Promotional/Brochure, December 2012
BLU BUYER’S GUIDE
Buying a home is fun and exciting. It can also be nerve-wracking. Having one of our Blu Realty agents working at your side will ensure that your best interests are looked after, and that your home-buying experience is happily memorable. Blu will help you find exactly what you’re looking for, and we’ve prepared this guide to help you streamline the process and avoid pit-falls.
1. Make Sure You’re Ready to Buy
If you’re thinking of buying a home, you’ve taken the first smart step by contacting Blu. But there are three things that have to be ready: You, Your Bank Account and the Real Estate Market.
Let’s talk. About what you want and what you need. We’ll help narrow your focus, find options, and ensure that you are ready to take the plunge. Plunge? Yes, it’s a big deal. There are sacrifices to make, and your home will require constant care. But it’s worth it—it’s what pride of ownership is all about.
Your Bank Account
Your first home will be the biggest financial obligation you’ll ever face. You need to have a down-payment, your debts should be managed, and you don’t foresee any issues with your source of income.
Markets go up, markets go down, and even the smartest experts can’t accurately predict when a market will peak or bottom out. But this is a long-term investment: if you choose a home that you can afford, and that meets your needs, you’ll enjoy living in your investment as it grows in value.
2. Decide Where You Want to Live
Our city has many diverse neighbourhoods. You may be attracted to the city centre; the prices are higher, but you’ll be able to walk everywhere. Or you may want to get more for your money by moving away from downtown. Maybe you want a quiet area, maybe you want a yard, or you want to be near a specific school. Visit the various city sectors and decide which ones are right for you. Narrowing it down in advance will save time and allow you to focus your search.
3. What Do You Want?
In real-estate speak, we refer to ‘Needs’ and ‘Wants’. ‘Needs’ are the essential things, as in number of bedrooms. ‘Wants’ are things you’d like to have—like a double-car garage.
Make lists. Needs and Wants. Must-Haves and Absolutely-Nots. As you make these lists, think about your lifestyle. Along the way, you’ll further narrow your criteria. Your strategy is to find a home in your price range, that fulfills all or most of your ‘needs’, as many of your ‘wants’ as possible, and in a neighbourhood you like.
There are many different types of homes to choose from. Here’s a quick run-through:
Single-Family Detached: The house is not attached to the house next door.
Semi-Detached or Linked: Two houses share a common wall.
Duplex: A building zoned for two families (a Triplex is zoned for three, Fourplex for four).
Townhouse: Also known as Terrace or Row Housing. Several homes, sharing walls, are joined in a row.
Condominium: You own 100% of your unit, plus a share of the common areas. Common areas include plumbing, electrical systems, hallways and elevators, and may include things like party rooms and gyms.
Loft: This is similar to a condo, but the design is open-concept and/or has exposed bricks and beams.
Live/Work: In some cities, this can still mean that you are living above your own retail business. Nowadays, though, it usually means that you are using at least one room of your house as an office or studio, and you run a business from that area
New or Pre-Loved?
A new house is just that. Everything is brand new and you just move in. On the other hand, not only do older homes have charm and character, but the previous owners will likely have made improvements and up-grades.
In both cases, of course, inspections are essential. ‘New’ doesn’t always mean ‘perfect’, and older homes can sometimes have a little too much character.
Building Your Own
If you want to build your own home, know your land. That means any and all restrictions on it, its neighbourhood, its history and its physical characteristics. Once you’ve chosen your design, know your builder—check references and visit other homes built by the same company. Have your Real Estate Advisor and/or lawyer review everything before you sign anything. While your home is being built, stay on top of the process with regular inspections and checks of time-lines and budgets. And remember that you have a legal right to make a full inspection of the house before you accept it as complete.
4. Choose Your Real Estate Advisor
The real estate market is not for do-it-yourselfers, and a good agent is worth his or her weight in gold.
Naturally, we think you should go with a Blu advisor. But if you’re reading this in a city where there is no Blu advisor, you can get referrals from friends and family members, go to Realtor.ca, meet agents at open houses, or just jot down numbers from lawn signs.
Then interview your prospective advisor. Make sure that you can establish a rapport—you don’t have to become instant best friends, but you need to see a friendly feeling right away, and you need to be able to communicate easily. Then ask questions.
Top Ten Questions to Ask When Hiring a Real Estate Advisor
1. How long have you been in the business?
A newly-licensed advisor can do a wonderful job and will have up-to-date training, but practical experience is invaluable.
2. What is your average list-to-sales-price ratio?
A listing agent should hold a track record for negotiating sales prices that are very close to list prices.
