While reports and all indications suggest the worst of the Windsor real estate ordeal is behind us, it is necessary to take in some lessons of the past few years so buyers and sellers can avoid making mistakes in the future.
Expectations should be realistic. In the past decade it wasn’t unheard of for equity to increase ten-fold. People expected this to continue so they could move on to something bigger and grander. If real estate has taught us anything, it’s that buying a home today means back to basics. In other words, don’t expect to see home values increase as they did a decade ago. Buyers need to stay in their home for the long haul to see any major profits.
Once again, we can’t time the market. Even real estate experts can’t do this. No one can really ever predict the all time low and all time high of the real estate market. We can’t say what’s going to happen in five years with 100% certainty. However, today, good advice is to buy real estate for the long-term and purchase a home that suits you, your family and lifestyle. It will increase over time. But looking for a quick “get rich” home? Not in today’s market.
Buy within your budget. Again, too many people over extended themselves in the past. Today, people are looking at smaller homes and planning on living there for the long haul. In real estate, we are hearing that “small is the new black,” as buyers are reconsidering lavish homes that are too big and have all of the amenities. These homes stay on the market longer than smaller properties.
Buyers are doing lots of research before buying a home and this will continue. Impulsive buying because real estate was considered a sure thing is not the case anymore. At the time, buyers would buy something and figure that in a few years they could sell for a handsome profit. Again, today, most buyers are looking to purchase a home that they will live in for many years, so neighbourhoods, schools, commutes and communities are carefully researched.
Buyers are thinking about long-term, especially with financing. With the economy, buyers want a payment they can live with for many years, not just the next 12 months.
The key to successfully buying a home in 2013 is to be a smart homebuyer. You know you are ready to become a home owner when…
1. You have a budget: It’s important to have good money management skills and you know where you are financially. Once you have this sorted out, it’s a good idea to draw up a budget for home ownership. Consider higher utility bills, homeowner’s insurance, HOA fees (if necessary), upkeep as well as costs if you are commuting further to work.
2. You have a down payment. This traditionally requires 20 percent of the home price. Of course, talk with your bank to see what programs are available, however, making little or no down payment gives you zero equity in a home and it could be that way for some time depending on the real estate market. And don’t forget the closing costs, which is an additional 3 to 6 percent of the purchase price.
3. You have a reliable income: Is your job secure? If you lost your job, can you make payments until you find another? What are your future plans? If you are a two-income family, what if one wants to quit at some point? Perhaps to stay home with children? Or what if you have plans to start your own business some day?
4. You have an emergency fund: If you have enough cash on hand to cover 3 to 6 months living expenses, this is a solid start to home ownership. If we have learned anything in the past several years, is that in case something happens to your job, you can still make the mortgage payment.
5. You have debts under control: If you have outstanding large debts, make sure to pay them down before you consider buying a home. Reconsider that European vacation or new car if you have too much debt and looking for a home in the next year.
6. Your credit report is good: While you don’t have to have perfect credit to own a home, a decent credit history can get you a lower interest rate.
7. You are ready to make a long-term commitment: Buying a home these days is best when you plan to stay put for at least 3 – 5 years. Typically, that is how long it will be to recoup your buying and selling costs.
8. You are prepared for the lifestyle: Buying a home is unlike renting, as now you are responsible for the headaches and costs of owning a home. When something breaks, it is your responsibility and you have to pay for it. You will also be responsible for yard upkeep and general maintenance. Are you prepared for this?