What all Home Buyers Need to Know

Joanne Taylor

778-227-1443
604-538-8888
info@joannetaylorhomes.com

 

 

 

Awarded

Rotarian of the Year

Rotary Club of South Surrey

2013

 

 

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Advice for Buyers

Finding the perfect home doesn't happen in one day. It takes careful planning and lots of work. Fortunately, there are a number of things you can do to simplify the process.  

 

1.    Things to Consider Before Starting Your Search

What Features Do You Need?

Do you need an extra bathroom, a garage, a fenced backyard, or lower utility bills? Do you want a fireplace, a short drive to work, or maybe minimal yard work? Once your list is complete, decide what’s most important to you.

What’s the Ideal Location?

Where you live obviously affects your lifestyle; it’s also one of the most significant influences on the value of your home. Your choice of location may be somewhat limited by the price you can afford. Even so, make sure to consider such things as distance to work, schools, shopping and entertainment.

What Kind of Home?

What type of property do you want? A single-family detached home is attractive to many people because it typically provides more living space and land. On the other hand, a condominium may be a more appropriate choice for you, with an emphasis on maintenance-free living. Determine what type of home best suits your desired lifestyle and budget.

What’s Your Budget?

How much do you want to spend? Just as importantly, how much can you afford to spend?  When purchasing a property, there are various expenses involved, including taxes, legal fees, appraisal fees, house insurance & moving expenses, all of which need to be paid before you are finally in your new home.  Plan on budgeting for these expenses now.

 

2. Choosing a REALTOR®

A REALTOR® can help you answer all of these questions and help you navigate through what can be a complicated business transaction. Ask friends and family members for referrals.  It’s important that you’re comfortable and confident with the agent you choose.

3. Searching For a Home

A REALTOR® will use various tools to try and find properties that meet your specifications. The most important is a local Board’s MLS® (Multiple Listing Service®) System. Your REALTOR®can quickly search through numerous properties available for sale in specific areas to find suitable listings; that is, houses that best match your needs, choice of neighbourhoods and price range. You can also view listings here

I can send you listings, just request what you'd like here

 

4. Seeing Houses

When you select a property and decide to visit a house, there are many things to consider. Does it have all the features you want? Is the neighbourhood what you expected? Try to picture your favorite furnishings in a room. Remember all of the technical considerations, including:

  • What type of wiring does the house have?
  • What about power outlets? Different appliances use different types.
  • What type of heating system does it use? Heating costs can vary drastically by type.
  • Have the roof and foundation been well maintained?
  • What condition are the windows in?
  • What about the plumbing?

There are numerous other things to consider as well. If you don't have time or don't feel comfortable doing it, home inspection services are available for a reasonable fee. Having a qualified home inspector look at the house is always a good idea. The older the home, the greater the need for professional inspection.

 

5. Making an Offer

Once you find a house you want to make your home, your REALTOR® can help you develop an offer. In the offer, you should specify how much you're willing to pay. State when the offer expires and suggest a closing date for the transaction. You can also propose some conditions on the offer. Some common types of conditions are:

  • Getting a suitable mortgage (include the amount, interest rates and any other figures you feel important);
  • Selling your current home (the seller may continue to look for a buyer, but will give you the right of first refusal);
  • The seller providing a current survey, or a "real property report," showing that there are no encroachments on the property;
  • The seller having title to the property (your lawyer will check this out when she conducts a title search to see if there are any liens on the property, easements, rights of way or height restrictions);
  • If there’s a septic system, the seller having a health inspection certificate, stating that the system meets local standards;
  • An inspection by a qualified engineer, should you have any doubts about the home's safety and construction; (oil tank etc)
  • Any inclusions of appliances and other items - basically, what stays and what goes.

You will need to present a deposit along with your offer. An appropriate deposit will show your good faith to the seller. Note that the seller's agent, if they are represented by one, is bound by law to bring all offers to the seller's attention.

 

6. If Your Offer is Accepted

After your offer is accepted and all conditions met, the offer becomes binding on both sides. If you later refuse to honour the agreement, you may lose your deposit or might be sued for damages. Before signing, make sure you understand and agree with all terms of the offer.

Before the property can formally change hands, there are still a few things to do. Be prepared to furnish proof to your lender that you’ve insured your new house. On or before closing day, both side’s lawyers will arrange to transfer title of the property from the seller to you. The mortgage money will be transferred to your lawyer's trust account, and then to the seller, and your lawyer will bill you all additional expenses such as land transfer taxes or outstanding legal fees.

