the renovations themselves in the 4 years they had lived there. Seemed like nice people! Lesson learned though: You don’t need the actually certified cheque for the deposit at the offer, but you need to bring a normal cheque for the deposit “for good standing”. This we didn’t know which meant a waste of driving back to the apartment to get the cheque.

Overall for this period, my lessons learned would be to be prepared to make an offer at any point by having a pre approved mortgage, and enough money in your account for at least a deposit (5%); be prepared to be patient; understand the flaws of the house; and stick to your budget and must have list.

This phase was emotionally stressful, but luckily is basically free! Other than an inspection (if needed), and of course gas and time, no money is spent during this time. That all happens next, in the closing period.

Next Post: The Close (or where you spend all your money!)

1 comment: