Randy Miller

Broker Of Record

Urban Avenue Realty Ltd., Brokerage

Whitby & Brooklin Real Estate

Office 905-430-1800

Direct 905-430-9444

Email: randy@randymiller.ca

Categories

Buying a first home

 The truth is, home ownership is one of the cornerstones of financial security, and if you’re thinking of buying a place don’t forget to consider your registered retirement savings plan (RRSP) as a source of some funds for a downpayment. The Home Buyer’s Plan (HBP) in our tax law makes it easy to use RRSP assets to help with a home purchase. Here’s a primer.

Eligibility

In order to use funds from your RRSP to help in a home purchase, you’ll have to be a first-time home buyer. This means that you may not have owned a home in the past five calendar years. More specifically, you’ll be out of luck if you owned a home during the window of time that starts Jan. 1 of the fourth calendar year before the year in which you make a withdrawal under the HPB, and ending 31 days before the date of the withdrawal. (If you have a disability or are buying a home for a related person with a disability, or are helping such a person to buy a home, the five-year condition may not apply)

If you’re married, each spouse can make a withdrawal under the HPB provided that neither of you has owned a home in the five-year period I’ve described, and you’re buying the home jointly. Even if your spouse has owned a home in the last five years, you can still make a withdrawal under the HBP as long as your spouse’s home was not your principal residence while you’ve been married or living common-law.

By the way, simply being pre-approved for a mortgage isn’t enough; you’ll have to actually enter into a purchase agreement to be eligible for a withdrawal under the HBP, and it has to be your intention to move into the home as your principal residence no later than one year after buying or building it. So, you can’t use the HPB to buy a rental property.

Withdrawals

You, and your spouse if he’s eligible, can each withdraw up to $25,000 from your RRSPs under the HBP. You have to be resident in Canada at the time you make the withdrawal, and you have to withdraw all the funds in the same calendar year. You can only make withdrawals from your own RRSP (that is, an RRSP under which you’re the annuitant), and not a plan under which your spouse is the annuitant.

Also, you can’t generally make withdrawals from a locked-in RRSP or a group RRSP under the HBP, and any RRSP contributions that you make must stay in your RRSP for at least 90 days before you can withdraw those funds under the HBP, otherwise you won’t get a tax deduction for those contributions.

You’ll have to close your home purchase by Oct. 1 of the year following the year of withdrawal (the taxman calls this the “completion date”). For example, if you make a withdrawal under the HBP in 2015, you’ll have to take possession of your new home no later than Oct. 1, 2016. Be aware that you can extend the completion date by one year if certain conditions are met.

Finally, you or your spouse cannot own the home for more than 30 days before you make a withdrawal under the HBP. So it’s best to make the withdrawal before the closing date if you can.

Repayments

You’ll have to repay the amounts borrowed from your RRSP under the HBP in equal instalments over 15 years, and your repayments will have to start in the second calendar year after the year of withdrawal (that is, in 2017 for withdrawals made in 2015). If you fail to repay the amounts, the shortfall is taxable to you in the year you missed the repayment. Also, be aware that you can’t claim a deduction for amounts repaid to your RRSP under the HBP. If you want more information on the HBP, check out the taxman’s booklet RC4135, Home Buyer’s Plan, which you’ll find at www.cra.gc.ca.

Source:
 Buying a home can be easier with the help of your RRSP by TIM CESTNICK. The Globe and Mail.

Whitby Brooklin Homes for Sale

Randy Miller
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby

905-430-1800

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Roadsign good credit

One of the most important aspects of your financial life is your credit score. Your credit score follows you forever and it will play a huge role in how insurance companies, banks and other lending institutions categorize your worthiness as a customer.

It’s vital that you take steps to improve your credit score, because any credit such as a car loan or mortgage financing may be more expensive (a higher interest rate), or its unobtainable.

What does the Credit Score actually tells you?

The credit score is an assessment of your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. This is done by converting certain aspects of your credit repayment history to a number based on a formula called the “FICO formula”. The result of this is known as a Credit Score.

When you get your Credit Score, you will see a number between 300 and 900 at the top – this is your score. The average score is in the mid-700s at present. You will also receive an interpretation of your score, and this will be more useful to you than the number itself. It will explain why your score is at its current level.

If your scores are above 760, you’re probably already getting the best rates. If they’re anywhere below that mark, though, they could stand some improvement.

