The main value indicator of commercial real estate is based on how much net income it produces. The key word in this statement is ‘net income.’ An investor is not looking for revenue of $25,000 in rent each month only to find that the expenses amount to $30,000 – this is just a money-losing property. A buyer is looking for a property with a solid income and a good rate of return. Increasing the net income of a commercial property can be achieved in two main ways.
Increase Rent
The most obvious way to increase the value of a commercial property is to increase the base rent of each unit. Of course, this does not make a landlord a well-liked individual; however, one does not need to add sharp increases to add significant value to the property.
Take for example a 10 unit apartment building with rent set at $800 per unit per month. With a total rent of approximately $8,000 per month or $96,000 per year and expenses at $65,000 per year, the net income would be approximately $31,000 per year. Based on a 9% expected return on investment (ROI) this property would be worth $344,444 to a buyer. If the rent on each unit can be raised by only 2.5% ($20) the net income would rise to $33,400 and the building would now be worth $371,111. That’s a $26,666 increase in value for only $20 per month!
While the rents are the easiest place to add both cash flow and value to a building, this is not always the best option. By raising rents a landlord will run the risk of having people leave the building, thus creating vacancies in the process – a key consideration in any rental market.
Decrease Expenses
Another great way to increase property value, and does not directly affect the tenants, is to decrease monthly expenses. This is an often-overlooked item because it is much harder to accomplish than simply writing a rent adjustment letter and distributing it throughout the building. Decreasing costs should be an ongoing duty of the property manager and building owner.
To begin this option, utilize the help of a Certified Professional Accountant. A professional accountant can usually uncover additional ways to successful cut costs, taxes and fees in your operation. They will also help you look at all outgoing expenses and determine which could be reduced or eliminated.
Reduced Expenses: these may include utility invoices (reduce water and electrical consumption in public areas), cleaning (outsource to the lowest qualified bidder) and advertising costs (ask for referrals from good tenants)
Eliminated Expenses: gas or heating costs (write these as owner responsibility), yard maintenance (remove grass and add decorative stone) and energy (eliminate free electrical outlets for parking)
The wealth that can be generated by commercial real estate is almost limitless. Over time, having the ability to increase the net income from a property will result in a much higher value and sale price when the time comes. By using different techniques to either increase revenue generated from the property or reduce expenses, these small changes will lead to much larger sale prices.
Monday, August 16, 2010
Friday, August 13, 2010
5 Tips for House Hunting
Here are five tips for success with first-time home buying:
House Hunting Tip #1 - Bring a Friend Along
Do you have a friend or family member with strong opinions on everything? You know the one. Well, bring them along during your house hunting trips!
When you think about it, it makes perfect sense. The house hunting process stirs up a lot of different emotions -- excitement, anxiety, joy, fear, frustration, exhilaration. And while these emotions are perfectly normal, they can cloud your judgment. That's not something you want when making a big financial decision.
You can balance this out by bringing a friend or family member along on your house hunting trips. This gives you an objective ally who can help you identify the pros and cons of each house. Chances are, they'll also be able to spot aspects of a house you might have missed otherwise.
House Hunting Tip #2 - Take Pictures of Each Home
Do you have a digital camera, or do you know somebody who does? If so, you have the ideal tool to help with the house hunting process. Take pictures of every house you visit, and then categorize them in folders by house address. This will help you recall the details of each house later on (when the details tend to blur together).
The photos will also give you an opportunity to see each home more objectively, after your initial excitement has faded. Then you can more easily decide which houses you'd like to follow-up on.
Tip #3 - Compare the House to Your Budget
Have you heard the expression "house poor"? House poor is what happens when people spend too much money and take on more of a mortgage loan than they can comfortably afford.
Think of it this way. If you have to work longer hours and scrape by each month just to afford a house ... is it really worth it? Keep your finances in mind, no matter how beautiful a house may be.
House Hunting Tip #4 - Consider the Commute
So you've found a home you like, and it's well within your price range. The next thing to consider is the location. How far is the home from work? Does it have easy access to the major roadways you need? How long is your daily commute going to be?
