Sept. 11, 2020

Going Into Multiple Offers

In today’s Comox Valley Real Estate environment there are currently more multiple offer scenarios than in the past few years. Not every property listed for sale goes into multiple offers, but recently many have. 

 

As a buyer, you might wonder “if there are no offers yet what is wrong with the house, am I over-paying?” and on the other side of the coin “Argh, multiple offers, now I have to compete and overpay to get the house!” 

 

As a seller, you might wonder “Did I not ask enough for the house?”

 

Recently, I showed a house that had been on the market for 2 years. We put in an offer and BOOM, multiple offers. You have no idea what everyone else’s timelines are, you only know yours.

Lately, there have been properties with more than five competing offers. If that’s the case, you have to be serious, sharpen your pencil and decide, is this the house you want?

There are a few things to remember when you are having those thoughts.

  1. Everyone is in a different stage of their house-hunting journey. Some are just starting, some have been looking for a while, some have been looking for a long time. 
  2. Everyone is looking for something that suits their needs. This may not be the same thing you are looking for, or what you are selling.
  3. The market will ultimately dictate the price of a house.
  4. Use your gut. If it feels wrong, it probably is not right for you. It might be perfect for the next person so don’t feel you are “missing out”.
  5. If you are going to need a mortgage, make sure you are pre-approved. If you can get a pre-approval letter, even better.
  6. A letter about yourselves can go a long way. There is still very much a personal touch to Real Estate and people like to know who they are selling their home to.
  7. Stick to your game while keeping in mind this: If you love the house, go in at your best offer. Would you prefer to lose the property by being $5000, 10,000, 25,000 to low, or get the property by paying 5000, 10,000, 25,000 to much? You know your budget, play within it and live with the outcome.

My biggest piece of advice on this is that you don’t want to regret losing the house because you decided not to put your best foot forward. 

What happens in a multiple offer situation?

When 2 or more offers come in, the Seller’s Real Estate agent must let the Buyer’s Real Estate agent know they are in a multiple offer situation and ask if they would like to revise the offer. At that point, you decide what you want to do. Do you want to stay where you are, revise your offer or drop out and walk away? The Seller will review the offers and they have a few options. 

1. Take the offer they like the best 

2. Take one of the offers and go back and negotiate with that offer. 

You may wonder why someone would do that. Here is an example. Suppose there are 2 offers. One has no conditions, but the price is a bit lower and the dates don’t line up perfectly for the Sellers needs. The other offer has lots of conditions, but the price is higher and the dates line up. The Seller may go back to one or the other offer and ask for changes (higher price, different dates, less conditions). 

Selling a house and receiving multiple offers sounds great, but is it really? In most instances, yes, it is great for the seller. You can force the buyers’ hands so that there is less back and forth, cleaner conditions, faster closings. Sometimes, though, when a buyer hears about multiple offers they can pull out and advise they do not want to participate. If there are more than 2 offers there is a lower risk of losing all offers. 

As a Seller, if you receive a great offer and you hear there are other offers coming in you can advise your agent, in writing, that you do not wish to receive any other offers.  Stick to the first one you received and be done with it. This is a decision you can make with your Selling Agent. They will advise you of the best option for you, ultimately you decide.   

The Buying and Selling of a home is stressful, exciting, nerve-wracking and in the end, exhilarating. Sometimes multiple offers happen, sometimes they do not. Being prepared in advance is the best course of action.

 

Sept. 11, 2020

First Time Home Buyers

 

You are doing a lot of online research, getting prepared to be a well-informed buyer, saving for your down payment and yet, it appears that there is conflicting information on what is a First Time Home Buyer.  

 

Guess what? You are not crazy. The federal and provincial governments have different definitions of a First Time Home Buyer. And to confuse you even more, Canada Mortgage and Housing (CMHC) and other companies that insure mortgages in Canada have a separate definition as well.

 

In British Columbia, a “First Time Home Buyer” is just that. A person who has never owned a home before, anywhere in the world. The house you are buying must be located in BC, as your principal residence. The size of the lot must be 1.24 acres or less and its value must be under $500,000 to take advantage of the first time home buyers property transfer tax exemption. 

There are partial exemptions between $500,000 and $550,000, but the main savings is for homes worth less than $500,000.

 

In Canada at the federal level, a “First Time Home Buyer “is defined as if you, or your spouse, have not owned a home for 4 full calendar years. The federal First Time Home Buyer's Program allows you to borrow money from your RRSPs to use as a down payment.

