Buying our first home in 2002 was an interesting experience. As first-time buyers, my hubs and I knew squat about buying a house, much less about buying and renovating an older home. A much older home. The object of our focus was a 100-year-old double-walled brick home in downtown Hamilton, converted to a barely-legal duplex with shared utilities, home-run electrical patchwork, and lathe and plaster walls and knob-and-tube wiring.
If you cringed while reading that, well then congratulations! You already know more about what were getting into than we did. We learned a lot on the fly.
Our purchase was a comedy of errors. We made the extremely bad decision of letting the seller’s agent represent for us. We almost lost financing on the mortgage over a technicality. We barely made the down payment required–we had to go late begging from our relatives to buy this beast when the unexpected news came up that we couldn’t put down just 5% of the purchase price. And we had to have our lawyer come down on the seller (and that real estate agent) like a ton of bricks for his not meeting the closing conditions the day before close.
We eventually got our house. It was a little squished, battered and bruised on the inside, and there were a lot of stairs. We had insurance premiums that made our eyeballs twitch–knob and tube and double-walled brick is expensive to insure–and we were required to make sure our tenants were independently insured.
But there were a lot of great things too. Being downtown, it was perfect for two 20-somethings who were commuting to school and had a small income. We rented out the downstairs so that 80% of our mortgage was paid for. We lived on the 2nd floor and attic. Living this way let us put an extra $500 or so against the principle of the house or repairs every month. We got to be handy as we were now landlords and things broke and tenants clogged toilets.
My late father-in-law spent a lot of time with us, teaching us how to strip and revarnish old wood floors. He helped tear out the sad patch of weed-ridden grass in the tiny front yard and lay gravel. He and my husband ripped out our old bathtub so that I could have a tub big enough to fit me while I was heavily pregnant.
In spite of all our mistakes, everything worked out OK.
Hubs and I had to learn what mistakes not to make the hard way. But I can tell you what you should do so you can avoid some of our mistakes:
1 – Use a mortgage company with a physical location and a person you can talk to. We got our original pre-approval the way some people get insurance–via a form online. Never talked to a person at all. When we renewed at the end of our mortgage term, working with Royal Bank and our mortgage specialist was like night and day compared to working with our original mortgage company.
Talk to your mortgage specialist first, before you start looking; they will tell you exactly what you can afford, and you’ll have that much of an easier time when shopping. The rates are competitive and you may qualify for perks if you have other services at the bank besides your mortgage. Not to mention, if we had had a person working with us the first time around, the near-loss situation of our conditional financing would never have happened. We almost lost our first home because nobody told us we needed to put 7.5% down on a duplex instead of just 5%.
A person could have told us that.
2 – Have a real estate agent who represents YOU so there’s no conflict of interest. And be armed with the contact info of an independently chosen real estate lawyer and home inspector when you do find a house. If you have all three chosen by you, you can minimize your worries about conflict of interest; these people are working to make you happy. For your first home, a good agent is a sound investment. If they know exactly what you’re looking for and where you’re willing to be flexible, they can save you a lot of fruitless poking around MLS pages and looking at houses.
Use ones recommended by a few different friends. You know they’ve made other people happy. This is why word of mouth advertising is still the best.
3 – Know what you’re getting into and what you’ll have. Part of this is related to the home inspector, and if you think buying an older home without condition of inspection is a good idea, well then you better rethink that. A good home inspector will level with you about the sorts of costs you might see as part of buying and renovating an older house. They know approximately what it costs to get a roof or windows fixed, and for specialist work like electrical, they’ll tell you if you should have something inspected and certified as a condition of the sale. This can let you know if an older home and its inevitable renovation is something you can afford to tackle… or whether it’s better to just walk away.
The home inspection can also save you loads of trouble when you are ready to resell. For example, when we sold this house, we had to prove the electrical had been inspected and proven safe.
Fortunately, that part we did right!
We bought our second home in 2009–it’s an older home too, and like our first house, needed TLC. In fact, we’re about to embark on a huge renovation project in about a week! But… that’s a different story.
I might be persuaded to share parts of our new renovation adventure at the #RBCFirstHome Twitter Chat on Tuesday August 18th at 8:30 ET. Come join us! Have a question you want answered? You can submit questions using the hashtag during the twitter chat and have RBC experts answer your home buying questions! There’s also a lawyer, a realtor, designers, home builders and mortgage experts on hand to answer other questions. You’re sure to learn more than you thought possible!
Throughout the chat, they’ll also be giving away five (5) $100 VISA gift cards from RBC. But also, don’t forget to enter this contest from Influence Central! Participants can win 1 of 3 $100 Visa Gift cards before the party even takes place!
Have you purchased an older home before? Tell me the story of YOUR current fix-er-upper project!
Disclaimer: I’ve been compensated to write this post sharing the story of purchasing my first home, but it’s all 100% true. And Royal Bank has been my mortgage holder since 2007.