What all Home Buyers Need to Know
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
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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:
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:
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!
No matter what type of home or property you're buying, plan on some extra expenses.
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.
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:
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!
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.
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:
6. BC Property Tax Deferment Programs:
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
CALL 778-227-1443 TODAY!