Tips For First Time Home Buyers

Tips For First Time Home Buyers

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May 2014,

Five Great Tips if you are Looking to Buy for the First Time:

Buying your first home can be an exciting yet stressful experience. It is imperative that you are informed along the way to ensure a smooth transition to home ownership. Here are the top five things to consider when buying your first home courtesy of an article written by Mark Weisleder, a real estate lawyer in the city of Toronto who writes articles published in the Toronto Star.

 

1)      What can you afford?

 

The first step is to sit down with a mortgage broker who can help you by looking at your credit score to determine what steps you can take to raise your score. If you plan to shop around using different mortgage brokers I would suggest pulling your own credit score from one of the online websites to eliminate having your credit pulled every time you sit down with a new broker. The mortgage broker will then look at how much you can afford. A general rule of thumb is 30% of your gross monthly income should be used to pay for your mortgage, insurance and property taxes.

 

2)      Narrow your Priorities

 

You need to determine what is the most important to you in your first home. Is it the size, or location? Condo or freehold? If a condo, are you prepared for the monthly common elements fee that is in addition to your mortgage payment? Other factors such as proximity to schools, entertainment, daycare, your job all need to be considered. It’s always a good idea to walk the neighborhoods you are interested in.

 

3)      Conduct a detailed home inspection

 

Do your research in employing the services of a professional home inspector. There are different levels of inspections available such as checking for mould, termites, infra-red scanners that can check insulation levels or moisture problems as well as inspections of the homes drainage system. Not all inspectors offer these services and the ones that do may charge more for a particular inspection. At the end of the day the extra cost may save you money in the long run as problems can be found and can be very costly, just watch an episode of “Holmes Inspection” for the proof.

 

4)      Ask the seller hard questions

 

This is where your realtor can be a huge asset. You want to ask questions like have they had any basement flooding problems, mould or roof leaks or have they had any insurance claims since they have owned the home. The sellers are required to respond truthfully and if there is any answers that seem suspicious you should discuss further and either adjust your purchase offer or simply walk away.

 

5)      Know your options for after-sale warranty protection

 

There are now many products that are available for buyers that will provide warranty protection on your homes heating, air conditioning, electrical, plumbing and major appliances. Most sellers will not give any warranty after closing so these warranty products can provide peace of mind to avoid any costly repair bills after closing.

Renovations That Build Equity

Renovations That Build Equity

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What kind of improvements should I do to add equity to my home?

The first improvement I would recommend is upgrading your  kitchen . The kitchen is the heart of the home where families gather and spend most of their time.  Some ideas:  new counter tops (engineered stone or granite), new hardware on the cabinets and even replacing the old faucet with a new one. To take things a step further, opening up as much space as possible by knocking down a wall to create the open concept that everyone is after.

The next value adding reno is the  bathroom . No one wants to use an old toilet that doesn’t even flush properly. The vanity should permit lots of space without compromising the overall size of the bathroom. Double sinks are always in demand and much like the kitchen, replace tired faucets with new ones to update the look and feel. If your bathtub is old and dated, you may want to consider an estimate to have it re-glazed. By re-glazing instead of buying a new tub, you may save some money while still achieving the updated look that you were after. Lastly, try to add as much light as possible. Natural light is the best.

In today’s market, value can be attached to  energy efficient homes. Your home acts like a system with many components adding to the overall energy efficiency. In Canada, the  EnerGuide Rating System (ERS)  offers a standard measure of your home’s energy performance. The rating allows you to compare the energy efficiency of comparable homes in your neighborhood. Making the right renovations can reduce your energy bills and operating costs, lessen the environmental impact all while increasing the resale value of your home.  Some examples  of components that add to your ERS: heating equipment, cooling and ventilation equipment, windows, doors, skylights, lighting, major appliances, electronics and insulation.

Many homeowners love to have a big yard that is full of lush green grass. I mean who doesn’t love a well manicured lawn? Having said that, by installing a  sprinkler system  you can help to ensure your yard stays green while minimizing the labor involved.

My last value adding reno for today, replacing the  front door . When you look at a house for the first time you are quick to formalize a first impression. If the front door is old and doesn’t feel secure what kind of feeling would that give to potential buyers… Replace the old door with a secure, stylish new one and I think you will be surprised at how much value this will add to your home.

 

We covered the value adding reno’s, next month look for the ones that don’t!

Get Started in Real Estate Investing

Get Started in Real Estate Investing

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Over 90% of millionaires have made their money through investing in real estate.