It's easy to be so enamored with a home that you forget about the drive time. But if you commute every day, drive time is a quality-of-life issue you can't afford to dismiss. Try driving to or from the house during rush hour. That will give you a good idea of what you'll face every day.
Tip #5 - Avoid Snap Decisions
Buying a home will probably be the biggest financial decision of your life. So it deserves careful consideration each step of the way. Even in a hot market where homes sell quickly, you have to make wise decisions based on research.
Remember, there will always be another house to come along. So even if you miss one due to your cautious approach, another home will be right around the corner. Keep these tips in mind while house hunting and you will have a much better experience.
House Hunting Tip #1 - Bring a Friend Along
Do you have a friend or family member with strong opinions on everything? You know the one. Well, bring them along during your house hunting trips!
When you think about it, it makes perfect sense. The house hunting process stirs up a lot of different emotions -- excitement, anxiety, joy, fear, frustration, exhilaration. And while these emotions are perfectly normal, they can cloud your judgment. That's not something you want when making a big financial decision.
You can balance this out by bringing a friend or family member along on your house hunting trips. This gives you an objective ally who can help you identify the pros and cons of each house. Chances are, they'll also be able to spot aspects of a house you might have missed otherwise.
House Hunting Tip #2 - Take Pictures of Each Home
Do you have a digital camera, or do you know somebody who does? If so, you have the ideal tool to help with the house hunting process. Take pictures of every house you visit, and then categorize them in folders by house address. This will help you recall the details of each house later on (when the details tend to blur together).
The photos will also give you an opportunity to see each home more objectively, after your initial excitement has faded. Then you can more easily decide which houses you'd like to follow-up on.
Tip #3 - Compare the House to Your Budget
Have you heard the expression "house poor"? House poor is what happens when people spend too much money and take on more of a mortgage loan than they can comfortably afford.
Think of it this way. If you have to work longer hours and scrape by each month just to afford a house ... is it really worth it? Keep your finances in mind, no matter how beautiful a house may be.
House Hunting Tip #4 - Consider the Commute
So you've found a home you like, and it's well within your price range. The next thing to consider is the location. How far is the home from work? Does it have easy access to the major roadways you need? How long is your daily commute going to be?
It's easy to be so enamored with a home that you forget about the drive time. But if you commute every day, drive time is a quality-of-life issue you can't afford to dismiss. Try driving to or from the house during rush hour. That will give you a good idea of what you'll face every day.
Tip #5 - Avoid Snap Decisions
Buying a home will probably be the biggest financial decision of your life. So it deserves careful consideration each step of the way. Even in a hot market where homes sell quickly, you have to make wise decisions based on research.
Remember, there will always be another house to come along. So even if you miss one due to your cautious approach, another home will be right around the corner. Keep these tips in mind while house hunting and you will have a much better experience.
Thursday, August 12, 2010
Negotiation Strategies For Buying Property
The Real Estate negotiation process can be a fun and exciting experience; especially when you are prepared and have a good negotiation strategy in mind. Here are some basic rules for handling property or any other negotiation in your business. By implementing these steps into your process you can hold your ground, get a fair deal and obtain property at the price you want.
Determine Your Target Price
If you have a target price in mind prior to the negotiation process you can effectively design your offer and counter-offer strategy to reach this goal. Make sure your price is reasonable; balancing your desire to own the property with market price and value fundamentals.
Offer Less Than You Expect to Get
Even if you have never heard of negotiation strategy, you probably already know to start your offer low to see what response you get. If you do nothing else, this strategy should reduce the asking price by 1 or 2 percent.
Bracket the Offer Effectively
Untrained negotiators usually expect to transact at a price halfway between their starting point and your initial offer. “Bracketing” means that you have taken this knowledge into consideration and have made adjustments within your offer to reflect it. The opening position should be low enough that if the seller splits the difference, the resulting price is lower than your target. For example, if the asking price is $110,000 and your target price is $105,000, you may bracket this negotiation with an offer of $98,500 (rather than $100,000). This would create a range of $11,500 and a higher chance of you obtaining the property at or below your target price.
