BEFORE YOU SIGN ON THE DOTTED LINE CONSIDER THE FOLLOWING TIPS FROM SOMEONE WHO HAS ALREADY MADE THE MISTAKES.
Let’s just say we know someone who took on home ownership without much exploration but wishes he had done so to avoid the mistakes he made. Mr. Mistake has a child who stays with his mother alternate days through the week so the house is pretty quiet on the off days. At first we thought he would invest in buying a smaller house for the two of them to live in but that didn’t happen.
The house he purchased was a 3000 sq ft. two-story home finished top to bottom however it wasn’t to his liking so he took on huge renovation projects. With the help of friends and hired help from Kijiji he got to work. He met lots of characters along the way responding to his Help Wanted ad online but hired very few. Saving money was the idea although not always the smartest when hiring people you don’t know.
Even today he will tell you not to bother hiring online even if they come with a resume in hand. If the job goes wrong good luck trying to find the person afterwards. You might argue that a reputable company could do the same but it’s less likely to happen compared to hiring random help from online ads.
Once was all said and done he sunk a further $70,000 into the home to update his new pride and joy. Thankfully a recent comparable home sale in the area proved he would recoup most of the money spent on the major renovations if he had sold. Keep in mind, this could change tomorrow, or the next day.
The work was 90% completed by himself and his girlfriend who is handy but even then they pushed limits as they have full-time jobs. Looking back he mentioned he would have passed on the house because of the amount of renovations it needed. He underestimated the time and costs involved with everything.
Other homeowners may not have needed to update the home he purchased but it certainly took its toll on him financially, physically and emotionally. It was far more than he had ever expected. It’s easy to look at areas of a home and say you want to change something believing you will do it all yourself.
We talked about a few of the mistakes he made when buying his first home and today I wanted to share a bit of our conversation with all of you. Buying a house is a big deal and new homeowners often rely on the experience of their realtor, parents or even friends who have already been through the buying process. Just don’t put all your eggs in one basket because it’s your money being spent, not theirs.
Buying Too Much House
Interest rates may be low but are you prepared if they go up? You better be if you have a mortgage that is up for renewal or you’re a new homeowner dipping your foot into the real estate market.
This is one area we can look back and say, we didn’t splurge on as we bought a home using only one income and saved the other for smaller expenses. A big house might look nice and fancy but with a larger home comes larger responsibility. You can expect your utility bills to be higher and costs to maintain the home.
If the bank tells you that they will give you a certain amount of dollars for your mortgage, do yourself a favour and step back and evaluate the situation. If you plan to deal with situations as they come along be warned that it’s not as easy as you think. A crack in the wall, chimney repair, flooded basement or many other surprise renovations could prove costly and your insurance might not cover the costs.
Just months after we bought our home Mrs. CBB lost her job and her health changed significantly but thankfully we prepared for financial emergencies. The only thing that it did cost us was investing in our retirement savings which we were no longer able to commit to. Since my income was due to increase we were lucky that she was able to stay home while I worked and is now a stay at home mom.
Today our investments are almost back on track and things are far easier now that we are mortgage free but it took some tough times to get to the better times. Even then there are always worries about what could happen as a homeowner.
Had we of bought too much house then we would have had to sell because we wouldn’t have been able to maintain it. I’m not just talking the mortgage and bills but maintenance of the house is a critical factor that would have put us over the edge financially. Sometimes buying a smaller home or even a condo is far better than getting in over your head buying too much of a house.
Over-bidding During Competition
There’s nothing wrong with renting for a bit until you find the perfect home. Too often we are in a rush to own that we forget about how much we are actually spending. Not every city has fierce competition for house buying and selling like in Toronto and Vancouver but you should always expect competition.
When we bought our current home we knew there was potential competition waiting but we didn’t let that deter us. If we lost the house because we didn’t bid enough then we would walk away. Our purchase was a bit unique as we bought from a senior who had strict guidelines about selling her home. It was her way or the highway although we did get her to move on a price a few times especially after the home inspection.
I’m not sure if her real estate agent was trying to persuade us into making an offer saying there was another offer coming in the next day or so. We loved the house but we didn’t let that potential competition get in the way. We put our offer on the table and finally after back and forth for over 2 hours she accepted, no competition at all.
If you really want to tick home ownership off your to-do list you must be prepared to pay over asking price or turn around and walk away. The right homeowner may be willing to pay the price but everyone’s financial situation is different. Some people spend far more over-spending on a house because of competitive offers that they’d have to live in it for years to see the return. I wouldn’t want to put myself in that position.
In areas where housing is fierce don’t let home ownership overpower the ease of renting until the right home for you comes up for the right price. If it’s meant to be it will be but you don’t need to fight for something that could cost you more down the road. Stick to your house hunting budget and walk away if the price gets too heated, unless of course you’re ready for it.
Skipping Home Inspection
No matter what you’ve heard from other people a home inspection is critical before you purchase your house. You might even consider skipping the home inspection because you really want the house and others want it too. This could turn into big bucks if you’re not careful.