June/2014,

Investing in real estate can be far more lucrative and rewarding in comparison to other forms of investments, but before deciding if this is a strategy or career you would like to get involved in, it may be helpful to  ask yourself the following questions:
  • Am I prepared to make a long term commitment
  • Do I have the capital or funding for:
    • Down Payments
    • Qualifying for mortgages
    • Lawyer’s fees, taxes, adjustments
  • Will I manage properties myself or hire someone
  • Am I willing to educate myself and do the research needed
  • Will I be able to sleep at night, or will I worry about everything
The most common real estate investment involves the  purchase of a rental property.  This can range from condos, townhouses, single family residences and duplexes all the way up to multi-family housing units that can really bring in positive cash flow and increased equity.
simple calculation  can be done on a potential property to determine if it warrants looking into further.
Analyze what the current rents are for a particular type of property and calculate the yearly rent. Divide this number by the purchase price of the home.
If the result is higher than  8% , this property may be worth looking into further.
For Example:  If the average rent for a single family dwelling in your neighborhood is $750, the yearly rent will be $9,000. If you think you can buy the house for $100,000, divide the yearly rent ($9,000) by thepurchase price ($100,000) and you will get an answer of .09 or 9%.
Once you have found a property that meets the 8% rule, you need to calculate all the monthly expenses.
Here is a list of expenses to consider:
  • Mortgage Payment
  • Insurance
  • Taxes
  • Utilities
  • Improvements or Repairs
  • Maintenance
  • Vacancy Allowance
  • Common Expenses Fees (Condos)
  • Property Management Fees
After adding up all monthly expenses, compare that with the income generated monthly from rents to see if you are able to create a  cash flow  situation where you are putting money in your pocket every month.
If real estate investing is something you plan on doing as a career or you simply wish to purchase more than one property, it’s a great idea to put together a team of professionals to assist and advise you.  You will want  a realtor, mortgage broker, lawyer or paralegal, accountant, insurance broker, home inspector and possibly a contractor.
The income that an investment property provides is not limited to monthly cash flow. Consider every mortgage payment, you are in fact paying yourself . The interest paid on your mortgage is tax deductible and each year depending on the real estate market, you should expect your property to appreciate in value. Check with your realtor to see how your local market is doing.
Thanks to www.canadarealestateadvisor.ca for the article.
What Is a Good Credit Score

What Is a Good Credit Score

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How is it determined and what can you do to improve your credit score

Experts have agreed that a good credit score is a score of 720 or above. A great credit rating would be a score of 760 or above. If your score is in the 680 range, it is still considered good and if you apply for a loan you will most likely get the loan, just not at the most attractive of interest rates.

Your credit score is made up of a 3 digit number that is calculated by a mathematical formula from information in your credit report. The number is essentially a prediction of how likely or unlikely you are to pay your bills. The higher your rating the easier it will be to get approved for a loan and at a favorable interest rate.

Payment history is a very important factor in your credit score. Most recent activity is more important that previous years, so its never too late to change your ways if you frequently make late payments.

The second most important consideration is how much money you owe in comparison to how much credit is available to you. This is known as your Debt to Credit ratio. Someone who has managed their money and kept their debt low in relation to how much money is available to them will be considered less risky then someone who has maxed out on their available credit. A good ratio would be to keep your debt at 30% of your total available credit.

Other factors include:

  • Length of Credit History – Longer you have credit, the better
  • Types of Credit Used – A good mix of credit (Mortgage, credit cards, car loan, line of credit) would be considered better than just having a few credit cards. Shows you can manage variety of credit
  • Frequency of Credit Applications: Applying for credit every week will have a negative impact on your score, lenders will think you are in financial distress

These are a few things to know about credit scores. For more detailed info contact me for info on local mortgage brokers who will work with you to get your credit score to a point that you can get approved for a mortgage.

Check In On Your Investments

Check In On Your Investments

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Make sure you hire the right property manager.

Owning a rental property is not just about collecting the rent on time. It is also about making sure that your property/investment is being properly maintained.

Here is an example of what can happen courtesy of Mark Weisleder, a real estate lawyer in the city of Toronto who writes a weekly column for the Toronto Star.

A man in B.C. wanted to rent his home for a year while he traveled to Egypt with his family. He hired a property manager to find a tenant and manage the property while he was away. The property manager found a tenant, who moved in and eventually trashed the place.

When the man returned from Egypt, his home was in terrible condition and he sued the property manager for the damages. He was successful with his claim in small claims court and was awarded the maximum $25,000 for damages.

It was found that due to the fact that the property manager failed to properly qualify the tenant by recognizing red flags and not inspecting the property on a consistent basis, they were in fact grossly negligent.

One example, had the property manager just “Googled” the name of the tenant, they would have discovered that the tenant had a criminal record, prior drug use and that her children were taken away from her. The rental application from the tenant was incomplete with no information about employers and no questions were asked as to how she could afford the monthly rent of $1,495 when her prior rental was only $700.

The property manager did not take any pictures at the beginning of the rental agreement to prove what condition the property was in.

With all this being said, the tenant had rented out rooms in the house, placed locks on doors to create additional units within the home, all without permission.

