New or Resale ... You NEED A Buyer's Representative
Buyers should be aware of their options so they are better able to protect their positions in a transaction. The role of the Realtor has been undergoing tremendous change over the past several years. Prior to 1995, all Realtors worked for the Seller in a Real Estate transaction. A buyer can now choose to retain representation with a Licensed Realtor and receive the same legal relationship that Sellers have received for nearly 100 years.
A buyer who understands their options will typically want to select their Real Estate representative EARLY in the transaction in order to avoid potential conflicts of interest should they be making many calls to various Realtors (typically listing sales representatives representing the Seller) or if shopping New Home sites (representatives are not necessarily Realtors – thereby having no accountability to the Buyer through RECO* or REBBA**).
With the advent of the Internet, many Buyers are conducting tremendous research on their own before looking at homes or contacting a Realtor. It cannot be understated that part of the research conducted from a buyer’s perspective, is the careful selection of the Realtor to represent their interests in the acquisition of property. A skilled Buyers sales representative will add tremendous value to the buyer during the drafting of the contract, during negotiations, and overseeing the contract to completion. If you’re going to spend the next 25 years paying for your new home… shouldn’t you spend a few minutes finding the right person to help make it all happen?
We know your rights … do you?
You have the right to remain silent
Anything you say while un-represented could be used against you
You have the right to be REPRESENTED
If you choose NOT to be represented;
Then all Realtors will work on behalf of the Seller during negotiations.
To find out more, please feel free to contact me, or book a complimentary private consultation to discuss your Real Estate Goals. My services are guaranteed to ensure your complete satisfaction!
Go to the REAL ESTATE REPORTS link and then click on REAL ESTATE ARTICLES for the Buyer Agency Agreement 2006 Form for further review.
Eight Basic Elements of an Offer
1. Basic Details
This includes the address and legal description of the property, and the names of the vendor, purchaser and brokers involved.
Depending on the market conditions, your opinion of the value of the home and the information provided by your RE/MAX Associate, the price you offer may be different from the seller's asking price.
3. Chattel - Inclusions and Exclusions
Items within the home that will be included in the purchase price such as appliances, fixtures or decorations such as drapes or mirrors are referred to as chattel. Don't assume that anything will be left behind. If you want it, put it in writing.
The deposit shows your good faith and will be applied against the purchase of the home when the sale closes. Deposits are usually no more than 3-5% of the purchase price, but a larger deposit can show the vendor that you're serious. Your RE/MAX associate will advise you on the appropriate amount, and you may wish to stipulate that some interest be paid on it in the meantime.
These include the total price of your offer as well as the financing details. You may arrange your own financing or may ask to assume the seller's mortgage, especially if it has an attractive interest rate. There will also be an expiration date and time after which the offer is no longer valid.
These might make your offer subject to home inspection, to your obtaining financing or to your selling your property.
7. Closing or Possession Date
Generally, the date the title of the property is legally transferred and the transaction of funds is finalized between 30 and 90 days from the date of the offer. This is often a good negotiating point as vendors usually have a fixed date in mind.
8. Request for a Current Survey of the Property
If the vendor does not have one, you may wish to make one obtaining a land survey a condition of the closing. In most cases, the vendor will not pay for a new survey. As discussed earlier, you can ask the vendor to provide a "Declaration of Possession" or you could buy a "Title Insurance" policy instead. If however, you are planning to add to the house or build a garage, the best idea is to request a new survey - you'll likely need it to get your building permits.
It's a day filled with nervous anticipation. This is the day on which all of the legal and financial promises in the offer are met. It's the day when you get the keys and begin a new phase in your life. Your RE/MAX agent and your lawyer will give you all of the details on steps and timings. All of the small details will be taken care of ahead of time, so in most cases it will be just a day of waiting by the phone.
Also, remember that this is a hectic day for the seller, too! Very often it's moving day and they're trying to gather all of their belongings to leave as the purchaser is trying to move in.