3. How will your marketing plan meet my needs?
You want to know how the agent will sell your home—where and how he or she advertises. Ask to see printed materials and links to on-line marketing activities.
4. Will you provide references?
Ask for a list of references, then call those references.
5. What separates you from your competition?
Key phrases to listen for: ‘assertive’, ‘available by phone or e-mail’, ‘analytical’, ‘able to maintain a good sense of humour under trying circumstances’.
6. May I review documents that I will be asked to sign?
A good agent makes forms available to you before you are required to sign them. Ask to see your agency disclosure, seller disclosure and listing agreement.
7. Can you help me find other professionals?
Your agent should be able to provide a list of service providers who can help with things such as home inspection, legal advice and financial advice. If you see the term ‘affiliated’, ask for an explanation—this could mean that the agent is getting compensation from the people on his/her list. If that’s the case, the referral is biased and not reliable.
8. How much do you charge?
Real estate fees or commission are negotiable and vary from broker to broker. Negotiate the best deal.
9. What if I’m unhappy with your service?
You may find that your agent is not performing to your standards. You may not get along. Ask if you can cancel your agreement if you want to.
10. What haven’t I asked you that I need to know?
Pay close attention to the answer to this question. There is always something else you need to know.
Once you’ve chosen your advisor, you will sign a contract. It will specify the advisor’s duties and obligations, and will spell out the nature of your relationship. That relationship will likely be Non-Agency, Dual Agency or Single Agency.
In the case of Dual Agency, the advisor represents the buyer and the seller, and all parties consent to this. In a Non-Agency relationship, the advisor can work with you, but cannot give you advice. Also, in this case, nothing you say is confidential.
Most people prefer the Single Agency relationship, where your advisor represents you alone, and is required to act only in your best interests. Anything you tell your advisor is confidential, and your advisor has an obligation to disclose to you any and all information related to the transaction.
What to Expect from Your Real Estate Advisor
Your advisor will perform many essential functions. First of all, he or she will become an expert on your wants, needs and financial parameters, and will make sure that you view only those homes that are right for you. Your agent is a resource for comparing homes and neighbourhoods, will be privy to non-public features of the MLS System, and will be able to make appointments and answer your questions as you walk through potential homes. He or she will also provide up-to-the-minute information on financing, explain your mortgage options, negotiate with sellers, smooth out conflicts, and draw up contracts.
A Note on FINTRAC
FINTRAC is the federal agency responsible for administering Canadian legislation and regulations concerning money laundering and terrorist financing. Your advisor is required to complete a Client Identification Form, and ask you for verified ID such as a driver’s license or passport. You can find out more at http://www.fintrac-canafe.gc.ca.
And a Note on Sticking With One Advisor
Some people think that they’ll get a better deal if they have more than one agent. The opposite is true. All agents have access to the same property listings. And scattering your time and energy among multiple agents will work against your goal of finding your best home.
5. Hire a Lawyer
There are many legal steps, and piles of documents, involved in the transfer or property ownership. You need someone to translate the ‘legalese’ and ensure that your interests are protected. Even if pit-falls like fraud, government legislation quirks, zoning issues or un-paid taxes don’t come up, lawyers will still make the transfer of the home a smooth one.
To find the right lawyer, get referrals from people you know, or from your Real Estate Advisor. Ask your prospective lawyer about fee structure and get an estimate on other costs. If you don’t understand something, ask. And don’t be intimidated—it is a lawyer’s job to explain legal jargon and be helpful to his or her clients.
6. Sell Your Current Home
Few people can hold onto two homes at the same time. You’ll need to sell your current home and here’s a quick overview of things you need to know.
Buyer’s & Seller’s Markets
When lots of people are shopping for homes, but there are few homes for sale, it’s a ‘Seller’s Market’. When there are lots of homes for sale, but few people buying them, it’s a ‘Buyer’s Market’. However, if you’re selling one home to buy another, you don’t have to worry about the market. Unless you’re making a huge category change, the price that you get for your existing home will be relative to the price you pay for your new home.
It is true that winter sales tend to be slow. That means that winter is a good time to make offers. If someone has to sell a house in January, and there are fewer buyers looking, your negotiating advantage rises. In spring, sales tend to be brisk. This means that there’s more competition for those houses that are for sale—and that makes it a good time to accept higher offers.
If You Need to Sell Fast
This is where your Real Estate Advisor becomes your second-most valuable asset. He or she will help you to establish the right price, and make your home look attractive—without making you look desperate.
Buy First or Sell First?