In Ontario, a landlord is permitted to access their rental unit by giving 24 hours notice to the tenant. This way landlords can ensure that a tenant is properly maintaining the home, make repairs, show the property to potential buyers and view the state of repair. Once a month or once every two months would be considered permissible, anything more than that could be interpreted as harassment.

If you or someone you know is considering renting a property, please contact me for more information about my Property Management Service.

Here is a link to my Investment Management company, www.rggroup.ca.

 

Frequently Asked Questions About Multiple Offers

Frequently Asked Questions About Multiple Offers

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Answers To Frequently Asked Questions

The real estate market in central Ontario has become extremely competitive with multiple offer situations becoming much more prevalent. With help from an article written by Mark Weisleder and additional insight from my personal experience let’s go over some of the common questions regarding the bidding war.

What does “holding back offers” mean?

A listing real estate agent may try to create a multiple offer situation by pricing a property slightly below market value and stating in the listing that the Seller will not review any offers until 5 to 7 days later. This strategy allows all potential buyers the opportunity to see the property while trying to generate as much interest for a hot property. The one benefit to Buyers is that this affords you the opportunity to conduct a home inspection before the offer is made with the thought of removing that condition in your offer which will be more attractive to the Seller.

If the Seller is Holding Back offers till next week, can I still submit a bid today?

The answer to this question is “Yes”. This is referred to as a bully offer and the listing agent is ethically bound to inform their client about any offer that has been received. If the Seller ended up changing their mind and chose to consider your offer, the listing agent would update the status to “offers are now being considered”. The worst thing that can happen when submitting a bully offer is that the Seller says they will not consider, and you must wait until the offer date arrives.

What does a listing agent have to tell all of the bidders?

A listing agent must tell everyone involved how many offers have been received and if any of the offers are from their own office, which could contain a commission discount. An agent cannot disclose the price of any offer.

Can I make an offer that states that I will pay $5,000 more than the best offer received?

This is not allowed and is referred to as an escalation clause. By accepting an offer with an escalation clause the listing agent would have to disclose the price that someone else bid, which is not allowed.

Can I make an offer with no price and ask the Seller to just “fill it in”?

First off, this is not something you should ever consider. Imagine if the Seller wrote in a price $100,000 above the value of the property. What then? Also this is not a valid offer as the price was not included and would most likely be considered void.

How should I prepare for a bidding war?

The best preparation is to use an experienced real estate agent who has had previous success in a multiple offer scenario. You want an agent who will tell you what the home is worth so you can bid a price that you are comfortable with and will not regret later.

Personally, I have been involved with numerous multiple offers and have managed to guide my clients through the process with a great success rate.

Thank you to Mark Weisleder for a great article. For more information on his law practice visit,  www.markweisleder.com.

What You Need To Know About Chattels and Fixtures

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When purchasing a new home, you are not just negotiating a price and possession date, you are also negotiating for the chattels and fixtures you would like included and excluded in the contract. Let’s take a closer look at what you should know with regard to chattels and fixtures.

A buyer cannot refuse to close a real estate deal if an appliance is not working, or if there is minor damages on the property,  unless  the contract says so. Having said this it is wise to seek advise from a knowledgeable real estate agent to help write a contract that would protect you if something like this were to happen.

Sometimes a buyer can write in a ” Hold Back Clause ” that will allow the buyer to hold back money to complete any repairs or to ensure that the chattels and fixtures will be in good working order. It is tough to get a seller to agree to these terms as sometimes buyers will say they aren’t satisfied with the repairs and the hold back money cannot be released to anyone. In certain situations this can be a useful clause but it is not widely used in the traditional real estate transaction.

The  best way  to approach damage or repair issues before closing is to get an estimate and then have your lawyer send that estimate to the sellers lawyer. Try to settle this before closing to avoid having to take this matter to small claims court.

So,  what if your oven breaks down 2 days after closing?  Unfortunately, the way most contracts are written you would be out of luck and responsible for the fix. Most contracts will state that the chattels and fixtures included in the agreement will be in good working order up until the date of closing. There are ways you can protect yourself by purchasing after sale insurance protection to cover your home systems and appliances.

The little things matter when dealing with chattels and fixtures. If the seller is  taking a chandelier , make sure you write in that they are required to replace it with a standard light fixture. If the seller is  removing a TV wall mount bracket , make sure they are required to fill in any holes that were created. Always ask for two full sets of keys, garage door remotes and mail box keys.

When you work with someone that understands the rules about chattels and fixtures you can properly protect yourself and should be able to minimize any problems that could arise after closing.

Thanks to Mark Weisleder who wrote an article that helped me write this months newsletter. For more articles or for more info regarding Mark’s law practice, check out www.markweisleder.com.