Here are the main factors that make your credit score lower:

  • Too much credit. Having too many credit cards can hurt your score. If you have several consumer accounts try to consolidate those balances and close the accounts.
     
  • Your account balances are too high: As a rule of thumb keep your credit card balances below 35% of the available limit. High balances ongoing will negatively affect your credit score.
     
  • You have late payments, or are behind on making minimum payments
     
  • Legal judgements for non-payment of bills, child support, etc.
     
  • Bankruptcy or consumer proposals

  • There is not enough recent revolving account information on your credit report. Using your credit cards regularly and paying them on time builds your score higher.


So you’ve had a few problems getting the bills paid lately, and you’re wondering what you can do to repair the damage to your credit. Or maybe your credit is OK, but you’d like to make it better. After all, the better your credit, the less you pay in interest and, typically, for insurance.

Here are some tips on how to improve your credit score:

  • Get a credit card if you don’t have one: Don’t fall for the myth that you have to carry a balance to have good scores. Having and using a credit card or two can really build your scores. If you can’t qualify for a regular credit card, consider a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Look for a card that reports to all three credit bureaus.
     
  • Add an installment loan to the mix: You’ll get the fastest improvement in your scores if you show you’re responsible with both major kinds of credit: revolving (credit cards) and installment (personal loans, auto, mortgages and student loans). If you don’t already have an installment loan on your credit reports, consider adding a small personal loan that you can pay back over time. Again, you’ll want the loan to be reported to all three bureaus, and you’ll probably get the best deal from a community bank or credit union.
     
  • Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
     
  • Try to pay your bills in full by the due date. If you aren't able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
     
  • Try to pay your debts as quickly as possible.
     
  • Don't go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score. You often can increase your scores by limiting your charges to 30% or less of a card’s limit; 10% is even better. If you regularly use more than half your limit on a card, consider using other cards to ease the load or try making a payment before the statement closing date to reduce the balance that’s reported to the bureaus. Just be sure to make a second payment between the closing date and the due date, so you don’t get reported as late.
     
  • Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
     
  • Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card. The older your credit history, the better. But if you stop using your oldest cards, the issuers may decide to close the accounts or stop updating them to the credit bureaus. The accounts may still appear, but they won’t be given as much weight in the credit-scoring formula as your active accounts.
     
  • If you’ve been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a “goodwill adjustment” improve the better your record with the company (and the better your credit in general). But it can’t hurt to ask.


Following these steps should help you improve your credit score within months. Once you establish good credit habits, though, and follow them consistently, you will be able to improve your credit score, and then maintain this higher score. You’ll get access to better financial products and services, and even save money over time.

To find out more about credit scores and reports, you can also visit the Financial Consumer Agency of Canada website and download or request a free copy of their guide, Understanding Your Credit Report and Credit Score. This guide provides practical, straightforward information on how to obtain and understand your credit report and score, as well as how to build and maintain a good credit history.

To find out your credit score, contact Canada's two most popular credit-reporting agencies: Equifax Canada and TransUnion Canada. These agencies can provide you with an online copy of your credit score as well as a credit report - a detailed summary of your credit history, employment history and personal financial information. (You can request your credit report by mail for free but your score is not included. If you request your credit report online a fee is charged and your credit score is included.) 

Are you planning to buy a house? Shopping for a mortgage can be confusing, the product features vary significantly. Having sold real estate in Whitby and the Durham Region for over 25 years, I can help you with the buying process. If you wish, I can refer you to a mortgage specialist that can explain the products and help you choose the right mortgage product. Try out my Mortgage Calculator and contact me today! 

Randy Miller
Broker of Record

Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby

905-430-1800

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low mortgage rates

Nearly half of Canadians are planning to buy a home in the next five years, survey says. More than 15 per cent are saying cheaper mortgage rates will allow them to make the purchase sooner than expected.


On 1 February 2015 The Globe and Mail reported: Younger Canadians, who are struggling with far more debt than their parents did at the same age, are the most likely to respond to falling rates. More than a fifth of millennials told a Bank of Montreal home buyers survey that they have shortened their time-frame for buying a home because of lower rates and 75 per cent said they were planning on making a purchase within the next five years.

Regionally, the demand among buyers is strongest in Ontario and Atlantic Canada, where the combination of low interest rates and cheaper oil prices are poised to put more money in the pockets of consumers. Nearly a fifth of residents told pollsters that they would speed up their home purchase because of low interest rates.

