Before Writing an Offer

by on June 5, 2015 with No Comments

Home Purchase Expenses

There are many costs that homebuyers incur, especially upon purchasing your first home. Some of the expenses related to buying a home are one-time costs, while others are continuing costs.

Your largest outlay is the down payment. As a first time buyer, this would likely represent only 5 – 10% of the purchase price. Be prepared to pay for additional costs, such as:

  • Legal Fees & Disbursements
  • GST and PST (if applicable)
  • Land Transfer Tax
  • Property taxes and adjustments (reimbursed to the vendor)
  • Interest on interim financing, if any
  • Utility Payments
  • Strata or Condominium Fees
  • Estoppel certificate fee
  • Survey Fee
  • Home Inspection Fee
  • Water quality and quantity certificate
  • Appraisal Fee
  • Mortgage broker’s fee (if applicable)
  • Mortgage Loan Insurance Premium (if less than 20% down)
  • Mortgage Loan Insurance Application Fee (if less than 20% down)
  • Moving Expenses
  • Renovations and repairs
  • Furniture, paint, carpeting, window coverings, etc.
  • Service and Utility Hook-up Fees
  • Property/Condominium Insurance
  • Mortgage Application Fee
  • Deed and/or Mortgage Registration Fee

Additionally, once you have purchased your home, you will incur regular expenses on a monthly, quarterly or yearly basis. Some of these costs include:

  • Mortgage Payment
  • Water and/or Sewer Payments
  • Electricity and Gas Services
  • Cable, Telephone and Internet Services
  • Property Taxes
  • Strata or Condo Fees
  • Repair/Maintenance Expenses
  • Homeowner’s Insurance

How to Make an Offer

When you have found a home you are interested in buying, your RE/MAX Sales Associate will walk you through the process of drafting an offer to purchase. Your sales associate will communicate the offer to the seller or the seller’s real estate agent for you. Some properties are in demand and you will not be the only interested party making an offer. Your RE/MAX Sales Associate will assist you in generating an offer that is reasonable and protects your interests using specified terms and conditions.

An offer can be drafted with or without conditions; an offer without conditions is known as a firm offer and one with conditions is known as a conditional offer. A conditional offer represents the party with the placement of certain conditions on the purchase. Some of these conditions could be “subject to financing approval”, “subject to the strata council allowing pets”, “subject to the buyer’s house selling”, “subject to an approved home inspection”, among many others.

The seller may accept your initial offer, reject your offer or present a counter-offer. The counter-offer may differ from your original offer in respect to price, conditions, the closing date or any other items. Offers can be countered back and forth between the parties until one of you accepts or rejects, ending the negotiations.

There are many components of an offer that you should be aware of and understand. Your RE/MAX Sales Associate will answer your questions and explain the entire process to you so that you are comfortable with the steps involved.

Terms

An offer includes certain “terms”, which specify the total price offered and how the financing will be arranged, such as if you will arrange your own with a financial institution or mortgage broker or if you wish to take over the seller’s mortgage (assumability).

Inclusions and Exclusions

These are specifications within the offer that detail the items to be included or excluded from the purchase of the property. Typical inclusions are appliances, window coverings, fixtures and decorative pieces.

Deposit

A deposit is provided from the buyer to the seller as a token of the buyer’s assurance and intention to buy the property involved. The deposit is applied against the purchase price of the home once the sale has closed. Your RE/MAX Sales Associate can assist you in proposing a certain and appropriate amount for the deposit.

Conditions

Items that are usually put in place to protect a party’s interests upon selling or buying the property and refer to things that must occur or be in place before the sale closes.

Closing Date

This is usually the date that the legal ownership of the property transfers from the seller to the buyer and, unless otherwise noted, when the funds for the purchase are concluded.

Possession Date

When the buyer takes possession as specified in contract oif purchase sale.

Purchase Price

This is the amount that the buyer is offering to pay for the property. The price is usually dependent on market conditions and may differ from the seller’s current asking price.

Legal Needs

Purchasing a home involves a lot of paperwork, most of which are contractual documents that will legally bind you to the numerous terms and conditions. For this reason it is important to have a good lawyer or notary public acting for you. Someone to protect your rights and interests.

Finding a Lawyer/Notary Public

If you don’t have a lawyer or notary public, you can look for a referral from friends, family or business acquaintances. Look for someone with real estate experience and discuss their fee scales. Your RE/MAX Sales Associate can help you locate a reliable professional, whom you feel comfortable working with.

