This is a post by Sean Cooper

With my property virginity finally gone, it’s the perfect time to reflect on the most important lessons I learned as a first time home buyer. Home ownership is a major milestone in your life, but there’s a lot of hard work along the way. Here are some lessons I learned – some, the hard way.

Shopping for home insurance can be a real pain in the neck

The most tedious part of buying a home was shopping for home insurance. I phoned three insurance providers for quotes. It’s a good idea to speak with an insurance broker, but keep in mind some brokers only deal with a handful of insurance providers, so you’re not truly shopping the market.

It’s important to find out what your policy covers and what the limitations are – pay extra attention to sewer backup and water damage, liability and replacement cost. Determining my home’s replacement cost was a bit tedious. Insurance providers ask all sorts of questions – when was your house built, how many fireplaces it has, if your waterlines are made of PVC or plastic, etc. Getting quotes is very time-consuming and the questions vary with each insurance provider. For example, one insurance provider requested the exact square footage of my kitchen counter tops. Replacements costs can vary greatly, so it pays to shop around.

One insurance provider determined my home’s replacement cost was $225,000, while another came up with a whopping $385,000. Pay special attention to the replacement cost and if there’s a limit because it helps determine the insurance premiums you’ll pay.

Don’t always leave it to professionals

While it would be nice to sit back, relax and let your agent and real estate lawyer take care of everything, it’s not always the best idea. When my offer was prepared, Schedule A (offer conditional on home inspection) as an attachment in the Agreement of Purchase and Sale was omitted in error. Fortunately my lawyer caught this omission and it was added into my offer. Although it isn’t always possible when there are multiple offers due to time constraint, it’s worthwhile to send your offer to your lawyer for review to ensure you are legally protected.

Also, when I received an estimate from my lawyer for closing, I was given an estimate of $1,800. However, when I received the invoice it was for $2,100. I inquired why the invoice was higher and he apologized and refunded the $300 difference. Never be afraid to ask for a discount, especially when it comes to your money.

Know industry terminology

Whether you’re shopping for a mortgage, purchasing a new air conditioner or renovating your kitchen , it’s a good idea to do some research. I received three estimates on central air unit installation. The technicians used terms like tons, BTUs and SEER, which I didn’t fully understand at the time. One technician recommended a 2.5 ton unit for my 3-bedroom bungalow, but another technician said it was way too big and probably wouldn’t work.

I recommend getting at least three estimates because it could mean the difference between a good deal and a home renovation nightmare. Remember, the lowest estimate isn’t necessarily the best. Be sure to ask family and friends for references on contractors they’ve used.

Home repairs can really add up

My home inspector didn’t find any major defects and all the major expenditures – amp, roof, furnace and windows – had been repaired and replaced within the last three years. So how did I spend over $6,000 on renovations in the first month? The cost of repairing furnace ducts, installing central air and replacing window screens quickly added up.

With tenants moving in day one, all these repairs were necessary. Home renovations can be pretty daunting; it helps to prioritize, so you’re not stuck with costly repairs and no cash to spare. Depending on the age and condition of your house, I’ve discovered that a good rule of thumb is to budget 3% to 5% of your home’s value for maintenance and repairs ($12,750 to $21,250 on a $425,000 house). It’s a good idea to inspect your home yearly for any imminent repairs.

Real estate agents matter

Real estate agents play a crucial role in your home search. Finding the right agent can mean the difference between buying your dream home and being priced out of the market. Asking family and friends and attending open houses are great ways to meet agents.

Come up with a shortlist of agents and interview them. Finding an agent who knows your needs and wants and will work hard is crucial. Remember, the seller is paying your agent’s commission, so it’s in your interest to get the best agent possible. I worked with four agents until I found the right one. If a real estate agent doesn’t have the time to respond to your emails and phone calls, you probably should find a new agent.

About the Author: Sean Cooper is a single, 20-something year old, first time home buyer located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University.

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  1. Bob on August 27, 2012 at 5:05 pm

    Finances are one of the most important things that affect your life and that makes it one of the most important things to be knowledgeable yourself. Relying on paid “experts” often means leaving your assets in the hands of someone with different priorities and incentives than you.

    Buying a home is one of the most import decision you can make so you should be as knowledgeable as possible and not rely solely on a real estate agent. It is really not scary and we even won a multiple offer on a underpriced huge Bi-level.