In contrast, just 13 per cent of residents in Quebec and 12 per cent in Alberta said lower rates were having an impact on their buying decisions. Plunging oil prices have made Alberta consumers more cautious about jumping into the housing market this year, while a high vacancy rates and a glut of newly built condos in Quebec is pushing more potential first-time buyers into the rental market, according to Desjardins Group.

Mortgage rates have been falling since last week, when the Bank of Canada shocked markets by cutting interest rates by 25 basis points ( a basis point is a hundredth of 1 per cent.) Lenders soon followed, with major banks dropping five-year fixed rates mortgages to as low as 2.84 per cent and this week cutting their prime rates by 15 basis points, which quickly pushed variable-rate mortgages among the Big Six banks as low as 2.25 per cent.

Many analysts had predicted that interest rates would rise this year, so the central bank’s unexpected decision to slash rates is widely expected to reignite the country’s cooling housing market. “Given the negative impact of lower oil prices on the Canadian economy, interest rates are likely to remain low for some time, supporting home sales, especially in Vancouver and Toronto where affordability is an issue”, said BMO senior economist Sal Guatieri.

But with mortgage rates falling only slightly and more Canadians telling the BMO survey they were planning to use lower rates to pay down their debt rather than load up on new ones, cheaper rates are expected to have a modest impact on the housing market.

Shortly before the Bank of Canada cut its target overnight lending rate, more than half of Canadians told an earlier BMO poll that cheaper rates would make them more likely to buy a home, though most said the drop would need to be 10 per cent or more to have a significant impact on their buying plans.

Source: Tamsin McMahon, The Globe and Mail

If a move is in your future, let’s sit down and talk about your plans. Contact me today!

Randy Miller
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby
905-430-1800


Visit my blog: https://whitbybrooklinhomes.wordpress.com/

Whitby Brooklin Homes

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Randy Miller
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby

905-430-1800

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Randy Miller
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby

905-430-1800

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Rent vs Own

According to a survey of 1,300 millennials released this week by EliteDaily and Millennial Branding, nearly six in 10 millennials (59%) say they’d rather rent a home than buy one, with just one in four saying they are either very or completely likely to purchase a home in the next five years. A decision that could cost them more than $700,000 over the course of their lives.

(This anti-home-buying trend can already be seen: Currently, only about one in four millennials own a home, down from about one in three in the mid-70s and early 80s, according to data from the Demand Institute.) That’s “bad news for the real estate industry,” the report concludes.

The reasons for this sentiment are many. More than six in 10 feel they simply can’t afford it, the survey revealed (whether or not they actually can’t afford it is another question entirely). Plus, millennials tend to marry and have children later (two events that often inspire home purchases) and are a generation that doesn’t like feeling stuck in one place, says Dan Schawbel, the founder of Millennial Branding.

Whatever the reason, this decision may be a costly one. “In most markets it is still cheaper to buy than to rent [each month]” — even when you factor in the insurance and property tax payments, in addition to the mortgage payments, says Daren Blomquist, vice president of RealtyTrac. And because interest rates are so low, now is a good time to buy in many markets — at least if you plan on staying in the home over the long term (Blomquist says that, as a very rough rule of thumb, if you don’t plan on staying in the home you are buying for at least five years, it may make sense to rent instead of buy).

Plus, you’re working toward owning an asset when you buy — that’s not the case when you rent. Considering that the median home in America costs $190,000 and historic annual home price appreciation is around 3%, according to data from RealtyTrac, a millennial who bought an average home today (and put $19,000 — that’s 10% — down) with a 30-year fixed rate mortgage at 4% would outright own a home worth $426,000 in 2045, and pay a total of roughly $373,000 for it (mortgage, taxes and insurance included) — a difference of $52,000. Plus, after 30 years, the person could live rent-free — a compelling prospect for retirement.

If that same millennial rented — let’s assume he pays $1,312 a month in rent this year (which is the average fair market rent for a three-bedroom nationwide, according to RealtyTrac) — and his rent appreciates at a rate of 2.7% a year (the average increase over the past decade, RealtyTrac says), he’ll end up shelling out nearly $717,000 in rent over that 30-year period — all without an asset to show for it in the end. Of course, he can cut that by having roommates, but at some age, he’s probably going to want out of the roommate game, unless it’s a spouse or love interest.

