Buying a home is for many, and especially for first-time home buyers, an exciting venture but also a somewhat fearful adventure. And it makes complete sense because home ownership is a huge commitment, and the process of buying is complex and overwhelming, with the buyer needing to make many significant decisions.
Call it a human flaw, but it is very common for people to lose the ability to think straight when they get nervous and anxious. So, doing some research and getting yourself educated on some real estate basics results in less stress and a clearer headspace to think, so you can make better decisions. Quite important when buying a home!
Don’t let the ‘Paralysis by Analysis’ get to you
So, what should a first-time home buyer read and get educated about? The following is an outline in some lessons for first-time home buyers about the most important factors to be better prepared, reduce some stress and, therefore, be able to make better decisions. Most pointers are linked to a more in-depth article. Remember, you are never able to know it all, so don’t get paralyzed by too much information.
Lesson 1: Understand the process of buying a home
In essence, buying a home takes 7 steps. Those steps are: getting pre-approved for a mortgage, researching and budgeting, finding a realtor, actually choosing the home, writing an offer, having a conditional purchase, getting a firm sale and receiving your keys. Those 7 home buying steps are defined and explained in The 7 steps for the first-time home buyer, including tips, and each step includes some helpful tips along the way.
Lesson 2: Read the paperwork ahead of time because there is a lot
Especially for first-time home buyers, writing the actual offer is exciting and stressful at the same time. Filling out the purchase contract makes it real! However, there is more than just the purchase contract when it comes to paperwork. Understanding ahead of time what you are signing really helps, so request the paperwork ahead of your home shopping journey.
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The purchase contract
This is the agreement between buyer and seller. It is about 6 or 7 pages with lots of small print and legal content. The buyer needs to fill out several sections, such as offer price, possession date, required conditions, the deposit amount, etc. Those require some pretty important decision making, and a foggy mind at that time is just not useful.
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The Consumer Relationship Guide
The Alberta Consumer Relationship Guide is a document created by the Alberta Real Estate Association. It explains the relationship between a realtor and you, and how it works when the realtor has a home listed that you, as a buyer, like. Who is your realtor working for in this scenario? For you or the seller? This consumer relationship guide gives clarity to important matters, and reading it ahead of time gives you the opportunity to get questions answered from your realtor.
Officially, this Consumer Relationship Guide must be signed and discussed before the home shopping journey begins. However, many agents make you sign this at the time of writing an offer. This is just more paperwork that can fog the mind and cause fear.
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The Buyer Brokerage Agreement
This is an agreement between you, the buyer, and your realtor. It lays out the commission structure, so it is an important agreement. The general agreement is that a buyer does not have to pay the commission of the buying realtor. However, this may not always be the case. This Buyer Brokerage Agreement also specifies a time span for finding a home under that agreement.
This third important document must also be discussed and disclosed before the home shopping begins. However, also here, many agents only show you and let you sign this document at the time of writing an offer. Again, at that moment, you have enough decisions to make, and you don’t need more confusion.
Lesson 3: Understand the complex financial language used when buying a home
Having your ‘ducks in a row’ regarding your finances is important, always. Buying a home comes with certain extra costs, besides the monthly payments and utilities. Educating yourself about the financial side of homeownership and the extra costs during the home buying process are important for obvious reasons.
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The mortgage
Mortgages are unique and personalized financial products. There are variable and fixed mortgages, each with their own advantages and disadvantages. Also, each mortgage comes with different terms and conditions regarding, for example, paying off your mortgage. Mortgage insurance is another important subject matter to understand. Learn what to look for in mortgages and decide what works best for your personal situation. The CMHC explains more about mortgage insurances.
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Monthly costs for every home owner
Every home owner faces costs, either monthly or yearly. The principal, interest, property taxes, utility costs, home insurance, condo fees and maintenance are just a few examples. Learn about these costs and budget for them. Find a complete overview of buying cost here.
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Other costs when buying a home
When buying a home, certain other costs are involved. There are, for example, costs of a real estate lawyer, a home inspection and a condominium document review by a professional. Get a clear overview of all those costs you can expect when buying a home.
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Check for first-time home buyer’s incentives
The Canadian government offers several incentives. Ask your mortgage broker or banker about any incentives for first-time home buyers, such as The First Home Savings Account (FHSA). CMHC is the best source for home buyer’s incentives.
Lesson 4: Explore the variety of home types to find what suits you best
Calgary offers a choice of single family homes, townhouses and condos. Single family homes come in attached, detached, bungalows, two stories, split levels, etc. Townhouses offer bungalow style, two and three story styles. Apartments are available in low rise, high rise, lofts, etc. Learn about all the different home styles.