In brief, here's what takes place before the actual closing day:
1. A copy of the offer will have been forwarded to the office of your lawyer. Your lawyer will have reviewed the conditions of the sale. You will have made your lawyer aware of how you, and any co-buyers, will be registered on the title of the property.
2. All of the conditions in the offer to purchase must be satisfied by the closing date. If one of the conditions in your offer was a house inspection, it should have been completed by the closing date, and you should be satisfied with the report.
3. All of your financing details will have been finalized and ready to fall into place on the closing date.
4. If the vendor did not have an up-to-date land survey, you'll have had one done. Your lender will insist on it.
5. Your lawyer will search the title of the property to ensure that you can purchase the home without any legal problems. Your lawyer will also make sure that tax payments have all been made and there are no liens on the home or the personal property the vendor has agreed to sell you as part of the deal.
6. You'll want to make sure that you've contacted all of the utility, cable, and phone companies to ensure an easy transition of service and billing.
7. Your lawyer will prepare a statement of adjustment. This confirms the selling price, adjustments, and the balance (less the deposit you provided with the offer). Your lending institution will draw up a certified cheque for your lawyer to hold in trust.
8. Additional settlement charges will have to be paid:
Your lawyer's fee and disbursements
Condo and co-op fees (Remember to ensure there is an adequate Reserve fund in place and that the condominium has a proper Technical Audit and Reserve Fund Study completed by competent professionals.)
Tax and utility adjustments; if they have been pre-paid, you'll have to pay the vendor for the portion of the service you assume
Land transfer tax; based on the price of the home, this fee ranges from 0.5% to 4% of the selling price
9. You'll want to make sure your homeowner's insurance policy will be in place to cover your new home and property once the deal is closed. Your lawyer will need a copy of the policy before closing.
What to expect on Moving Day
Saying good-bye to one neighbourhood and discovering a new one is an exciting adventure. But let's face it, at the end of your home-buying process you may find yourself exhausted. After all, the other obligations in your life have not paused.
What's more, now there's another cost -- moving. Whether you hire professionals or strong-arm friends into helping, be prepared for the cost of the move. Here are some suggestions on how to reduce the cost of your move, but let's first look at how to prepare for the big day.
You will have noticed that your possessions expand to fill the space allotted. Guess what, if you're moving into a larger home, you'll be gathering more stuff, so start out right.
Don't take it all. Before you pack it all into boxes and cart it to a new location, take a good look at everything and find out what you can live without. This is a great time to have a garage sale and what doesn't sell, you can give away to charity.
Have all of your change of address cards filled out months in advance. You'll want to notify friends, family, businesses, organizations you're a member of, etc. Have the cards ready to mail once the deal is closed. Redecorate before the move. Sometimes it isn't possible, but if you have the chance to work without the obstructions of furniture, you'll find that you can get twice the work done in half the time.
Put the utilities in your name. Hydro, water, gas are the first companies to call. But don't forget to coordinate your telephone and cable service. Of course, you'll want to let the companies servicing your old home know when to disconnect service there.
You'll want to ensure that each item you own is well packed to minimize damage during travel. Whether you're moving around the corner, across town or across the country, the moving process is always the same.
To Hire Movers or Not to Hire Movers?
If you hire movers to pack for you, they'll descend on your home with a crew of experienced packers who will seal, pad and itemize everything you own in a day or two.
During the move, you'll want to make sure you're insured while your belongings are in transition. Many moving companies also offer additional insurance.
On moving day, go through the house with the crew supervisor and have him take note of any special instructions. If there are items you will need first in your new home (like a crib) make sure they put it in the moving van last. The movers will also make note of the condition of your goods on a master list. It is your responsibility to make sure it's accurate.
After the van is unloaded and your goods are unpacked, inspect everything and make note of any damage. While movers do unpack, they don't put dishes or linens away.
If you are undertaking the packing process by yourself, it will take time. Pack well in advance, and take note of what you can really live without. You'll have items that need special attention and other items that need to be disassembled. Label each box in detail and, if you know where it will go in your new home, put the destination on the box.
Pack what you need most last!
Label each box carefully!
