Pros & Cons Of Buying A House

I: Getting Started

Think you’re ready to become a home owner? So do we; after all, everyone becomes a homeowner at some point, it’s no big deal right? Wrong. Home ownership is a major life decision, not simply a financial one. So let’s back up a little and start at level one: is homeownership right for you at this time? Don’t worry, we’ll wait for you to answer; finding out whether or not owning a home is in your best interest ought to be as stress free as possible. But if you’ve answered ‘yes’, then you’ve already made a major step toward becoming a homeowner. But affirming your desire to own a home and taking the requisite steps to realizing this dream are two different things. So if you want this dream to become reality, you’ll need to think about a few things that are involved with both owning and maintaining your own property.

Pros:

• Security and Stability: if you make a smart choice, owning a home can provide you with a significant financial asset that can act as your anchor through economic hardships. Owning a home also provides you with the peace of mind of having a place to call your own, where you are stationed and grounded.

• Freedom and Flexibility: being a homeowner certainly entails maintaining your home both inside and out, but this can be viewed as an opportunity for you to be creative and have your home express who you are. While you ought to keep in mind other’s aesthetic sensibilities for both practical and economic reasons, you ought to feel free to make whatever alterations you desire, whether cosmetic or foundational.

Cons:

• Rates and Responsibilities: owning a home involves a significant financial commitment, both short and long-term. You will be required to come up with a substantial sum for the initial down payment as well as a host of other fees (e.g. legal fees, property tax, deposit, mortgage loan insurance, land transfer tax, etc.) before taking possession of the home, you must also make timely mortgage payments, and assume financial responsibility for all maintenance and repairs. When you own a home you do not have the luxury of deferring responsibility to a landlord or superintendent, so for better or worse, the time, effort and money it takes to maintain a property falls directly on you.

• Permanence and Perpetuity: while owning a home certainly provides you with a piece of mind and the stability of having a place of your own, such security comes at the price of a serious long-term commitment. Homeownership is certainly not on par with the marital vow of “till death do us part” (chances are pretty good that your home will outlast you anyways!), but you are undertaking a responsibility that will involve you both personally and financially for as long as you are owing on your mortgage.

Financial Checklist & Actual Costs

At this point you have established the will to become homeowners, now it is time to determine if you have the capacity. No, not mental capacity, something much more important: financial capacity. Determining financial capacity for homeownership involves both short term financial holdings and long-term capital projections; you don’t want to simply get into a house, you want to be able to sustain homeownership for a long time. It’s a marathon not a sprint. And like any runner knows, it’s what you do to prepare for the race that determines how well you will perform during it. Here are a few things to consider when evaluating both whether you are financially ready to purchase a home at all and what will maximally be able to afford:

• Net Worth: take your total assets (cash savings or items convertible into cash), subtract your liabilities (debts or other existing financial obligations) and the difference is your net worth. Net worth is a fair determination of your financial position in relation to buying a home. It will typically give an accurate indication of how much you will be able to spend on a home and how much of a down payment you will be able to afford.
• Income, Savings and Expenses: while keeping your net worth in mind, you can also test your financial aptitude for sustaining homeownership by calculating your current monthly income and expenses and projecting what they will be in the foreseeable future. It is imperative that you determine your gross monthly income because your housing costs should not exceed 32% of that income. In fact your total monthly debt load (housing costs and all existing debts owing) should not exceed 40% of your monthly income. All of these factors will be weighed by your lender to determine the maximum home price you can afford.

 Actual Costs

There is not much to say by way of introduction here; what follows are the terms of engagement associated with your home purchase (figures will vary depending on a host of variables such as location and specifications of the property):

Necessary Fees:

• Deposit
• Down payment
• Property Insurance
• Legal Fees

Possible Fees:

• Mortgage Loan Insurance
• Appraisal Fee
• Home Inspection Fee
• Land Registration Fee
• Title Insurance
• Prepaid Property Taxes and/or Utility Bills
• Certificate of Location Cost

Choosing The Right Home For You

If you don’t live in Levittown then the good news is that there are a number of choices available to you for choosing a home that will fit your present and future needs and wants. If you are a pathologically indecisive person then the good news is that Levittown exists; it’s in New York, look it up here. Joking aside, choosing a home that suits your needs and wants presently and in the future is not an easy decision to make. Whatever your personal situation, you will probably want to create a checklist of negotiable and non-negotiable features you would like to see in your home. Here are some things to keep in mind when composing such a checklist:

• Location: close to work or is commuting okay? If you have kids how important is the house’s proximity to their school? Is an urban or a rural environment preferable? The old real estate adage “location, location, location” is not entirely facetious. Locale truly brings all of the essential elements of homeownership together: what location will get you the best return on your investment? What location will best suit your needs and wants over the next 5, 10, 20 years? Where will you be able to best cultivate the life you would like for you and your family?
• Size (and Shape) Matters: houses aren’t the most malleable structures, so choosing the right amount of square-footage is obviously important. But even if the square-footage is adequate, the layout and/or architecture may be undesirable. You will have to decide what number of bedrooms and bathrooms is right for you and your family. Again, because this is a long-term investment, try to account for the changes that may be in store for you in the future. Is the home in an area in which you could easily add an addition if needed? Do you have the financial wherewithal to add a bathroom if need be? There are also a great many different types of home. Is a single-family detached preferable or a duplex? Semi-detached or townhouse? There are no set rules for finding a home that is compatible with your needs, so take your time in investigating what your best options are.
• Special Features: here’s where the negotiable and non-negotiable features on your checklist really begins to fluctuate. Is central air a necessity? Do you require a lot of storage space? Is a home office or hobby space a necessity? What about yard size or a swimming pool? These are all factors that can play a major or minor role in deciding whether or not to purchase a home.

Detached or Semi; Condo or Freehold?

 

Detached or Semi; Condo or Freehold

Explaining some of the terms used in real estate

 

When it comes to real estate terms, many people prefer to live by the adage, “ignorance is bliss”.  However, as you embark on a search for your next or first home, knowing what the most common terms in real estate mean is vital to a fluid journey from search to purchase.  Let’s examine the basics:

Detached:  refers to a stand-alone, one family house, not attached to another home or series of homes.  At the moment, this is the most common type of real estate purchase in Niagara, but the future seems to be in multi-family buildings, so let’s enjoy our privacy while it lasts.  In a detached home, you are the king of your castle.  There is no-one to answer to, and you get privacy along with responsibility. 

Semi-Detached:  this is a single building, hosting two often equal residences.  Most semis are of the side-by-side variety, but there are some front-back semis in Niagara as well.  The single biggest advantage of purchasing a semi is “more home for the dollar”.  You likely can find a larger semi for the same money you would spend on a smaller detached home.  You also usually have a very manageable lot, meaning lower maintenance costs and lawn care efforts.  The single biggest drawback of a semi is the fact that your “attached” neighbour will have a big impact on your home.  I have seen many examples throughout the Niagara region of semi-detached homes where one owner is maintaining the property extremely well, while his neighbour is not.  You share a building, a roof, and often a lawn or driveway.  What happens when the roof is in need of repair, and only one of you is in the financial position to repair it, while the other is not?  If you are able to get along well with people, and are not afraid of the challenges that may arise, semis provide good opportunities to many people.  Remember too that the neighbour next door today may be moving tomorrow.  Keep a positive attitude, but be aware of the speed bumps that may be on the road ahead.

Townhouse:  a home in a series of attached homes, also known as “row housing” in some areas.  Usually, a townhouse is in a complex or townhouse development where all the housing is of the townhouse variety.  There are new developments throughout Niagara though where townhouses share a community with both detached and semi-detached homes.  This has become common throughout the 1990’s to today, as cities and regions require developers to provide a variety of buildings and price points in order to fill demand for housing on a number of different levels.  The number of townhouses in a development can be as few as 3, to as many as 60 or so.  Townhouses are of two varieties – freehold or condo.  We will deal with these terms next.

Freehold:  implies a home where the homeowner is solely responsible for the property, including the building, lawns, gardens, garage, fences, driveways and sidewalks.  The owner owns the property outright, with no additional fees to pay to anyone outside of the usual property taxes and utilities.

