Megann  Willson

Megann Willson

Real Estate Agent

HomeLife/Realty One Ltd., Brokerage

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Is buying a cheaper home the best option for you?

Tall downtown condo building

In a tight seller’s market like we’re experiencing now in the GTA, clients are still looking (wishing, hoping) for bargains. And occasionally, there are incredible deals out there. The truth of it is, though, that prices are high, and supply is very limited. That doesn’t mean you should take whatever you can get, but it does mean that smart buying practices are more important than ever.

House hunting is not shoe shopping. Running from one property to another hoping you’ll magically find the perfect one, isn’t going to work. (Although I do think that often a good house will send you signals, if you’re paying close attention).  Consumers have had their perception of the home buying experience warped by the plethora of real estate and renovation shows on television. They see homes being purchased for less than the price of a car, and transformed into perfect gems where it’s sunshine and lollipops every single day. Weeks or months of work are compressed into a half an hour or an hour, and the big payoff works out every single time. That’s because they don’t often show you the times when it didn’t. That would be too disappointing.

I’ve loved every home I’ve ever lived in. Every home I ever lived in had flaws and compromises. Even the ones that I thought were a dream home on the day I bought them. It’s always a balance, and it will be the same for you. So how do you find a home that has enough checkmarks on the right side of the equation (happiness-making) and not too many on the wrong side (flaws or compromises)?

In my experience, it doesn’t start with the house at all. It starts with you. You need to know yourself and understand your capabilities, strengths, and weaknesses.

First, assess your financial position. That includes knowing your numbers like your net worth (how much money you have minus your debts), as well as how much money you make, spend, and save each month. A financial advisor can help you with this – as can your mortgage agent and your real estate agent. We can help you understand your GDS and TDS (that’s your gross debt service ratio and your total debt service ratio – which are the limits lenders will look for of how much income you should be spending to pay debts including loans and rent or mortgages).

Next, think about your skills. Can you do a lot of basic repair jobs yourself? Or do you need to hire help? All of this will figure into which house you choose. If you’re a lucky buyer who’s an electrician or plumber, or you have a sibling or parent who is, and is willing to lend a hand, you may have more options to consider, where you can invest a little “sweat equity” and get more home for your money.

Lastly, think about whether you can live with what the location will cost you. For example, if you find a spacious, well-appointed home that is less expensive but a two-hour commute from your work, you’ll probably end up wanting a vehicle, unless the transit is amazing. In that case, your car payment for a second car may eat up a lot of the monthly savings on your mortgage. Not to mention the time - do you really have an extra four hours a day, to make that commute work? And will it feel worth it, on the busiest of days?

Location will always be a critical part of the decision. One of my clients showed a solid decision-making process on her first solo home recently. She organized all her finances and we made sure everything was ready. Then we talked about the pros and cons of various properties and neighbourhoods “on paper”. She thought she might like to live near one of her friends (also an inexpensive option), but it turned out that a slightly-less-spacious place in a more upscale neighbourhood with many amenities was her final choice. Even though it cost a little bit more per month, it gave her easy access to a wonderful part of the city with bountiful amenities and transit. We picked up her keys on Tuesday, and I know she’s going to be very happy there!

So remember, choosing on one factor alone isn’t the smart solution to your housing search. Take a good hard look at your situation, view the neighbourhood with a clear head, and use logic and research to assess all the important factors in your decision. Then, when you’ve narrowed down your options on paper, you’ll be ready to take action when you find the home that’s the best fit to your needs.

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