Never Offer to Split the Difference
Splitting the difference in a negotiation means that you offer a number that is half way between both sides. The problem with this method is that if you are the one that makes this offer, the seller can now negotiate with your new price as a low point. You effectively re-bracket yourself with the estimated final price above your target.
For example, if your offer is $180,000 and their asking price is $220,000, an effective negotiation should result with an approximate $200,000 final price. If you offer to split the difference too quickly, the new bracket positions will be $200,000 and $220,000. In this case, the probable outcome will be closer to $210,000 and you will have left $10,000 on the table.
Look for Gains Beyond Price
Once the price is close to final, see if you are able to get anything more out of the deal. There are literally hundreds of ways to do this so try something unique. The sellers are not usually willing to counter-offer - removing the request – and risk losing the deal.
Final Thoughts
Using a negotiation strategy will ensure that you have created a final deal that satisfies both parties. You will have ethically presented yourself and your offers with proactive purpose, rather than reactive response and you will obtain the best outcome possible for your negotiation. These rules will help you understand the process and successfully obtain the properties you want to buy.
Determine Your Target Price
If you have a target price in mind prior to the negotiation process you can effectively design your offer and counter-offer strategy to reach this goal. Make sure your price is reasonable; balancing your desire to own the property with market price and value fundamentals.
Offer Less Than You Expect to Get
Even if you have never heard of negotiation strategy, you probably already know to start your offer low to see what response you get. If you do nothing else, this strategy should reduce the asking price by 1 or 2 percent.
Bracket the Offer Effectively
Untrained negotiators usually expect to transact at a price halfway between their starting point and your initial offer. “Bracketing” means that you have taken this knowledge into consideration and have made adjustments within your offer to reflect it. The opening position should be low enough that if the seller splits the difference, the resulting price is lower than your target. For example, if the asking price is $110,000 and your target price is $105,000, you may bracket this negotiation with an offer of $98,500 (rather than $100,000). This would create a range of $11,500 and a higher chance of you obtaining the property at or below your target price.
Never Offer to Split the Difference
Splitting the difference in a negotiation means that you offer a number that is half way between both sides. The problem with this method is that if you are the one that makes this offer, the seller can now negotiate with your new price as a low point. You effectively re-bracket yourself with the estimated final price above your target.
For example, if your offer is $180,000 and their asking price is $220,000, an effective negotiation should result with an approximate $200,000 final price. If you offer to split the difference too quickly, the new bracket positions will be $200,000 and $220,000. In this case, the probable outcome will be closer to $210,000 and you will have left $10,000 on the table.
Look for Gains Beyond Price
Once the price is close to final, see if you are able to get anything more out of the deal. There are literally hundreds of ways to do this so try something unique. The sellers are not usually willing to counter-offer - removing the request – and risk losing the deal.
Final Thoughts
Using a negotiation strategy will ensure that you have created a final deal that satisfies both parties. You will have ethically presented yourself and your offers with proactive purpose, rather than reactive response and you will obtain the best outcome possible for your negotiation. These rules will help you understand the process and successfully obtain the properties you want to buy.
Friday, August 6, 2010
The Importance of Home Inspections When Buying A Home
A home inspection prior to purchasing a home or condominium can bring peace of mind when you sign the sales contract. Knowing what to expect both inside and out will help you make an informed decision about the value of the home and the future upkeep.
A home inspection accomplishes two important goals. First, it gives you a chance to determine the condition of the house, its structural soundness, and the condition of its mechanical systems. Second, it brings any problems to the seller’s attention at a time when they can be resolved before closing a sale.
A comprehensive inspection includes a visual examination of the structure from top to bottom, including the heating, air conditioning systems, the interior plumbing and electrical systems, the roof and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement and visible structure.
Following the examination, the inspector will provide a report that not only points out possible defects or areas of concerns, but also the positive aspects of the structure as well as the type of maintenance that will be necessary to keep the home in good shape.