Condominium:  means, in the most basic definition, that the home owner owns the interior of the house, with the exterior and the property itself owned by a condominium corporation, of which each home owner is automatically a member.  It is not always easy to explain how exactly this works, and that is complicated by each condominium corporation having its own set of rules and regulations.  Look at it this way… you take the exterior walls, and cut them in half.  You own the inside half, and to a certain degree, can do what you want to the interior of the home.  The condominium corp owns the exterior half, and for a monthly fee, looks after all the “common” areas, including lawns, gardens, sidewalks, parking, exterior lighting… and even the exterior décor.  You, as the owner of a unit, have a voice and a vote when it comes to meetings of the condo corp’s board of directors.  It provides you with a way to play a role in how your specific condo complex operates.  An advantage of condos is that included in your monthly fees are maintenance of the grounds and that includes mowing the lawns and shovelling the snow!  There are usually a few utilities included, which may reduce your additional costs in the big picture.  There are lots of things to discuss with your Realtor® when considering a condo purchase.  I would be happy to discuss them with you!

Beds, Baths + Beyond?

 

Beds + Baths

What does that plus sign really mean?

 

One of the questions I am frequently asked by someone reading real estate listings are “what do you mean by 2 + 2 bedrooms or 2 + 1 baths?”  Each plus sign in this example has an entirely different meaning.  Let’s deal with each of these questions, one at a time… so, in a way, we will look at them 1 + 1.

 

In regards to bedrooms, what the listing Realtor® is trying to show the reader is that there are bedrooms both above grade (or ground level), and below.  In the case of a 3 bedroom bungalow, for instance, with a supplemental bedroom finished in the basement, we would list the house as having 3 + 1 bedrooms.  That is 3 above, and 1 below.  This is very important to potential home buyers because often there is a preference as to where the bedrooms should be.  I find this most often with young families.  The maternal instincts of some mothers dictate that the children all need to be on the same level, or at least fairly close by.  However, as the children get older, the maturing teenager will look for space of his or her own.  I always refer to this as the Greg Brady room.  If you have ever watched the Brady Bunch TV show, you will remember that there were 6 kids and two parents, along with Alice, the live-in maid.  Greg was the oldest child.  Once he had reached a stage of early adulthood, he negotiated with his parents that he should have a room of his own.  They finished off some space in the attic or loft, if I remember correctly, and tada!  Greg had his own room.  Now it is much more common to have that additional bedroom finished in an area of the basement, or lower level.  This also can work well as an in-law or “Granny” suite, as it allows for a certain amount of privacy and separation from the main common areas of the home.  Private space and independence are important factors for both these examples (teenager & Grandparent).  It is often a point of contention among real estate salespeople how to advertise a home that has bedrooms on multiple levels.  A brother of mine has a four level sidesplit, with bedrooms on 3 different levels.  How do I handle this?  My theory is to still go by the rule of grade – is the bedroom above or below grade?  In this particular case, there are 3 bedrooms above grade, and 2 below.  Thus I would list the home as having 3 + 2 bedrooms.  Others, though, would call it a 5 bedroom home.  This is where an ad in a magazine or newspaper might be easier to read by just saying it has 5 bedrooms, but I would still want the actual listing to read 3 + 2 bedrooms.  Occasionally, we get calls from confused buyer prospects, who think if the ad says there are 4 bedrooms then they are all on the same level.  I always direct them to the actual listing, or simply tell them that the best thing to do if you are befuddled, is to call me, the “de-fuddler”.

 

Now, the bathroom story is completely different.  With bathrooms, there is less concern for where in the house they are located, and more concern for the size of the bathroom.  We count the number of plumbing outlets, for lack of a better term.  The first number is the number of “full” bathrooms in the house and the second is the number of “partial” bathrooms.  A full bathroom is defined as having a toilet, sink and either a tub or shower, or both a tub and shower.  A half bath is sometimes referred to as a “powder room”, and consists of just a toilet and sink.  This is also referred to as a 2 piece bath.  When you read a listing as having 3 + 1 baths, this means there are 3 full bathrooms, and 1 half bathroom.  When a bathroom has a toilet, sink, bath and shower, we would define it as a 4 piece bath.  Add a bidet, and you have a 5 piece bath.  Add a second sink, and we now offer a 6 piece bathroom.  Anything from 3 up is called a full bathroom, as long as there is a tub or shower included.  Sometimes, as in the home on Geneva Street I lived in in the late 1960’s, the owner installed a stand-alone shower in the basement.  Now I personally would not call this a “half bath” or even note it in the bathroom stats, but would rather point out this feature of the home in the description, or “ad copy”.  I find it humorous when the house is listed as having 1 full and 1 half bath, only to find one full bath and a stand-alone cheap metal shower downstairs.  I hope that this clears things up a bit.  If you have comments or questions, please contact me.