Designate a destination!
You'll also want to pack a box of essentials.
These are items you're likely to use once you arrive in your new home. Include items like:
toothbrushes and toothpaste
garbage bags (a lot of them!)
paper plates, cups and plastic utensils
hammer, screwdrivers, pliers
some light bulbs
snacks and drinks
Is a BRIDGE of the equity on their current home.
Must have a firm sale on their existing residence.
Can finance to a maximum (depending on lender) of 95% of sale price less existing financing.
Prime plus 2% - 5% - accruing per day.
Plus a set up fee - minimum $250.00.
No monthly payment usually required unless it runs longer than 60 days - total owing taken from closing proceeds.
Interim Financing - Creative Financing:
If there is no sale.
Availability depends on financing on current residence.
Can only finance up to 75% on principal residence: open mortgage or secured line of credit.
Probably have to increase mortgage on purchase, or put a secured line of credit behind the mortgage.
Cost can be expensive - higher rates and fees.
BE PROACTIVE - GET NUMBERS WELL IN ADVANCE OF CLOSING- NUMBERS SUBJECT TO CHANGE AND SHOULD BE VERIFIED BY YOUR LENDER- Compliments of Laurie Furness
TYPES OF HOUSES
TYPES OF HOUSES
Condominium – a form of ownership in which the homeowner purchases and owns a unit of housing and shares financial responsibility for common areas. (In British Columbia, these are also called “stratus”.)
Detached/Freehold – A property where you own both the property and the land on which it is built.
Townhouse – an attached home that is not a condominium.
What is a Mortgage?
The purchase of a home is one of the biggest decisions and significant financial investments a consumer makes. It is extremely important that you do your research and educate yourself on key mortgage terms in order to make an informed decision about what mortgage product is best for you.
Different consumers are at different stages in their lives. They have different mortgage needs and there are many mortgage products to choose from. The best result will occur when you work with a mortgage professional who can offer sound, professional advice and a mortgage solution that matches your needs and circumstances. Above all, you need to be comfortable with your mortgage choice.
It is important to obtain a pre-approval for the amount of money you can borrow from a lender and avoid looking at homes that may be out of your price range. The pre-approval process is usually guaranteed for a period of 90 days. For additional security for the lender, you may want to have a co-signer – a party who signs the mortgage documents along with the borrower, but who does not have any interest in the ownership of the property.
WHAT IS A MORTGAGE?
Few people can come up with the entire amount of money required to pay for the cost of a home. A mortgage is a loan of the money most people require to finance the purchase their home. A mortgage allows individuals to buy property without paying the full value all at once. The mortgagor is the person borrowing money, the mortgagee is the lender of the money.
When negotiating the amount of your mortgage, you should be aware that you will most likely be required to provide a down payment which is the money you put towards the purchase price of your home. The amount of your mortgage is determined by the purchase price of the home less the amount of your down payment. As with all loans, a mortgage must be repaid to the borrower with interest. There are different types of repayment methods which make up the different kinds of mortgages available.
Like all loans, regular payments made over time go towards paying down the mortgage. These payments are made up of two parts – one part goes towards paying the principal (the amount of money borrowed) and other part goes towards paying the interest (the fee charged for borrowing the money.)
The more money you can put down, the less you will have to borrow, and the less interest you will have to pay over the length of the mortgage.
If you have a down payment equivalent to 20% or more of the purchase price, you will have what is called a conventional mortgage.
If your down payment is less than 20% of the purchase price, you will have what is called a high ratio mortgage. A high ratio mortgage must be insured to protect the lender. This insurance is called mortgage default insurance. It protects the lender in case the borrower isn’t able to repay the loan.
Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and AIG United Guaranty offer assistance to first-time home buyers who do not have a lot of disposable funds for a down payment. Ask your mortgage professional for more details.
Term & Type of Mortgage
TERM OF MORTGAGE
The term of a mortgage is the length of time a lender will loan mortgage funds to a borrower. This duration can be from six months to ten years, two to five years being the most common. Generally, the shorter the duration of a mortgage term, the lower the interest rate, and the less it costs to borrow the money. At the end of each term, you will either pay off the balance owing or renegotiate the mortgage for another term until the entire mortgage is paid back.