That said, many millennials will likely rent now but buy a home down the road. But waiting to buy has its costs, too — interest rates and median home prices are likely to rise down the road. At current rates of appreciation, in 10 years the average home (now priced at $190,000) would be selling for about $249,000. If interest rates return to their historical norm (from over the past 15 years) of 5.6%, a monthly house payment (including mortgage, taxes and insurance) on a $249,000 home would be $1,574 a month, a 52% increase over the $1,037 house payment for a median priced home now; plus, over that 30 years, you’d pay a total of $566,640 (assuming you put 10% down) for a home worth $558,356 at the end of that period. “In this scenario you wouldn’t come out positive on your investment in the property until a year after the mortgage was paid off, in 2056 — at which point the home would have a projected value of $573,608,” explains Blomquist.

Of course, there are some compelling reasons to rent. You have more flexibility when renting, as you aren’t tied to a mortgage payment, and savvy investors can likely get higher than 3% annual returns elsewhere. And, quite frankly, “if you can’t afford it, don’t buy,” says Blomquist; you don’t want to end up in a situation where you have to foreclose on a home.

By Catey Hill, marketwatch.com

If you are thinking of buying a home in Whitby or Brooklin, or other areas within Durham Region, let me be your personal guide on your journey to home ownership. My priority is to provide outstanding service to you and make you happy by finding the perfect home for you! Contact me today!

Randy Miller
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby

905-430-1800

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Buyers Beware

 

 

When residential properties are for sale and the seller is shown to be a bank, this usually indicates that the owner could not make their mortgage payments and the lender is selling the property to recover the mortgage amount owing. If you are considering making an offer on one of these homes, here are 5 things you need to know: 

1.    The process that most lenders will follow in Ontario is Power of Sale, and not Foreclosure. The main reason is that a Power of Sale can be completed much faster than a Foreclosure. Powers of Sale can be completed generally in 3-4 months, while the Foreclosure process will typically take up to a year to complete. Banks also prefer this method as it permits them to get bad loans off their books quickly and if there is any shortfall, they can immediately sue the original borrower for the deficiency.

2.    Lenders are supposed to try and get fair market value for the property that is sold, so it is not automatic that you will be able to buy the property at a substantial discount. Use a professional buyer agent to make sure you know what this property is worth before making any offer.

3.    The lender will usually contain special clauses in this contract that will be important to any buyer. For example, all appliances will be sold on an "as is" basis, with no warranty, meaning you are out of luck if the appliances are not working when you close. No warranty will be given regarding the room sizes or even the lot size for the property. If there is a tenant on the property, no guarantees are given about the length of any lease or how much the tenant may be paying in rent. If HST is payable, for example if the property had a business running in it before the lender took over, or if it had been substantially renovated, then this extra HST has to be paid by the buyer on closing. Finally, if the original owner comes up with the money before closing to pay off the mortgage, then the deal is over.

4.    In order to deal with the above clauses, buyers should make sure that any purchase is conditional upon a detailed home inspection condition so that everything can be verified, including the condition of the home, the room and lot sizes, and whether there was any business, such as a day care, operating in the home before closing. This could involve discussions with the neighbours as well as well as any tenant that the buyer will be assuming after closing. Regarding the lot size, ask the bank's real estate agent if the bank has any survey relating to the property and if not, check at www.landsurveyrecords.com  or www.protectyourboundaries.ca as there are over 1.5 million surveys available for purchase through these websites to assist you when the boundaries are not certain.

5.    Buyers should attempt to close the deal quickly, once they have satisfied themselves as to all conditions, to avoid having the original owners come back and pay off the mortgage before closing, thus ending the deal.

When you understand what is involved in buying a home from the bank, you should not have any unwelcome surprises either before or after closing.

Story provided by Mark Weisleder BA., LLB

Research, professional knowledge and advice make for good decision-making. Knowledge is power and helps the buyer make the best decisions possible for his family. So it’s important to find the right agent that has experience with sale-of-power properties. Contact me today! I will be working for you every step of the way to make sure that you get what you want.


Randy Miller
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby

905-831-2222

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Here is a great article from Mark Weisleder that might interest you. The Real Estate Council of Ontario did a survey of first time buyers in Ontario and found that one of the top issues that buyers had was they wished they understood the real estate contract and the process involved in buying a home a lot better, before they bought their home. Here are 5 things to know so that you will not be surprised either before or after closing.

