Category Archives: first time buyers

First-Time Home-buyer Lessons

 

My husband and I bought our first home three years ago, and I’ll admit we made some mistakes along the way.

Here are 5 hard lessons we learned as first-time homebuyers.

1. We bought a very old house. Before we bought the home, we had it inspected by a reputable home inspector. In his report, he suggested that we have the house’s foundation assessed by an engineer. But we didn’t do that. Why? We were in too much of a rush to buy the house.

Lesson? Pay attention to the inspection report. After living in the home for about a year and a half, I called an engineer who told us a foundation wall had to be replaced–and soon. It wasn’t cheap.

2. Our agent told us that upping our offer by a few thousand dollars would only mean an extra $40, $50 or $60 a month on our mortgage. It doesn’t sound like much, but if interest rates go up spending thousands more on our home will hurt.

Lesson? Once you figure out your maximum price, stick to it. This is one thing we actually did well. In the end our offer was accepted at the price we were willing to pay, but upping our bid could’ve made paying the mortgage a lot tougher.

3. When you’ve been a renter for most of your life, it’s a shock to suddenly find yourself responsible for repairs. We hired a roofer who did a really bad job, and we had to pay another roofer to do the work a second time. Then I had to go to small claims court to try getting my money back from the first one.

Lesson? Shop around before hiring a contractor. I should have paid more attention to a couple of negative online reviews. You can also look up court decisions online to see if other customers have had problems.

4. We were able to put a 20% down payment on our home and had about $10,000 set aside for closing costs, taxes, home insurance and other expenses. It wasn’t enough.

Lesson? Set money aside, then set some more aside. You also need to budget for the unexpected. In the first year, we spent several hundred dollars on a new sump pump after our crawl space flooded. Last year, we spent a few hundred dollars on an exterminator for mice.

5. This past winter, while our foundation wall was being dug up and replaced, I called a real estate agent to talk about possibly putting our house up for sale. I was pretty fed up with the seemingly unending problems and stress. The good news was that our home had gone up in value and we could make a profit. Though we’ll stay put for now, at least we have an exit plan–as long as the housing market stays strong.

Lesson? Have an exit plan. Hopefully these hard-earned lessons can help you become homeowners. Or maybe decide to remain renters. Good luck!

 

Source: Tangerine.ca – by Dominique Jarry Shore Wednesday, July 3rd, 2019

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12 home inspection issues buyers can leverage to negotiate the sale price

Photo: James Bombales

Waiving a home inspection is like purchasing a used car on Craigslist without taking a look under the hood — you’re likely to run into issues down the road. A new survey from the online home improvement marketplace, Porch, reveals that 86 percent of home inspections uncover one or more problems that need to be addressed. While hiring a home inspector will set you back about $377 on average, their expertise could save you from buying a lemon or shelling out thousands of dollars in future repairs.

Prospective homebuyers can use the information provided by a home inspector to negotiate a lower sales price, accounting for the cost of repairs or replacing a feature altogether. Of the 1,000 individuals surveyed by Porch who hired a home inspector, 37 percent submitted a revised offer with help from their real estate agent, saving an average of $14,000 off the listing price of their new home. That’s no small chunk of change!

Here we examine the most-flagged home inspection issues buyers can use to negotiate the best sale price.

Photo: James Bombales

1. Roof – flagged in 19.7% of reports

Roofs with asphalt or cedar shingles have an average lifespan of 20 years whereas metal roofs only need to be replaced every 50 to 75 years. Your home inspector will look for signs of water damage, mold or algae, and take note of any sagging or missing shingles.

2. Electrical – flagged in 18.7% of reports

If you’re looking to purchase a home built prior to the 1950s, you’ll want to inquire about its electrical wiring. Knob-and-tube wiring, which was popular from the 1880s to the 1940s, can cause electrical shocks and fire. Other issues to take note of include exposed wiring, ungrounded wire receptacles and paint on electrical outlets.

Photo: James Bombales

3. Windows – flagged in 18.4% of reports

While broken windows are a pretty obvious spot, your home inspector may conduct a simple test to check for air leaks. However, there’s no guarantee the home owners will agree to repair the window seals — some consider this cosmetic, rather than structural.

4. Gutters – flagged in 16.9% of reports

Your home inspector will want to make sure the gutters are in good working condition, assessing their size, any damage, and how far water is directed away from the house.

Photo: James Bombales

5. Plumbing – flagged in 13.6% of reports

Plumbing problems can quickly add up, costing an unsuspecting homeowner thousands of dollars. With a flashlight in hand, your home inspector will scan for potential leaks, polybutylene piping, DIY projects gone wrong, tree root damage, and more.

