Buyers and Sellers Articles
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Seller Articles
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Buyers Articles
Buying your new home is a serious venture. It can be an absolute pleasure or a massive headache. Your house is not just your home, it is a serious investment in the dwelling, the area and your future.
When buying a home - you're bound to have many questions. For example, "In what area can I find a home that suits my needs?", "How much money will I need to afford the monthly payments?" and "How long will the home buying process take?"
Below are some articles that you might find useful in the home buying process. Please feel free to click on one of the links below to read more.
Buyer Articles
Advice for First-Time Buyers
- Pre-Qualification: Meet with a mortgage broker and find out how much you can afford to pay for a home.
- Pre-Approval: While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You'll also avoid being disappointed when going after homes that are out of your price range. With Pre-Approval, the buyer actually applies for a mortgage and receives a commitment in writing from a lender. This way, assuming the home you're interested in is at or under the amount you are pre-qualified for, the seller knows immediately that you are a serious buyer for that property. Costs for pre-approval are generally nominal and lenders will usually permit you to pay them when you close your loan.
- List of Needs & Wants: Make 2 lists. The first should include items you must have (i.e., the number of bedrooms you need for the size of your family, a one-story house if accessibility is a factor, etc.). The second list is your wishes, things you would like to have (bonus room, den, etc.) but that are not absolutely necessary. Realistically for first-time buyers, you probably will not get everything on your wish list, but it will keep you on track for what you are looking for.
- Representation by a Professional: Consider hiring your own real estate agent, one who is working for you, the buyer, not the seller.
- Focus & Organization: In a convenient location, keep handy the items that will assist you in maximizing your home search efforts. Such items may include:
- One or more detailed maps with your areas of interest highlighted.
- A file of the properties that your agent has shown to you, along with ads you have cut out from the newspaper.
- Paper and pen, for taking notes as you search.
- Instant or video camera to help refresh your memory on individual properties, especially if you are attending a series of showings.
- Location: Look at a potential property as if you are the seller. Would a prospective buyer find it attractive based on school district, crime rate, proximity to positive (shopping, parks, freeway access) and negative (abandoned properties, garbage dump, source of noise) features of the area?
- Visualize the house empty & with your decor: Are the rooms laid out to fit your needs? Is there enough light?
- Be Objective: Instead of thinking with your heart when you find a home, think with your head. Does this home really meet your needs? There are many houses on the market, so don't make a hurried decision that you may regret later.
- Be Thorough: A few extra dollars well spent now may save you big expenses in the long run. Don't forget such essentials as:
- Include inspection & mortgage contingencies in your written offer.
- Have the property inspected by a professional inspector.
- Request a second walk-through to take place within 24 hours of closing.
- You want to check to see that no changes have been made that were not agreed on (i.e., a nice chandelier that you assumed came with the sale having been replaced by a cheap ceiling light).
- All the above may seem rather overwhelming. That is why having a professional represent you and keep track of all the details for you is highly recommended. Please email us or call us directly to discuss any of these matters in further detail.
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Buying a home is one of the most important purchases most people will make. In order to make the right decision the first time, potential buyers need to be prepared. Consider the following before starting negotiations:
As the potential buyer, you want the advantage. While you want answers to all your questions to the seller, reveal very little about your circumstances. Do not give the seller personal information such as your income, the maximum you are able to pay for a down payment or the home, or when you want to move. Make sure that your agent knows not to reveal any such information to the seller or his/her agent.
Also, do not let the seller see how much you want the property. If you appear desperate or overly enthusiastic, the seller then has the stronger bargaining position. When meeting with the seller or listing agent, keep your emotions in check.
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Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which is the best for your situation. You probably won't qualify for all of them. In fact, you may only qualify for one. But if you do qualify for more than one, you may save yourself money (and worry) in the long run if you do your homework before signing on the dotted line.
Fixed Rate Mortgages
The principal advantage of fixed rate mortgages is that the interest rate is set for the entire term of the mortgage. A fixed rate mortgage offers you the security of knowing exactly how much principal and interest you will be paying on your mortgage during the term you selected, your payment will remain the same.
This is a great product for first time buyers or those who live by a strict budget.
Keep in mind that with a fixed rate mortgage you are locked in for the selected term, and that you may incur a penalty to break your mortgage.
If you are considering a fixed rate mortgage keep the following options in mind to help to reduce your mortgage faster.
Choose a lender who offers you the flexibility to:
- Change your payment schedule
- Increase your monthly payments
- Make lump sum payments at no additional charge
These options will help you to pay down your mortgage faster and reduce the amount of interest you pay.
Variable Rate Mortgages
Depending on the level of risk you are willing to take, a variable rate mortgage can save you money while keeping your options open during times of fluctuating interest rates. The past 30 years shows that if you were on a rate based on the Prime lending rates you would have saved more money than those on a fixed rate mortgage.
