Elizabeth Barr, Sales Representative | CELL. (289) 219-3121

  1. What price home can I afford?
  2. What about my down payment, should I put more or less down, if we can afford it?
  3. What steps should I take when looking for a home loan?
  4. Is it possible to negotiate interest rates?
  5. How low can I consider offering?
  6. How and what do I negotiate?
  7. How do I find out about the condition of the home I'm considering?
  8. What is title insurance?
  9. Is it better to buy a new home or a resale?
  10. Fixer-Uppers - Are they good or bad?
  11. Can you borrow the money to repair?
  12. Is there a good "return" for my efforts?
  13. Are foreclosures good or bad ideas?
  14. When buying a home how much does my REALTOR® need to know?

Question 1: What price home can I afford?  Back to Top

The price you can afford to pay for a home will depend on several factors:

  • Your household income
  • The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
  • Your outstanding debts
  • Your credit history
  • The type of mortgage you select (open vs. closed, fixed vs. variable rate, amortization and term)
  • Current interest rates

Lenders will analyze your gross household income (before taxes) in relation to the projected cost of the home and outstanding debts. This will determine the size loan you can borrow. They will analyze your Gross Debt Service (GDS), which will consist of the following mortgage expenses: principal and interest payment on your loan, property taxes and heating costs (and condominium fees, if applicable).  As a general rule, no more than 30-32% of your gross household income should go to mortgage expenses. 

Question 2: What about my down payment, should it be more if we can afford it, or less? Back to Top

The bottom line is that making a larger downpayment reduces the amount of debt that must be financed.  Having a 20% downpayment also means that your mortgage does not have to be insured by the Canadian Mortgage and Housing Corporation (CMHC).  

 

Question 3: What steps should I take when looking for a home loan? Back to Top

It is strongly recommended that home buyers pre-qualify for a loan before they start their search, or very soon after. By being prequalified, you knows exactly how much you can afford, and you can make more informed decisions in the market place.  Prequalification is almost always done at no charge, and most lenders also offer the process online. You will need to submit an application, your credit report may be pulled for a fee, your employment, income and bank accounts will be verified. 

Be aware though, that pre-approval does not mean guaranteed financing.  Once you've decided on a home, the lender will still want the value of the property assessed along with your current financial state before committing to forward any funds at closing.


Question 4: Is it possible to negotiate interest rates? Back to Top 

Compare the published mortgage rates of various lenders.  It never hurts to shop around, know the market and try to get the best deal. I would be happy to connect you with one of my colleagues at Dominion Lending Centres.  They are located at the RE/MAX Garden City office at the Lake & Carleton Plaza in St. Catharines.  They are masters at sourcing the very best financing for each buyer(s) specific needs.


Question 5: How low can I consider offering? 
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There are always some sellers who for some reason must sell quickly, however in general, a very low offer in a normal market might be rejected immediately. In a strong buyer's market, the below-market offer will usually either be accepted or generate a counteroffer.  In a strong seller's market, offers are often higher than full price. While it is true that offers at or above full price are more likely to be accepted by the seller, there are other considerations involved:

  • Is the offer conditional upon anything, such as the sale of the buyer's current house? If so, such an offer, even at full price, may not be as attractive as an offer without that condition.
  • Is the offer made on the house "as is," or does the buyer want the seller to make some repairs before the close of escrow or make a price concession instead?
  • Is the offer all cash, meaning the buyer does not require a financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer conditional on financing.
  • Are there any requests for seller concessions, such as asking the seller to contribute towards closing costs? If so, the offer is not really full price.

Question 6: What should I offer? Back to Top   

Different sellers price houses very differently. Some deliberately overprice, others ask for pretty close to what they hope to get and a few underprice their houses in the hope that potential buyers will compete and overbid. A seller's advertised price should be treated only as a rough estimate of what they would like to receive.  Discovering the seller's motivation for selling can be a powerful negotiating tool for me, your realtor!  

While they can be made, think twice about a low-ball offer, because it often sours a prospective sale and discourages the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway.

Before making an offer, I will review with you how much comparable homes have sold for in the area.  That way, you can determine whether the home is priced within reason and you can determine how much you'd like to offer.

 

Question 7: How do I find out about the condition of the home I'm considering? Back to Top

Sellers are required to disclose any material latent defects (those which cannot be seen) about the home.  A Seller Property Information Sheet (SPIS), if available, can be a wealth of information about the property.  The prudent buyer will make the offer conditional upon inspection by a Certified Home Inspector.  An inspector will assess the home's major systems and make recommendations as necessary.

Depending upon what changes you wish to make to the home (adding a pool, accessory unit, additional buildings, an addition etc), carefully review of the city's by-laws and zoning requirements to determine that there will be no issues moving forward.

People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions, if the homeowners association has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.


Question 8: What is Title Insurance? 
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It's an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership.  It is not a requirement in Ontario.

For a one­-time fee, called a premium, a title insurance policy may provide protection from such losses as: 

  • Unknown title defects (title issues that prevent you from having clear ownership of the property)
  • Existing liens against the property’s title (e.g. the previous owner had unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property)
  • Encroachment issues (e.g. a structure on your property needs to be removed because it is on your neighbour’s property)
  • Title fraud
  • Errors in surveys and public records
  • Other title­-related issues that can affect your ability to sell, mortgage, or lease your property in the future

Title insurance should be discussed with your lawyer.


