Your Biggest Bet
When Alan and Hannah Silverstein bought their first home in 1981, they were upset to feel a cold draft from their family room wall. The entire wall of the room felt chilly and, as winter set in, ice began to form along the baseboard. Alan complained to the builder, who insisted that nothing was wrong. To demonstrate how well insulated the house was, he pulled out a penknife and jabbed it into the wallboard. “He looked at the hole he had made. Then he cut it larger,” Alan says. “And larger still. It turned out that the wall hadn’t been insulated at all.”
The experience taught Silverstein that glossy surfaces can hide a lot of nasty surprises. In the years since that first home purchase, he’s built a real estate law practice in Toronto and written several books on property buying, including The Perfect Mortgage and Homebuying Strategies for Resale Homes. The one piece of advice he gives all his clients and readers? Take your time before buying. “In real estate,” he says, “you can’t leave anything to chance. The contract to buy a home should be the conclusion of the book, not chapter one.”
Silverstein, 52, says the best way to begin your real estate search is with a bit of soul searching. Jot down on a sheet of paper a list of your needs and then an accompanying list of your wants. Be as specific as possible. Do you need to have a double-car garage? A home office? Do you want — but not need — a park nearby? A second bathroom? Compiling these lists forces you to think through your desires; it lets you see what features are most important to you and it points out any differences between you and your spouse. Most important, the lists help you to avoid rash decisions. According to Silverstein, only if a home satisfies all of your needs and most of your wants will you be happy. Trying to shoehorn yourself into a make-do arrangement simply because it’s cheap is usually a recipe for misery — you’ll end up frustrated and wanting to move within a year.
Of course, you must also consider your financial state. One time-honored rule holds that you should never buy a home that costs more than three times your gross family income, but exactly how much debt you’re prepared to take on will depend upon your job security, your age and how many children you’re supporting. To find out what you can potentially borrow, you should visit your local bank and get a pre-approved mortgage before you start shopping. There’s no cost or obligation for this service and it can be helpful in fixing an upper limit to your house hunting. Remember, though, that the maximum amount the bank will lend you is just that — the maximum, not the recommended amount. If you can buy a house that satisfies your needs and wishes for less, you should do so.
Now it’s time to start shopping. Silverstein suggests that true bargain hunters wait until December. The winter months, especially the weeks right around Christmas, are the slowest time of the year for the real estate market and prices are often more flexible than they are in the spring rush. If you’re a first-time buyer, Silverstein recommends a bungalow as the ideal purchase, both for practicality and for resale value in the years ahead. “Eventually baby boomers are going to start to downsize and not everyone wants a condo. There will be a lot of competition for bungalows between people looking for a starter home and the downsizers.”
For maximum resale value, steer clear of monster homes — Silverstein believes that mammoth properties are going to be increasingly hard to sell as boomers age and their kids leave home. Also to be avoided are properties that appeal only to narrow markets. Houses with only two bedrooms can be troublesome to resell because they limit the range of potential buyers. Homes that lack parking or that have a swimming pool also cut down on your resale opportunities. If you’re buying a condo that doesn’t include a parking space, Silverstein recommends that you pay extra for one — you can always rent it out if you don’t have a car and it will make reselling your condo far easier.
Spend a bit of time getting to know the community around any property you’re thinking of buying. The most effective way to get acquainted is take a couple of extended walks through the neighborhood, once on a weeknight and once on a weekend afternoon. If possible, stop and talk with local residents. They can fill you in on everything from the quality of the local schools to the best shopping in the area.
If you have doubts about a neighborhood’s safety, call the local police station and ask about the area’s break-in rate and crime level. Most police officers will be happy to share their knowledge. If you’re going to be commuting every day to work, consider trying the commute for a couple of days before making any decision. Too often a trip to work that looks quite bearable on paper turns out to be an ordeal in reality.
The best investment you can make is $300 to $400 for a complete home inspection by a qualified home inspector before you make an offer to purchase. But even if a home appears perfect and passes an inspection with flying colors, don’t get involved in a bidding war. Real estate agents love these contests but you’ll never get value for your money if you’re pitting your chequebook against a dozen other enthusiastic buyers. “The ability to walk away is vital,” says Silverstein. “The same as a poker player, you have to know when to hold ’em and when to fold ’em.”
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September/October 2003 issue.