At this time, be sure to check with your lawyer that everything is as stated in the offer-to-purchase. 

Once you're satisfied and the keys to the front door are in your hands, there's nothing else to say, except welcome home!

 

Extra Expenses

 No matter what type of home or property you're buying, plan on some extra expenses. 

  • Propterty transfer tax (1% of the first $200,000 of the purchase price + 2% on the balance) due on day of Completion at LTO
  • A mortgage broker's fee
  • An appraisal fee
  • Surveying costs (if the seller couldn't come up with a current survey)
  • A high-ratio mortgage insurance premium
  • An interest adjustment. (Mortgages are normally calculated from the first of each month. If your closing date is the same as the beginning of your mortgage, there will be no adjustment. However, if your closing date is July and you move in on June 15, those last 15 days are the interest adjustment period. Your lender will expect you to cover the cost of the interest during that time.)
  • House Inspection fee
  • Moving costs
  • Strata Move-In fee
  • House insurance
  • Reimbursement to seller for the unused portion of any prepaid property taxes or utility bills
  • Lawyer or Notary fees, and, if applicable, REALTOR® fees

 

THE REAL COSTS OF HOME OWNERSHIP

 

Many first-time buyers are so excited about finding that perfect home that comes with everything on their wish list that they often don’t realize that the costs involved go beyond the purchase price.  It’s very important that when we enter into the single biggest purchase of our lives, that we always have a clear plan, research or budget.

 

THE MORTGAGE

Once the decision to buy a new house has been made, the financial adventure begins. Meet with your lender or mortgage broker to find out exactly what you can afford to spend. The first order of business will be to determine the amount of your down payment. You need a minimum of five percent down to around 20-25 per cent.

The lender then calculates what you can borrow based on the total of mortgage payment, property taxes, heating costs and any current debts you’re carrying.

A great place to start researching is on the CMHC website (Canada Mortgage and Housing Corporation). 

 

There is a calculator that helps you estimate the maximum purchase price and maximum monthly housing cost you can afford based on your gross monthly household income. Generally the monthly cost of your mortgage, property taxes and home insurance should be no more than 28 to 32 per cent of your monthly gross pay. Some advisors suggest using your take-home pay to calculate that same percentage so you’re not eating up all of your income with home expenses.

 

COSTS OF BUYING

Buying entails a number of extra costs as well. You may also be responsible for real estate fees (if you are selling as well as buying), mortgage loan insurance (if you are paying less than 20 per cent down on your home) and, on a newly built home, GST and possibly PST.

It’s worthwhile to pay for a home inspection to check for major issues.

As a buyer, you don’t pay your Realtor, but it’s important to have a lawyer or notary public to represent your interests, and you do pay for that. A buyer is also responsible for the property transfer tax of 1 per cent on the first $200,000 and 2 per cent on the balance.

Buying expenses can also include a site survey, optional title insurance and strata move-in/move-out fees. And don’t forget about moving expenses.

 

THEN THERE ARE OWNERSHIP EXPENSES

You finally have a place to call your own. Now, you have to protect it and your valuables. Homeowner’s insurance is important because it covers you for unforeseen incidents, such as fire, burglary, a flood, or sewer or water damage.

Once you own, there are heating, electricity, cable, Internet, home telephone, garbage, sewer, property taxes and other local municipal fees to consider. You may even need to buy an annual parking pass to park on your street.

Things do break down, so you need to have a bit of a financial cushion in case the washer quits or your hot water tank bursts.

In addition, when buying a townhome or condominium, soon-to-be buyers might also end up with major replacement or repair costs—beyond the monthly strata fees.

Don’t let those hidden costs turn you off buying a home. If you practise due diligence, you’ll be able to kick back and enjoy your new home that much more.

 

 

BUY OR SELL FIRST?

It's the age-old question, do I sell my home before I buy, or do I buy my new home before I sell? It's natural to want to buy your new home first so you have the security of knowing where you'll be living. But there are advantages to selling first, buying later:

 

  • You'll know how much your house is worth, so you can be sure of how much you can spend.
  • There's a chance you won't have to make your offer subject to financing.
  • You might be able to arrange a long closing to give you time to look. .
  • It could be a stressful situation, but it's also stressful to own two homes.

 

There is no generally correct answer to the classic real estate problem of whether it's better to buy first or sell first?