When we bought our current home we hired a home inspector based on the referral of our real estate agent. Don’t do this either. A home inspection might only cost you $500 depending on who you hire but it’s important to do your homework. Don’t be afraid to knock on doors too if you do get references from a home inspector.
The other option is to spend a bit more money and call in tradesmen to inspect the critical parts of the home before home ownership becomes part of your monthly budget. Hiring a master plumber, carpenter, electrician, roofing company etc. to comb through the house inside and out is your best bet.
So you spend more money but at least it gives you peace of mind.
Underestimating Small Fixes
I remember walking through opens houses with Mrs. CBB and noticing plenty of things that needed to be fixed. To some people they might overlook them as they are simply detail fixes but they could turn costly. A botched up hard-wood floor can cost thousands to repair and should be done right.
Related: Are Open Houses Worth It?
Remember what you buy today better be in tip-top shape when you come to sell your house in the future even if the house is your forever home. Don’t let anyone tell you how much the small fixes will cost you unless it is someone who specializes in the work. Just because your dad says that a new tile job in the bathroom will only cost you $100 a most doesn’t mean he knows the current pricing of labour and product.
Whatever you do don’t just walk past the obvious especially when the homeowner might be trying to hide something they know is an expensive fix. It happens, so be prepared.
Home Maintenance Costs
Taking care of your new property inside and out is expensive no matter what anyone says and part of your home ownership responsibilities. Considering the cold winters in Canada your roof won’t last as long as the shingle says. Finding out how old the roof is may save you thousands down the road and possibly some negotiation power. Consider the age of the roof and if it’s near the end of its life-span by contacting a roofer for an estimate.
Yard work takes time but also money especially if you plan to landscape your property with shrubs, flowers, rocks etc. Finding free flowers online is a great way to save cash but if you’re buying new from the nursery or garden centres do your best to shop the sales.
Watering your lawn to keep it healthy is pricey so consider this when purchasing a larger piece of land. Know your limits and how much you are willing to invest in keeping the property looking pristine. If you let your house fall apart you can expect to see a potential decline in price value when it comes time to sell it.
Thinking You’ll Do It Yourself
Home ownership for Mrs. CBB and I has certainly had its ups and downs.
I admit I am the worst when it comes to this mistake because I am a handyman without time. I enjoy renovations and DIY projects but always get in over my head. When we walked through our current home I remember telling Mrs. CBB how we could put a new kitchen in and I’d be able to do it. Ya right!
We’ve been in our house now for 7 years and I have yet to complete any major renovations apart from landscaping the property front and back. This includes a new walk-way of interlocking bricks, stone walls, lighting, shrubs, flowers, new deck, path-ways etc. It’s all done. That took me an entire summer to complete BEFORE we had our son and even then it spilled over into the next year.
Once we had our son that was it. I don’t have the time like I used to and all those DIY projects that I thought I was going to tackle I’ll have to pay someone else to do. It’s easy to get in over your head with high expectations to do the work yourself but that doesn’t always happen. Life gets in the way and everything else gets pushed back. Sometimes we are in good health when buy a house and then things take a turn for the worst.
Don’t fill your plate with more than you can handle.
When you buy your first home the last thing you want to be doing is blowing money renovating the house after you just spent a fortune to get your new mortgage. Home ownership research allows you the time to explore the renovations needed or desired before you buy a house. This way you know what it might cost if you’re not able to do the work yourself.
A $13,000 kitchen renovation that you want to DIY might turn into $30,000 if you have to pay someone else to do the work.
Home Ownership Needs Your Signature
Home ownership is a big deal and not just to show off to your friends that you’ve got what it takes. No one cares. Never be in a rush to buy any home especially if you aren’t fully ready to make that purchase emotionally or financially. I’ve often heard people say in conversation that they need to save at least $10,000 for a down-payment to buy a house one day.
I don’t even know where that number came from but it seems to be the magic number when looking to get in the real estate market. Honestly, I’d save far more depending on how much house you can afford. Not just afford but really afford. It’s the difference between buying a single bed and a King bed. If you don’t have wiggle room you’re going to fall eventually.
Buying a house on a whim could prove costly down the road. Avoid letting the desire for home ownership take precedence over reality.
Discussion Question: Looking back name something that you overlooked or justified in order to purchase your first home. What would you do differently?
My week in review
You may have noticed I only blogged once the past week. There’s a reason for that.
Where to begin, where to begin. I’ve been sick, very sick. In fact the entire family has been ill with a virus that is spreading like maple syrup on pancakes. Just when I was trying to get over the horrific cough I got we were hit with what we initially thought was food poisoning.
It is believed that we had a stomach virus called Rotavirus and boy did it ever hit hard. It all started after a dinner party where we were exposed to a child who had just had the same illness which he picked up from primary school. It took no time at all to get in our system and cause major problems for us. With-in hours.
Mrs. CBB was a mess and spent a night laying on the cool floor in the bathroom to help ease the stomach pain and for easy access to the toilet. I went in to work but ended up vomiting as I got out of my truck and had to leave about an hour later. I couldn’t take it any longer because it was trip after trip to the bathroom and just overall lethargic from the nausea and pain. I needed a hot shower and rest.