 

The insurers, Canada Mortgage and Housing, Genworth and Canada Guaranty, define a “First Time Home Buyer” as someone who hasn’t purchased a home before OR hasn’t owned a home in 4 full calendar years OR someone who recently experienced a breakdown in a marital or common-law partnership.

 

Here are some examples:

 

Example 1

You have recently split up with your partner, found a $600,000 property and have a $31,000 down payment. You can participate in the CMHC First Time Home Buyer program but must have the cash savings or a gifted down payment. It cannot be from RRSPs.

 

Example 2

You have not owned a home for 5 years, found a $600,000 property. You can withdraw up to 35,000 in RRSPs for your down payment, use savings or a gift. You can also take advantage of the CMHC First Time Home Buyers program.

 

Example 3

You have never owned a home before, found a $600,000 property. You can withdraw up to $35,000 in RRSP for your down payment, use savings or a gift. You can also take advantage of the CMHC First Time Home Buyers program. There is no savings of Property Transfer Tax as the property is greater than $500,000.

 

To take advantage of every program you would need to purchase a property for under $500,000 and NEVER owned a house ever. So even if you have never owned a home you might not qualify for First Time Home Buyers programs. However, home ownership is still a tried and true way to gain wealth in Canada so regardless of whether you fit the box of First Time Home Buyer, it is still worth jumping in.

 

 

July 8, 2020

High Ratio Mortgage Insurance

What is High Ratio Insurance Anyway? 

Last month CMHC announced they were tightening up their lending guidelines for high ratio borrowers and everyone was up in arms about the impact that would have on first time home buyers. Anyone with less than 20% down payment would require a high ratio mortgage. Meaning the more money you have to borrow (as a percentage of the home's value) the higher ratio the mortgage is. I wanted to delve in a bit deeper and explain what these changes mean and how this will affect you, as a home buyer or seller.  

CMHC (Canada Mortgage and Housing Corporation) is a crown corporation that was created back in 1946 to assist with the return of Canadian soldiers returning to Canada from the war in Europe. They created social and rental housing, wartime housing and worked with the provinces to create low-rent housing developments. CMHC built the first co-operative housing in Canada, assisted in the construction of Habitat for Expo 67 in Montreal and they manage the Granville Island lands in Vancouver. They have implemented programs to repair and improve accessibility for disabled persons’ homes, they work with aboriginal groups for urgent repairs and continue to increase the rental and multi-family residential housing stock.

To buy a house back in the 1940’s a person needed 25% down payment. In 1954 CMHC introduced a mortgage loan insurance that allowed people to purchase homes with less than 25% down by paying an insurance premium. The banks followed the CMHC underwriting guidelines, the buyer paid an insurance premium, and if the home buyer defaulted on their mortgage, CMHC protected the bank by paying them back any losses incurred.

Before 1992 to purchase a home, a person needed a minimum of 10% down. CMHC piloted and eventually finalized the ability to purchase a home with 5% down payment. Fast forward to 2006 where they allowed 0% down payment. Then the pullback started. First was the removal of 0% down payment back to 5% down payment. Over the years, the price of housing has continued to rise and CMHC has developed a substantial investment in the Canadian housing market. As CMHC is a crown corporation they have a responsibility for prudent underwriting guidelines and ensuring that the housing market does not become a housing crisis. Over the years the Ministry of Finance has mandated that CMHC and their counterparts Genworth and Canada Guaranty create stricter lending guidelines. This includes the mortgage “Stress Test” which involves qualifying at a higher mortgage rate than one is actually receiving, having better credit, longer job stability and a quality home.

Fast forward to last month and CMHC made some policy changes, requiring buyers to have even better credit than before and lowering the borrowing amount for a buyer. What is interesting about this decision is that it was a CMHC decision, not a Ministry of Finance decision. This left the door open for Genworth and Canada Guaranty to NOT change their policies.  As Mary Putnam, Vice President at Canada Guaranty stated, “Given the implementation of the qualifying stress test and historic default patterns, Canada Guaranty does not anticipate borrower debt service ratios at the time of origination to be a significant predictor of mortgage defaults.”

What She Said!! Defaults on mortgages are caused by an economic downturn, job loss, divorce, death in the family. Defaults are caused because life became overwhelming and unmanageable, not because of how a mortgage was originally granted. No one intends to default on their mortgage. Mortgage payments are generally the first debt people pay in times of trouble.

