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Whatever angles are considered, the purchase of a house is a major investment in your life. For many buyers, it could be a process that will be more expensive than it should because many of them will get into it head first and will fall into traps such as:
- Paying too much for the house they want;
- Losing their dream house to the hands of another buyer;
- And (this is the worst), buying a house that does not correspond to their needs.
Buying a house using a systematic approach will help you avoid falling into these frequent traps. Not only it will save you money but also you will buy the house that really meets your requirements. This rubric presents the 9 most common and expensive traps. It will inform you on how to identify them and how to avoid them.
Buying blindly
What price should you offer when filling an offer to purchase? Is the asking price too high or does it seem to be a good investment? If you did not do any research on the market to assess the value of similar houses, you will make an offer blindly. Not knowing the market conditions might lead you to offer too much or you might miss an opportunity to make a competitive offer on a house that is a really good deal.
Buying the wrong house
What are you looking for in a house? A simple question that might lead to a complex answer. Too often, buyers get excited and overwhelmed when buying a new property and become an owner of a new house that ends up being too big or too small. Maybe the travel distance to work is too long or more important repairs than expected are needed. Take the time to define your needs and your expectations. Write everything down and use this list to assess each house for sale you will visit.
Legal Problems
Make sure that you will obtain the irrefutable proof that the sellers own the house right from the beginning of the negotiation process. Make sure also that the house is not mortgaged and free of any other type of legal lien and that a title search will be performed. The last thing you need to discover is that there is a legal hypothec on the house or other type of priority lien, or you find out there are other owners in the picture or leases were already granted.
Non-compliant designation
In your offer to purchase, make sure you request a current certificate of location that describes accurately the limits of the property. If this document is not the exact reproduction of the actual reality, for example, if the expansion of the balcony or the addition of the pool is not there, this certificate will not be accepted by the bank. Be very clear and firm on these issues.
Repairs not mentioned
Don’t expect the seller will provide you with a comprehensive list of everything that needs to be verified or repaired. You as well as the seller expect to maximize the investment. Make sure you perform a thorough inspection of the house quite early in the process. Consider hiring an independent inspector who will examine the house objectively and ensure the purchase contract is conditional to the results of the inspection. The contract should include in detail all the elements of the house and all the required repairs.
Not being pre-qualified
A pre-qualified mortgage is fast and easy to get. And free. When you’re pre-approved for a mortgage, you take the stress away while you shop and you feel more secure knowing that you will be ready to move when you’ll find your dream house.
Contract defaults
If a seller does not comply strictly to the contract by neglecting to do repairs he/she promised to do, or by changing the nature of the contract in any way, this can lead to the postponement of the signature. Agree on a compensation amount ahead of time if, for example, the repairs are not completed as expected. Prepare a list of items both parties agreed on and follow up closely on each of the items.
Hidden Costs
Make sure you identified and found all the costs resulting from the sale – small or big – as early in the process as you can. When a transaction is concluded, sometimes unexpected fees suddenly “appear” after the total amount has been established: discharges, contributions, etc. Ask the seller to indicate in writing the total costs and charges for which you are responsible.
Rush the signature
During this step, it is crucial you take your time and insist on analyzing all the documents the day before the signature. Make sure the documents reflect your understanding of the transaction perfectly, that nothing was added or removed. Is the interest rate exact? Everything has been covered? If you rush through it, you might end up in a dead end at the last minute and with no solution at hand, you might compromise the transaction.
How to avoid costly errors relating to the house while in a middle of a divorce?
With divorce comes the weight of emotional difficulties and important financial decisions that need to be managed properly. One of the most important is the one relating to the house.
In the emotional turmoil and worries concerning the assets that divorce brings, you particularly need clear, precise and objective answers about your real estate wealth. The decision making process will be easier once you are informed of what can happen with the mortgage, taxes and all issues related to the house. The advice of a third party, neutral and well-informed will help you make rational decisions rather than emotional decisions.
The first question you might want to ask yourself is: “Do I want to continue living in the house?” Will your neighborhood be a source of comfort or painful memories? Do you prefer minimizing the disruption or moving to an area which would lead to a new beginning?
Only you can answer these questions, but regardless of the answers, the financial impact must be considered in the decision making process. What can you afford? Does your “new” budget allow you to keep the house? Can you re-open your mortgage to negotiate refinancing? Is it better to sell and buy something else? What can you buy with your new budget?
The goal of this document is to help you ask the right questions in order to make informed decisions that correspond to your new situation.4 OPTIONS
It is important to understand the financial impact of each of these scenarios.
Sell the house and share the profits
Your main interest in this option is to maximize the selling price of the property. We can help you avoid the errors which owners often make in your situation, and which compromise the expected results. While you are trying to put some order in your situation, make sure you set the net profit you expect to earn. After the expenses related to the sale and after establishing how profits will be divided, what will be left? The division of profits might not be equal because the judgement of divorce might have set a different arrangement or the cash deposit was different or because the laws in effect related to family patrimony would influence the process.Buy the portion of your spouse
If you have the intention of keeping the house, you will have to determine how you will honour your monthly obligations with one income. If you qualified for the mortgage with two incomes, it might be difficult to refinance with only your income.Sell your portion to your spouse
If you leave, you can start over with some cash in your pocket. However, you have to know that the existing mortgage loan is still in effect and you will remain, with your spouse, because you both signed for the loan, jointly responsible. This responsibility towards the prior loan can prevent you from obtaining a mortgage if you buy another house even if in fact you are not legally the owner of the first house anymore.Remain an owner
Some divorced couples will postpone the decision of the sale of the house for a certain time even if one of the spouses continues to live in the house. This situation will give you some breathing room and take away some worries, but requires vigilance given tax rules. Keep in mind that at the date of the sale, your situation relating to your income tax return might have changed.
When you decide to sell
If you and your spouse decide to sell the house, make sure you obtain the services of professionals to get the most from this important asset. Your differences must be put aside and you should get involved in the brokerage contract.