Short term agreements or mortgage contracts are usually for two years or less. Short term mortgages offer a lower cost of borrowing (interest rate) than a longer term. People who believe that interest rates are currently higher than they will be in the future generally choose a short term mortgage. They anticipate that interest rates will be lower at the time of renewal.
Long term agreements are generally for three years or more. Long term mortgages cost a bit more than short term mortgages, so the interest rate will be higher. A higher interest rate appeals to borrowers who value the stability and predictability of fixed expenses over a set period of time. A stable mortgage payment is easier to budget and offers peace of mind.
It can take a long time to completely pay off your mortgage – usually from 15 to 25 years. The process of fully paying off your loan by installments of principal and interest over a definite period of time is called Amortization. In recent years, mortgage lenders and insurers have offered consumers longer amortization periods of 30, 35 and 40 years.
There are many ways of repaying your mortgage. Some people find comfort in a pre-determined fixed rate – it helps them budget and plan for other things in their life. Some people desire more flexibility in their repayment – their circumstances might include fluctuations in their cash flow, and they may want to make larger payments whenever possible. Different kinds of mortgages appeal to the different types of borrowers. Your mortgage professional can help you decide what is best for you.
If you want to make large payments on your mortgage or pay off the entire mortgage without penalty, then an open mortgage is for you. An open mortgage offers maximum flexibility. These homeowners are willing to accept some fluctuation in the interest rate for the flexibility of paying off the entire mortgage before the term is complete.
It is important to keep in mind that most regular mortgages will allow homeowners to make lump sum payments of up to 20% of the entire mortgage once a year without penalty. These are often called privilege payments. That payment goes directly towards paying down the principal of the amount borrowed. You may therefore not need an open mortgage, with higher interest rates, to make additional payments.
A closed mortgage is a commitment with a pre-determined interest rate, over a pre-determined period of time. A buyer who uses a closed mortgage will likely have to pay the lender a penalty if the loan is fully paid before the end of the closed term.
With a closed mortgage, the interest rate will not change over the length of the term and the length of the term will not change. Payment amounts are predictable and the principal amount owing at the end of the term is predictable.
Closed mortgages generally have lower interest rates than open mortgages. Most closed mortgages will allow the homeowner to make a payment up to 20% of the entire mortgage once a year without penalty. This payment goes directly toward paying down the principal of the amount owing.
A convertible mortgage is an agreement made at the beginning of a term that allows homeowners to change the type of mortgage they hold during its term. If a homeowner wants to start with an open mortgage and then lock into a closed mortgage, a convertible mortgage is the right choice. It offers lower rates than an open mortgage, and has the option of switching to a closed term.
Home Closing Terms
HOME CLOSING TERMS
When you and the seller come to an agreement on the price to be paid for the house, you must provide a deposit. A deposit is an advance payment of part of your down payment and is paid at the time of signing the Agreement of Purchase of Sale.
The Agreement of Sale is a legal document the buyer and seller approve detailing the price & terms of the transaction.
When negotiating the cost of the house you want to purchase, it is important to keep in mind that you will also be required to pay property tax. Property tax is paid on privately owned property and is usually paid semi-annually or monthly. The amount is based on local tax rates and assessed property value.
Other than the deposit and down payment, you should keep in mind that you will likely also be paying for a home inspection – an examination of the structure and mechanical systems to determine a home’s safety and makes the potential homebuyer aware of any repairs that may be needed.
Considering insurance on your mortgage
Talk to your mortgage professional about insurance protection against your mortgage in case of death, accident or illness. There are many insurance options to choose from.
Mortgage Loan Insurance
Mortgage loan insurance enables home buyers to purchase a home with as little as 5% down payment. The amount of the insurance premium depends on the amount borrowed from the lender. Premiums can be paid in a lump sum or be added to your mortgage and included in your monthly mortgage payment.