What does this mean for you? There are still all the same options as there were before. Banks are still lending money. High ratio insurers are still allowing 5% down payment from savings, RRSP or a non-repayable gift from parents. Keep your credit clean, keep your job steady and you can buy a home. Nothing has really changed.

 

March 26, 2020

Purchase Plus Improvements Mortgage

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March 19, 2020

Protect YOUR Credit through COVID-19

In this crazy time of COVID-19 money is getting tight. Bills are piling up, banks and other lenders may be offering deferred payments. Look for these risks before skipping a payment and keep your credit healthy through this uncertain time.

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Posted in Credit
March 4, 2020

It's Going Up, Strata and Condominium Insurance

Strata and Condominium insurance coverage in British Columba has recently faced some serious increases in premiums. Of special note in B.C. is that duplexes, triplexes, townhomes, patio homes and condominiums are all considered a Strata Unit.

Many factors have led to this increase, here are a few:

1. Insurance premiums have been rising for all types of coverage, including homeowner insurance.

2. Condo/Strata insurance premiums have been very low for a long time.

3. The rebuild cost if an entire condominium complex is destroyed can be astronomically high in some areas.

4. Water-related losses are the number one claim from Strata to Insurance companies.

5. Some Strata have used insurance claims to provide maintenance to their buildings

6. Fewer insurance companies want to take on the risk of insuring condominiums.

The hardest-hit Strata complexes are going to be complexes that are extremely expensive to rebuild, self-managed Strata buildings, Strata buildings that do not have a depreciation report and Strata buildings that have had a lot of claims.

Ways that Strata Councils can save on their insurance premiums are

1. Have depreciation reports to provide to the insurance companies. This provides confidence that due diligence of maintenance is being conducted by your strata.

2. Increase the deductible for a loss. When I lived in Vancouver our deductible was $50,000.00. Some Strata complexes have deductibles as low as $2500

3. Ensure all hot water tanks are less than 10 years old, that plumbing for dishwashers and washing machines are up to date and to modern-day code, deal with any water leaks immediately, regardless of how small.

4. Ensuring there are a minimum of insurance claims presented by the strata corporation.

5. Weigh the cost of remaining self-managed versus hiring a property management company.

As a consumer, you can protect yourself by purchasing a Strata Unit Owner’s Policy. This covers the strata’s deductible, contents insurance, liability and coverage for any unit upgrades that you may have done. You can purchase earthquake insurance, jewellery and art riders and other additional insurance add-ons.

If you are planning on purchasing a Strata Unit, the below clause is something you should consider when putting in an offer. This will ensure that you are afforded the opportunity to review the strata insurance documentation and that you are able to receive proper insurance coverage for your purchase.

This offer is subject to (A) the Buyer reviewing and approving the terms and rates of the strata corporation’s insurance, including the premium amounts, deductible amounts, and coverage limits thereunder and the date of expiration of such policy or policies; and (B) the Buyer confirming the Buyer’s ability to obtain personal strata owner’s insurance on terms satisfactory to the Buyer, including coverage for any owner’s portions of deductibles payable under the strata corporation’s insurance, in each case on or before ________________. These conditions are for the sole benefit of the Buyer. Immediately upon execution and delivery of this Contract of Purchase and Sale by all parties, the seller or the Seller’s agent will obtain copies of the strata corporation insurance policy or policies, and will immediately, upon receipt, deliver such document(s) or cause such document(s) to be delivered to the Buyer or the Buyer’s agent.

If you are selling a Strata Unit, I would strongly recommend that you obtain the Strata Corporations insurance policy to have readily available to potential buyers. If you can provide certainty around your strata premiums that will give you a leg up against other competing strata unit sellers.

For further information please speak with your Insurance company. The below link is a guide to Condo Insurance in British Columbia and is provided by the Insurance Bureau of Canada

http://assets.ibc.ca/Documents/Brochures/Condominium-Insurance-in-British-Columbia-BC.pdf

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March 4, 2020

New Housing Stress Test Rates

The government pendulum has started to swing a little bit back after the extreme measures it took back in 2017 when it slashed the purchasing power of home purchasers by 20%. The stress test has affected almost all mortgage holders including seniors, home purchasers and people renewing their mortgage. Adding 3% back, limited to mortgages with less than 20% down payment, is too little. Let’s see how it works out in several examples below.

