Carol Palfrey Associate Broker " The Eastside is my Neighbourhood "

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Cell:1 (604) 818-7422
Office :1 (604) 263-1911
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4387 Main Street
Vancouver, BC
V5V 3R1 Canada

ARE YOU PLANNING TO BUY A HOUSE OVER $500K?

 

If so, you need to be aware that the down payment rules are changing as of February 15th, 2016. The most recent change to the mortgage rules requires people to put a larger down payment on property priced between $500,000 and $999,999.  Purchases over $1M require at least 20% down with most lenders requiring even larger down payments for purchase prices over $1.25M.

 

In Canada, all loans with less than 20% down payment require mortgage Insurance. By changing the guidelines for insured mortgages, the effect encompasses all lenders.

For purchases of $500,000 or below, a 5% down payment is still possible.  For purchases over $500,000, the down payment requirement gradually increases as 10% is required for the portion over $500,000.  For example, a $550,000 purchase will require $25,000 for the first $500,000 and $5,000 for the remaining $50,000. This is $5,000 more than previously required.

 

The old policies will remain in effect for files approved prior to February.. As most lenders hold rates for between 90 and 120 days, the actual completion date can extend to June.    

 

In our opinion, the silver lining here is that the government appears to feel they are not in a position to increase rates enough to slow down the market. For existing and new borrowers, this hints to continued low interest rates.

 

Here are a few examples of the new down payment requirements:

 

$500,000 ............ $25,000 ............... 5.00%

$550,000 ............ $30,000 ............... 5.45%

$600,000 ............ $35,000 ............... 5.83%

$650,000 ............ $40,000 ............... 6.15%

$700,000 ............ $45,000 ............... 6.43%

$750,000 ............ $50,000 ............... 6.67%

$800,000 ............ $55,000 ............... 6.88%

$850,000 ............ $60,000 ............... 7.06%

$900,000 ............ $65,000 ............... 7.23%

$950,000 ............ $70,000 ............... 7.37%

$999,999 ............ $74,999 ............... 7.50%

 

 

 

How Does Rental Income Help?  

If you are wondering about purchasing a rental property or a house with a suite that you will collect rental income with, you may be surprised on how lenders will calculate that.  Over the past couple years, lenders have eased up a little bit and are now allowing for more generous calculations of rental income.  Common questions that will determine the answer: 

  • Purchasing a house to live in that has a rental suite as well?  If so, you can purchase with as little as 5% down payment and 1/2 the rental income will get added to your file.  If you can put 20% down or more, then you have a much more generous calculation that basically takes the rental income and deducts it from the mortgage payment, allowing people to qualify for much more. 
  • If purchasing an investment property, you need minimum 20% down payment and the rental income again offsets the mortgage payments which is a much more generous calculation.  

The best thing to do is be pre-qualified by a mortgage professional to ensure you know exactly what purchase price you can go to.  

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Mistake 1: Going For the Estate Agent Who Offers The Lowest Commission


Having made the decision to sell your home, you’re now planning on interviewing a number of real estate agents. There are plenty of agents out there who will undercut the competition by seriously lowering their commission, in an attempt to win the mandate to sell your home!

“As a home seller, I’m saving money, so why is that a bad thing,” you say?

Well, there are a number of ways to look at this topic:

  • Less commission means less marketing resources available to help in getting your home sold. Whichever marketing tools that agent suggested he’ll be using, there’s a good chance it’ll be substantially less than what a full commission agent would be able to spend on the marketing of your home.

Reasonable point, no?

  • If the listing agent goes the route of a heavily discounted commission rate in order to get your property on his books, how many buyer agents will be turned off once they find out how much their portion of commission will be? Wouldn’t it financially benefit the buyer agent to go elsewhere with his client and get paid a standard market commission for his service?

How many buyer agents will get excited to help your listing agent out?

  • And, ever wonder why the agent needs to lower his commission that low in order to get the business? If he’s willing to drop his commission level at a drop of a hat (hurting his bottom line), how good do you think he’ll be when it gets negotiation time for the sale price for your home (hurting your bottom line).

 

As tempting as it is to sign up with the agent offering the lowest commission, having read the above, let’s hope you put his listing presentation in perspective to what the other agents are bringing to the table in the marketing of your property.


Mistake 2: Choosing The Estate Agent Who Gives You The Highest Listing Price


Once you go on the market with an overpriced property, the chances are very high that you’ll eventually end up selling your property at a price below the market price. One cannot emphasize enough the importance of correctly pricing a home when putting it on the market.

Those first 3-4 weeks of marketing are crucial and if the price is too high, potential buyers will ignore your listing. Or worse, agents will use your overpriced property to bounce educated home buyers off to more correctly priced properties. Either way, the result will be that this overpriced property will now sit on the market for a much longer period of time and eventually sell at a lower price than would have been achieved if one had properly priced it at the start!

Let’s assume there is that one buyer who decide to put in an offer: another realistic risk you run with trying to sell an overpriced property is that the banks won’t find value during their appraisal. This will limit the amount of financing for the buyer and unless there’s a bigger deposit coming in, the deal is likely to fall through.