Title Insurance provides the purchaser with coverage against title risks inherent in real estate transactions (including title fraud) for as long as you own your home.
Mortgage Life Insurance (also known as creditor life insurance)
Mortgage Life Insurance is designed to protect your family from the financial burden of paying off your mortgage in the event that something should happen to you. It is a life insurance policy that pays the balance of your mortgage to the lending institution if a person listed on the mortgage is unable to make mortgage payments.
Getting Ready to See a Lender
What Lenders Look For
Lenders are looking at the risk factors from two points. First, will you be able to make your scheduled monthly payments? Second, if you default (don't make your payments) can the financial institution get enough money from the sale of the house to repay the loan?
You'll be asked about your net worth, the difference between the value of everything you own and the amount you owe. Lenders take into account your bank balance, any types of investments, other real estate, cars and boats, other loans, credit card balances and many other things. Remember to be as specific as possible. So if you have a coin, significant stamp or art collection, have it appraised!
Your credit rating is your history of loan repayment and will be used by lenders as an indicator of your ability to repay your mortgage. It covers how you've managed past debts or if you've filed for bankruptcy. You'll be asked to sign a form allowing your financial institution to gather information from your employer, creditors and credit rating agencies.
If you've had credit problems, it may be a good idea to check and clean them up before you apply for a mortgage. You can check your own credit rating by contacting a company that compiles the information. Simply send a note asking for your credit rating along with photocopies of two pieces of ID with your current address, plus a photocopy of a utility bill or credit card invoice. The process takes about two weeks and you'll get a good idea of how you'll be evaluated by the banks.)
If there is an outstanding debt, contact the creditor and resolve it. If you notice an error, report it immediately in writing and get it resolved.
Although your credit may not be perfect, it does not mean you are unable to purchase a home. Make sure you talk to a mortgage broker about your situation before you give up on your dream. Even if you can't buy now, your mortgage broker can help you re-establish your credit so that one day you will be able to live your dream of owning a home.
Getting Ready to See Your Lender
Remember that impressions count. The best way to make a good impression is be prepared. Gather the following information to submit to your lender:
Current statement of earnings of all purchasers
-Updated bank account balance(s)
-Current credit card statements
-Car loan or lease information
Other debt information
All asset information:
-vacation property (trailer, timeshare)
-collectibles (they must be professionally appraised)
Projected down payment information
Names, addresses and telephone numbers of:
-Chequing/savings account bank branch and contact
LAST DETAILS YOU’LL NEED TO CHECK
You will be required to provide the following list of information to your mortgage professional to finalize the mortgage:
Confirmation of income or employment earnings
Current bank information
Evidence of your down payment
List of assets
List of liabilities
Contact information for your lawyer
Copy of the Purchase Agreement
Copy of the MLS listing
Contract and building plans if your home is being built
Paying Off Your Mortgage Sooner
PAYING OFF YOUR MORTGAGE SOONER
How to shorten the length of your mortgage and minimize the cost of borrowing
There are many benefits to shortening your mortgage, and thereby paying less for the cost of borrowing the money. You can free up money for other things in your life – the education of your children, money for your retirement or an emergency fund.
Make more payments. Increase the frequency of your payments. Ask your mortgage professional to show you how you’ll save by paying biweekly or weekly, instead of monthly. Paying more frequently can save you hundreds of dollars in annual interest costs.
Make the largest down payment you can afford. This will substantially reduce the length of time to it takes you to repay the mortgage. If interest rates decrease when it is time to renew your mortgage, consider keeping your payments the same and applying more money to the principal.
Make prepayments or anniversary payments. Most mortgages will allow you to make payments up to 20% of the entire mortgage once a year. This money is applied directly to the principal, saving you money in annual interest costs. Consider using your tax refund or annual bonus for this type of payment.
Make lump sum payments whenever your financial circumstances permit.
Double your payments whenever possible.
