Canadian millennials may be confident in the housing market, and even in their ability to afford a mortgage, but there’s a good chance many of them don’t understand the cost of buying a home.
Nobul, an online service matching buyers with agents, conducted a survey of more than 400 Canadian millennials (part of the Angus Reid Forum) to gain a better understanding of their attitudes and perception of buying and selling real estate.
When it comes to working with a real estate agent, 75% of millennials hired the first agent they met. There are tens of thousands of real estate agents in the Greater Toronto Area. What are the chances that the first one you meet will be the right one for you?
Nearly 40% admitted to knowing nothing or very little about the average commission rates. If you’re selling, not understanding average commission rates in your market for your housing type could cost you thousands of dollars!
"The study clearly shows that while millennials value home ownership, with many planning to purchase soon, they don't completely understand the costs," says Regan McGee, CEO, Nobul. "Industry stakeholders need to take more responsibility in creating transparency in real estate transactions, especially as it relates to the costs associated with buying and selling a home. Nobul is ahead of the game and offers just that to consumers - accountability, transparency and ultimately thousands in savings when they buy or sell a home."
The greatest shock to us was that 33% of millennial buyers believe that there are affordable home options in their desired neighbourhood. Why is this surprising? Consider the average price of a resale home in Canada is close to $500,000, and the average millennial makes just over $44,000 a year. Even two millennials with the average salary would have a tough time qualifying for the average priced home.
Now, let’s consider buying a pre-construction home. There are many closing costs to consider, including potential interim occupancy fees, development charges, utility connections, Tarion warranty fees, and potentially HST on appliances; not to mention all the other closing costs, like land transfer tax, your status certificate, and legal fees.
To play it safe, you should be saving around 3-5% of your home’s purchase price to cover your closing costs. That means if you buy a home for $450,000, you need $13,500 to $22,500 saved for closing! This is a big chunk of change, especially when you already have a hard enough time saving for the down payment.
So, whether you’re working with a real estate agent or buying pre-construction right from the builder, make sure you ask about estimated closing costs. You may have the down payment saved, but if you need to close right away, you could run into some trouble if you haven’t considered the true cost of buying a home.