Buying a home: avoiding the pitfalls
Lightspeedchick is starting her search for a new place, buying for the first time. So, M-J, here are some notes from our friends and our own buying experience in the extended post body, if you find them helpful.
GET A BUYER’S AGENT
The buyer’s agent is important because they can do faster, more powerful and up-to-the-minute property searches than the stuff you may find on MLS.ca or on other listings — they get them before they are posted to MLS so you have a better chance of finding a place you really like in the neighborhood you want. Still, MLS is useful for getting an idea of neighborhoods and prices and the type of housing stock available.
GET A GOOD INSPECTOR
We used Amerispec for our inspection and we were a bit disappointed in their service — they noted some things, but completely failed to notice things such as leaking / broken U-bends under both the kitchen and bathroom sinks. We also ater found out that the basement’s sump pump was completely encased in tree roots that had cracked the foundation in their search for water! So your mileage may vary — someone that comes with recommendations from friends is probably a good bet, over picking someone at random from the Yellow Pages.
Be aware of things that require periodic maintenance like roof membranes and asphalt if you live in a flat-roofed building, for example, that need to be redone every 10 years or so to maintain their integrity: the inspector should be able to let you know when you’ll need to do this.
EXISTING VS. BUYING ON SPEC
It’s better, definitely, to buy an existing place than something unbuilt. As we found out when our condos on Garnier + Mont-Royal failed to materialize, sometimes the funding falls through, or the company is shady, or just have a bad track record in project management. So do your research!
If you do buy unbuilt, make sure any deposit cheques are held in escrow by a notary until delivery — we didn’t have a notary at the time, and the construction outfit we had been dealing with, Habitations D3 (also does business as Altima Construction) cashed our cheque, which is against common practice, and we had to chase them down to get the money back after their vaporware condos failed to materialize — they had sold over 100 units without a clear title to the land they wanted to build on!
NEWER VS. OLDER
Wherever you buy, there will always be the choice of older vs. newer buildings. Newer usually means less electricity costs thanks to better insulation, and construction techniques which provide better soundproofing. If you’re tired of living in a creaky, loud, wooden place where your neighbors might as well be in your living room, newer is the way to go. But usually, new places lack architectural detailing like moldings, hardwood floors etc — so they can seem a bit flat and dull. The ideal situation is a renovated older place with new windows and insulation, in my view, but they are also the hardest to find, so when looking, you’ll have to choose your priorities.
THESE ARE THE PEOPLE IN YOUR NEIGHBORHOOD
If you choose a place in a low-rise, mixed-use building with ground-floor retail, be aware of the store’s line of business, hours and clientele. For example, if there’s a high-traffic store like a depanneur or restaurant underneath, be prepared to live with with noise, smells, cars, lots of delivery trucks, etc.
Even living close to a high-traffic area like a stadium, school, shopping center or bridge (as you well know) can be a drag.
In order to gauge this, be sure to visit the place or the area at different times of the week or day — not just on Open House Sundays when it’s quietest. Monday morning and Friday afternoon rush hours, around 9pm or midnight, noon, etc.
There also might be other businesses in the immediate neighborhood that may affect your enjoyment of the property — living in a ‘light industry’ area as we do, with the Robin Hood flour plant, a paper mill, caleche stables and a meat-packing plant within 2 blocks of us, there is a lot of truck traffic and occasionally, a distinct…horsiness in the air. For example, we have a commercial film studio behind us, who, the other day, decided to start their loading-dock operations at 3am; it’s one of those things the seller neglected to mention.
Not to say that industry is bad, but if it is there, ask other people in the neighborhood or building (NOT the vendor) if they find it bothersome, and it’s worth Googling the company name to see if there have ever been complaints.
RENOVATIONS: KITCHENS AND BATHROOMS
If you buy a place with the idea of renovating until it looks like something from Metropolitan Home, the one thing I can say is try to find a place with a really good kitchen and bathroom already in place, because these are the most expensive parts of a house to renovate. At the very least, watch out for strange layouts, because redoing wires and plumbing is a costly pain in itself. Estimate on $5-$10K with labour per room if you plan on chic-ifying it — so the less you have to do here, the better.
If there is a Jacuzzi tub, check it out thoroughly - generally, they have a tendency to accumulate mildew around the intakes etc, and there’s always the problem of bacterial buildup in the filtration system. If it was never maintained, you may end up having to chuck the whole thing out.