6. Branches overhanging roof – flagged in 13.3% of reports

Having an old-growth tree in your front yard might seem like a selling point, but it can actually cause a lot of damage if not properly maintained. Branches can rip off roof shingles, leaves can pile up and clog up your gutters, and heavy limbs can come crashing down into your living room.

Photo: James Bombales

7. Fencing – flagged in 12.6% of reports

Home inspectors will evaluate the condition of a fence that lines the property. But again, this is one of those “choose your battles” situations. Are you willing to risk losing out on your dream home because a few pickets have gone missing? Probably not.

8. Water heater – flagged in 12.2% of reports

While a rickety fence may be no big deal, a busted up water heater certainly is. Home inspectors check for things like water leaks, sediment buildup, corrosion on the pipes, and low water pressure.

Photo: James Bombales

9. Driveways, sidewalks, patios, entrance landing – flagged in 11.9% of reports

Cracks in your driveway or patio are pretty much inevitable. That being said, you’ll want the home inspector to ensure water isn’t seeping into those crevices. If major issues do turn up, you may be able to seek compensation for those repairs.

10. Air conditioning – flagged in 9.9% of reports

According to the Porch survey, most homebuyers negotiate only $500 for AC repairs, but the actual costs are much higher — think thousands of dollars, not hundreds.

Photo: James Bombales

11. Exterior paint – flagged in 9.6% of reports

If the house was constructed before 1979, your inspector will likely conduct a lead paint test. Additionally, if the exterior paint is peeling, some lenders (like the Federal Housing Administration and Veterans Affairs) will not approve the loan due to concerns over health and safety.

12. Foundation issues/cracks – flagged in 8.9% of reports

Home inspectors can look for obvious signs of foundation problems like cracks in basement walls, damaged bricks and uneven floors. If you and your home inspector suspect the problems are serious, you may want to bring in an engineer. But consider it money well spent — foundation fixes can cost $10,000 or more. Gulp.

Source: Livabl.com –  

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Fed unveils First-Time Home Buyer Incentive in Barrie

Fed unveils First-Time Home Buyer Incentive in Barrie 

A federal official unveiled Canada’s First-Time Home Buyer Incentive in Barrie, ON last week.

Adam Vaughan, the parliamentary secretary to the minister of families, children, and social development, said that $1.25 billion has been allocated for the program over the next three years. The program, which will begin on September 2, is expected to reduce monthly mortgage payments required for first-time buyers without increasing the amount they need to save for a down payment.

“Housing affordability is a major issue and a major concern for families,” said Vaughan. “This region has become one of the most expensive in the world and the prices of downtown Toronto are starting to echo up into communities like Barrie, and the success of Barrie itself is also having an impact on housing values and land costs.”

The program will be available to first-time home buyers with qualified annual household incomes of up to $120,000. Under the incentive, the Canada Mortgage and Housing Corporation (CMHC) will provide up to 10% on the purchase price of a new build and 5% on a resale.

Source: Mortgage Broker News – by Duffie Osental 31 Jul 2019

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The Cost of Selling Your Home Without a Real Estate Agent

Everybody likes to save a little money. So when Rossana was ready to sell her condo a few years ago, she figured she could save some cash by selling it herself — without using a real estate agent. After all, her property was in a hot real estate market and she thought: “How hard could this be?”

Rossana, a busy mother of one, had become overwhelmed juggling her daily responsibilities in addition to managing her rental condo. She had grown tired of being a landlord and dealing with a revolving door of tenants — so when the family currently renting it was moving out, she decided that it was time to sell.

In hopes of saving some money, Rossana chose to sell her condo herself instead of working with a real estate agent. She thought: How hard could it be? She figured it would be easy to just hire a company that charges a flat fee to photograph the condo for her and advertising the property online. After all, she could handle the rest of the details herself. Right?

What she quickly discovered was that this approach didn’t work.

Missed Opportunities

“I found the service I used was not the best,” Rossana says. First, she says the service might have turned off potential buyers with unprofessional photos, “Honestly, I could have done a better job if I had done it myself.”

Second, when it came to marketing her property, Rossana says the marketing plan wasn’t aggressive enough to expose her condo listing to a large population of potential buyers. “My condo just didn’t get the same visibility if it would have had on MLS.”

Her condo was not widely promoted, and the service she used was not authorized to advertise on Realtor.ca (also known as MLS), which is many Canadians’ first stop when starting their home search.

Low Buyer Confidence

Rossana found buyers who had real estate agents wouldn’t come to view her property since she was selling it herself. “I think they lacked confidence that the sale would go through, or that it would be a complicated process because I didn’t have an agent.”