  2. Sean Cooper on August 27, 2012 at 7:42 pm

    @Bob That’s great advice. While I find real estate agents helpful, it would be nice to be able to have access to all the data on MLS to look for my own houses and comparable properties. I found it frustrating to deal with some agents that didn’t provide the information I wanted.

    I actually wrote this article in honour of my appearance on Page 1 of the Toronto Star Business section today. Here’s the online version:–tenants-help-pay-for-a-first-home

  3. Echo on August 28, 2012 at 10:07 am

    I don’t know if my real estate agent was bad at math, or just trying to pull a fast one, but when we sold our home and I went to the lawyers office to sign the paperwork, I noticed the real estate agent commission was $3k higher than it should have been. I paused, did a quick calculation, and sure enough, it was higher. I stopped, let the lawyer know, and they had to get new paperwork drawn up.

    I’m not sure if that would have been caught had I signed the documents at the higher amount.

  4. Echo on August 28, 2012 at 10:23 am

    Oh, and congrats on the Star mention – very nice!

  5. Sean Cooper on August 28, 2012 at 11:33 pm

    @Echo Thanks! It was an honour to be in the Star. Love your column. Keep up the great work.

  6. Manette @ Barbara Friedberg Personal Finance on August 29, 2012 at 12:57 am

    Real estate agents matter… I definitely agree. I remember when we were looking for our first house, I met a real estate agent for a new subdivision. I asked for a schedule of a visit to the site but she said that the place is still being prepared for the construction of the houses. I insisted that I want to see the place so she cannot say “no” anymore. When we reached the site, I asked the agent where the houses will be constructed, the clubhouse, etc. She cannot show me any blueprint or document of the housing project, nor any copy of the floor plan of the houses. I asked her several questions but she cannot give me a proper response. I could not believe it she was selling me something but she cannot show me any plan and she does not know anything about the product she is selling! So I decided to go home and forget about the ridiculous agent.

  7. Emilio on August 29, 2012 at 12:31 pm

    Real estate agents are glorified door openers.
    This category of people are right up there with used car salesman.

    As a buyer you will be better off using the selling agent to draft the offer with. This way you can negotiate a better deal for yourself, at least 2-3% less than you would have if you used a buying agent.

    I don’t know what you mean by being priced out of the market without an agent. The market is what it is… the agent’s interest is not your best interest but his own.

  8. dyl on August 31, 2012 at 1:48 pm

    i just finished executing the sale of a family home on my own (I am 26 w no legal/real estate experience). it is not particularly difficult and discount brokerages offer MLS listings and some support for a minuscule flat fee. The incentive system created by a contract with a Realtor does not work in the client’s interest which is absurd considering they are the one with the money and thus the power to craft the deal.

    I dont exactly understand your assertion that “the seller is paying your agent’s commission”. While a finder’s fee for an accepted offer is not uncommon, it is a fraction of the fee the buyer pays their agent and is not by any means required.

    While there is a certain value for realtors (busy professionals, elderly, quick sale required, etc) they are not the fundamental piece of the puzzle they assert themselves as. the rise of discount brokerages and a general aversion to high transaction fees have rightly scared the realtor profession. for proof, just see the CREA’s obviously desperate (and thoroughly misleading) “how realtors help” campaign.

  9. Home Buyer Help on April 2, 2014 at 12:39 pm

    Nice insights Sean. Will help other first time home buyers. I agree with all your advice. Glad to see you wisely had a home inspection. This is something some home buyers mistakenly pass on to avoid the extra cost.

  10. T. Richard on September 9, 2014 at 5:22 pm

    As a military family moving every few years, we have purchased/sold 8 homes and are building our retirement home. Realtor’s have craftily cornered the market, to play on people’s fears/need to sell in a timely fashion. We, personally have had two transactions go south, due to corrupt realtor’s who were seeking to pad their own pockets. On both occasion’s, we became ‘aware’ of their motives and immediately terminated our business relationship. In general, a realtor with steer you to the property that will make them the highest commission, despite having signed a ten page agreement to represent YOUR interests. While I am sure that there must be a few honest realtors out there, it is the absolute most corrupt industry I have ever encountered. I have personally met three former realtor’s that quit the industry, as they could not abide by the industries underground corruption. Use a realtor if you must, BUT be savy, aware and keep your wits about you.

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