Even the most experienced homeowners lack the knowledge and expertise of a professional inspection firm. For example, watermarks in the basement may indicate a chronic seepage problem, or simply may be a result of a single incident.
A professional assessment will provide complete information about the condition of the property you are considering and will help avoid any unpleasant surprises after the sale. In addition, a home inspector can remain totally objective, while you as a prospective homebuyer may be emotionally involved.
The inspection fee for a typical single-family house can vary depending upon the geographic area. The particular features of the home such as size, age and special structures will be taken into consideration. A decision to have a home inspected is a good investment. You might save many times the cost of inspection by being aware of defects, maintenance requirements, and upgrading requirements.
Good decorating should not sell you on a house. Remember, you’re also buying structural and mechanical systems. Walk through a house twice before you hire an inspector. The first time, look at the rooms, the floor plan, and envision your own decorating ideas for the house. The second time, go back and look at the condition of the walls, doors, appliance, and plumbing. If the home still looks good after two visits and you’re getting serious about the purchase, hire an inspector.
When interviewing a potential home inspection firm, carefully inquire about the specifics of their work and company. Ask how long they have been in business, ask for references from previous customers. Find out what type of insurance they carry and do they guarantee inspections? Ask if they go on the roof?
A home inspection usually lasts about three hours. Professional inspection companies will be happy to answer all your questions. Avoid firms that issue only a verbal report. The report should be in narrative form, not just a checklist of items inspected. The home inspector should also issue a written report with accurate cost estimates for any major defects discovered during the inspection. You may find it valuable to accompany the inspector as he goes through the house.
A home inspection accomplishes two important goals. First, it gives you a chance to determine the condition of the house, its structural soundness, and the condition of its mechanical systems. Second, it brings any problems to the seller’s attention at a time when they can be resolved before closing a sale.
A comprehensive inspection includes a visual examination of the structure from top to bottom, including the heating, air conditioning systems, the interior plumbing and electrical systems, the roof and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement and visible structure.
Following the examination, the inspector will provide a report that not only points out possible defects or areas of concerns, but also the positive aspects of the structure as well as the type of maintenance that will be necessary to keep the home in good shape.
Even the most experienced homeowners lack the knowledge and expertise of a professional inspection firm. For example, watermarks in the basement may indicate a chronic seepage problem, or simply may be a result of a single incident.
A professional assessment will provide complete information about the condition of the property you are considering and will help avoid any unpleasant surprises after the sale. In addition, a home inspector can remain totally objective, while you as a prospective homebuyer may be emotionally involved.
The inspection fee for a typical single-family house can vary depending upon the geographic area. The particular features of the home such as size, age and special structures will be taken into consideration. A decision to have a home inspected is a good investment. You might save many times the cost of inspection by being aware of defects, maintenance requirements, and upgrading requirements.
Good decorating should not sell you on a house. Remember, you’re also buying structural and mechanical systems. Walk through a house twice before you hire an inspector. The first time, look at the rooms, the floor plan, and envision your own decorating ideas for the house. The second time, go back and look at the condition of the walls, doors, appliance, and plumbing. If the home still looks good after two visits and you’re getting serious about the purchase, hire an inspector.
When interviewing a potential home inspection firm, carefully inquire about the specifics of their work and company. Ask how long they have been in business, ask for references from previous customers. Find out what type of insurance they carry and do they guarantee inspections? Ask if they go on the roof?
A home inspection usually lasts about three hours. Professional inspection companies will be happy to answer all your questions. Avoid firms that issue only a verbal report. The report should be in narrative form, not just a checklist of items inspected. The home inspector should also issue a written report with accurate cost estimates for any major defects discovered during the inspection. You may find it valuable to accompany the inspector as he goes through the house.
Thursday, August 5, 2010
First Time Home Buyers Information
What can I expect for Closing costs?