The eternal question. Many people are able to time their sale and purchase to happen on the same ‘closing date’. As a buyer, you can make your offer ‘conditional’ on the sale of your existing home, so you’re not paying for the up-keep of two homes. Or, when selling, you can try to extend the ‘closing period’ to give yourself more time to find your next home.
7. Work Out the Finances
Figure Out What You Can Afford
Before you start looking for your dream home, you have to find out how big that dream can be. A home is the most expensive thing you’ll ever buy, and there are lots of additional expenses to consider. It is these extra costs that can leave people ‘mortgage-poor’ (where the cost of home ownership leaves them little else). So you need to think ahead.
When buying a home, there are five main one-time costs: Down-Payment, Legal Fees, Title Insurance, Inspection Fees, Property Transfer Fees and Taxes. Depending on your circumstances, there is a sixth one-time cost—moving. If you have a large household, and/or are moving from a long distance, this expense can be significant.
After that, there are five monthly costs: Mortgage, Utilities, Maintenance, Insurance and Property Taxes. How much of your monthly income these costs take will determine the size of your mortgage, i.e. how much you can borrow. We figure this out in one of two ways:
Gross Debt Service Ratio (GDSR) Calculation:
This lending principle states that your monthly housing cost should not exceed 32% of your gross monthly family income.
Total Debt Service Ratio (TDSR) Calculation:
Under this lending principle, your monthly housing cost and payments on all of your other debts (including loans, credit cards, and lease payments) should not exceed 40% of your gross monthly income.
Our will let you easily estimate your maximum affordable mortgage payment of principal and interest. Just enter your monthly income and expense amounts, and the calculator will do the rest. Then, use our Mortgage Calculator and your monthly payments, showing principal and interest, will be figured out for you.
8. Arrange a Mortgage
Who to Talk To
There are hundreds of banks, credit unions and other lenders who would love your monthly mortgage payments. So talk to everybody—your banker, other banks and people you know. And talk to Blu—we have a lot of knowledge about mortgages and can offer great advice.
But you may find that your best resource is a Mortgage Broker. Mortgage brokers make their living by finding low rates, and they usually don’t get paid unless you sign your mortgage through them. That motivation translates to getting you the best deal.
Your Best Mortgage Could Be the Seller’s Mortgage
Often, you can take over, or ‘assume’, the seller’s mortgage. If the seller is locked into a lower interest rate than you can get, it’s a great idea.
There are three items to note:
Mortgage Term: This is the length of time of your bank loan—it’s usually five years. At the end of the term, you negotiate a new term, and new rates.
Amortization: This is the length of time it will take to pay off the mortgage, and it often runs to 25 years. The longer your amortization, the lower your monthly payments (and the more interest paid).
Interest Rate: Interest is the cost of borrowing money; the rate is a percentage of the total loan amount.
Using Blu’s , check the difference between borrowing $100,000 at 6% for 25 years, and at 9% over the same amortization period. At 6%, your total interest is $91,940.69; at 9%, $148,391.15. That difference of $56,450.46 affects how much you can borrow, and illustrates how important it is to find the best possible interest rate for your loan.
You want your mortgage to be as small as possible, which means making the biggest down-payment possible. So set aside as much money as you can. And think ahead: Does your new home need repairs? Do you want to renovate? Do you need appliances? Furniture?
Your Interest Rate: Fixed or Variable?
With a ‘variable’ mortgage, your rates fluctuate with the bank rates. With a ‘fixed-rate’ mortgage, you ‘lock in’ at a set rate for a set period. But if you lock in for five years and rates goes down, you’re stuck paying too much for five years. If rates steadily climb, you’ll save a bundle. Blu can offer good advice on this tough question.
The Home Buyers’ Plan – A Little Sweet Relief
If you’re a first-time homebuyer with money in an RRSP, you can withdraw up to $25,000 without paying income tax. If your spouse is also eligible, that’s $50,000. Ask Blu how to best take advantage of this plan.
Mortgage Application Check-List
Here’s the information you need to supply to your lender:
Letter of Employment Confirmation: state your position, salary and length of employment.
List of Assets: cars, stocks, bonds, GICs etc.
List of Liabilities: car payments, students loans, credit card debt etc.
Social Insurance Number
Chequing Account Number
Lawyer’s Contact Information
Details about the house you want to buy
Budgeting for Extra Costs
There are lots of extra costs involved. You need to consider these, because they will add up.
Application Fee: Some lenders charge a fee to process your application. Ask to have it waived.
