Imagine you’ve had your eyes and heart on this girl for the longest time. Finally, you built up the guts to ask her out and she says yes. You’re blown away that she agreed so you take her out for dinner to a fancy restaurant and after enjoying the appetizers, entrée, wine and dessert, you realize you didn’t bring your wallet.
Coincidentally, your date didn’t bring her wallet either.
And there’s no ATM around too…
Even more awkward…
A number of situations play in your mind:
- You tell her to take a cab home (oops, you can’t, she doesn’t have money and neither do you).
- You call your parents to come pay for the tab.
- You call your parents to come pick her up as you go wash dishes for the restaurant.
- Your date can take a hint that you screwed up big time and she’s extremely embarrassed and unlikely to go out for dinner with you again.
- Somehow the day passes but because you made this unforgivable error, you lose your date to someone else.
This happens in real estate by the way.
Jack and his wife and child were renting a home and sharing it with his mom, dad and aunt and uncle. His sister Susan and her husband and child were renting another home. They were looking for an 8 bedroom home for under $900,000.
I worked with them to look at several homes and finally helped them find their dream home in Surrey that was 4000+ sq ft, built in 2012, great neighborhood, great floor plan and it was priced really well at $850,000 (where comparables were $900,000+.
We negotiated an accepted offer and were working on getting the financing.
They had gotten a mortgage pre-approval for around $900,000 but the problem was, it was subject to them receiving a down payment gift from their relatives which wasn’t going to come for another 6 months! Big problem! The seller wasn’t going to budge on the completion date.
What’s more, my clients didn’t even have money for the deposit which was $20,000 and to be paid upon subject removal.
RESULT: We couldn’t remove the subject to financing clause on their dream home and because it was priced really well, other buyers came in and bought the home. Clients were incredibly disappointed, stressed and thought they wasted a lot of time for nothing.
COSTLY Mistake #1: Not Making Sure You Have ALL Your Financing in Place BEFORE Looking for a Home!
SOLUTION: Always make sure you have your financing in place before even considering buying a home. You don’t want to find out 6 months into your home search, after looking at dozens of homes, negotiating a stellar price for the home of your dreams, then realizing you can’t remove subjects because you can’t get financing.
This 1 Mistake Could Cost You Thousands in Bidding Wars!
Jason was in the middle of a bidding war. The East Vancouver market was HOT as the West Side was becoming too unaffordable.
This old timer (1930s) large home was situated on a large lot in a prime neighborhood, on a quiet street, close to great schools and close to transit.
The listing agent specified that offers were to be received by Friday at 3pm and it was noon. The last time he asked the listing agent, there were 5 offers and some were over asking and some were subject free.
The home was priced well below market value and even if Jason was going to pay more than asking, he knew he could easily renovate it and flip it to make a 6 figure profit in a few months based on the market conditions. Jason was confident as he has bought, renovated and flipped a few homes by himself before. That was his plan.
He wrote a subject free cash offer, well above asking price with a quick completion and won the bidding war! “Woo-Hoo!” He thought. After receiving the keys a few weeks later, he quickly began hiring his contractors to begin with the renovations. One of the contractors noticed some structural issues with the home and recommended that he get a home inspection done.
Jason hired a home inspector for $500, and the home inspector advised him that there were some structural, foundational issues with the property. The home inspector recommended him to hire an engineering company to inspect the foundation.
RESULT: The engineering company found out the home was located on peat (soft soil) and indeed was sinking on 1 side. The cost to fix was going to be $75,000 and it had to be done if Jason still wanted to renovate and flip. There goes his profit. He wanted to get rid of it and knew no one was going to buy it with that sinking issue, so he did the repairs and put it on the market.
COSTLY Mistake #2: Not Performing a Home Inspection
SOLUTION: Always do a home inspection for older homes if you’re not planning on tearing it down. If you’re in a bidding war, pay to get a home inspection done before submitting a subject free offer. You may lose the $300 if you don’t win the bidding war, but it’s better than paying a $75,000 bill later on.
Jason put the home on the market and again, it was a bidding war and he received subject free offers and he sold it and broke even on his investment or so he thinks.