It is recommended that you have an additional 3% for your closing costs. This is in addition to your down payment. Some of the closing costs you can expect to incur, are, Lawyers fees, Deed Transfer Tax (up to 1.5% of the cost of the home), Property Tax Adjustments, Home Inspection Costs, etc. On a $200,000 home purchase, your typical closing costs would be approximately $4-5000. If the home is heated with oil, you will need to pay for a full tank of oil, an additional $7-900 (the owner is required to have the oil tank filled the day before closing). In recent years, many lawyers are recommending Title Insurance. I strongly recommend adding Title Insurance for every purchase or when you re-negotiate your mortgage. Title Insurance costs approx $250.
What is Title Insurance?
Title insurance is unlike any other kind of insurance. It is not house insurance which only protects the contents of your home or its structure and for which you have to pay a monthly or annual premium. Unlike house insurance, you only pay a one-time premium with no deductible.
Title insurance is distinctive in that it protects your ownership or title against losses incurred as a result of undetected or unknown title defects, for as long as you own your home. Even if you are the rightful owner of your home, there are instances such as real estate title fraud, when your title can come into question.
What is CMHC Mortgage Loan Insurance?
Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with as little as 5% down payment — with interest rates comparable to those with a 20% down payment.
To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.
Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate. For more info, please click this link: http://cmhc.ca/en/co/moloin/index.cfm
What is the RRSP Home Buyers Plan?
The Home Buyers’ Plan (HBP) allows you to withdraw up to $20,000 from RRSPs to buy or build a qualifying home for yourself (as a first-time home buyer) or for a related disabled person. You may still be considered a first-time home buyer if you own a rental property or if you have not recently owned a home.
This is a temporary “loan” from your RRSP — you must pay back the amount you borrow from your RRSP for the Home Buyer’s Plan within 15 years or it will be added to your taxable income.
You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner). Typically, you will not be allowed to withdraw funds from a locked-in RRSP. For more info, please click on the following link: The Home Buyers’ Plan (HBP) allows you to withdraw up to $20,000 from RRSPs to buy or build a qualifying home for yourself (as a first-time home buyer) or for a related disabled person. You may still be considered a first-time home buyer if you own a rental property or if you have not recently owned a home.
This is a temporary “loan” from your RRSP — you must pay back the amount you borrow from your RRSP for the Home Buyer’s Plan within 15 years or it will be added to your taxable income.You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner). Typically, you will not be allowed to withdraw funds from a locked-in RRSP. For more info, please click on the following link: https://www.nscu.com/Investments/RRSPs/RRSPHomeBuyersPlan/
It is recommended that you have an additional 3% for your closing costs. This is in addition to your down payment. Some of the closing costs you can expect to incur, are, Lawyers fees, Deed Transfer Tax (up to 1.5% of the cost of the home), Property Tax Adjustments, Home Inspection Costs, etc. On a $200,000 home purchase, your typical closing costs would be approximately $4-5000. If the home is heated with oil, you will need to pay for a full tank of oil, an additional $7-900 (the owner is required to have the oil tank filled the day before closing). In recent years, many lawyers are recommending Title Insurance. I strongly recommend adding Title Insurance for every purchase or when you re-negotiate your mortgage. Title Insurance costs approx $250.
What is Title Insurance?
Title insurance is unlike any other kind of insurance. It is not house insurance which only protects the contents of your home or its structure and for which you have to pay a monthly or annual premium. Unlike house insurance, you only pay a one-time premium with no deductible.
Title insurance is distinctive in that it protects your ownership or title against losses incurred as a result of undetected or unknown title defects, for as long as you own your home. Even if you are the rightful owner of your home, there are instances such as real estate title fraud, when your title can come into question.
What is CMHC Mortgage Loan Insurance?
Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with as little as 5% down payment — with interest rates comparable to those with a 20% down payment.
To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.
Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate. For more info, please click this link: http://cmhc.ca/en/co/moloin/index.cfm
What is the RRSP Home Buyers Plan?
The Home Buyers’ Plan (HBP) allows you to withdraw up to $20,000 from RRSPs to buy or build a qualifying home for yourself (as a first-time home buyer) or for a related disabled person. You may still be considered a first-time home buyer if you own a rental property or if you have not recently owned a home.
This is a temporary “loan” from your RRSP — you must pay back the amount you borrow from your RRSP for the Home Buyer’s Plan within 15 years or it will be added to your taxable income.