As a home seller, you only have one chance to make a first impression. One is tempted to go with the estate agent who suggested marketing your home at a higher price, but make sure to ask for substantiation of that price level by means of a Comparable Marlet Analysis. 

Asking the agent what’s currently on the market nearby with similar features as your property, plus looking at the recent list of sales of similar homes in the area, will give you as the homeowner a more realistic expectation of the sale of your property. Plus, it will quickly set the agent straight as to where he came up with his high listing price!


Mistake 3: Looking For The Estate Agent Who Sold The Most Properties


It might be tempting to use the total number of properties sold as your sole measuring stick in choosing the estate agent who will be selling your home. Just as the agent who only managed to sell a handful of properties last year might not be your direct choice, the agent selling 60 properties per year might not necessarily be the obvious choice either.

Per Mistake 2 above, where the estate agent who gives the highest listing price does get the listings, it will become evident that the overpriced properties aren’t selling and remain on the agent’s books. Thus, the number of properties that agent will eventually sell versus the properties that he still has on the books, will be quite low. In real estate terms, they refer to it as the sales-to-listing ratio.

An agent selling 13 out of 15 listings must be doing something better than another agent who sells 20 out of 60 listings.

Don’t go looking for the estate agent who sold the most properties but take in consideration how well the agent priced the property, what was proposed as a marketing plan, how the reactions were when you tried to reduce his commission from the start (ie test the negotiation skills) or how the overall presentation and communication report was. Those skills will be pertinent when it comes down to buyer negotiations.

Is the estate agent’s overall service equivalent to the high sales numbers?


Mistake 4: Deciding To Go With The Estate Agent Because He’s Family


Selling one’s house is very serious business. Most agents will agree that every contract is different. Every client has his/her specific requirements, needs and wishes and all that needs to be properly documents by both buyer and seller. It is therefore of huge importance that, not only during negotiation but especially at the time of closing, everything is adequately legally worded.

Uncle Joseph or cousin Annie might be a great relative of yours, besides them having to be knowledgeable to be dealing with some of the intense (complex?) negotiation and subsequent paperwork, if things were to not work out with the buyer(s), it might be hard to split the personal from the business aspect of the property sale!

Will either of you be able to look past whatever may develop from a home selling process if the experience isn’t the greatest?

Perhaps the decision ought to be to not automatically choose your relative as the person to market your home, but inform them that there will be a fair interview process where multiple agents will be able to compete for the listing agent job!

 

 

Mistake 5: Only Interviewing One Estate Agent


Ideally, it is highly recommended that you will be interviewing 3 different agents. Not only will each agent have its strengths in marketing and servicing, the respective agents will have their own set of tools and traits to bring to the table when marketing your property.

None of which you would be exposed to seeing if you were to only interview one agent!

Similar as in a lot of other businesses, the 80/20 rule applies in real estate. If anything, it’s skewed even more dramatic (numbers of 90/10 in certain markets aren’t uncommon). In other words, the remaining 80-90% of agents will do whatever it takes to gain those relatively few remaining listings; even if it means exaggerating a bit when it comes to the listing price.

 

 

Mistake 6: Not Bothering Looking Into The Estate Agent’s References


It always amazes me how little research home sellers actually do prior to selecting an estate agent. To be blunt, a lot of times, people spend more time reading up on the latest testimonials and reviews prior to buying that latest, newest UHD TV, than looking into the estate agent’s history, prior to hiring him. Yet, the financial impact is easily 100x bigger and will last for the next 20-30 years!

When choosing an estate agent, besides looking at his listings, have you ever googled his name, tried to find them on LinkedIn, Facebook or Twitter? Did the activity on those social platforms match the professionalism and service you expected?

Every estate agent ought to be able to provide you as the home seller with a list of references. The trick is to bypass the ones that were hand selected and made it on that list!

Why not ask the agent which listings he’s currently working (or have it researched yourself before talking to him) and ask him whether you can call or email a few of those clients? You’ll very quickly find out how these current clients rate the estate agent’s services and professionalism throughout the house selling process.


Mistake 7: Opting To Work With A Part-Time Estate Agent


There’s a reason why there’s such a high turnover of estate agents. An outsider may look at their local estate agent and think he’s got a cushy life, driving around town with these buyers, doing a few seller presentations and signing the big sales contracts.

Selling real estate can’t be that tough, now can it?

There’s no debate about it that the question needs to be asked whether the estate agent is part-time or full-time involved in the business.

How can a part-time agent possibly be flexible in doing all the buyer viewings? When will the marketing of the property take place? After hours? Weekends only? How long before clients will get a response to their enquiries and when will they go for viewings of the property? Furthermore, where do you as the home seller fit into that schedule?

The work that’s involved in managing a listing, marketing it, giving it ample exposure, taking offers, finally selling it and hopefully bringing it to a successful close, requires a full-time involvement by the agent.

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