Question 9: Is it better to buy a new home or resale? 
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That decision is very much personal preference.  Some people feel that buying into a new-home community is a bit riskier than purchasing a house in an established neighborhood. Others prefer a new build because things won't "wear out" and need replacement.  Many factors will come into play, such as:

  • are you prepared and can you afford to wait it out if the development is delayed in a new build?
  • have you factored in landscaping and fencing costs?
  • how much do fully mature trees mean to you and your family?
  • can you see yourself renovating a resale, if necessary?
  • how important to you is a home's unique character?

Sales price increases in either type of housing are strongly tied to location, growth in the local housing market and the state of the overall economy.  Future appreciation in value in either case depends upon many of the same factors.  Your best bet is to walk through both types, and see which one appeals to you best.

 

Question 10: Fixer-Uppers - Are they good or bad? Back to Top

Distressed properties or fixer-uppers can be found everywhere. These properties are poorly maintained and have a lower market value than other houses in the neighborhood. It is often recommended that buyers find the least desirable house in the best neighborhood. You must consider if the expenses needed to bring the value of that property to its full potential market value are within your budget. Most buyers should avoid run-down houses that need major structural repairs. Remember the movie " The Money Pit?" Those properties should be left to the builder or tradesman normally engaged in the repair business.

Question 11: Can you borrow the money to repair? Back to Top

HUD's Rehabilitation loan program, Section 203(K) is a program designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.

A 203(K) loan is frequently done as a combination loan. You purchase a "fixer-upper" property "as is" and rehabilitate it. Or, you may refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.

Investors are required to put 15 percent down. Owner-occupants have a required down payment of 3 to 5 percent. A minimum of $5,000 must be spent on major improvements.

Major repairs can be: a new heating system, roof, replacement windows, etc. You may then also finance additional repairs and improvements i.e.: new carpeting, kitchen cabinets, appliances, etc. You must of course "qualify" for the total amount you will be borrowing through this program.

Two appraisals are required. These appraisals will be on the property "as repaired" not "as is." Plans and specifications for the proposed word must be submitted for architectural review and cost estimation. Once approved mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.

Question 12: Is there a good "return" for my efforts? Back to Top

Remodeling a home improves its livability and enhances curb appeal, making it more salable to potential buyers. Some of the popular improvement projects are updated kitchens and baths, enlarged master bedroom suits, home-office additions and increased amenities in older homes.

The resale market is often difficult because you are competing with new construction. You need to give your home every competitive advantage you can if you are selling an older home.

Home offices are a relatively new remodeling trend. Adding one to a house often recoups 58 percent of the costs, according to a survey found in a report called "Cost vs. Value Report" in Remodeling Magazine.

Question 13: Are foreclosures good or bad ideas? Back to Top

The incidence of foreclosures is cyclical, based on national and regional economic trends.

People can get a rough estimate of the number of foreclosures in a target area by dividing its population by 2,500, according to John T. Reed of Reed Publishing, Danville, Calif.

New England had so many foreclosures that newspapers added foreclosures-only sections to their real estate classified advertising section. But these states recovered in the mid-1990's.

Buying directly at a legal foreclosure sale can be risky and dangerous. The process has many disadvantages. There is no financing so purchases require cash. The title needs to be checked before the purchase or the buyer could buy a seriously deficient title. The property's condition is not well known and generally, an interior inspection of the property is not possible before the sale.

Additionally Estate (probate) and foreclosure sales are exempt from some states' disclosure laws. The law protects the seller (usually an heir or financial institution) who has recently acquired the property through adverse circumstances and may have little or no direct information about it.

Question 14: When buying a home how much does my real estate REALTOR® need to know? Back to Top

Be sure to find out who your real estate REALTOR® is representing before you tell them too much. The degree of trust you have in an REALTOR® may depend upon their legal obligation of representation. An agency working with a buyer has three possible choices of representation. The REALTOR® can represent the buyer exclusively, called buyer agency, or represent the seller exclusively, called seller agency, or represent both the buyer and seller in a dual agency situation. Some states require REALTORS® to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types:

1. In a traditional relationship, real estate REALTORS® and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub-broker, who brings the ready, willing and able buyer to the table.

2. Dual agency exists if two REALTORS® working for the same broker represent the buyer and seller in the same transaction. A potential conflict of interest is created if the listing REALTOR® has advance knowledge of another buyer's offer. Therefore, the law states that a dual REALTOR® shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, without express written permission.

3. A buyer can hire an REALTOR® who will represent their interests exclusively. A buyer's REALTOR® usually requires a retainer which is refunded once the buyer purchases a house. The amount of the retainer differs from REALTOR® to REALTOR®. A buyer's REALTOR® can perform enhanced services for the buyer, such as preparing a market analysis on the home they are buying. All information provided to the buyer's REALTOR® shall remain confidential and will not be relayed to the Seller's REALTOR®.

Garden City Realty Inc., Brokerage St.Catharines Garden City Realty Inc., Brokerage St.Catharines