Appraisal Fee: Your mortgage lender may want your new home appraised by a professional, and will often pass that cost onto you. Ask if you can have that fee waived.
Mortgage Broker’s Fee: Your mortgage broker may charge a fee that’s payable on your closing date. Ask your broker, in advance, what that fee will be.
Land Survey Fee: Lenders may require a survey of your property, even if it’s an existing survey. Ask your lender about this at your first meeting, and check with your lawyer.
Home Inspection Fee: A home inspection is crucial to avoiding surprises and protecting yourself. This is money well-spent.
Home Insurance: Mortgage lenders require you to carry fire and extended-coverage insurance because your home is the security deposit on the mortgage. Often, you can have your insurance payments added to your monthly mortgage payments. But shop around for the best policy.
Title Insurance: This is not mandatory, but it will protect you from all sorts of fraud and potential errors surrounding the title to your land. Ask your lawyer for details.
Legal Fees: You’ll pay your lawyer for his or her invaluable time, plus you’ll pay for ‘disbursements’, i.e. costs involved in title searches, drawing up the title deed, and preparing your mortgage. Ask for estimates.
Adjustments: Your home’s previous owner may have paid property tax or utilities in advance, and he or she will want to be credited for those payments. Your Blu Advisor and/or lawyer will know what might come up.
Maintenance and Utilities: Remember that you will now have more monthly payments. There will be property taxes, and utilities. If your new home is a condominium, there will be monthly fees.
Property Transfer Tax: The amount of this tax varies from province to province. Ask your Blu Advisor, or your lawyer.
The GST/HST and New Homes: Resale homes don’t involve GST/HST, but newly-built homes do. If you intend to live in your new home (instead of renting it out) there is some relief. Consult your Blu Advisor and/or lawyer.
9. Go Shopping
Now your ducks are all in a row. You know what you want and what you can afford. And you have a Blu Advisor at your side to save you time, energy and money.
See What’s Out There
The Wonderful Realtor.ca
have access to an incredible house-hunting tool called the MLS System, which is operated by real estate boards across Canada. You can view the publicly-available information yourself, but your Blu Advisor has deeper access and can start sending you listings of potential new homes right away. Most listings have multiple photos; some have moving 360-degree views. And with the interactive mapping feature, you’ll be amazed how fast and easy it is to zero in on your favourite houses.
Take Another Tour
Go back to the neighbourhoods that you previously identified as desirable. Go during the day, and at night. Note the proximity of industrial areas, railway tracks, airports and flight paths. Look for parks, schools, shopping areas and transit hubs. Jot down the addresses of houses with For Sale signs. If there are Open Houses under way, go inside and look around.
Open Houses are a great way of seeing the homes in your prospective neighbourhood. They will likely be hosted by an agent that knows the house, and the neighbourhood, very well. So don’t be afraid to ask questions.
Note: If you are going to open houses without your Blu Advisor, take some of your advisor’s cards with you. This will keep over-zealous agents from hounding you for information during your visit.
When you have found homes that you want to see, tell your Blu Advisor and he or she will book the appointments for you. (The Realtor Code of Ethics frowns upon clients contacting listing agents directly.)
Don’t let a giant kitchen island or swanky hot tub distract you from your goal of finding a home that meets your needs and fits your budget.
Don’t get carried away by the décor or furnishings. Try to visualize how the home will look once it’s yours—with your furniture, your paint colours, and your lifestyle.
Don’t wear clothing that will make you tired—fatigue affects decisions. Wear light clothing and comfortable shoes that are easy to slip on and off.
10. Make an Offer
You’ve found a home! Congratulations! Now, if you actually want to make it yours, you have to make an offer that the seller will accept.
Preparing the Offer
Seller: The present owners.
Purchase Price: The most important number. Let’s hope the seller goes for it!
Deposit: A cheque you write to the seller or the seller’s broker. This is your way of saying ‘my offer is serious’. The size of the deposit is up to you.
Chattels & Fixtures Included: This is what’s included in the house—the appliances, the draperies, the light fixtures. Be clear about this. Don’t assume that the dishwasher will be there when you move in.
Irrevocability of the Offer: This refers to the length of time you give the seller to consider your offer. It’s usually no more than 48 hours.
Completion Date: This is the glorious day you take possession; usually 30-60 days after signing.
Clauses Particular to the Agreement: Every transaction is unique, and you may want to add conditions that are important to you, e.g. proper home inspection.
Submitting the Offer
You’ve signed on the dotted line and your advisor has given your offer to the seller. Now what? The seller can accept your offer, which is great. Or, the seller can reject your offer. This is not uncommon, but your Blu Advisor will find out why.
