You may want to read the previous chapter on looking for Toronto homes here.
Getting over the hurdle
New Construction
Are you dreaming of a home that doesn’t have that lived-in feel? New homes have their own advantages, chief among them being your ability to customize finishes, the extensive warranties, and the chance to get in on the ‘ground floor’ of a new neighbourhood.
During unstable economic periods (such as a credit crisis), newly constructed homes can be a great entry point into home-ownership because builders and developers will offer generous incentives just to dispense with excess inventory. On the downside of buying new, construction delays can hold up your moving plans. You may also prefer to live in a more established neighbourhood.
Stigmatized Houses
Stigmatized houses fall into a very specific (and tiny) category of homes out there. Such houses usually come with a history of crime, violence or a miraculous event taking place there. Perhaps a ghastly crime was committed in or near the house, it might have been home to a notorious criminal, or an untimely and bizarre death might have occurred on the property in the past.
Photo by Bo Nielsen
Such houses, which are generally avoided by most buyers, may be quite a bargain – as long as you aren’t very superstitious and/or don’t care! A 2000 study from Wright State University concludes that stigmatized houses actually end up selling for only 3% less than their ‘regular’ counterparts on average, but they take much longer to sell. So if you are ready to buy quickly, you may be in line for a bargain.
Most Realtors® will be completely honest with you about the history of a stigmatized house, and—in any case—there are laws in place requiring real estate agents to disclose stigmas (and any other potentially damaging information) to buyers, at least vaguely. If you are worried, don’t hesitate to ask for details.
Reviving Neighbourhoods
Some neighbourhoods have been on a decline in past years, making them unpopular with just about everyone but bargain-hunters. There are, however, urban renewal initiatives which seek to gentrify such lagging neighbourhoods and even restore them to their former glory. You can ask your agent or the local municipality whether there is any urban renewal planned for the neighbourhood you are looking at. If so, you might still be able to buy cheap, but you can expect the value of your home to rise with the popularity of your street… hopefully at a much faster rate than the market norm, thanks to revitalization plans.
Growing with Your Home
If you’ve found a neighbourhood that you really like, but the nicer homes in it are out of your price range, don’t worry. You still have the option to purchase one of the cheaper homes, perhaps a home that has not been updated or repaired for a while. Such a home will definitely need some TLC, but at least you’ll be in a great location. The old adage to buy the ‘worst home on the best street’ is certainly wise advice to follow.
Photo by Kith Latham
Similarly, you may find a neighbourhood that is not yet up to par with what you want, but that appears to be up-and-coming, with a lot of development going on. This kind of forward momentum carries with it the intrinsic potential for property value growth.
Special Cases
As we mentioned earlier, you may sometimes want to buy a second property as an investment. If you have bought a condo for this purpose, you may want to approach the condo association president and introduce yourself to them, even if you don’t live in the condo yourself just yet. Ask him or her to share with you dates of meetings (or at least meeting minutes) so that you can keep track of what is going on in the community. This way, you will not be surprised if your building undergoes major remodelling or increases maintenance fees to top up the reserve fund, for example. In addition, make automated arrangements with your bank so that you can ‘set and forget’ the monthly payments.
If you are a first-time buyer, you probably want to steer clear of homes that are in foreclosure (despite the current popularity of such homes with home buyers in the U.S.). Purchasing such a home can involve fairly complicated legal and financial issues. If you do come across a great deal, however, select a buyer’s agent who specializes in foreclosures, and have this professional explain exactly how the process works and how it differs from a ‘normal’ real estate transaction. Remember, your agent may have to navigate some special circumstances to see your deal to a successful conclusion.
To Wait or Not to Wait?
Unless you are a first-time buyer (or are buying an investment/income home), don’t worry too much about timing. People who already have a home must usually sell it in order to come up with the money for the down payment for the new home. That means that if you are purchasing your next home during a depressed market, you will also have to sell in the same depressed market. Similarly, if you want to sell during a boom, you will also have to buy during the same boom.
Photo by Darren Tunnicliff
This may be a little trickier when you are moving a greater geographic distance and the real estate market in your destination area differs from where you are currently located. You will have to decide on your own (based on research and your agent’s advice) whether to wait and, if so, for how long.
Now that you know more about your many options, learn how to weed through them with some insightful house-hunting questions.
