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First Time Buyer Friday #11 – When To Walk Away

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

Broken house

“Needs TLC”

Q. I made an offer to purchase a house and my inspector found a few problems. How do I know when to walk away?

A. Unfortunately, not all houses are created equal, and you may find that after finally getting an offer accepted on your first home, that the inspection report turns up some issues you missed on your initial viewing of the property. This is normal – it’s the inspector’s job to pick apart the various systems of the home and point out to you everything you’re taking on when you buy the house. The big question is – what is acceptable and what’s too much?

When I bought my home, it was only 11 years old. Everything that I needed to change was merely cosmetic, and if worse came to worse, I could always wait (and suffer through the pastel pink walls and mint-green carpet). But if you’re buying an older home, things like knob-and-tube wiring, a faulty roof, or a cracked or leaking foundation might be a reality and turn your dream home into a nightmare – and this is why an inspection is the best $400 you can spend when you’re shopping for a home.

You should be prepared to replace a few things and make a few changes once you move in, but you’ll probably want a good idea as to how much money this is going to cost. For example, if your inspection report finds that the roof is failing and you’ll soon need to replace it, it’s not hard to get a roofing contractor over for a quick drive-by estimate. It’s another thing altogether if your inspector suspects there may be substandard wiring, cracks in the foundation, or failing stucco or other exterior cladding. These repairs are often much more costly – and sometimes cover up other problems not visible to your inspector. It’s not necessarily the cost of the repairs that is the greatest cause for concern.It’s what you don’t know that can cost the most. If you aren’t comfortable with this, it might be a signal that it’s time to be glad you had an inspection, walk away, and move on to another property.

Your REALTOR® has probably seen lots of similar houses in his or her career and can certainly help counsel you, but you should always get reliable repair estimates from reputable contractors – they are the ones you’ll be writing a cheque to for repairs. The decision to walk away or not has to be your own; you need to be comfortable with any repairs or upgrades that may be necessary when you take ownership of the house.

A smart buyer will also consider if the house will be difficult to sell in a few years’ time if these issues are not looked after when he or she owns the house. The roof might not be leaking now, but the last thing you want is to take a hit on the price of your home because a subsequent buyer doesn’t want to fix the problems you inherited from the previous owner!

As with dating, there are plenty of fish in the sea when it comes to buying houses, and your REALTOR® will help you find the right house. And, also like dating, you’ll probably find that you love that house even more than you did the one you let get away.

I’d love to answer your questions about buying or selling a house. Give me a call at 250-885-0512, e-mail me at Tim@TimAyres.ca or fill in my contact form. Connect with me on Twitter at Twitter.com/TimAyres.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #10 – How Does Rent To Own Work?

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

What's the Deal with Rent-To-Own?

What's the Deal with Rent-To-Own?

Q. I’ve heard about people being able to rent-to-own a home? Is this legit? How does it work? Why don’t more people do this?

A. At first glance, renting to own a home sounds like such a good deal. No or little money down, similar payments to rent, going towards your equity instead of in the landlord’s pocket. And for many people, this would work out just fine. However, it’s not as simple as it sounds.

A rent-to-own program is essentially an agreement for sale, which is a legal term that means you are agreeing to purchase the property from the owner on a set date in the future, for an agreed-upon price today. Payments on an agreement for sale are credited to the purchase price, and used to pay any interest, if any. Essentially, the seller is financing your purchase of the property until such time that you can qualify for a mortgage and pay out the rest.

Most rent-to-own programs boast that they are “interest-free,” but while you’re paying no interest, only a portion of your payment is applied to the principal. The rest goes directly into the owner’s pocket as rent. So, no, it’s not interest in the traditional sense of the word, but it’s essentially six-of-one, half-dozen-of-the-other, isn’t it?