While she wasn’t getting a great deal of interest, Rossana still had to be on-site for open houses over the weekends. “I was living at the other end of the city at the time, so the commute was terrible. It was so much work, but I wasn’t getting much traction.”

Less-than Attractive Offers

When offers did get presented, they were far below the listing price. Plus, agents came in very confident with their clients’ offers, and Rossana didn’t feel she had the experience to handle these types of negotiations.

“I felt people were trying to take advantage of me, because I was trying to sell on my own. And I didn’t have the full picture of the market. I didn’t have the background to stand up to those low offers.”

Making the Decision to Hire an Agent

After more than five weeks of trying to sell the property on her own, Rossana decided to list her home with a professional real estate agent, after getting a referral from a friend.

“I immediately saw the difference in having a real estate professional in my corner,” Rossana recalls. “She offered staging, took really nice photos, and her level of professionalism was so impressive. And when there was an offer coming in, she was able to negotiate on my behalf.”

In the end, Rossana sold her condo — about two weeks after hiring an agent — and for a price she was very happy with.

“I really underestimated the amount of time an effort needed to sell a home myself. For anyone looking to sell their home, I highly recommend working with a real estate professional.”

Reasons to Use a Real Estate Professional

Rossana’s experience is a valuable tale for those thinking of taking a DIY approach to selling a home. While there is a cost to selling with a real state agent in the form of commission, the cost to sell without one may be greater.

Here are five benefits to working with a real estate agent:

  1. Market Knowledge. Rossana’s real estate agent knew what comparable condos in her neighbourhood had sold for, and the inventory on the market at the time. This enabled her to have an informed perspective on a reasonable listing price and acceptable end selling price.
  2. Visibility and Presentation. From professional staging to high quality photos, Rossana’s real estate agent presented her home in a highly attractive manner that was appealing to potential buyers. And because she could list the property on Realtor.ca, those looking for properties online could browse the photos and features of Rossana’s condo 24/7.
  3. Administration and Coordination. One of the things that Rossana underestimated was the time commitment required to sell a home privately. Her real estate agent took care of all the showings and open houses, allowing Rossana to be completely hands off until it came time to review an offer.
  4. Professional Real Estate Networks. As an established agent, Rossana’s real estate agent could connect with others working with buyers in the neighbourhood, and present the property to those in her network, further widening the net of potential purchasers.
  5. Negotiation Skills. Rossana’s real estate agent had significant experience negotiating deals and was in a great position to get Rossana the best possible price for her condo — Rossana didn’t have to do any of the negotiating herself.

Thinking about selling your home? Let Rossana’s story be a reminder of the benefits to working with a real estate professional.

Not sure how to find one or what to look for in a real estate professional? Discover Seven Things to Look for in a Real Estate Professional for some valuable tips.

Source: RoyalBank.com – By Diane Amato February 19, 2019
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The 7 Most Common Mistakes Home Buyers Make

 

1
Not Getting Pre-Approved Before You Shop

The more experience you have with buying real estate, the more you’ll learn about the complicated process. Between the confusing terminology and the logistics of buying a house, it’s all-too-easy to make the wrong move or wind up in an unwise investment. If you’re a first-time home buyer, skip the buyer’s remorse by learning about some of the most common pitfalls and how to avoid them. To find out what not to do, we reached out to Tracie Rigione and Vicki Ihlefeldthis link opens in a new tab, Vice Presidents of Sales at Al Filippone Associates/William Raveis Real Estate in Fairfield, Connecticut, to get their best advice.

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What the new mortgage rules mean for homebuyers

mortgage math

Today, the Office of the Superintendent of Financial Institutions (OSFI) introduced new rules on mortgage lending to take effect next year.

OSFI is setting a new minimum qualifying rate, or “stress test,” for uninsured mortgages (mortgage consumers with down payments 20% or greater than their home price).

The rules now require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada (presently 4.89%) or 200 basis points above the mortgage holder’s contractual mortgage rate. “The main effect will be felt by first-time buyers,” says James Laird, co-founder of Ratehub.ca. “No matter how much money they put down as a down payment, they will have to pass the stress test.” The effect of the changes will be huge, resulting in a 20% decrease in affordability, meaning a first-time homebuyer will be able to buy 20% less house, explains Laird.

MoneySense asked Ratehub.ca to run the numbers on two likely scenarios and find out what it would mean for a family’s bottom line. Here’s what they found:

SCENARIO 1: Bank of Canada five-year benchmark qualifying rate

In this case, the family’s mortgage rate, plus 200 basis points, is less than the Bank of Canada five-year benchmark of 4.89%.

According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 20% down payment at a five-year fixed mortgage rate of 2.83% amortized over 25 years can currently afford a home worth $726,939.