This was now the second time I had to leave work and although it was devastating to me because of the money I was going to lose it had to be done. I don’t have employer paid sick leave at my full-time job so I’m looking at a slimmer pay cheque this month. At least no one else was getting infected from me.
Being home in bed was far nicer than laying on the bathroom floor in pain. Our son was the last to get it and the poor little guy took it hard. He had no idea what was happening as he was just throwing up so much. You know what I’ll be doing next week, steam cleaning the carpets. I’m thankful I haven’t put in the wood floors yet. I suppose that’s one renovation that I put on hold that was worth it.
I can’t even begin to tell you how many loads of laundry I did this past week. We went through so many towels, blankets, clothes it was insane. Disinfecting the house was the last step so we washed bed sheets and all surfaces just to be sure.
It took about 3 days to get out of our system and 4 to feel better and start eating normal again. This stomach virus seems to be going around and it’s contagious. Staying home was the best course of action. We got the all clear from our doctor the other day so all is well.
Thanks to everyone who followed my illness updates on Facebook for the well wishes.
CBB Published Posts
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Top Post This Week: 11 Habits To Help You Budget Better in The New Year
Making a difference (MAD) 2017
Welcome to the 2017 Making A Difference series! Join the networking movement of Personal Finance Bloggers around the world. If you are a personal finance blogger and would like your blog to be featured simply drop me an email.
I’m currently booking March/April.
There’s no MAD series this week but will resume next week.
Weekly Fan Brag
If you have a brag that you want to share email me at firstname.lastname@example.org with a photo and small write-up of your deal. It can be anything you saved money on that you are excited about.
If your story gets featured you get two ballots in the yearly draw for a PC Financial Gift Card and at least one ballot for emailing me your entry. Either way, you get a ballot in the draw.
CBB Finance Tip
Allow yourself to make the final decision about your money and not be influenced by others who may try to persuade you to do what they think is best. Unless of course you are spending money and are out of control you may want to take a seat and listen to what someone has to say. Ultimately in the end, it’s your money, your choice.
Top finance post
I read lots of finance posts from all over the world every week and I learn something new from each one of them. This week I stopped by the personal finance blog, How Do I Money written by Derek Olsen.
His post about Doing The Dishes By Hand shares his life lesson about doing the dishes by hand and getting your hands wet with finance. We can certainly understand what it’s like to wash every dish, spoon and cup by hand and how budgeting has helped us get rid of debt and build up a savings account.
The more often you budget, pay bills, organize your debts, and track your net worth, the better.
Top frugal recipe
Food is a big part of any budget and a struggle for so many people which is why I’ve created frugal recipes for my family and yours for many years.
I have a second Facebook page called The Free Recipe Depot where I exclusively share recipes from Food Bloggers around the world. Check out the Free Recipe Index on CBB compiled of frugal recipes that are 100% tested and accepted by family and friends!
This week I stopped by Yes I Can Cook a blog written by stay at home mom Sara Nayeem who shares recipes from her little kitchen inspired from her mother, friends, family and those around the web. She has this recipe for simple twisted hotdog buns made with hotdogs and Pillsbury dough or homemade dough that I thought was pretty cool. You could easily use sausages as well. Our son loves hotdogs so I might give this a shot.
Top money-saving DIY
Mr. Groundhog said that we were going to have an early Spring 2017 so I thought I better get started on sharing some gardening and landscaping tips for everyone. This post over at the website Architecture and Design filled with 40 front door flower-pot ideas for first impressions is outstanding.
We love flowers at the front of our home and on the front porch. We also have two large flower pots but last year they were both empty. This year I plan to do something a bit different and it’s inspiring posts like this that give me the inspiration.
What do you put outside your front door?
Search term giggles
Always begin and end your day with a SMILE!- Mr.CBB
- Canada Porn Image– You clicked because you would find that on a personal finance blog, right.
- Front of a scan Canada ID card– Sounds a bit fishy to me
- Can’t get days off– Join the club!
- Dumpster Diving Make-Up – So let me get this straight, you want to dumpster dive for makeup?
- Why scanner code ring on the entrance– Ha, you mean the security gates beeped when you walked into the store. I wouldn’t put too much hope into those things as they go off if you wear a belt most times.
Every week I get thousands of people visit Canadian Budget Binder because they did a search online and found my blog.
Most times funny, Sometimes serious.
That’s all the fun for this week, thanks for dropping by and we’ll see you all again next Saturday.
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- The Saturday Weekend Review #205: How to Handle The First Blank Page Of Your 2017 Budget
- The Saturday Weekend Review #206: How A Guy Managed To Break The Poverty Chain
- The Saturday Weekend Review #207: How to Prepare for Short term Lost Income Before It Happens
- The Saturday Weekend Review #208: Achieve Financial Success By Leaving Money Sins Behind
- The Saturday Weekend Review #209: 8 Ways to Waste Money You Could Be Saving
Image courtesy of phanlop88 at FreeDigitalPhotos.net