The new rule will take an average of the top banks 5 year discounted fixed-rate and add 2%. Currently,the Bank of Canada is using the posted 5-year Conventional Mortgage rate offered by the big six banks.  This artificially inflated rate is not truly representative of average contract rates offered by banks, credit unions and mortgage finance companies. 

The Big Six Banks tend to keep their posted rates very high to ensure that when a client is breaking their mortgage the interest rate differential penalty will make the cost to break the mortgage prohibitive. It also keeps people stuck at their current mortgage lender because they are now unable to qualify with the artificially high rate that is currently in place. The “posted” rate has very little to do with the actual mortgage rate a consumer is going to receive.

What impact will the new qualifying rate have?

This new qualifying rate is only for mortgages with less than 20% down. Mortgages with more than 20% down currently still must qualify at the higher rate. As if the mortgage industry is not confusing enough, once again, people with larger down payments get the short end of the stick. This policy may change and there are “discussions” around the qualifying rate for a client with more than 20% down payment.

Let’s assume you have 5% down and want to buy a house.

Currently, you would have to qualify at 5.19%. As of April 6, when this gets implemented, you would qualify at 4.89%. Mathematically you will get about 3% additional in purchasing power. Not a game-changer by any means but every little bit helps.

What does this mean for your income level?

*For the above qualification I used a 25-year amortization, property taxes of $3570 – $570 Homeowner Grant = $3000, Heating of $75 per month and GDS of 39% and a 4% high ratio insurance premium. Everyone will be a little bit different. For the lower-priced properties, the taxes I used will be high, but there will be condo fees to compensate so the numbers, although not perfect, will give you an idea. 

When I lived in Vancouver, I had a really hard time accepting the price of Real Estate. Bill Macklem, a mortgage broker I have known for years, gave me some great advice.

He said, “if you can afford the mortgage payment, and the interest on the mortgage is less than your rent, you are further ahead with buying.”

I came home, gave our landlord notice and cashed out some RRSPs to buy a condo. In the future, I would not put in my notice before actually finding a place to buy. We were almost homeless for a bit.

With rates as low at 1.99% for a 3-year term with HSBC, if you make $60,000, at 5% down you technically should be able to qualify for a $419,889 mortgage and a $440,883 purchase price.  That is $156,192 difference. That is why so many people are bringing on co-signors. 

If you are comfortable with the mortgage payment amount, figure it out. Consider bringing on a co-signor, selling anything you don’t “need.” Get rid of subscriptions, sell your second car, buy a house with a suite. Whatever it takes. It is worth it. Home is Worth the Effort.

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Feb. 5, 2020

Spring Fling

Spring is rapidly approaching and with the better weather comes a great opportunity to sell your home. The “Spring Market” is when the most homes sell, with the largest mortgage closing dates across Canada being June 30, July 31 and August 28. People want to move at the beginning of summer which means they start looking for houses in March and April. If you are considering selling your house this spring, now is the perfect time to start getting your house ready to sell. The first step is to take a step back and look at your house as if you are a buyer. Pick apart the big and little items that a buyer may not like. Determine if those items can be fixed or if you are willing to accept the fact that not everything is perfect.

A great way to start is to have a building inspection done on your home. When someone buys your home, they will generally hire a building inspector to look at the house from top to bottom, inside and out. If you get a building inspection and fix a lot of the items in advance this is a great selling feature.

You can even have the building inspection on display at the house and mark the items you have fixed. If your home was built before 1994 and has vermiculite insulation, you may wish to get this tested for asbestos. If there is no asbestos, you can provide the paperwork to show there is no asbestos. If there is asbestos, you can have it remediated prior to selling your home. If there is asbestos found in the insulation and it is not remediated, most mortgage lenders will not give the buyer financing. This limits the number of people who will be able to purchase your home.

Having perimeter drains flushed and working, gutters and drains moving water away from the house, fences fixed and upright all help in selling your home. Fixing all the loose ends such as electrical outlet covers, baseboards, loose handles and any other items you know should be repaired. Go into the attic and look for mould and ensure that air is circulating properly. It is about giving buyers the confidence that the house they are going to buy is loved and cared for by you, the seller.

Does your house look too lived in? Does it just need a deep clean or does it need to be repainted? If your walls are crazy colours, consider repainting in neutral colours. If you have carpeting, consider getting them professionally cleaned. Before listing the house have professional housekeepers come in for a day.