From a buyer’s perspective, a rent-to-own scheme is attractive if that buyer would likely not be eligible for traditional mortgage financing due to poor credit, and/or would not have sufficient funds available for the required minimum 5% down payment. By renting-to-own, the buyer is essentially paying a down payment (and rent) to the seller while living in the house. At the end of the term of the rent-to-own contract (one to five years), the buyer/renter is obligated to pay the outstanding balance to the seller/landlord, which would be the original price agreed on at the start of the term, less the amount of the portion of the monthly payments allocated to the purchase price and the buyer/renter’s initial deposit. The agreement for sale is registered on the title to the property which ensures that the seller/landlord cannot simply sell the property to somebody else.

Example: if the purchase price of the home was $400,000, and the rent was $1750 per month, 30% of which was assigned to the purchase price ($525), three years of payments would net $18,900 which would leave an outstanding balance of $381,100. This balance would need to be paid to the owner at the end of the term, assumedly by a mortgage that the buyer would now qualify for (a bank would hopefully recognize the history of monthly payments to improve the buyer’s credit situation). Please note that these numbers are for illustration only, and the length of the term and amount of the monthly payment which is applied to the purchase could be more or less, depending on what is negotiated.

What happens at the end of the term if the buyer still doesn’t qualify for a mortgage to pay out the outstanding balance to the seller? In this case, the seller would be eligible to keep the deposit and all payments made by the buyer during the term. The same goes if a buyer defaults on a payment.

From the seller/landlord’s perspective, is this a good deal? I know I wouldn’t do it. First, unless you own the property outright or have a small mortgage, you’re going to be making payments on the property until the end of the rent-to-own (agreement for sale) term when you get your lump-sum from the buyer. If the renter/buyer’s payments aren’t large enough to cover your mortgage payments, you’re still paying out of pocket and still need a place to live. Second, if you have a small enough mortgage or own the property outright, why not just rent it out to good tenants and have a nice income stream for life? Why sell an income-producing asset at the end of the term? And thirdly, for every rent-to-own buyer in the marketplace, there are probably several more willing and able outright purchasers for your property. Why wait to get your cash now? You’d earn some rent/interest on the agreement for sale, but the opportunity cost of doing so could exceed the benefits, especially if the buyer defaults and the property has lost value. This is probably why you don’t see more agreement for sale/rent-to-own properties on the market – there isn’t a compelling incentive for owners to agree to it.

I think there are better ways to improve your credit and to save money for a down payment to take advantage of home ownership. RRSP withdrawals, the tax-free-savings-account, and other financial tools come to mind. However, you’d probably talk to families who’ve been able to purchase a home through a rent-to-own scheme that are perfectly happy with the result.

In any case, I would highly recommend having a lawyer and/or an accountant review any rent-to-own or agreement for sale contract you are considering entering into, either as buyer/tenant or as seller/landlord to make sure you understand the benefits and risks. There are many schemes that would be very one sided toward the landlord/seller, so be sure what you’re entering into is fair and equitable.

What do you think? Have you ever purchased a property this way or know somebody who has? I’d love to read your comments below.

If you have any questions about renting to own, agreements for sale, how you can make home ownership a reality, or any other real estate matter, please give me a call at 250-885-0512, e-mail me at Tim@TimAyres.ca or fill in my contact form. You can connect with me on Twitter at Twitter.com/TimAyres.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #9 – Bidding Wars or Competing Offers

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

Multiple offers can still happen

Multiple offers can still happen

Q. I had my REALTOR® prepare an offer on the perfect house yesterday, but we lost out because there were competing offers. What can you tell me about how this works?

A. It can be so frustrating, especially as a first time buyer with limited finances, to find the right home for your needs only to lose it to another buyer in competing offers, sometimes called a bidding war.

With record low interest rates and falling prices, it’s much more affordable these days to buy a house than in recent years. Not surprisingly, many first time buyers like yourselves are stepping into the market, after having been sidelined by high prices and interest rates. There are many reports of multiple offers happening, especially with lower-priced, entry-level properties.