1.    How much is the bank really lending me?

When you go to your lender to arrange financing, many buyers wrongly assume that if you are borrowing $300,000, then that is the amount you will receive on closing. Not true. In many cases, the lender may deduct a mortgage processing fee, which can be approximately $250. If the lender is paying your property taxes, they may deduct an amount right off the top in order to create a tax account for you, sometimes up to an additional $1,000. If your closing is for example on January 10, 2015, and your first payment is March 1, 2015, then the lender may deduct in advance interest from January 10, 2015 to February 1, 2015. Finally, if you are using CMHC or Genworth to obtain insurance for your mortgage, for example if you do not have 20% of the down payment, then not only will the premium be deducted from the principal amount of your mortgage, but an additional 8% PST will also be deducted on closing. Buyers often tell me that the PST charge was not explained to them by anyone. Ask your mortgage broker or lender in advance about all of these potential charges so you are prepared for what you will have to bring in on closing.

2.    What does "more or less" mean when they are discussing the frontage and depth of a property, or the square footage?

What this means is that if there is an error in the dimensions or square footage up to 5%, a buyer can typically not complain about it after closing. If the boundary lines matter to you, make the deal conditional on your receiving an up to date survey that demonstrates the actual boundary lines. If the square footage matters, arrange to hire a professional to measure it for you. Most offers contain a disclaimer that the seller does not warrant anything anyways so you need to protect yourself if this matters to you.

3.    The seller told me the counter tops were made of granite but I found out later they weren't; can I sue after closing?

The answer is usually no, since the fine print indicates that if it is not in the Agreement, it didn't matter to the buyer or the seller. Therefore, if anything about the property does matter to you, whether it is any feature or item contained in a listing, be sure to include it in your agreement of purchase and sale as well.

4.    I bought and sold my home on the same day. Even though I was packed up at 1 pm, I could not get into my new home until 6 pm, meaning that I had to pay the movers for an extra 5 hours. Can this be avoided?

This can be a real problem, especially at the end of the month. The safe way to avoid this is to close your purchase a few days early and obtain bridge financing so that you can move when it is convenient for you. The interest you will pay to do this is much less than what you will pay movers to wait around.

5.    I don't agree with the terms of the furnace rental contract. Can I just cancel it?

Unfortunately, the answer is usually no, unless you are prepared to pay a penalty. In the fine print, the buyer agrees to assume every rental contract that is disclosed. Before you sign, ask for the details of any rental contract in advance so that you are aware of what it will cost to either assume the contract and continue making the payments or the cost to cancel it after closing.

When you understand the fine print and the process before you sign any real estate agreement, you should not receive unwelcome surprises later.

By Mark Weisleder 

Purchasing or selling real estate is a complex process and every element of the transaction is best handled by an experienced professional. Don’t take chances, go with proven results and experience. With 25 years of full-time local service in Whitby, Brooklin, Ajax, Pickering, Oshawa, Courtice and Bowmanville, I can make your purchase or selling worry-free. Contact me today!

Randy Miller
Broker of Record
Royal Heritage Realty Ltd., Brokerage
905-430-1800

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Chattels and Fixtures


Here is a great article from Mark Weisleder, a real estate laywer, author and speaker:

 

5 things to remember about chattels and fixtures

The buyer notices that the oven is not working when they do their final home visit, 2 days before closing. Can the buyer refuse to close or hold back money to repair the oven? These are just some of the questions that I receive from anxious buyers during the course of a home purchase.

Here are 5 key lessons to remember:


1. The buyer cannot refuse to close a real estate deal if an appliance is not working, or if there are minor damages on the property, unless the contract says so. What the standard real estate contract says is that the buyer can only refuse to close if there has been substantial damage to the property before closing. This would cover a house burning down or a major flood before closing, but would not cover a cracked window or appliance that is not working.


2. The buyer or the buyer lawyer is also not permitted to decide on their own to hold back money to complete any repairs, unless the contract says so. In my experience, sellers rarely agree to any clause in an agreement that permits a buyer to hold back money, for example, to make sure that the seller has completed any required repairs before closing. The problem is that in practice, buyers will typically say that they are not satisfied with the repairs and the holdback money cannot be released to anyone.


3. Here is my advice to settle repair or damage issues: get an estimate for the damage and then have your lawyer send it to the seller lawyer, offering to just settle the matter by the seller either fixing the problem before closing or the seller providing a credit equal to the estimate and the buyer fixes it themselves after closing. I am usually able to work this out with seller lawyers before closing. Unfortunately, if there is no settlement, there is no automatic right to hold back money and the buyer will be required to sue the seller in Small Claims Court after closing to get their money back. This is not a good solution for anyone, because of the time it takes to go to court to resolve this. Be reasonable and solve your problem.