You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner). Typically, you will not be allowed to withdraw funds from a locked-in RRSP. For more info, please click on the following link: The Home Buyers’ Plan (HBP) allows you to withdraw up to $20,000 from RRSPs to buy or build a qualifying home for yourself (as a first-time home buyer) or for a related disabled person. You may still be considered a first-time home buyer if you own a rental property or if you have not recently owned a home.
This is a temporary “loan” from your RRSP — you must pay back the amount you borrow from your RRSP for the Home Buyer’s Plan within 15 years or it will be added to your taxable income.You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner). Typically, you will not be allowed to withdraw funds from a locked-in RRSP. For more info, please click on the following link: https://www.nscu.com/Investments/RRSPs/RRSPHomeBuyersPlan/
Wednesday, August 4, 2010
11 Questions to Ask Your Agent
Following is a list of general questions you should always ask when considering making a real estate purchase. Keep in mind, however, you are unique.
You have particular dislikes and likes as well as factors in your life that are different than other people. The point I am trying to make is that you shouldn't stick to just these questions. You are making an important choice, so give some thought to your situation.
1. Don't rush into things. The first question to ask should be directed at yourself. What type of home do you want? How big should it be? What amenities do you want? Are you planning for a family in the next three to five years and will the home be able to accommodate a new bundle of joy? Make a definitive list and stick to it. If you stray from it, you could end up with a house that doesn't really fit you and suffer buyer's remorse.
2. The next question is what area do you want to live in? Pick a few. You may find the prices to be excessive or the selection not so hot, but make sure you exhaust those areas before moving on. Again, you want to avoid buyer's remorse.
3. Once you start looking at homes, a key question to ask is how long the house has been on the market. The amount of time will give you an idea of how flexible the owner is on price. If the house has been on the market for a month, the owner isn't going to be very flexible. If it has been on the market for six months, flexibility will definitely exist.
4. Has the house previously been under offer, but fell out? If so, find out why? Was it a problem with the buyer getting financing or did the buyer find out there was something wrong with the home?
5. What kind of condition is the house in and how old is it? Remember that a seller has typically done everything reasonably possible to spruce up the home. If you can see wear and tear on the house, it may be a red flag. In such a situation, you need to get a home inspection to make sure there aren't problems in areas you can't see such as mold, rust and water leaks.
6. If you have children or are planning on it, you must investigate the school district. Are the schools good? Is there a lot of crime in the area?
7. In addition to the home price, you should ask whether there are any additional fees such association fees, betterment charges, etc.
8. What are the property taxes and what will they be when you buy? Many people are shocked to find out how much they have to kick out in property taxes. Don't get surprised.
9. Zoning and easement issues are often overlooked when buying a home. If you are buying in a neighborhood with many homes, zoning is undoubtedly going to be for residential living. Easements, however, can be terrible surprises. Find out if there are any easements on the property. An easement gives a third party the right to use of part of the property. This can include giving the neighbor the right to do something or a utility company to place structures on your prospective property.
10. Noise is another big issue to consider. If you are serious about the property, make sure to drive buy on weekdays and weekends. If the property shares a wall with another residence, such as a duplex or condo, make sure you view it while the neighbors are home to get an idea of how loud it is.
11. In the euphoria of buying a property, practical issues can be missed. A big one is traffic. Specifically, what is the commute like between the house and your place of work? You don't want to buy the house only to find out it takes three hours to get to and from work each day.
Obviously, you should be asking many additional questions before making a purchase. These 11 questions, however, will help you get started.
You have particular dislikes and likes as well as factors in your life that are different than other people. The point I am trying to make is that you shouldn't stick to just these questions. You are making an important choice, so give some thought to your situation.
1. Don't rush into things. The first question to ask should be directed at yourself. What type of home do you want? How big should it be? What amenities do you want? Are you planning for a family in the next three to five years and will the home be able to accommodate a new bundle of joy? Make a definitive list and stick to it. If you stray from it, you could end up with a house that doesn't really fit you and suffer buyer's remorse.
