Buying a home anywhere in Canada comes with uncertainty right now, especially in Toronto and the rest of Ontario where the market was booming up until real estate was impacted by the Coronavirus. In this article, we will go over the common questions about buying a home during these uncertain times and new factors to consider because of the pandemic.
Should you buy a home without seeing it?
While you are still able to legally buy a home without seeing it, many real estate agents at Fivewalls would advise against it. We do not expect the Coronavirus to cause people to buy homes without seeing them. What will likely happen is that buyers will view less homes and real estate will be expected to use more virtual tools to help buyers view the without ever having to step foot into the property. These tools include:
- 3D video mapping of the property,
- video tours,
- and virtual open houses.
All of these things can really help you get a sense of the property without ever stepping foot inside the home.
Home sellers may start to limit showing for buyers who meet certain criteria
As expected, home sellers are nervous about who they let in their homes. Recently, many sellers have implemented a 3-tier system when allowing a potential buyer into the home:
- Ensuring that their real estate agent sets up virtual tours so buyers can view the home online.
- A scheduled tour for just the outside of them home where buyers can view the home from a distance.
- If the buyer is still interested and can prove that they are healthy, they will be allowed to view the home inside.
To ensure that only serious buyers are coming through, many sellers are now asking for confirmation that the buyer has been qualified for a mortgage before they can view the home in person. At Fivewalls, we predict that it will become a norm that sellers ask more from buyers before allowing them to view the home.
What are your options if a home seller insists that you put an offer on a home without seeing it first?
While it is not common to put an offer on a home without seeing it first, anything is possible when it comes to new changes in real estate. For high-demand areas, it’s best to prepare yourself for all situations so that you can prepare for what you are willing or not willing to do. If you really love the home and want to put an offer on the house but do not feel comfortable going to view the home during the COVID pandemic you can put different clauses into your offer that will allow you to view the home before the deal is finalized. Some clauses buyers can use to protect themselves are as follows:
- Paperless Closing
- Delay of Closing if Third Parties are Unable to Close
- Delay of Closing and Title Insurance
- Automatic Delay of Close if Either Party if Quarantined and Cannot Sign
Did you know that many celebrities and top business professionals do buy homes without visiting them? While their reasons may be for a much more glamorous reason for buying a house unseen, the reason they feel comfortable doing so is because they have a trusted real estate agent representing them who understands exactly what they are looking for.
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Questions to ask yourself before thinking about buying a home during a pandemic
1. Do you have job or income stability?
Being able to purchase a home ultimately comes down to whether or not you can afford the costs associated with buying. As of early April, a record of 1 million jobs have been lost in Canada and while the Government is rolling out wage subsidies, there are likely more jobs that will be lost. If you are unsure about the impact on your job, then you may want to hold off on buying a home until the economic situation is more clear.
2. Do you have a back-up plan in case you lose income?
Given that banks will refuse to give you a mortgage if you lose your job even when you were pre-approved is a major risk. One way to mitigate that is ensuring that you have a co-signer or guarantor in case this were to happen. Making sure you have a financial back-up in case something were to interrupt your income will reduce stress in the home buying process.
If your answer is “no” to any of the questions above, then buying a home right now may not be the best for you. Even industries that were growing fast or seemingly stable could suddenly change to the opposite during a pandemic. It’s harder to predict than ever so if you have any doubt, buying a home is best put aside. However, if you are keen on purchasing a home, then start preparing now to get ahead of other buyers.
How can you best prepare to buy a home during the pandemic?
1. Get pre-approved for a mortgage
Making sure you are pre-approved for a mortgage is the first step in buying a home, even if we are not in a pandemic. You can meet with a mortgage professional virtually or in-person as most banks are still open. At Fivewalls, we recommend that you use online tools to get pre-approved and do as much of the process online as you can. Getting pre-approved for a mortgage can help you determine how much you can afford and the true cost of buying a home. Furthermore, many sellers will not let you into the home until they can confirm you have been pre-approved for a mortgage. Note that sellers will not know how much you have been approved for, only that you are qualified to purchase the house if the showing is successful.
2. Calculate your savings and make sure you have enough buffer room in case you get laid off.
Because we are in a pandemic, budgeting for uncertainty is the future is more important than ever. Always prepare for the worst-case scenario of losing income because many industries are impacted. The general recommendation is that you have 6 months worth of your income tucked away for home repairs, property taxes and any surprise that may arise after closing on a home. This means that all the money you have been diligently saving for a down payment on a home you need to remember to have “extra” for an emergency fund. Many lenders will require borrowers to prove they’ll have some money left after closing.
3. Check-in with your boss to see what the company’s plans are in terms of layoffs and hiring.
Many companies are offering open communication when it comes to layoffs and hiring during this time. Jobs that are considered essential services may not have the threat of layoffs in front of them but should still consider their savings if they plan on purchasing during this time. The Government has taken many measures in place to help keep Canada’s economy strong and help bring support to those who have lost their job due to the pandemic. You can read more about Canada’s COVID-19 Emergency Response Benefit here.
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Disclaimer: given that the Coronavirus (COVID-19) has caused shocks to how real estate is operated, please note that the information above could change at any time given that companies are constantly updating their policies in response to the pandemic. Intended to Solicit Buyers or Sellers that are not currently under contract with another real estate brokerage.