Lawyer’s/Notary Public’s Function

You will need a lawyer or notary public to process your purchase and ensure the terms are met:

the correct property is purchased
transfered title to your name
ensureed title is free and clear of prior owners encumbrances
your mortgage is registered properly on title
The legal process varies from province to province within Canada. Specifically, you will need to consult with your chosen legal professional and he/she will explain the process and the steps that need to be completed before you get the keys to your new home.

Your lawyer/notary public will prepare a “Statement of Adjustments” outlining all the financial aspects of your sale.

Legal Fees and Disbursements

The difference between legal fees and disbursements is analogous to the parts and labour you pay when fixing your car. Your RE/MAX Sales Associate can help you locate a reliable professional, whom you feel comfortable working with.

Home Inspection

A home inspection is an objective visual examination of a home’s structure and systems.

Why get a home inspection?

There are a number of reasons why RE/MAX recommends a home inspection including:

To ensure you are not surprised by major defects
So you can be advised about the various elements of the home including – heating and cooling systems, structure, electrical and plumbing
To learn about how the mechanical systems work and need to be maintained
Most homeowners are not expert in the numerous components of house construction
A third party can be objective as there is no emotional attachment

Who should you hire?

Home inspectors are often referred by family or friends. Your RE/MAX agent can also provide you with a list of inspectors. Look for one that is trained and certified by a national organization such as Canadian Association of Home Inspectors (CAHI) or National Institute of Building Inspectors (NIBI) and who has errors and omissions insurance. Do not hire someone who will do any suggested work due to the conflict of interest.

When should you call?

Order the inspection after your offer has been accepted. The contact will stipulate the length of time you have to complete the inspection.

What is involved?

The home inspection will determine the structural and mechanical soundness of the home. Your home inspector can identify existing and potential problem areas, suggest possible solutions and provide estimates for the cost of the work required. You will receive a report outlining the inspection findings. You should accompany the home inspector during the inspection or arrange to meet them at the home so they can walk you through the report. If as a result of the inspection, you have further concerns, have a specialist in that area conduct a more extensive examination.

What does it cost?

Costs vary depending on a number of factors including:

Size and location of the home, features, age, and services required. Additional services may include radon, septic and well testing. Your RE/MAX agent can assist you in obtaining a quote from a potential inspector before you enlist his/her services.

Mortgage Information

Mortgage lending is a highly competitive field. Information on mortgage rates, which can change daily, is available in local newspapers, through mortgage brokers, from individual lenders and of course through conventional financial institutions. When you are shopping for a loan, interest rates tell just part of the story. You will also need to study the various fees lenders charge and many mortgages today are almost custom-tailored to individual needs with many options available.

Ask your Agent

Your RE/MAX real estate professional can recommend lenders to check with prior to beginning any serious house hunting so you will know exactly what you can afford.

First Time Home Buyers Guide

by on June 4, 2015 with No Comments

The Benefits of Home Ownership

Pride of Home Ownership
Pride of home ownership is the number one reason why Canadians desire their own home. There is no landlord looking over your shoulder. You are able to make home improvements knowing that any appreciation that results, will be to your benefit. Home ownership gives you and your family a sense of stability and security. It’s making an investment in your future.

Appreciation
In Canada, especially in the last few years, homes have appreciated considerably and in doing so have added substantially to owners net worth. Unlike stocks and bonds, you get to live in your real estate investment. Also, in Canada your principal residence is exempt from capital gains taxes.

Mortgage Reduction Builds Equity
Each month, part of your monthly payment is applied to the principal balance of your home loan, which builds your equity. You can borrow against a home’s equity for a variety of reasons such as home improvement, sending your kids to university or college, or starting a new business. Why pay-off your landlord’s property when you can own your own?

Homeowners accumulate wealth for the future while enjoying the benefits of a shelter that they have can use, improve and sell. Their home is a safe haven for investment.

Are You Ready to Buy a Home?

First – do you have the financial resources? You should have five percent of the purchase price of a home for the down payment, but ideally even more. Are there other priorities in your life e.g. starting a new business, which require your savings? If not, buying a home should be on your radar.

Second – do you expect to stay in your new home for some time? Moving can be expensive and you will want to build some equity before having to relocate. Your job and home life should be stable.

What Can You Afford?