The seller may also ‘sign back’, or make you a ‘counter-offer’. In this case, the seller wants to alter some part of your offer—usually the price, in which case he or she will cross out your offered price and write in a higher number, or delete a condition. Then it’s your turn, and you can do the same, or accept the counter-offer. Your Blu Advisor will stick close to you through this process and see you through it.
11. Have the Home Inspected
When you’re buying a home, you need to scrutinize every last detail. Home inspections rarely cost more than a few hundred dollars, and they can help you avoid unpleasant surprises. Your Blu Advisor can recommend several trustworthy home inspection companies.
Make a Conditional Offer Based on a Satisfactory Home Inspection
This is an increasingly standard condition on any resale home. If the seller doesn’t want you to closely examine the home before you take possession, you may want to keep looking.
Hire a Qualified Professional
Make sure your inspector is a member of a recognized professional organization. Ask for, and check, references. You need to know that your inspector has the right training and experience.
What Will Inspectors Check?
Lots of stuff. Plumbing and electrical systems, the roof, visible insulation, walls, ceilings, floors, windows, and the integrity of the foundation. They also check for lead paint, asbestos, mould, outdated and dangerous wiring, and evidence of pests like mice or termites.
Join the Inspection
It’s going to be your home—get up close and personal. If your inspector finds a problem, you’ll learn about it. And, along the way, you’ll pick up maintenance tips from a pro.
Get it in Writing
Your inspection report will summarize the condition of your home. If there’s anything that needs work, the inspector will note an estimated cost for the repairs. That estimated cost will affect your offer.
Home Inspection for a New Home?
As mentioned, ‘new’ does not mean ‘perfect’, and construction quality can vary greatly from builder to builder. In some provinces, repairs and corrections required for new homes may be covered by government or industry-sponsored warranty programs. Bad news doesn’t necessarily mean it will have to cost you. Still, the inspection cost isn’t significant and may be worth it.
12. Close the Purchase
Your offer has been accepted and you can’t wait to move in. But you still have to close the deal. Your Blu Advisor and your lawyer will do most of the closing work. Here’s what you need to do.
Immediately begin satisfying any conditions of the agreement that require action on your part. Your Blu Advisor can fill out the documents stating that the conditions have been satisfied.
Have your lawyer search the property title. This can take a while, so make sure you allow ample time.
Well before closing, make sure that your insurance will be effective on your closing date. Your insurance broker will give you a ‘binder’ letter certifying that you’re covered. You can’t get a mortgage without this letter!
Have your lender finalize your mortgage documents and have your lawyer review them before you sign them.
A day or two before closing, you’ll meet with your lawyer to sign the closing documents. Your lawyer will tell you in advance what certified cheques you’ll need to seal the deal.
13. Organize Your Move
It’s time to move and there’s much to do. Here’s your check-list.
Call at least three moving companies. Get quotes, get references and check those references. We’ve all heard the nightmarish stories, so make sure that your mover is established, reputable and has insurance.
Schedule Your Move
‘Closing date’ may not mean moving date—you may not get the keys to your new home until late in the day. So schedule your actual move for a day, or two, after closing. And try to move on a week-day, and mid-month. Moving companies are busiest on week-ends, and at the beginning/end of each month. You may be able to negotiate a better rate if you move at another time.
Your lawyer will transfer essential utilities like hydro and water, but you’ll have to make the arrangements with the telephone and cable companies.
If You’re A Renter
Give notice to your landlord, or sub-let your apartment. You will have to clean; you may have to paint. Start this process early. Budget the time for it—and, if need be, the cost of hiring someone to do it.
Go to Canada Post and register your change of address. Send out address cards to anyone who regularly sends you mail. And don’t forget to have the address changed on your driver’s license.
Evaluate & Liberate
A new home is a sort of new lease on life. This is a chance to liberate yourself from the stuff you’ve been hoarding for years. If you don’t need it or don’t want it, sell it or give it away. Have a garage sale and/or call around to various charities to see if they’ll pick up furnishings, clothing and appliances
Moving companies will do this, but you will do it best. If you buy your own boxes, and pack yourself, you’ll also save money. Start packing early, label anything that’s fragile and label your boxes by room so the movers will know where to put them.
Breathe? Yes. Because, after you’re un-packed and settled in, you may feel strange urges—to buy a new carpet, get quotes on expanding the deck, shop for stainless steel appliances So stop, breathe and relax. Take the time to adjust to your new budget. Take the time to enjoy, and love, your new home.