4. What if the oven breaks down 2 days after closing? Unfortunately, the way the contract is written, the buyer does not get an extended warranty. The seller will typically only warrant that appliances and home systems will be working on closing, not after closing. Make sure that even if you are not moving in until a few days after closing that you go to your home immediately after closing and check to make sure that everything is working properly. If anything is not working or there is a damage, have your lawyer immediately contact the seller lawyer the next day about your issue. Also consider buying after sale insurance protection to cover your home systems and appliances. Canadian Home Shield is a company that offers this type of protection at a reasonable price.


5. Little things matter. If your seller is removing a chandelier, make sure they are required to replace it with a standard light fixture so you do not walk into a dark home on closing. If your seller is removing a TV bracket from the wall, make sure that they are required to fill in any holes that are created. Make sure you are to be given 2 full sets of keys, FOBs if a condominium, garage door openers and mail box keys. If the agreement is silent, the seller may only get you one set and it is costly to obtain a duplicate set, in most cases.


When you understand the rules about chattels and fixtures and properly protect yourself, you should be able to minimize any problems that arise after closing.

 

By Mark Weisleder

Randy Miller 
Broker  
Re/Max Rouge River Realty Ltd., Brokerage  
905-668-1800 or 905-427-1400


 

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Today I found an interesting blog article about 'Bidding Wars' which I want to share with you. It tells the story of a couple who tried to find their dreamhome in Toronto and all the bidding wars they found themselves in. Bidding wars are a seller's dream but can be a buyer's nightmare...

Cait: Walk us through your first bidding war. What happened?

KL: The first bidding war we got into was for a condo, which is very rare; this is when we realized how competitive the family-friendly condo market was in Toronto. Generally, it’s a good idea to see a home at least twice: once privately (so you can look at it in-detail) and again at the open house (to see how many people show interest in the property). However, with this first property, offers were accepted anytime and there were three offers on the first day it was listed.

You can usually submit your offer 1 of 3 ways: at the property itself, at the listing agent’s office, or you can send it in via fax. Most real estate agents will recommend you do it in-person (i.e. not via fax), so you can build some rapport with the listing agent and sellers, as well as be available to change your offer on the spot. For the condo, the listing agent held the offer presentations at her office, which was in Markham – and on a Friday night at 10pm. It was a really strange experience, and our real estate agent said he’d never seen that before, especially for a downtown Toronto condo.

Anyway, as the buyer, you don’t go in yourself. You basically sit and wait, while your real estate agent goes in and presents your offer to the listing agent + sellers. It’s done this way so hopeful buyers don’t get emotional, make rash decisions, etc. and also adds a level of professionalism to the whole experience. But I was literally sitting in a car waiting while our agent presented our offer and then we waited together until all the other offers were presented. After that, the listing agent + seller may decide to accept an offer (in the first round) or choose a few offers that are close and ask if you’d like to improve yours (in a second round). We didn’t make it past the first round.

Cait: Were you disappointed you’d lost?

KL: I was. I’d fallen in love with that condo and had basically already moved in, in my head. Then people tell you “everything happens for a reason” and you kind of roll your eyes at that, especially when you’re disappointed… but it’s true! It’s good we lost that one, or else we wouldn’t have bought the amazing house we have now.

Cait: Did you stop looking at condos after you lost?

KL: No, we still looked at them a bit, but just added houses to the mix. When we did the cash flow analysis on large two-bedroom condos with large corresponding condo fees versus houses, a three-bedroom house was not that much more expensive.

Cait: What was different about the second bidding war you entered?

KL: Once we decided to start looking at houses, I fell in love with the first one we saw – and this is a bad idea! Our real estate agent always told us to see multiple properties, so we wouldn’t make any rash decisions or jump into something just because we loved the “idea” of it. But after seeing so many condos, that first house had everything we were looking for in a condo, and I loved the idea that we could actually afford a house!

This brought us into another highly competitive segment of the market for renovated three-bedroom starter homes. The next house we decided to submit an offer on had an “offer date”, which meant all offers were accepted only on that date. On top of being in the neighbourhood we wanted, the house was nicely updated and had a basement apartment. (Tip: If you see a home that has income potential, be prepared for the bidding war to be extra competitive!)

