Getting started in the real estate market is a major decision requiring a substantial financial commitment. Buyers should complete thorough market research before ever investing large sums of money.
Many myths and false perceptions about the real estate market provide unreliable information and make transactions that much more difficult. To make informed decisions when transacting in the real estate market, note the following Common Myths About the Real Estate Market
Myths And Facts About Real Estate
1. Myth: You Can Buy a Home Without the Help of An Agent
Yes, you can easily buy or sell a home without a real estate agent, especially because many websites provide a wealth of information to the public on all steps of the buying and selling process. Nevertheless, buyers should do it with caution.
Truth: Buyers and sellers need to understand the value a skilled and experienced real estate agent can provide. An expert agent can be a true asset in any real estate deal. A buyer’s real estate agent must prioritize their client’s best interests throughout the transaction, and the same for the seller. Agents offer knowledge about current market conditions, properly prepare all documentation, and use their expertise to negotiate the best deal.
2. Myth: You Must Pay 20% as a Down Payment Plus Closing Costs
Putting down 20% as a down payment on the purchase of a new home is a good idea; however, it is not required, in Quebec.
Truth: There are various mortgage options that require as little as a 5% down payment, and some closing costs can also be covered.
3. Myth: Your Offer Will Only Be Accepted If You Go Directly to The Listing Broker
This myth, unfortunately leaves buyers in a highly vulnerable position, with the possibility of being taken advantage of or manipulated by listing agents.
If you are visiting, sourcing or writing offers without your own real estate expert representation, a listing agent can sway you.
Truth: Listing brokers are contractually obligated only to the seller. Their job is to make the sale of a property as beneficial to the seller as possible.
4. Myth: A Down Payment is the Only Upfront Cost
A down payment is, unfortunately, one of many upfront costs for purchasing a new home. Other expenses to keep in mind and save for include a home inspection, appraisal fees, and closing costs. These extra costs can range from 3% to 6% of the purchase price.
Truth: Most closing costs are negotiable, so you can ask the seller to pay them. If you wish to finance closing costs, you can always ask your lender for a loan where some or all of the closing costs can be added to the loan amount.
5. Myth: Buying Property is Always a Better Financial Decision vs. Renting
Purchasing a home is an excellent investment if you stay in the home long enough to enjoy its financial returns. In order to assess whether renting or buying is cheaper, calculate the total of what a purchased home would cost you throughout the time you plan to own it.
Truth: The upfront costs such as insurance, closing costs, maintenance, and interest must be calculated into a long-term cost comparison to renting a unit. Remember to add the costs of selling a current property into the calculations, such as commissions, closing costs, and appraisal fees.
Compare the result to the amount of rent you would pay on a monthly basis for a similar unit plus rental insurance. If you are planning to stay in a home only for only a few years, it could cost significantly more to buy than rent.
6. You Should Sell Your Current Home Before Buying a New Home
There are no rules regarding how many properties someone can own. In fact, the rental real estate market is an excellent way to generate a consistent income.
Truth: Speak with your lender about the possibility and requirements to keep your current home as a rental property to generate tenant income while buying a new home. A special type of appraisal may be required on the rental property, or investment reserves of 2-6% might be needed, unless the current home is totally paid off.
7. Home Inspections are Not Required
It may sound tempting to save a couple of hundred dollars by avoiding a professional home inspection.
Truth: Home inspectors examine over 1,600 specific items around the house, thereby helping to signal any blatant or unidentified issues in or around the home. It is best to uncover any flaws, no matter how big or small, before purchasing a new home. A thorough inspection works to avoid any surprises, therefore, hiring a professional home inspector is definitely worth the money to save potentially thousands of dollars in the long run.
It is recommended to hire a professional home inspector and be sure to be with them when they walk through the house during the inspection. Do not be shy to ask any questions along the way.
Before engaging in a major real estate transaction, it is best to consult with a Montreal real estate lawyer to ensure a smooth transaction. Property lawyers will help clients understand the terms and conditions of the deal and serve them in case any issue arises at any stage of the process.