With variable rate mortgages your mortgage payment could increase or decrease depending on fluctuations in the Prime lending rate, which is determined by the Bank of Canada. With most variable rate products you can lock in at our discounted rate (not bank posted rates) anytime during your term.
Variable mortgages are great for those who have flexibility in their budget and can afford for their payments to increase. The lenders use a higher rate to qualify you to make sure that you can afford it if the rates do rise. So, you may not qualify for as large of a mortgage as with a fixed rate mortgage.
Insured vs. Conventional Mortgages
In Canada all mortgages with less than 20% down payment (or equity) will require default insurance. There are 3 different insurers in Canada, Genworth Financial, CMHC and AIG. These insurers will insure the property against default, this is not life, disability or critical illness insurance and it protects the lenders not the borrower. The insurance premiums are pro-rated depending on the amount of down payment as well as the amortization you choose. The premiums can be paid in full at the lawyer's office or added to the mortgage. This insurance allows Canadians that have small or no down payment to be able to purchase a home.
Conventional mortgages are mortgages that have larger down payments, at least 20% of the value of the property. These mortgages are not typically insured so there is no insurance premium to worry about. With conventional mortgages the lenders will likely do an appraisal to ensure the value of the property. The lenders are not as strict with their lending guidelines as there is more equity in the property and therefore less risk.
All mortgage terms and amortizations are available with both insured and conventional mortgages.
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Naturally, you want to get the best deal for the least amount of money. This holds true for mortgage rates as well.
A lower interest rate means a lower monthly mortgage payment, which can save you money in the long run. Also, it is easier to qualify for a lower payment than a higher one.
You basically have two routes to finding the best rate. The first is to do all the research on your own. The second is to use a mortgage broker.
Do-It-Yourself
With the advent of the Internet, much of this information is readily available online. Once you have educated yourself sufficiently about real estate loans, all it takes is the time and energy to sift through online resources to find the information you need.
Rates change quickly. That great rate you find today might not be there tomorrow. Once you find the rate you are looking for, submit a loan application and lock in that rate.
Some sources for interest rates on the Internet include:
Bank Rate Monitor
E-Loan
When comparing loans, make sure that you're comparing loans of the same type. For example, you find that "Loan A" for a 25-year loan has a much lower interest rate than "Loan B" (also for 25 years). Upon further inspection, you find that "Loan A" is technically a variable rate mortgage where the mortgage rate (and payment) can go up or down over the period of the mortgage. Loan B, on the other hand, is a fixed rate mortgage. Its payment is also based on a 25-year amortization, but becomes due for renewal of interest at the end of say 5 years. Loan B's interest rate (although higher that Loan A) is guaranteed not to change during the 'fixed' period so at least it gives some peace of mind and may make it easier when budgeting for your expenses. While both said "25-year", they are not the same type of loan.
Ask the lender for a statement detailing all fees associated with the loan. Factors such as appraisal fees, set-up fees and other fees charged in addition to the interest rate can vary greatly from one lender to another.
Mortgage Broker
If you do not have the time or experience to "do it yourself," look for a qualified mortgage broker that can assist in finding the right mortgage for you. Ask friends and associates who have refinanced or purchased recently if they have a broker they can recommend. You'll want to find a broker who is energetic, flexible and knowledgeable about finance and loans and someone who has your best interests in mind. If you don't have a mortgage broker in mind we recommend Tammy & Marty Laframboise. Tammy & Marty have extensive experience in the mortgage business and are very approachable and professional. You can view their website at:
The Mortgage Planning Centre
Remember that even though you may have been a customer with your bank for many years you may not get the best deal from them when it comes to arranging a mortgage. Banks will generally only offer their own products while mortgage brokers can 'shop the market for you'. Often your mortgage broker will be able to get a better deal for you, even at your own bank, because they place large amounts of business with them. Whereas when you approach the bank yourself you are just one customer to them.
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Once you have found a property that you like now is the time to make an offer to purchase. Follow these suggestions (and your realtor's advice) so that the offer and subsequent purchase go as smooth as possible.
You will be asked for a down payment on the home you are purchasing. You can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the less your mortgage payments will be every month.
The Offer to Purchase must be a written offer and your realtor will have the appropriate forms that will need to be completed. As the buyer you will decide how much you want to pay for the home, what possession date you would like, how you will finance the purchase etc. It is advisable to make sure that you make your offer to purchase subject to certain conditions. Without any conditions then it would become a firm deal as soon as both parties have agreed and signed the offer. As a buyer this may not be in your interest. What happens if you cannot get the mortgage that you were hoping for, or perhaps there are major stuctural problems with the property that you are buying? Your realtor will be able to advise you on what conditions you need for your circumstances and how they should be worded.