We registered our offer early, at our real estate agent’s suggestion, because when you do so, the listing agent has to tell you if any bully offers come in. (A bully offer is when someone submits an offer that they think is amazing, in hopes they can buy the house before it goes to a bidding war.) Most of the time, sellers won’t even look at bully offers, because they know they can get more out of a bidding war – but it’s still good to know if any have been submitted, because then you can get a sense of how competitive the bidding war is going to be. In the end, 10 offers were registered on the house, which is high, even for Toronto. All offers were presented at the house itself, which meant there were 10 hopeful buyers + their real estate agents waiting around to present.

Before you enter a bidding war, you and your real estate agent will decide between two different strategies: either go all-in with your “first and best” offer, or bid slightly below it and know that you’d be happy to go up another increment (say $10,000). Typically, if there are a lot of people (and therefore a lot of offers), you’ll want to go all-in with your highest offer. If there are only 2-3 people, though, you may go in lower and know you have some wiggle room. Because there were 9 other people making offers, we decided to go all-in. Our real estate agent thought we had a good offer, but also warned us that it would likely sell for more because of the income potential. (We’re also grateful he was honest and told us not to bid any more than we already had, as he didn’t think the house was worth more.) Like our first bidding war, we didn’t even make it past the first round. And here’s where the numbers may shock people: we went in at $140,000 over asking, and we still lost by $35,000.

Cait: That’s crazy!

KL: Yea, list prices on houses are basically irrelevant in Toronto. Actually, that’s not always true. Most houses are underpriced to spark a bidding war, but once in a while you’ll find a house that’s listed for what the sellers want. When you see something that’s accurately priced, you freak out and mentally add like $100,000 on top of that. It takes time and a lot of viewings to figure out what a house is worth, which is why it’s really important to not fall in love with the first place you see. Plus, if there’s one truth to the Toronto housing market, it’s this: a house is worth whatever amount a buyer is willing to pay.

Cait: Are you happy you lost the second bidding war?

KL: We would’ve been happy if we’d won, but it’s also fine that we lost. Looking back, the house was on a busier street, it didn’t have great curb appeal, the upgrades weren’t done exactly to our taste, and my partner actually wasn’t keen on having a basement apartment because he didn’t like the idea of having a stranger living in our house. We definitely weren’t willing to pay $35,000 more for it, even with income potential. But if our offer had won, we would’ve been ahead on a monthly cash-flow basis, compared to the house we ended up buying.

Cait: Let’s talk about the third and final bidding war you ended up in, then. Walk us through what happened.

KL: By the time we went into this one, we had built up the right mentality for bidding wars. After losing a couple bidding wars already, you can’t help but feel defeated, and you’re not exactly hopeful the next one will be a success. This mentality is both good and bad. It’s good because it prevents you from getting attached, and it helps you map out your plan from a strategic standpoint vs. an emotional one. But it’s a little depressing, too! After seeing so many homes, and losing two bidding wars already, I was emotionally exhausted and didn’t have any hope that we’d actually win this one – but we wanted to try.

We saw the property multiple times, first privately and then again at the open house. When we were at the open house, we saw a lot of foot traffic, so we knew it would be another competitive situation. I told you (and showed you) all about the house last week and we obviously loved it. I could tell my partner really loved it, because he upped our budget by quite a bit in the end. I also think we’d also just gotten to the point where we had to decide to go all-in – like really all-in, with as much as we could – because we just wanted to buy a house and move on with our lives.

This time, there were 14 offers! The listing agent gave every real estate agent a 5-minute slot to present, so our real estate agent and I (and Kingston!) went for a walk around the neighbourhood during that time. We didn’t feel great about our offer, this time, just because of how many offers there were. But less than 2 hours later, we got a callback saying that ours was 1 of 6 offers that were extremely close to each other, and asking if we had any room to improve.

When you go into the second round, you can do one of two things: leave your offer as-is, or improve it. Since there’s a chance your original offer was the highest one already, you can take the gamble and choose not to increase it. But we decided to improve our offer, because we really liked the house. Thirty minutes later, we got another callback saying that ours was 1 of 3 offers that were extremely close, and asking if we could improve our offer yet again. (A third round!) With the help of our agent, we were able to improve our offer a little bit again. The sellers also asked if we could move up the closing date by 2 weeks, which was no problem for us, because we were renters (didn’t have another house to sell first) and could move anytime. The date is what helped seal the deal, because we won!

Cait: What conditions did you release in your offer?

KL: When you enter a bidding war, you need to make a clean offer (no financing or home inspection conditions) or else there’s little-to-no chance you’ll win. So we released both, and decided to use the seller’s home inspection.

