This is a post by Sean Cooper
With my property virginity finally gone, it’s the perfect time to reflect on the most important lessons I learned as a first time home buyer. Home ownership is a major milestone in your life, but there’s a lot of hard work along the way. Here are some lessons I learned – some, the hard way.
Shopping for home insurance can be a real pain in the neck
The most tedious part of buying a home was shopping for home insurance. I phoned three insurance providers for quotes. It’s a good idea to speak with an insurance broker, but keep in mind some brokers only deal with a handful of insurance providers, so you’re not truly shopping the market.
It’s important to find out what your policy covers and what the limitations are – pay extra attention to sewer backup and water damage, liability and replacement cost. Determining my home’s replacement cost was a bit tedious. Insurance providers ask all sorts of questions – when was your house built, how many fireplaces it has, if your waterlines are made of PVC or plastic, etc. Getting quotes is very time-consuming and the questions vary with each insurance provider. For example, one insurance provider requested the exact square footage of my kitchen counter tops. Replacements costs can vary greatly, so it pays to shop around.
One insurance provider determined my home’s replacement cost was $225,000, while another came up with a whopping $385,000. Pay special attention to the replacement cost and if there’s a limit because it helps determine the insurance premiums you’ll pay.
Don’t always leave it to professionals
While it would be nice to sit back, relax and let your agent and real estate lawyer take care of everything, it’s not always the best idea. When my offer was prepared, Schedule A (offer conditional on home inspection) as an attachment in the Agreement of Purchase and Sale was omitted in error. Fortunately my lawyer caught this omission and it was added into my offer. Although it isn’t always possible when there are multiple offers due to time constraint, it’s worthwhile to send your offer to your lawyer for review to ensure you are legally protected.
Also, when I received an estimate from my lawyer for closing, I was given an estimate of $1,800. However, when I received the invoice it was for $2,100. I inquired why the invoice was higher and he apologized and refunded the $300 difference. Never be afraid to ask for a discount, especially when it comes to your money.
Know industry terminology
Whether you’re shopping for a mortgage, purchasing a new air conditioner or renovating your kitchen , it’s a good idea to do some research. I received three estimates on central air unit installation. The technicians used terms like tons, BTUs and SEER, which I didn’t fully understand at the time. One technician recommended a 2.5 ton unit for my 3-bedroom bungalow, but another technician said it was way too big and probably wouldn’t work.
I recommend getting at least three estimates because it could mean the difference between a good deal and a home renovation nightmare. Remember, the lowest estimate isn’t necessarily the best. Be sure to ask family and friends for references on contractors they’ve used.
Home repairs can really add up
My home inspector didn’t find any major defects and all the major expenditures – amp, roof, furnace and windows – had been repaired and replaced within the last three years. So how did I spend over $6,000 on renovations in the first month? The cost of repairing furnace ducts, installing central air and replacing window screens quickly added up.
With tenants moving in day one, all these repairs were necessary. Home renovations can be pretty daunting; it helps to prioritize, so you’re not stuck with costly repairs and no cash to spare. Depending on the age and condition of your house, I’ve discovered that a good rule of thumb is to budget 3% to 5% of your home’s value for maintenance and repairs ($12,750 to $21,250 on a $425,000 house). It’s a good idea to inspect your home yearly for any imminent repairs.
Real estate agents matter
Real estate agents play a crucial role in your home search. Finding the right agent can mean the difference between buying your dream home and being priced out of the market. Asking family and friends and attending open houses are great ways to meet agents.
Come up with a shortlist of agents and interview them. Finding an agent who knows your needs and wants and will work hard is crucial. Remember, the seller is paying your agent’s commission, so it’s in your interest to get the best agent possible. I worked with four agents until I found the right one. If a real estate agent doesn’t have the time to respond to your emails and phone calls, you probably should find a new agent.
About the Author: Sean Cooper is a single, 20-something year old, first time home buyer located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University.If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).