Besides the choices of types of homes, a buyer can choose between brand new or resale. And to top it off, Calgary has more than 200 communities. Choices, choices, choices!
Yet, many of those choices are determined by your buying power; hence the importance of getting pre-approved and budgeting. Overall, the point is that home buyers have many decisions to make throughout the buying process.
Lesson 5: Learn more about condominiums and what it entails to own a condo
Buying a condo means you buy into a condo corporation. Condo corporations come with advantages, disadvantages, rights and obligations. While it is next to impossible to understand the entire condo act, it is important to get some sense of what condo living entails and what some condo terminology means.
Learn some of the important details such as what the condo fees cover, how to understand the financial situation of the condo corporation and how to avoid special assessments. Also, know what the bylaws can tell you about having pets, for example.
Lesson 6: Familiarize yourself with some general terminology regarding the home buying process
Just reading the purchase contract alone will bring up some real estate lingo and, often, questions regarding the buying process. What exactly is a deposit, how much should the deposit be and how is this deposit different from the down payment? The contract states a line about the RPR, the Real Property Report, but what is an RPR? It also mentions the term ‘title’, so the question is, what is title? What are conditions, what are terms, etc? These are just a few random examples that may need explanation.
Condo living also comes with lots of terminology. What is an AGM, how can I avoid a special assessment, how are decisions made by the board? Before deciding on buying a condo, get a general sense of what all this condo lingo involves.
Lesson 7: Educate yourself about the current type of real estate market
Real estate markets are roughly divided into 3 categories: a buyer’s market, a seller’s market and a balanced market. In a nutshell, the type of market dictates who is ‘at the wheel’, the buyer or the seller. A buyer’s market is in favor of the buyer, who has more choice and has more power in prices and negotiations. A seller’s market is in favor of the seller. A buyer in a seller’s market usually has less choice and tends to have more difficulty negotiating. A balanced market isn’t leaning towards either market.
Learning more about the type of real estate market helps you make important decisions. For example, how can you beat a competing offer in a seller’s market? Or, if it is a buyer’s market, how do you negotiate even better to get a lower price?
Lesson 8: Get some understanding about the current economic factors in real estate
Real estate markets in Canada are very local.
Real estate markets are always moving, backed by economic factors. A few important markers that influence the real estate market are interest rates, employment and income levels, inflation, government policies, construction costs and global economic conditions. Getting a general understanding of what makes the real estate market move may help in your decision to buy or not to buy. Also, it may help to determine what type of home to buy, and where.
The general subject of economy in real estate fills many books, magazines, newspapers, podcasts, tv and radio broadcasts. The economy is based on many factors and it creates ‘a million’ different analyses and opinions. Don’t experience the ‘paralysis by analysis’. Perhaps a good start is to read our monthly statistics report and infographic issued by the Calgary Real Estate Board.
Lesson 9: Get insight on the pros and cons of brand new vs re-sale properties
Buying brand new from a builder or buying a resale property is another choice for a buyer to consider. The buying process between the two is slightly different. As well, ownership may differ between the two. It is always good to get a sense of those differences before purchasing.
Lesson 10: Gather some basics about negotiations when writing an offer
Negotiations in real estate are often a tense part in the process of buying a home. How to negotiate depends on so many different factors that it is impossible to get these in a single script. However, knowing a little bit more about negations puts you in a better position during the negotiation process. We have written a few articles with some tips and strategies on negotiations.
Lesson 11: Read those general tips for first time home buyers
Whether it is your first home, your second or third, there is always a learning curve in buying real estate. As a matter of fact, the home buying process often takes a few years to get comfortable with, even for realtors. And some learning curve will always remain with the ever-changing rules, the ever evolving and the fast-growing technology. We hope that these tips for first time home buyers are helpful in the journey.
Nobody has a crystal ball!
And always remember, nobody has a crystal ball! But securing your own understanding and knowledge via some basic self-education as laid out above will help you make better decisions. And in combination with a good and honest realtor to help you in the process, you will have done everything in your power to make the best possible decisions. With that, you will love your own home for many years to come!
Questions or want to chat? Contact us!
We are Tanja van de Kamp and Ariette van Pelt, working as a team, both buying and selling homes in Calgary. Calgary has been our home since 2004, and real estate our full-time profession since 2009. Tanja was a lawyer in The Netherlands for 12 years, and learned how to negotiate strategically, and to work in the best interests of her clients. Thanks to our honest and transparent approach to real estate and towards our clients, we have built our business.
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