THE CONDO BOARD
If you’re looking at a condo, get a full rundown of the condo board meeting minutes, condo agreement and financials. You don’t want to walk into a situation where someone hasn’t been paying their dues, leaving the condo board cash-strapped for maintenance and repairs. Sometimes you may find absentee landlords who rent out their units to people that treat them like student apartments, so in that case it’s important to get to know both the tenant and the owner.
INTEREST RATES + DEBT RATIOS
Nothing’s worse than finding that perfect place and then getting turned down for the mortgage! Banks calculate your ability to get a mortgage based on two debt ratios, the Gross Debt Service (GDS) and Total Debt Service (TDS) - on is more the essentials, mortage plus regular payments etc, and the other includes other debt such as lines of credit. For example, for a CMHC-insured mortgage (where the down payment is less than 25%) these ratios are usually 32% and 40%, respectively.
You can usually check these using bank’s online calculators. If your ratio isn’t initially favourable, you can try adjusting it by lowering your credit limits. Assuming you have a good credit rating, you can always raise them again later on.
One thing worth knowing is that mortgages are likely to be the ‘cheapest’ money you’ll have in your lifetime; you can easily take more time to pay it off if you need to. If you can swing it, think about adding a little extra to your mortgage amount to pay off credit cards etc. - you will in effect be consolidating your debt under a much friendlier interest rate.
And finally…
BUYING TO LIVE VS. INVESTING
The general advice is, unless you really plan on moving again in 2-3 years, buy because you love the place and the neighborhood. That alone will probably ensure that you can get your money back if you ever decide to sell. If you buy purely for market speculation, there is always the chance that some event (the price of oil, politics, interest rates) will cool the market off completely — so you’d better be happy with what you bought.
Hope that helps, and good hunting!
September 28, 2004 6:13 PM
Comments
Excellent points, Michael. As with the inspector, the buyers’ agent is a YMMV experience; I guess we were lucky.
The ‘hip neighborhood’ factor is really a trailing-edge phenomena — the Plateau as we know it was a really edgy and creative (if scummy and creepy) place in the 80s, and by the time the newspapers got around to noticing, it was the mid-90s and that scene already over; it was well colonized and now Safe to Move In For Hipster Wannabes. I think now they are wagging the dog in this respect; a bunch of developers get their hands on some warehouses in Villeray and decide to make them into lofts and bam! There’s the Homefront section talking it up like no tomorrow. Not to dis the actual journalism of people like Mary Lamey but a lot of it is pure advertorial, so caveat emptor.
I’d add St-Henri, Ville-Emard and Pointe Ste-Charles to the underrated list; I find it a shame that there is so little development going on in the east end (hochelaga-maisonneuve, the area around the East Village and Frontenac metro, etc.) — those neighborhoods have real potential for revitalization while still remaining within reach of working families.
wrote aj on September 29, 2004 5:48 PM
Great article, AJ.
I would add one thing, and that is not to rely too much on or expect too much from your (buyer’s) agent. There is no one more motivated to find the perfect place - and no one who understands the quirks of your preferences - more than you. An agent does have access to information - in particular, historical selling prices (not just asking prices) - that is critical to have, but nothing can substitute for doing your own legwork. A lot of first-time buyers assume that an agent will show them everything that comes along and really squeeze the system dry to find you the perfect place - but that’s rarely the case.
A couple of other things - the profile of each Montreal neighbourhood is quite different in terms of space, housing characteristics, and of course price. Comparing places from ‘hood to ‘hood is difficult (though less difficult in the case of condos than town homes), and the only way to learn about the differences is through experience - and that means seeing a lot of places and learning the code-words on the MLS.
The other thing is that in many areas of Montreal the market moves very quickly. It’s common for houses and condos to sell within days of being listed, and often at full asking price. It’s important, then, to get comfortable wiht making very quick price decisions. A basic measure on this is asking price per square foot - discounting the space taken up by stairwells from the street. It’s really helpful in the confidence department if you have a good idea of what an area’s average is, and then you have a basis for other decisions. If the price per square foot is high, why? Have they already invested in the renos, making it more costly up front but less down the road? Or is the seller speculating rather than selling at market price?
Lastly - don’t prejudge based on what the newspapers say the hot neighbourhoods are. There are still many areas on the Plateau that are reasonable (though fewer and fewer), whereas there seems to be a great deal of over-inflated prices in Rosemont and NDG.
wrote Michael on September 29, 2004 9:43 AM