Five traps first time home buyers need to avoid

BY CLEVE DeSOUZA

Congratulations on your decision to buy your first home. Owning property is a proven way to build wealth and protect your future.

For most of us, a home is the biggest purchase we will ever make, so it is natural to feel a little nervous about whether or not you are doing the right thing. In a 2019 report, the CMHC (Canada Mortgage and Housing Corporation) found that 42% of homebuyers felt uncertain about the process. Unforeseen costs and paying too much were at the top of their list of concerns.

While you go through the process, remember most agents are ethical and want to help buyers and sellers. In 2019, 78% of buyers worked with a real estate agent to help them through the process. That is a significant increase over the 61% of buyers who used agents in 2018. The perception of the value of agents also rose, from 28% customer satisfaction in 2018 to 35% in 2019.

If you find a good real estate agent, those concerns disappear. The problem is, you don’t know that until you find yourself thousands of dollars out of pocket and probably many years later. We have five tips to help you avoid making these common mistakes:

• Beware if an agent is not willing to show you a home unless you are pre-qualified. There is a steep learning curve when it comes to buying your first home. The best agents know that and will help you learn what you need, even if you have not pre-qualified for a loan. Agents who will not invest this time are only interested in the transaction.
• Watch for agents who play on your emotions when looking at property. They are over the top in praising the property. You’ll hear them say “Wow! What a great house!” You are looking for a home that appreciates in value and that you can afford. Buying a great house in the wrong neighbourhood could lead to economic disaster.
• If you hear the words “Trust me, I know what I am doing,” get out fast. This agent does not want you to ask questions about what they are doing. That is never a good sign.
• Watch out for agents who try to talk you into buying cheap property. Cheap in real estate means cheap. Most cheap properties will not appreciate in value. If an agent suggests something that seems too cheap, ask him or her to show you the long-term appreciation for other properties in the area. If they cannot show you that, it is a definite red flag.
• Buyer agents are aiming to close the gap between what you want and what the seller wants. Look out for situations where you are the only one compromising. This is a sign of less than adequate negotiating on your behalf.

In general, look for an agent who understands real estate investing, not just one who knows how to fill out forms for you. Look for someone with at least two years experience. It takes that long to learn this business. Real estate agents work with banks, mortgage companies, appraisers, and other local businesses, so ask people in those businesses for recommendations. Finally, never sign a long-term buyer-agent agreement.

If you think you’ve connected with a bad agent, what are your options?

First, talk to your agent and explain your concerns. He or she may change. Next, review your contract. It should include a specific end date. If you are still unhappy, your next step would be to appeal to the owner of the real estate company. Rather than risk a dissatisfied customer, the owner of a quality agency may recommend another agent or waive the contract. If it gets really bad, or your agent has done something unethical, consider contacting your area licensing board.