At the time of making the offer you will also be required to submit a deposit with the offer to 'show good faith'. The amount of this deposit may vary but you should budget for around $10,000. This deposit and the offer is presented to the seller and their realtor. Once the offer has been negotiated backward and forward and a final agreement and signature is agreed the property is then referred to as 'conditionally sold'. At this time your deposit will be cashed and placed in the selling real estate brokerages trust account until such time that the deal completes and the lawyers call for the remaining funds or, where the conditions are not met, the deposit is refunded to the buyer and the seller places their property back on the market. Normally you will have approximately 7 days to meet the conditions of the offer. This may be to complete your mortgage application and make sure that the lender is willing to lend the money based on your personal circumstances and the basis of the property in question. Also, if you are having a property inspection or an inspection of condominium documents that this is completed and that you are happy with the results prior to the deadline for the conditions being met. Once you are satisfied with each condition being met you will be required to send a 'Notice of Waiver' to the seller and their realtor showing that you are willing to proceed. Once all conditions have been waived the deal is then firm and there is no backing out by either party. If either party does attempt to back out of the deal once it is firm the other party may have recourse to sue, and probably will.
Once the offer has become 'firm' the contract will be sent to both buyers and sellers lawyers so that the legal paperwork, transfer of title etc.can be completed and the monies paid to facilitate completion on the day of possession.
Prior to being called into the office by your lawyer to sign all the paperwork and pay over the remaining monies you should set up some property insurance and notify the utility companies of your possession date.
On the day of possession your Realtor will make sure that the keys to your new home are releasable and will meet you at the property at 12 noon. They will then do a 'walk through' of the property with you to ensure that everything is in order and then hand the keys over to you. Welcome to your new home!
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Sellers Articles
When selling your home, there are no guarantees that a buyer will simply walk through the front door and decide to buy your home. It is important that your property receives maximum exposure to attract a ready, willing and able buyer.
The appearance of your home, a buyer's first impression, and other considerations can also affect the sale of your home. Have you considered that other home prices in your neighborhood and the condition of your own home are important factors used to determine how you price your home? In many cases you will have to bring your home to the buyers attention. Effective marketing will help ensure your property gets the right exposure such that you get the best possible sale price for your home.
Below are some articles that you might find useful in the home selling process. Please feel free to click on one the links to read more.
Seller Articles
Most municipalities require that homeowners obtain a building permit before making modifications to their residence. Which modifications require a permit vary by municipality. Also, some municipalities are more vigilant than others in enforcing permit laws.
In order for the homeowner to receive a permit, the homeowner or his/her designee are required to file plans and pay fees to the municipality. In addition, the improvements are given a value. If they increase the value of the property, this may result in an increase in property taxes. Inspections are often required, and this means having to schedule and then wait for inspectors to approve the work to be done. This process can be time consuming and inconvenient in the short run. It is for this reason that some homeowners skip the permit process.
If a permit is needed and you fail to get one, the municipality may discover this at some time in the future and getting a permit retroactively can frequently be significantly more expensive and much more problematic than having obtained the permit before work commenced. If work is not done in accordance with municipial procedures or if the inspector is unable to determine if the work has been done properly, the homeowner could be required to open walls, tear up floors, so that the inspection may take place. In addition, by law, work not permitted where a permit was required must be disclosed to any prospective purchaser. This may cause the owner to discount their sale price or perform costly or time-consuming repairs before title can be transferred.
Save yourself the future hassle and loss of money by researching whether all work on the premises has been done according to code and with the proper permits. You may obtain these permits by going directly to Building & Safety in the municipality in which the property is located. Be aware that potential buyers of your property could write a condition into the offer to purchase stating that proof of permits must be provided by the seller prior to the offer becoming firm. If you do not have the permits in place it could result in a collapsed sale or a re-negotiation on the price.
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June and Fred Smith were diligent about getting their home ready for sale. They knew that their large rear deck was rotten so they replaced it before putting their home on the market.
The Smiths also knew that some of the wooden shakes on the roof were starting to bow and crack and that some of the shakes needed replacing. They had previously called in a reputable roofer several years ago who had quoted them $3500 to replace the damaged shakes. Other than the damaged shakes the roofer felt that the roof was in good condition for its age. The Smith's decided not to do the work to the roof as they felt it wasn't significant and would not put off buyers from wanting to buy the property.
The Smith's home was attractive, well-maintained and priced right for the market. It received an offer shortly after coming on the market.
But the buyers' property inspection report indicated that the roof was in serious condition and that the whole thing would need to be replaced at the cost of over $10,000.
First-Time Tip: If you get an alarming inspection report on a home you're buying or selling, don't panic. Until you see the whole picture clearly, you're not in a position to determine whether you have a major problem to deal with or not.