If you haven’t already gone through the mortgage pre-qualification process, you will need to meet with a lender or mortgage broker. They will establish how much of a mortgage you will qualify for. Mortgage rates vary considerably and it is paramount that you shop around for the best rate, terms and options.

Each of our property listings had a built-in Mortgage Calculator “tab” to determine it’s affordability for you.

Note:If you are buying a condo, the amount of your monthly assessment has a direct impact on how much you can afford to spend on your mortgage.

First time homebuyers may want to take advantage of the federal government’s Home Buyers’ Plan. Under this plan, you may use up to $25,000 of your RRSP towards the purchase of a home. The money is tax-free as long as you pay it back in the next 15 years. Ask your RE/MAX Sales Associate for details.

Questions To Ask When Assessing Home Features

  • Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?
  • Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs?
  • Do you plan to have children? Downtown or suburbs? Proximity to recreation or work.
  • Do you need a substantial backyard? Pets?
  • Is there adequate storage space?
  • Will any remodeling be required to make the home move-in ready for you?
  • What service providers (cable, Internet, telephone, Satelite) are available in the area, and is the house completely wired for each? Can you hear me now – how good is the cell phone reception?
  • How much are the yearly property taxes?
  • How much do utilities run each month? Does the house use gas or electric for the furnace, water heater, and appliances?
  • How old are the major appliances, and which are included with the house?
  • Have there been any major repairs to the house, and if so, when were they completed? For example, how old is the roof? Has water ever damaged the basement or foundation?
  • Ever had problems with insects, such as termites and spiders, or rodents?
  • Older homes need to be carefully examined – Windows may need caulking or new sashes, bathroom tiles may need grouting, home may need rewiring (planning on a hot tub or sauna?), a new hot water heater, or a new furnace.

Location, Location, Location

  • How far will you be commuting and what is the traffic like? Factor in cost of fuel.
  • Where will your children attend school and how will they commute?
  • Are there recreational facilities and parks close by?
  • Are you close to family and friends?
  • Is safety or high crime an issue?
  • Is the property close to an obstacle or negative influence? (i.e. an apartment building, shopping centre, school, radio tower, power lines, LRT or railroad track, highway, airport or commercial project).
  • Access to schools, work, recreation, shopping centres, public transportation, cultural attractions, libraries, churches and hospitals
  • Adjacent undeveloped land – what is proposed for this or other green space?
  • Heavy traffic can be noise nuisance and hazard for children
  • Distance from the unit to amenities, parking, walkways, roads, public transit
  • Does the neighborhood reflect positively on the value of the condo and your lifestyle choice?
  • Does this neighborhood, for any reason, have a poor reputation?
  • Is the future economic climate for the area good? Are businesses moving in? Is there government investment?
  • Are people moving in or out of the neighborhood? What is their age, income level, family size?
  • Are there plans for this neighborhood that you may be unaware of (i.e. a future highway, a commercial development or a new housing development) that will provide competition on resale?

Noise and Privacy

  • Proximity to highways, driveways, parking lots, playgrounds, trains.
  • Proximity to elevators, garbage disposal, fire exits, heating and air conditioners.
  • How well is the building soundproofed.
  • Visit at different times/weekends to check noise levels and activity.

Working With a Real Estate Agents

by on May 4, 2015 with No Comments

Can I use an agent for a new home?

Yes, however buyers should be aware of the differences inherent in working with sales agents who are employed by the developer, rather than traditional real estate agents.

Builders commonly require that an outside agent be present, and sign in, the first time a prospective purchaser visits a site before payment of commission even is discussed. At times when buyers use an advertisement to find the development themselves first, builders can refuse to pay any commission regardless of how helpful an agent may become later in the process. It is advisable to call the development first and inquire about their policy on compensating real estate agents if you are using one.

How do I find a real estate agent?

Getting a recommendation from a friend or work colleague is an excellent way to find a good agent. Be sure to ask if they would use the agent again. You also can call the managers of reputable real estate firms and ask them for recommendations of agents who have worked in your neighborhood. In any case, whether you are a buyer or a seller, you should interview at least three agents to give yourself a choice. A good agent typically works full-time and has several years of experience. If you are a seller, you should expect to review a comparative market analysis, which includes recent home sale prices in your area, when you talk to a prospective agent.

What about a buyer’s agent?

In many states, it’s now common for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. More and more buyers are going a step further, hiring and paying for their own agent, referred to as buyers brokers.

How do you find a good agent?