Choose a shorter length of time to repay your loan. Ask your mortgage professional to show you how selecting a 20 year amortization period instead of a 25 year amortization period will affect your payments and interest costs. Consider choosing 15 years to repay if possible. Your mortgage payments will be higher but you’ll pay substantially less interest over the course of the loan.
If interest rates have dropped when you renegotiate your next term, keep your mortgage payments the same. More money will go directly to paying down the principal.
An interest rate is the amount of interest charged on a monthly loan payment, expressed as a percentage. It is based either on the rate the Bank of Canada charges to lend money to money lenders or on bond yields. Interest rates are generally lower if you borrow money for a short period of time and higher if you borrow the money for a longer period of time.
Fixed Rate Mortgage
When you agree to a fixed rate mortgage, your interest rate will never change throughout the term of your mortgage. There are no surprises as you’ll always know exactly how much your payments will be and how much of your mortgage will be paid off at the end of your term.
Variable Rate Mortgage
When you agree to a fluctuating interest rate for the length of the term, then you have a variable rate mortgage. Interest rates fluctuate with the bank’s prime lending rate, and may vary from month to month. When interest rates change, your payment amount remains the same, however the amount that is applied to the principal will change. For example, if interest rates drop, more or your mortgage payment is applied to the principal balance owing. The variable rate mortgage is a good option for homeowners who believe that interest rates are currently high and will drop.
Determing Your Needs
So, you've decided you want to own a home. It's a popular dream. For most people, with the right planning, it can become reality. But there is a lot to know before you begin moving. We’ll take you through the planning process step-by-step, to determine exactly the kind of home that's perfect for you. We'll ask you some questions and we've provided worksheets that you can print out and use with your RE/MAX agent.
What Does Your Future Lifestyle Hold?
How many bedrooms will you one day require? Your preschoolers will be teens some day. Are you planning to stay in your home that long? Perhaps your teens are ready to move out on their own. What will you do with all the extra space? When you're thinking about accommodating your family's needs, think of things like parking. How many cars will require space? You'll also want to consider proximity to -- and the reputation of -- schools in the area.
How is your work situation?
These days people tend to change jobs frequently, and sometimes the best way to get a promotion is to move to another company.
If you might be transferred, will you be able to sell quickly? Keeping work in mind, how long do you want to spend commuting? Do you drive or rely on public transportation?
As you can see, you will want to give some thought to how long you intend to stay in your home. It may be difficult to answer before you've even found your home, but if it's your first home give some thought to the resale value when it is time to upgrade. On the other hand, if you're planning to stay in your home for a long time, consider your future needs and purchase a home that will accommodate them.
Do You Live a Maintenance-Averse Lifestyle?
When you're looking at homes, consider the advantages of brick over a wood frame house when it comes to painting. Take a look at the garden. If you don't enjoy cutting grass, then an expansive lawn may not fit into your lifestyle. You can also evaluate the possibility of future maintenance and repairs based on the age of the house. If you don't like the idea of major renovations, a newer home may be your best option.
Is Your Lifestyle More Geared to a Fixer-Upper Fantasy?
Many first time buyers have them. It goes something like this: You find a big home in a great neighbourhood that's well below what you'd expect to pay for that house in that neighbourhood. You see a couple of coats of paint, new broadloom, a few repairs and voilà, a dream home without the nightmare price.
Before you jump headlong into this 'once-in-a-lifetime opportunity' consider how you'll do all of the work. Will it be weeknights after a long day at the office, or will you hire someone? Are you ready to live in a dusty mess as you renovate? Do a realistic assessment of the job at hand and be sure to have the house inspected. The last thing you want is a bargain home that turns into a money pit. You're far better to find a house that costs a little more each month but doesn't need much work than to buy a fixer-upper that eats up hundreds of dollars each month.
For example, lets say you could buy a really nice house with minimal work required for $10,000 more than a fixer upper. At today's mortgage rates, assuming you could stay within your monthly budget, that really nice home would cost you only about $65 per month more than the fixer-upper. If you buy the fixer-upper, you'll be spending a lot more than $65 each month to whip it into shape, as well as the strain your family will go through living in an unfinished home.