Moving from one house to another involves financial risk of carrying two houses simultaneously, or ending up on the street and having to move twice. Let us investigate which alternative has fewer disadvantages.

 

IF THE CLIENT BUYS FIRST:

 Some say, "It’s like learning to walk, before you can crawl"

 

1) He may have the satisfaction and security of knowing where he is moving to & but only perhaps!


2) The smart thing to do is to include a clause in the offer, stipulating that the purchase is Subject to the sale of the buyers house by a certain date (such as in 60 days)


3) If the buyer needs new financing, there would also have to be an appropriate clause to that effect.


4) Because of these two subject-to clauses, the buyer will have reduced bargaining power (in comparison with a subject free cash offer). The seller will be less inclined to negotiate on his asking price.  Some Seller's may not even look at offers that have a subject to sale clause, and could cost the buyer more.


5) Then there is the uncertainty of whether the buyer's house will sell during that limited time period. To avoid tying up his principle's house needlessly, the listing broker will insist on inserting an escape clause: The sellers acceptance of this offer is subject to him being able to continue to market his house during the next 60 days, then the seller will give the buyer 24 hours to remove all subject clauses and make this a firm binding contract. Failure to do so will render this contract null and void and the seller will be free to accept the other offer.


6) The lending institution that will grant the new mortgage for the buyer may not give a firm commitment until the buyer's house is sold. Besides the uncertainty of how much new financing the buyer will need, the problem may be the buyer's inability to carry two houses.


7) Next, the buyer will find himself under pressure to sell: he has a limited amount of time to sell. Precious days will be wasted on getting the show on the road: processing, publishing and circulating the listing. It may be on the computer without a picture. 

 

8) Selling in a buyer's market often compounds additional problems. Overoptimistic/unrealistic sellers tend to overestimate their homes market value and underestimate the length of time that is required to sell their house.


9) The buyer will not have the luxury of being able to hold out for a good price; in fact, he may be forced to progressively reduce his price in order to attract an offer. Everybody has seen the ads, Owner has bought and must sell. Some ruthless buyers may decide to wait and see how low the unfortunate owner is willing/able/forced to go.


10) To add insult to injury, the buyer may be served (during the 60 days he has to sell) with the 24-hour escape clause before his old house is sold. As for most people, it is too risky to borrow bridge financing and to carry two houses. They will have no choice but to step aside and lose out on the home of choice. If somebody buys first, chances are that he will buy high (little bargaining power) and sell Low (due to time pressure) and/or he may lose out anyway on the house.

 

IF THE CLIENT SELLS FIRST:

 1) The preliminaries of putting the house on the market can be taken care of without wasting precious time.

 

2) While their house is for sale, there is nothing to stop them from familiarizing themselves with what is on the market; should they find a suitable home before they have a firm offer on the old house, the subject-to-sale method is available.

 

3) If they get an offer on their old house before they have found something they like, then they have the luxury of being able to drive a tough bargain (to make only small concessions on their asking price)

 

4) If the buyers are renters, then a long possession date should be no problem. A long possession date could be a bargaining factor and should be attempted on all offers.

 

5) After the buyers have received a firm offer with a substantial deposit (for their peace of mind), they can get their mortgage approved and,

 

6) Drive a hard bargain on their next purchace. The owner of the house they want to buy will view them as cash buyers and will be more disposed to making price concessions.

 

So if you sell first and buy later, there is nothing to stop you from looking while marketing your own house, and if you play your cards right, you will sell high and buy low.

 

Regrettably, there is no universally perfect solution to this dilemma. Each client will have to weigh the risks of having to move before the next place is available: if they bunk with friends or relatives or rent temporary quarters, there is the expense of having to move twice, storing the furniture somewhere and possibly having to put a pet into a kennel. Worse still where will the children go to school? For what ever it is worth, all of these problems are surmountable and merely inconveniences in comparison with the financial burden and fiasco of having to carry two houses for an indeterminate period of time.

 

PLENTY OF WAYS TO CASH IN ON REBATES:

 

There's no question that becoming a homeowner is an expensive endeavour. From taxes and legal fees, to upkeep and repairs, the list of bills is never ending. However, whether you are a first-time home buyer, or have been in the game for years, there are a number of grants and rebates available that can help ease the burden on your bank account.