Getting a recommendation from a friend or work colleague is an excellent way to find a good agent, whether you are a buyer or a seller. Be sure to ask if they would use the agent again. You also can call the managers of reputable real estate firms and ask them for recommendations of agents who have worked in your neighborhood.
A good agent typically works full-time and has several years of experience at minimum. If you are a buyer, you don’t usually pay for your agent’s services (in the form of a commission, or percentage of the sales price of the home). All agents in a transaction usually are paid by the seller from the sales proceeds. In many states, this means that your agent legally is acting as a subagent of the seller. But in some states, it’s legal for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. You also can hire and pay for your own agent, known as buyer’s brokers, whose legal obligation is exclusively to you. If you are a seller, you should interview at least three agents, all of whom should make a sales presentation including a comparative market analysis of local home prices in your area. The best choice isn’t always the agent with the highest asking price for your home. Be sure to evaluate all aspects of the agent’s marketing plan and how well you think you can work with the individual.

How much does my real estate agent need to know?

Real estate agents would say that the more you tell them, the better they can negotiate on your behalf. However, the degree of trust you have with an agent may depend upon their legal obligation. Agents working for buyers have three possible choices: They can represent the buyer exclusively, called single agency, or represent the seller exclusively, called sub- agency, or represent both the buyer and seller in a dual-agency situation. Some states require agents to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types:

  • In a traditional relationship, real estate agents and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub- broker, who brings the ready, willing and able buyer to the table.
  • Dual agency exists if two agents working for the same broker represent the buyer and seller in a transaction. A potential conflict of interest is created if the listing agent has advance knowledge of another buyer’s offer. Therefore, the law states that a dual agent shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, without express written permission.
  • A buyer also can hire his or her own agent who will represent the buyer’s interests exclusively. A buyer’s agent usually must be paid out of the buyer’s own pocket but the buyer can trust them with financial information, knowing it will not be transmitted to the other broker and ultimately to the seller.

6 Mistakes Home Buyers Make

by on May 4, 2015 with No Comments

Mistake #1.  Not Getting Pre-Qualified for a Mortgage

Before looking for your next home take the time to get pre-qualified by the bank or mortgage broker you choose.  This can save you hours of searching for homes in the wrong price range or worse, purchasing a home and then finding out you don’t qualify for financing.  Pre-qualifying gives you peace of mind, helps narrow your search criteria and most importantly, gives your RE/MAX agent a negotiating edge by being able to alleviate the sellers concern over financing. The latter is especially important should a competing offer surface.

Mistake #2.  Not Shopping For Mortgage Terms

Rates are negotiable! Banks will sharpen their pencils to get your business especially if you have a good credit rating and bring other business to them e.g. RRSP’s, general account, savings etc. Posted rates should viewed as a starting point. You need to know what the best rate is and this is usually done by get competitive quotes. Also, ask whether the bank will cover appraisal fees, and about buy-out fees, penalties, payment options, portability etc.  The time spent can save you thousands of dollars over the life of the mortgage.

Mistake #3.  Not Getting Professional Inspections

Nobody wants to purchase a home only to find out later there are defects, latent or otherwise.  Ensure you obtain inspections where needed e.g. home inspection, structural engineer, insect, radon etc.  If the inspection identifies deficiencies you may be able to negotiate the purchase price to cover required repairs or make your satisfaction of the inspection subject to the homeowner remedying the problem. Your RE/MAX agent can advise you on inspections you should consider.

Mistake #4.  Not Using A Professional Real Estate Agent.

Your RE/MAX agent can help you make a purchase with the least amount of problems.  He or she can ensure the price you pay is market value.  They can offer expert advice on what to look for, conditions to include, negotiation strategy etc. After all, they work for you.

Mistake #5.  Buying First Before Selling

If price is important you should always sell your present home before buying another.  It has the advantage in letting you know exactly how much money you will have available for your next purchase.  Selling your home first allows you to place fewer conditions on your purchase which makes your offer more attractive to a seller.  They often will demand more money to take a “subject to” offer which takes their home off the market.  The other advantage is if you find a terrific house, chances are others will also find it attractive and you stand to lose it if you can’t make an unconditional offer.

Mistake #6. Not Knowing The Full Cost Of Home Buying

Know all the costs associated with your purchase.  Consider the following costs:   legal fees, transfer tax, property taxes, new home landscaping, fencing, appliances, window coverings.