5 Tips for Buying a Home

Looking to buy a home? Here are five essential tips for making the process as smooth as possible.

Get your finances in order.

Start by getting a full picture of your credit. Obtain copies of your credit report. Make sure the facts are correct, and fix any problems you find. Next, find a suitable lender and get pre-approved for a loan. This will put you in a better position to make a serious offer when you do find the right house.

Find a house you can afford.

As with engagement rings, there’s a general rule of thumb when it comes to buying a home: two-and-a-half times your annual salary. There are also a number of tools and calculators online that can help you understand how your income, debt, and expenses affect what you can afford. Don’t forget, too, that there are lots of considerations beyond the sticker price, including property taxes, energy costs, etc.

Hire a professional.

While the Internet gives buyers unprecedented access to home listings and resources, many aspects of the buying process require a level of expertise you can’t pick up from surfing the web. That’s why you’re better off using a professional agent than going it alone. If possible, recruit an exclusive buyer agent, who will have your interests at heart and can help you with strategies during the bidding process.

Do your homework.

Before making a bid, do some research to determine the state of the market at large. Is it more favorable for sellers or buyers? Next, look at sales trends of similar homes in the area or neighbourhood. Look at prices for the last few months. Come up with an asking price that’s competitive, but also realistic. Otherwise, you may end up ticking off your seller.

Think long term.

Obviously, you shouldn’t buy unless you’re sure you’ll be staying put for at least a few years. Beyond that, you should buy in a neighbourhood with good schools. Whether you have children or not, this will have an impact on your new home’s resale value down the line. When it comes to the house itself, you should hire your own home inspector, who can point out potential problems that could require costly repairs in the future.

Things you need to know about Timeshares

For some people, timeshares are a good option. Timeshares can guarantee you vacation time since they often come with fixed annual dates for right-of-use. On top of that, timeshare resorts typically offer larger accommodations (often two bedrooms or more) and more in-room amenities, such as kitchens and washing machines, than a hotel room. Timeshare owners can also “exchange” their shares for accommodations at other resorts around the world.

The image of timeshare owners as elderly seniors has changed too, with timeshare owners becoming younger and more ethnically diverse with a median age of 39 for owners, and more than 40% of U.S. owners either African-American or Hispanic. Nearly three-quarters of owners have college degrees and 23% have graduate degrees, and have a median income of $100,000.

Here are some things experts say to keep in mind before you buy a timeshare:

Don’t pay full price

Like most real-estate transactions, the price is usually negotiable. The timeshare industry likes to point out that over a 20-year period, a family of four could save over $25,000 on accommodations by staying in a timeshare compared with what they would pay for hotel stays. Nevertheless, considering how many options you have when it comes to vacations, you’ve got the leverage when it comes to price.

The “hard-sell” approach from some timeshare companies can be very unsettling and often the reason why timeshares continually get mocked is the way they get sold. People don’t go out and say ‘I want to buy a timeshare today’, it’s sold as a heavy impulse buy.

Know what you are actually buying

It’s also important to know what kind of real estate interest you actually own when you purchase a timeshare. In about 95% of timeshare sales in the U.S. you get a deed to a property, called a “timeshare estate” under state law, which often means you can rent the share out, sell it or exchange it, and pass it on to your heirs. You do have to pay the maintenance fees each year, just like property taxes and beware, if you don’t make your payments, the timeshare company can foreclose.

If you are buying a timeshare in an unfinished property, the Federal Trade Commission recommends that money should be placed in an escrow account registered to a local bank until the property is completed, and include a “non-performance” clause in the sales contract. That way, the timeshare developer goes bankrupt or defaults before the property and unit are finished, you can get your money back, the FTC says.

Because timeshare companies know that you can likely find cheaper options from existing buyers, they usually offer closing incentives and other perks. But those perks don’t usually recoup the money you would save from buying from an existing owner. Websites such as Timeshare Users Group and RedWeek.com, are great sites to visit if you are seriously thinking about buying a timeshare.