The new buyers also had a quick completion and moved in shortly. Not long after, the new buyers hired an oil tank inspection company that discovered that there was an underground oil tank in the back of the home. They had the oil tank dug up and realized it was leaking and the soil contaminated, affecting the neighbors.
RESULT: Jason was sued as he is responsible for removing the oil tank and responsible for all the clean up necessary. A lawsuit proceeded and Jason had to pay another $50,000 for the removal, clean up, legal fees, environmental testing, and compensation to the buyers and the neighbors.
Don’t Be Fooled By The Mortgage Helper – It Might Disappear
George and Jill were looking for a Vancouver Special with 2 mortgage helper suites in the basement. They weren’t working with an agent and thought it would be better if they just searched on MLS and go to open houses.
They thought that if they go to the listing agent of a home they were interested in, the listing agent would get them a better deal if they didn’t have an agent.
Anyway, they found this great home. It had 4 bedrooms upstairs, two 2 bedroom suites in the basement of which both were unauthorized. The sellers were living upstairs and were receiving around $4000/month in rental income. George and Jill thought it would be perfect for them.
They asked the listing agent to write an offer for them. The listing agent gave them some forms to sign and before long, they had an accepted offer in place. George and Jill got their financing and did their home inspection and removed subjects. The deal was firm.
After they moved in for a couple months, they received a letter in the mail from the city. Someone had complained about their unauthorized suites and a city inspector was coming to inspect the property.
The city inspector came, inspected the unauthorized suites, ordered George and Jill to shut one of them down and make necessary renovations to legalize the second one.
RESULT: George and Jill spent $50,000 to renovate and legalize 1 of the 2 bedroom suites and remove the kitchen of the other 2 bedroom suite. They also lost $2000/month in rental income which put financial stress on them in making the mortgage payments. They couldn’t make the payments without the 2 mortgage helpers and were at risk of defaulting on the mortgage.
COSTLY Mistake #3: Not Knowing the Ramifications of Unauthorized Suites
SOLUTION: George and Jill should have done their homework regarding unauthorized suites. Unauthorized suites are illegal. Though there are unauthorized suites everywhere and there are many that go years without being caught, more and more of them are being reported to the city and the city is shutting these down regularly.
Beware of the Big Bad Oil Tank
If you’re not a builder and you are buying an older home, you should always be aware of the existence of an UST (underground storage tank). In the midst of bidding wars, subject free offers are common and it’s important to know that you can often do a home inspection and an oil tank inspection prior to writing your subject free offer.
Even if you’re a builder, I helped my client buy a home and an oil tank scan was done and there was indeed an oil tank. However, during excavation, the excavators almost punctured the oil tank so if you’re a builder, you have to be careful in the oil tank removal. You DO NOT want to go through the hassle of cleaning up an oil spill on a residential property.
COSTLY Mistake #4: Not Performing an Oil Tank Inspection
SOLUTION: Many older Homes built between 1910 and 1970 were heated using oil stored in underground storage tanks. When homes switched over to gas, these tanks were filled with sand or capped but many still remained buried.
Unfortunately, over time, these tanks corrode and leaked oil and when that oil spreads to neighboring properties, then you’re in big trouble!
ALWAYS get an oil tank inspection done before buying older homes. If you find an oil tank, not only are you going to be concerned about leakage, but banks may not lend to you if they know there’s an oil tank present.
A Good Buyer’s Agent Will Prevent You From Being in the News
In the video, I talk about the different agencies that exist in Real Estate. The worst situation to get in is thinking your Realtor is representing your best interests when they’re NOT.
COSTLY Mistake #5: Not Hiring a Buyer’s Agent
SOLUTION: When the listing agent asked George and Jill to sign some forms, he didn’t really go into detail explaining them. He just asked them to sign here and sign there. They trusted the listing agent and assumed he was representing them.
What they didn’t know was that the listing agent was offering them what’s called “Customer Agency”, meaning he was representing the seller, not the buyer.
Hence, the listing agent was not looking out for George and Jill’s best interest and could care less if they bought a home that didn’t work for them.
If you’re new to buying homes and you’d like discover how you can find your best and most affordable home in Vancouver and make no mistakes at all in the process. Then call Gary today at 778-862-9787 or fill out this simple form.