What happened to the Smiths is typical of what can happen over time with older homes. Roofs will deteriate over time. However regular mainatance can prolong the life of a roof.
The Smiths considered calling in other roofng experts to see if the work could be done for less. After studying the buyers' inspection report, the contractor's proposal and the buyers' offer to split the cost of the roofing work 50-50 with the sellers, the Smiths concluded that they had a fair deal.
The solution is not always this easy, especially when contractors can't agree. Keep in mind that there is an element of subjectivity involved in the inspection process. For example, two contractors might disagree on the remedy for a dry-rotted window: one calling for repair and the other for replacement.
Recently, one roofer recommended a total roof replacement for a cost of $12,000. A second roofer disagreed. His report said that the roof should last another five or six years if the owner did $1600 of maintenance work. Based on the two reports, the buyers and sellers were able to negotiate a satisfactory monetary solution to the problem for an amount that was between the two estimates.
It's problematic when inspectors are wrong. But it happens. Inspectors are only human. Here is another example: A home inspector looked at a house and issued a report condemning the furnace, which he said needed to be replaced.
The sellers called in a heating contractor who declared that the furnace was fit and that it did not need to be replaced.
The buyers were unsure about the furnace, given the difference of opinions. The seller called in a representative from the local gas company. The buyers knew that the gas company representative would have to shut the furnace down if it was dangerous. He found nothing wrong with the furnace, and the buyers were satisfied.
In Closing: Sometimes finding the right expert to give an opinion on a suspected house problem is the answer, but it is always good to get two opinions.
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CMA is real estate shorthand for "Comparative Market Analysis". A CMA is a report prepared by a real estate agent providing data comparing your property to similar properties in the marketplace.
The first thing an agent will need to do to provide you with a CMA is to inspect your property. Generally, this inspection won't be overly detailed (she or he is not going to climb on the roof to examine its condition), nor does the house need to be totally cleaned up and ready for an open house. It should be in such a condition that the agent will be able to make an accurate assessment of its condition and worth. If you plan to make changes before selling, inform the agent at this time.
The next step is for the agent to obtain data on comparable properties. This data is usually available through MLS (Multiple Listing System), but a qualified agent will also know of properties that are on the market or have sold without being part of the MLS. This will give the agent an idea how much your property is worth in the current market. Please note that the CMA is not an appraisal. An appraisal must be performed by a licensed appraiser.
The CMA process takes place before your home is listed for sale. This is a good assessment of what your house could potentially sell for. Your Realtor will also be able to make suggestions as to what improvements (if any) you could make prior to putting your home on the market. Many of the suggestions require minimal expense and effort, but could dramatically increase the chances of a quick sale and at the optimum price.
CMAs are not only for prospective sellers. Buyers should consider requesting a CMA for properties they are seriously looking at to determine whether the asking price is a true reflection of the current market. Owners who are upgrading or remodeling can benefit from a CMA when it's used to see if the intended changes will "over-improve" their property compared to others in the neighborhood.
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Ready to close the deal? Maybe not.
Sometimes unforeseeable issues arise just prior to closing the sale. Hopefully, with negotiation, most of these have a workable solution. Unfortunately, this is not always the case. But don't panic. Another buyer might still be found who is willing to accept the house as is.
Imagine that your prospective buyers are a couple with young children. They envision your unused attic as the perfect playroom for the kids but, before closing the deal, they request an inspection to see if it's safe and also if they will be able to install a skylight to provide natural light to the new space.
This inspection reveals that under the shingles that are in good condition is a roof that will only last another year or two. The prospective buyers immediately balk, not wanting to incur the time and cost of replacing the roof. Their plans were to move in and only have to spend time and money renovating the attic. The additional cost of the new roof, they say, is just too much.
At this point, you sit down with the prospective buyers and calmly discuss the situation and how it can be solved to the benefit of all. First, you agree to get another professional opinion on what really needs to be done. Inspectors are only human, and are not infallible. Once the extent of the damage is agreed upon, you can jointly decide what to do about it. While the buyers hadn't planned on that expense, you show them that instead of a limited roof life that they would get with most existing homes, they'll have a new worry-free roof that won't cost them in repairs for the next decade or so. Since the roof wasn't in as good shape as you had thought, you agree to lower the purchase price to help offset the cost of the new roof.
By negotiating calmly and looking at all possibilities, what could have been a "deal breaker" can be turned into a win-win situation for both the buying and selling parties. In other cases, the most workable agreement for both parties might be for the deal to be called off. The seller can always find another buyer and the buyer can always find another home.
To protect yourself against last minute "buyer's remorse," make sure the purchase contract anticipates and closes as many loopholes as possible after all known defects have been fully disclosed.
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