Know your state’s right of refusal on timeshare contracts

Because of many documented cases of abuse on timeshare sales and resales, most states have put in fairly generous opt-out clauses for consumers, known as the “right of rescission.” Typically consumers can have up to a week to rescind a sales contract for a timeshare, for any reason. In Florida, for example, where nearly 25% of U.S. timeshares are located, it is 10 days, and money must be refunded back to the consumer within 20 days after receiving a cancellation notice.

Be wary of any company that requires you to sign the contract documents in a different state than where you plan to buy as you may be entering into a contract in a state that has fewer protections.

If you opt out, the FTC recommends you send a letter via certified mail or hand-delivered with a signed receipt. In addition, be sure to keep records of any correspondence and who you talked with, the FTC says.

Beware of scams

Some dissatisfied timeshare owners may encounter a scheme where they’re cold-called and offered a “buyer” for their timeshare, typically for an inflated price over the price they originally paid. “If someone calls you up to buy something from you that you haven’t advertised, you should hang up,” says Gary Prado of Red Week.

It isn’t a real-estate investment

Nusbaum, ARDA’s president, cautions that timeshare properties aren’t for those who are looking to make money on real estate but for planning future vacations. In addition, he says, to get the most out of a timeshare, you have to use it.

You could call these a notoriously lousy investment if you could call them an investment at all, but you can’t because what real investment is guaranteed to lose 30% to 70% right off the bat?

That is, unless you buy used. There’s a huge number of folks who caved into three hours of hard sell and are now desperate to dump their shares.

Exception: Some of the higher-end properties in exclusive resorts don’t lose much value, and may offer benefits like frequent-flyer miles that could be worth the extra money if you buy from the developer. Before you buy, though, check resale values online; don’t take an agent’s word for how much depreciation to expect. Also, a relatively new type of expensive time share, called a fractional interest, may actually gain in value over time.

Get a survey even if your agent says no

Only a survey prepared by an Ontario land surveyor can confirm that a property is situated inside the appropriate land boundaries.

lf a building is sitting on land owned by the Crown, or a local municipality, or a neighbour, the otherwise proud owner is going to be extremely unhappy and will soon be seeing a litigation lawyer.

For example, it is dangerous to assume that any cottage is built exactly where it should be located. Only a survey prepared by an Ontario land surveyor can confirm that the cottage is situated inside the appropriate land boundaries, that the land it sits on is where it should be and is the correct size, and, if appropriate, the lot has private lake frontage.

Barry Lebow, a veteran realtor, wrote a post about a Toronto buyer who paid $2 million for a house in Toronto. His agent (not Lebow) told him that a survey was a waste of money. It turned out that the driveway was actually a wide city sidewalk and it was illegal to park there. He sued and settled with the title insurer, but still has nowhere to park his Mercedes.

On his Facebook post, Lebow wrote, “A survey is one of the single most important documents a homeowner can have – period. Title insurance does not replace a survey. It may pay for a mistake but it will not give you a driveway you thought you had, or move fence lines.”

A sobering 1989 court decision about a cottage and its property remains one of the best reminders: Dorothy Holmes paid $170,000 for a cottage on Georgian Bay. There was no survey. The cottage was built in the 1930s, but unfortunately more than 95 per cent of the building was sitting on the 66-foot shoreline road allowance owned by the township. She had no title to the land underneath most of the building and was unable to purchase it. She sued and lost at trial and at the Court of Appeal.

There are many court cases involving a swimming pool or septic bed built on the land next door; where the new house was constructed on the wrong lot; where a buyer had to pay $12,000 to get a right-of-way to the property; and where fences and retaining walls were built some distance from the actual lot boundary.

The moral of the story: if your real estate agent says you don’t need a survey – get one anyway. Or get another agent.

If you buy without a survey, make sure you understand the huge risks you are taking.

Bob Aaron is a Toronto real estate lawyer