Cait: What are the risks involved with releasing both conditions?

KL: You usually don’t need to get a home inspection on a condo in Toronto – at least not new ones – so we felt fine about the first one. But for the houses, we just had to read through and trust that the seller’s home inspection was accurate. Some people still feel more confident commissioning their own inspection, but that can get expensive when you end up participating in multiple bidding wars.

Source: http://www.ratehub.ca/mortgage-blog/2014/10/team-case-study-on-winning-and-losing-bidding-wars/

 

If you find yourself in a bidding war for the house of your dreams, prepare to be flexible and accept that the seller is in control. How much the property is worth depends on how much the buyer is prepared to pay. In a bidding war, I can help you determine how much the house is really worth cause the last thing you want is to over-pay for a house. I'm an experienced real estate agent who knows the market and I can help you get the house of your dreams. So, contact me today!  

 

 

Randy Miller 
Broker  
Re/Max Rouge River Realty Ltd., Brokerage  
905-668-1800 or 905-427-1400

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House of Horror

 

Mark Weisleder, real estate lawyer, author and speaker, on how to stay out of trouble when buying a house:

Make sure your lender has done their appraisal of your home

Just because you are pre-approved for financing, it does not mean you will get your money on closing. There are always more lender conditions to satisfy, whether it is income verification, proof of down payment and a satisfactory appraisal of your home, to make sure you didn't overpay. Make sure you satisfy all requirements before you waive any finance condition. I have seen many cases where lenders have refused to advance money on the closing date because of incomplete information or problems with the home's appraisal. This can cause delays in closing, extra moving expenses and in worst case scenarios, a default in the deal where the buyer forfeits their deposit.

Visit the neighbourhood on foot

No seller will tell you about a neighbour from hell or problems with other homes on the street. They may also not disclose problems with their own homes or whether there had been a suicide or murder on the property. When you are doing your home inspection, have someone talk to your potential new neighbours and ask them directly if they saw any repair trucks at the home you are interested in, and whether there may be some strange people living nearby. It also helps to work with a real estate agent who is familiar with that neighbourhood as well, to avoid any surprises after closing.

Choose a home inspector carefully

The home inspection is a critical part of the process, so do your research. Make sure the company is registered before retaining them. The Ontario Association of Home Inspectors is a self-regulating body that defines qualifications for home inspectors, and grants the designation RHI, or Registered Home Inspector, to qualified practitioners in Ontario. Most inspection firms have a limitation of liability clause, which states that if they miss something that costs you money, they are not responsible. Ask the inspection company if they have ever been sued by a buyer. Also ask them whether they carry insurance in case they do get sued. Remember that home inspectors cannot see behind walls. In older homes especially, it is worth considering paying extra to check for moisture behind the walls, termites and drainage issues.

Go to City Hall

Visit your local building department and find out if any new developments are planned. New development may increase property values but also increase traffic. Check to see how many owners have applied for minor variances, to either build homes or additions that are larger than the by-law permits. This gives an indication of the future direction of this neighbourhood.

Include everything you expect to receive on closing

There is no such thing as too much detail. Insert clearly everything you expect to receive on closing, including window coverings, drapes, mirrors, closet organizers, TV brackets, garage door openers and even 2 sets of keys and FOBs in a condominium. If the seller wants to remove the chandelier, make sure they install a cheaper fixture before closing, so you do not enter a dark house when you move in.

Basement apartments must be legal

If the home contains a basement apartment and the income is important to you, make sure that it legally complies with zoning and the fire code by-laws. If it doesn't, then all it takes is one complaint from a neighbour and you may be forced to spend thousands of dollars to make it comply after you buy.

Check about your insurance premium early

Find an insurance agent right away and if possible, check what it will cost to obtain insurance as soon as you sign your agreement and before you waive any conditions. An insurance agent can check the history of claims in the neighbourhood and can let you know about claims for sewage back-ups or vandalism. If it has old knob and tube wiring, or the place used to be a grow house, you will have difficulty arranging insurance. This is important information that any buyer should have before deciding to waive their conditions and complete the deal.


By following these steps, you can avoid horrors after closing.


Purchasing or selling real estate is a complex process and every element of the transaction is best handled by an experienced professional. Don’t take chances, go with proven results and experience. Contact me today, I can make your purchase or selling worry-free.


 

Randy Miller 

Broker  

Re/Max Rouge River Realty Ltd., Brokerage  

905-668-1800 or 905-427-1400


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