Declutter, declutter, declutter. You must pack anyway, so start packing now. Get all “Maria Kondo” and keep the end in mind while clearing your space. Pets – love them but they smell. You may not be able to smell your pet, but other people can smell your pet. If it is a caged pet, remain extra diligent with cleaning out their cages. If you have hairy pets, remove hair from everywhere, clean or change their beds and ensure their eating area is out of the way. Change kitty litter constantly, remove doggie doo from the back yard and try to make the house look like no pets live there.

Teenage bedrooms – I get it, I had a teenager once. It was smelly. I am not sure how you are going to get your teen's bedroom clean, but it must happen. Maybe buy them a package of fancy coat hangers, new bedding and create an incentive for when their room is clean. Possibly give the housekeepers danger pay and send them in with a Hazmat suit. Whatever you decide, the room, closet, under the bed, behind the dresser, it all needs to be clean.

Now, pretend you are a buyer. Drive up to your house with fresh eyes. What do you notice? What do you like and not like? Walk up the stairs and unlock the door. What is your impression? Walk into the house. Where do your eyes go first? Do you need a plant, to remove a painting, add a rug? Does it feel inviting? Does it smell nice? Does it look like a home that is loved and cared for? Do you remember why you bought the house? Do you remember the great memories created in your home? This is why someone is going to buy your house. They want to have a home to create memories in, have security and become a homeowner. With these extra little tips, you can create more value and make your home as marketable as possible.

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April 23, 2019

Should We Renovate Before Selling?

When you are considering doing some renovations with the idea that the new look will increase the value of your home, there are some choices that are better than others. Some of the best return on investment reno's might even surprise you.

During a recent study by JLC Group’s Remodeling Magazine, they established some costs versus value trends in 2019. What has the biggest bang for the buck? Replacing your garage door.

That’s right if your garage door looks terrible, go ahead and replace it. You will recoup an estimated 97.5% of the cost. The next best value for the cost is changing the façade of your home. If you have grungy old vinyl siding and replace it with something updated and fabulous, you will recoup an estimated 94.9% of the cost.

 

It is really the outside of the house that gets the economic go ahead. A deck addition, siding and new entry door all come in around 75% of cost recovery. The only indoor A+ return is a new kitchen. This is not surprising as so much of our time is spent inside and around this home hub. At an 80.5% cost recovery, go ahead and fix your kitchen, just remember to not go overboard.

You heard me, overboard. Upscale renovations just don’t get the required payback. The worst pay-off is an upscale master suite, bathroom or kitchen renovation. Midrange reno's had a much better return on investment. I know you personally might want a second kitchen inside the kitchen, 2 ovens, a baker centre and 3 sinks, but at the end of the day, don’t expect to get your money back out when you go to sell.

Your home is your castle and not all renovations are going to increase the value of your house but they may be worth it to you. That’s okay as this is where you live, where you create amazing memories and where you provide a haven for family and friends. 

If, on the other hand, you are doing the renovations in preparation to sell your home, reach out to me first and we can discuss whether the change is going to be worth the time, effort and cost. Sometimes it is and sometimes it just isn’t.

April 3, 2019

The Rules Have Changed for Housing in the ALR

April 3, 2019

Thinking about buying a property located in the Agricultural Land Reserve (ALR)?

As of February 22, 2019 the BC government has introduced a few changes to the Agricultural Land Commission (ALC) Act which affect the size and number of dwellings allowed on a parcel of land in the ALR.

ALR

 

KEY CHANGES:

  • ONLY ONE RESIDENCE PER ALR PARCEL IS PERMITTED

  • THE PRINCIPAL RESIDENCE CANNOT EXCEED 500 m2 (5,400 sqft)

 

Previously the ALC Act allowed additional dwellings for farm help or immediate family members. This meant that manufactured homes could be brought onto the property or accommodation above an existing farm building could be constructed. This is no longer true. These types of dwellings would now be considered a "non-adhering residential use" and must now be approved through an application process.

 

Because there are many homes in the ALR which already have more than one dwelling, the Act contains some grandfathering provisions. Carefully refer to the Act and Bulletin No. 05 to see which provisions apply to your specific case. 

 

Links

ALC INFORMATION BULLETIN No. 05

ALC - Agricultural Land Commission