Under new rules, they need to qualify at 4.89%
They can now afford $570,970
A difference of $155,969 (less 21.45%)

SCENARIO 2: 200 basis points above contractual rate

In this case, the family’s mortgage rate, plus 200 basis points, is greater than the Bank of Canada five-year benchmark of 4.89%.

According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 20% down payment at a five-year fixed mortgage rate of 3.09% amortized over 25 years can currently afford a home worth $706,692.

Under new rules, they need to qualify at 5.09%
They can now afford $559,896
A difference of $146,796 (less 20.77%)

If a first-time homebuyer doesn’t pass the new stress test, they have three options, says Laird. “They can either put down more money on their down payment to pass the stress test, they can decide not to purchase the home, or they can add a co-signer onto the loan that has income as well,” says Laird. The stress test will be done at the time of refinancing as well, with one exception. “If on renewal you stay with your existing lender, then you don’t have to pass the stress test again,” says Laird. “However, if you change lenders at mortgage renewal time, you may have to pass the stress test but it’s not crystal clear now if this will be the case for those switching mortgage lenders.”

So if you’re a first-time homebuyer, it may mean renting a little longer and waiting for your income to go up before you’re able to buy your first home. Alternatively, some first-time buyers will buy less—maybe a condo instead of a pricier detached home. Or, the new buyers may opt to get a co-signer to qualify under the new rules.

But whatever you do, if you’re a first-time buyer, make sure you understand what you qualify for using the new regulatory rules, and get a pre-approved mortgage before you start house-hunting. “This shouldn’t be something that shocks you partway through the home-buying process,” says Laird.

And finally, do your own research and run the numbers on your own family’s income numbers. You can use Ratehub.ca’s free online mortgage affordability calculator to calculate the impact of the mortgage stress test on your home affordability.

Source; MoneySense.ca – by   

 

 

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The best way to help your child buy a home – The complications and benefits of gifting funds to your son/daughter to buy a condo

Q: I am in the process of helping my daughter buy a condo, here is what we have done so far:

We signed the mortgage with her as primary and me as co-signer,  I will be giving her the down payment and she is going to be living there and she will be the one paying the mortgage and all expenses.

My question is what would be the best way to do this transaction looking it at both a legal and tax perspective. From the tax perspective: How should I arrange/declare that I am gifting her the down payment on this condo? And when do we claim the tax breaks for her as a first time buyer? Would that be at time of paying the lawyer for land transfer etc.? Also, I would like to still be able to have some room on my credit as to buy another property so we were thinking if her owning 90% of the condo and me keeping just 10% would work for this purpose. According to the lawyer, we both have to have some percentage assigned because we are both on the mortgage.

From a legal perspective, we are thinking about joint tenancy as the best way to protect the asset if one of us passes away unexpectedly.

My intention is really just to help her “fly on her own,” but with all the legal and tax implications, we’d really like to do it in the best way possible.

—Claudia

A: Hi Claudia. First, let me congratulate you and your daughter! It’s wonderful that you are in a financial position to help her with the purchase of her first property.

It appears you’ve given the current and future implications of this decision a great deal of thought.

I can only assume that your lawyer has asked for a percentage split on the property because you are co-signing the mortgage and because you are opting to have both you and your daughter on title as owners’ of the property.

This legal structure helps limit the amount of taxes you owe, as you can specify that your share in the property is nominal, say 10%. Just keep in mind that each joint tenant can gift or sell their portion of the property. That means, your daughter has the legal right to sell her 90% stake in the condo even if you don’t want or agree to the sale. It also means that you are exposing yourself to creditors, should your daughter file for bankruptcy or become a defendant in a lawsuit. Finally, the 10% that you own will not be sheltered under the principal residence exemption as this property is not your primary residence.

But there is a silver lining. The Canada Revenue Agency does not tax gifted money. That means if you opt to gift your daughter the entire down payment to purchase the condo neither you nor your daughter are required to pay tax on that gifted money. If, however, lenders find out that this gift is, in fact, a loan, this can seriously impact whether or not your daughter can qualify for a mortgage as all debts (even loans to family members) are included in debt ratios used to qualify borrowers for mortgages.

Finally, your lawyer or legal representative handling this real estate transaction will take care of the paperwork when it comes to the first-time home buyers’ tax credits and rebate. That said, ask your lawyer to confirm that your daughter won’t be exempt from these credits because you are on title. According to the CRA, a buyer is disqualified from claiming these credits if they’ve already owned a home or they lived in a home owned by their spouse or common-law partner now or in the last five years. While it seems remote that your daughter would lose eligibility to these credits, it’s still better to check now than find out the hard way.

Source: MoneySense.ca – Romona King, November 13th 2017

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