 

Here are the top 13 grants and rebates for home buyers and owners:

 

1. Home Buyers' Plan: Qualifying home buyers can withdraw up to $25,000 (couples can withdraw up to $50,000) from their RRSPs for a down payment. Home buyers who have repaid their RRSP may be eligible to use the program a second time. See Canada Revenue Agency & search “Home Buyer Plan”. www.cra.gc.ca

 

2. GST Rebate on New Homes: New home buyers can apply for a rebate of the federal portion of the HST (the 5% GST) if the purchase price is $350,000 or less. The rebate is equal to 36% of the GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000. The rebate does not apply to homes $450,000 and above.

 

3. BC Property Transfer Tax (PTT) First-Time Home Buyers' Program: Qualifying first-time buyers may be exempt from paying the PTT of 1% on the first $200,000 and 2% on the remainder of the purchase price of a home priced up to $425,000. There is a proportional exemption for homes priced up to $450,000. The rebate does not apply to homes $450,000 and above.

 

4. First-Time Home Buyers' Tax Credit: This federal non-refundable income tax credit is for qualifying buyers of detached,

attached, apartment condominiums, mobile homes or shares in a co-operative housing corporation. For the 2012 tax year, the maximum credit is $750.

 

5. BC Home Owner Grant: Reducing property taxes for homeowners with an assessed value of up to $1,295,000, this basic grant also gives home owners:

  • A maximum reduction of $570 in property taxes on principal residences in the Capital, Greater Vancouver and Fraser Valley regional districts;
  • An additional grant of $200 to rural homeowners elsewhere in the province;
  • An additional grant of $275 to seniors aged 65-plus, those who are permanently disabled and war veterans of certain wars.

6. BC Property Tax Deferment Programs:

  • Property Tax Deferment Program for Seniors. Qualifying home owners aged 55-plus may be eligible to defer property taxes.
  • Financial Hardship Property Tax Deferment Program. Qualifying low income home owners may be eligible to defer property taxes.
  • Property Tax Deferment Program for Families with Children. Qualifying low-income home owners who financially support children under age 18 maybe eligible to defer property taxes.

7. Canada Mortgage and Housing Residential Rehabilitation Assistance Program Grants: This federal program provides financial aid to qualifying low income homeowners to repair substandard housing. Eligible repairs include heating, structural, electrical, plumbing and fire safety. Grants are available for seniors, persons with disabilities, owners of rental properties and owners creating secondary and garden suites.

 

8. Home Adaptation for Independence: A program jointly sponsored by the provincial and federal governments provides up to $20,000 to help eligible low-income seniors and disabled homeowners and landlords to finance modifications to their homes to make them accessible and safer.

 

9. CMHC Mortgage Loan Insurance Premium Refund: Home buyers with CMHC mortgage insurance who purchase an energy efficient home or make energy savings renovations qualify for a 10% premium refund and possible extended amortization without surcharge.

 

10. Energy Saving Mortgages: Financial institutions offer a range of mortgages to home buyers and owners who make their homes more energy efficient.  For example, home owners who have a home energy audit within 90days of receiving an RBC Energy Saver Mortgage may qualify for a rebate of $300 to their RBC account.

 

11. Low Interest Renovation Loans: Financial institutions offer ‘green’ loans for home owners making energy efficient upgrades.  Vancity’s Bright Ideas personal loan offers homeowners up to $20,000 at prime + 1% for up to 10 years.  RBC’S Energy Saver loan offers a 1% interest rate discount or a $100 rebate on a home energy audit with a qualifying purchase through a fixed rate installment loan over $5,000.  For more information, visit your financial instituition.

 

12. BC Hydro Appliance Rebates: Mail-in rebates for purchasers of ENERGY STAR washing machines, refrigerators, dishwashers or freezers.

 

13. BC Hydro Fridge Buy-Back Program: Turn in your old, energy-wasting fridge for recycling and BC Hydro will pay you $30. It must be clean and in working condition.

 

14. BC Hydro Windows Rebate Program: Receive rebates or tax savings when you by ENERGY STAR high-performance windows.

 

15. FortisBC Rebate Program: A range of rebates for home owners include a $75 rebate for upgrading to an ENERGY STAR washing machine, a $300 fireplace rebate, $500 off water-heaters and $1,000 for switching to natural gas.

 

 

If you have any real estate questions

or are thinking of buying or selling your home, please email Joanne at

 info@joannetaylorhomes.com 

or

CALL 778-227-1443 TODAY!