2. The next question is what area do you want to live in? Pick a few. You may find the prices to be excessive or the selection not so hot, but make sure you exhaust those areas before moving on. Again, you want to avoid buyer's remorse.
3. Once you start looking at homes, a key question to ask is how long the house has been on the market. The amount of time will give you an idea of how flexible the owner is on price. If the house has been on the market for a month, the owner isn't going to be very flexible. If it has been on the market for six months, flexibility will definitely exist.
4. Has the house previously been under offer, but fell out? If so, find out why? Was it a problem with the buyer getting financing or did the buyer find out there was something wrong with the home?
5. What kind of condition is the house in and how old is it? Remember that a seller has typically done everything reasonably possible to spruce up the home. If you can see wear and tear on the house, it may be a red flag. In such a situation, you need to get a home inspection to make sure there aren't problems in areas you can't see such as mold, rust and water leaks.
6. If you have children or are planning on it, you must investigate the school district. Are the schools good? Is there a lot of crime in the area?
7. In addition to the home price, you should ask whether there are any additional fees such association fees, betterment charges, etc.
8. What are the property taxes and what will they be when you buy? Many people are shocked to find out how much they have to kick out in property taxes. Don't get surprised.
9. Zoning and easement issues are often overlooked when buying a home. If you are buying in a neighborhood with many homes, zoning is undoubtedly going to be for residential living. Easements, however, can be terrible surprises. Find out if there are any easements on the property. An easement gives a third party the right to use of part of the property. This can include giving the neighbor the right to do something or a utility company to place structures on your prospective property.
10. Noise is another big issue to consider. If you are serious about the property, make sure to drive buy on weekdays and weekends. If the property shares a wall with another residence, such as a duplex or condo, make sure you view it while the neighbors are home to get an idea of how loud it is.
11. In the euphoria of buying a property, practical issues can be missed. A big one is traffic. Specifically, what is the commute like between the house and your place of work? You don't want to buy the house only to find out it takes three hours to get to and from work each day.
Obviously, you should be asking many additional questions before making a purchase. These 11 questions, however, will help you get started.
Tuesday, August 3, 2010
First-time buyer Checklist
Being a first-time home buyer, knowing where to start is an important part of making the home buying process easy, stress-free, and simple.
1) Getting Ready
2) Get Set
3) Go
4) Congratulations
1) Getting Ready
- CONTACT A MORTGAGE SPECIALIST & GET PRE-APPROVED
- Review Purchasing Costs
- Deed Transfer Tax (Varies depending on wheere you are - check with your muinicpality)
- G.S.T / H.S.T (only on new property)
- Legal Fees (Notary Public / Lawyer)
- Home Inspection (if applicable)
- High Ratio Mortgage Premium (only if borrowing over 80% of the purchase price)
- Deposit (minimum 5% & forms part of the purchase price)
- Review First Time Buyer Savings
- R.R.S.P tax free withdraw (up to 25K per person)
- Property Transfer Tax Rebate (No P.T.T under $425K)
- Define your Search Criteria
- Needs Vs. Wants analysis
- Neighborhood analysis (likes & dislikes)
- Become an expert
- Determine what your budget will get you in your neighborhood of choice
- View property details from listings in your neighborhood of choice
- Tour open houses of qualified homes
- Through process of elimination determine what home(s) interest you the most
- Make an offer
- Draft Contract of Purchase & Sale
- Determine Price, Possession date & Completion Date
- Determine Subjects (usual subjects: Inspection, Financing & Strata Paperwork)
- Submit Offer (with Expiry time and date)
- Sellers Options (Accept, Counter or let expire)
- Once offer is accepted
- Work through & remove all Conditions
- Place deposit check into the Trust Account of your Realtors Brokerage (Bank Draft)
- Select Notary Public / Lawyer
- Prepare for the move
- This First Time Home Buying outline will be altered slightly depending on the product being purchased (House or Condo). However the basic outline that you see above is the foundation of the home search needed to get you “the buyer” into the home that works best for your needs.
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