Why You Should Consider Selling In The Winter

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Working as a Realtor I often hear people say “We are going to wait and sell in the spring.”
I cannot tell you how many times I hear this. While there is nothing wrong with this I would like to point out a few examples of why it’s a good idea to sell in the winter.

Last year I was working with Brian and Sandy who had a beautiful two story home in north east Barrie. The house itself was very nice but their backyard was awesome. It was substantially larger than other properties and also had an in ground pool.

At the time we were listing the property for sale, there was a significant amount of snow to the point you could not even see that there was a pool. With some help from Brian and Sandy and a little bit of my own elbow grease, we worked together and cleared the snow so prospective buyers could see the pool and envision themselves enjoying this amazing backyard.

The market was strong and given there wasn’t as much competition as you would find in the spring market, we were able to generate multiple offers and sell the property in one week.

If you or someone you know is considering a move, contact me to find out what the current inventory looks like in your market for your type of home and if it would make sense to sell before inventory levels rise in the spring.

What You Need To Know When Buying Power of Sales/ Foreclosures

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Power of sales and foreclosures usually happen when an owner is no longer making their mortgage payments and the lender is selling the property to recover the amount owing on the existing mortgage.

The process that is most frequently found in Ontario is the Power of Sale and not a Foreclosure. The main reason being that Power of Sales can be completed much faster than a Foreclosure. Power of Sales can be completed in most cases in 3-4 months, where as Foreclosures can take up to a year to complete. Banks and lenders like the shorter process as it permits them to get bad loans off their books faster and if there is any shortfall, they can immediately sue the original borrower for the deficiency.

Lenders are supposed to try and get fair market value for the property that is being sold, so in saying that, it’s not automatic that you will be able to purchase the property at a substantial discount. It’s wise to seek the expertise of a professional to make sure you know the value of the property before making an offer.

Power of Sale properties will often contain special clauses in the Agreement of Purchase and Sale that are of importance to the buyer. For example, all appliances will be sold on an “as is” basis, with no warranty. This means if they are not working on the date of closing, unfortunately you would be out of luck. No warranty will be given with respect to the measurements of rooms, lot size. There is no guarantee of vacant possession, meaning if the property has tenants, it would be your responsibility to evict or renegotiate a new lease agreement.

If HST is payable, for example the property has commercial zoning, then HST would be your responsibility and would be due on closing.

The last thing you really need to be aware of is that if the original owner is able to satisfy the outstanding amount owing on the current mortgage before the date of closing, then you are out of luck and the deal would become null and void.

Power of Sales are intriguing to many buyers as the opportunity exists to buy at a substantial discount. I have previous experience working with Power of Sales so if you are thinking about pursuing this type of property contact me and we can make sure everything adds up in your best interest.

The basis of this post was taken from an article published by Mark Weisleder, a real estate lawyer in the city of Toronto. You can get more information about Mark and his practice by visiting www.markweisleder.com.

Five Things To Remember When Doing a Renovation

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Spring time is around the corner (hopefully), and with the warmer temperatures home owners often start to consider doing home renovations. Here are 5 really good things to remember when thinking of hiring someone to renovate your home.

1. Check References

Make sure to ask any contractor how long they have been in business and for a list of previous customers that you can call to make sure that all work was completed on time and on budget. You may even wish to go see the work that was done, this way you can judge for yourself the quality of the workmanship. Also make sure that the contractor is licensed and insured in the event that someone is injured on site or there is damage to your property or even your neighbours.

2. Will They Be Obtaining a Building Permit?

Most renovations will require at least one permit (electrical or building) so be more cautious when someone tells you that they do not need any permits. Permits in real estate become important when selling as the buyer will want to know if a permit was pulled which gives more assurance that the work was completed correctly as the City will have performed an inspection of the work.

3. Cash Deals

Contractors or homeowners may offer to do the renovation for cash in order to obtain a discount. Besides this being illegal, you will have no proof of payment, so if the work is not done correctly or some other problem arises you will not have any written contract that you can point to for assistance.

4. Tie Payments To Work Milestones

DO NOT pay more than 10% as a down payment. Create a milestone schedule so when certain milestones are completed in the renovation, you will pay out a portion of the balance due. It’s also wise to make sure that all sub-trades that are working on site have been paid at every milestone.

5. Make Sure Everything Is Clear And In Writing

It goes without saying that you must have a written contract detailing very clearly the work that is being done and everything that is to be included and the milestone stages of payment. If appliances are to be included or if you want a certain type of handle, make sure the contract states your specific requests.

If you are prepared when it comes time to hire someone to renovate your home it should make the process less stressful for you and your family.

The basis of this article was taken from an article written by Mark Weisleder, a real estate lawyer now practicing law with
Real Estate Lawyers.ca LLP.

For more information you can contact him:
Email:  Mark@RealEstateLawyers.ca
Website:  www.RealEstateLawyers.ca