Typically, if you decide to offer on a property, your REALTOR® will inform the listing agent of your intention to write one and request the title and property disclosure statement. At this time, the listing REALTOR® will also inform your agent if there are any other competing offers.

If there are no competing offers, then your offer is presented to the seller of the house you want to by either by your agent or by the seller’s agent. The offer is either accepted (great), countered (not as great), or rejected (booo!).

If there is a competing offer, this changes the game plan considerably. You very likely will not see a counter-offer, so you need to decide with the help of your REALTOR® what your best possible offer will be. Often, this means going over the asking price, especially if the property is new on the market.

However, you should keep in mind, that price isn’t everything, and making it easier for a seller to accept your offer will also help your position. If the offers are very close in price, the one with the easiest conditions could win, even if it’s a few thousand dollars less. Keeping your offer free of unusual conditions (like parental approval) and keeping the conditions short (no more than 5 business days) could bump your offer into first position.

One thing a first-time buyer has going for him or her is that there is no current property to sell. A subject-to-sale offer has almost no chance of acceptance in a multiple-offers situation.

When I present multiple offers to sellers, I usually present them in the order in which they were received, taking notes along the way. Once all offers have been presented, we go through the notes, comparing one offer with the other(s), and the seller decides which one to go with. Again, price isn’t everything, and I have had sellers accept a few thousand dollars less for an offer that just “felt right” to them. That is one of the most fascinating things about residential real estate – the emotional connection a seller has to his or her home when selling bears largely on their decision-making process.

If you are unsuccessful in getting the deal on the property, ask your REALTOR® if he or she can arrange to have your offer in backup position. This way, your offer is automatically accepted if the first one collapses.

I love helping first-time buyers get into their first homes – nothing is more rewarding than handing over the keys to my first time clients. I provide guidance and assistance every step of the way and beyond, all at no cost. If you have any questions, please  give me a call any time at 250-885-0512, e-mail me at Tim@TimAyres.ca or fill in my contact form. Connect with me on Twitter at Twitter.com/TimAyres.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #8 – Do I Need A Home Inspector?

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

What lurks in the attic? The home inspector knows!

What lurks in the attic? The home inspector knows!

Q. A friend said that if I decide to purchase a condo or a home with a warranty, I don’t need a home inspector. It that true?

A. I would always recommend that you protect yourself from unforeseen problems by hiring a qualified home inspector as a condition to buying the house. In fact, it’s so important that our standard-form Contract of Purchase and Sale has an inspection clause pre-written into the subjects page.

An inspector will cost you somewhere between $300-$500 and is money well spent. Some offer a lower rate for condos or townhouses, while others are the same for all property types. This is money that is spent before you remove your conditions, so it’s a good idea to get the final approval on your financing before you pay an inspector to look at the house. That way, you avoid the frustrating position of  knowing that the house your bank won’t let you buy is safe and sound.

As of March 31, 2009 all home inspectors are required to be licensed in British Columbia. This is a huge step forward in standardizing the industry and protecting consumers. Prior to this requirement, anyone could call him or herself a home inspector without any real knowledge about homes or any formal training! To be fair, most reputable home inspectors belong to a self-regulating professional organization such as the Canadian Association of Home and Property Inspectors (CAHPI).

With a condo or townhouse, sometimes an inspector cannot get access to all areas of the exterior of the building, for example, the roof. It’s important that you get your REALTOR® to arrange access to these spaces. Otherwise, you only get a limited idea of the condition of the property by having the inspector examine only the strata unit you’re buying. Remember that when you buy a condo or townhouse, you are also buying an interest in (and responsibility for) the common property of the building, so it only makes sense to have it inspected to avoid any unforeseen expense.

If you buy a newer home, it will come with a warranty. The good news is that the warranty will cover many things that could go wrong. The bad news is that a warranty doesn’t prevent problems from occurring. Better to spend the money and get it inspected. Often, the current owners of the property can have any problems found remedied before you move in, saving you the hassle of making a warranty claim.

It can be disappointing to have an inspector examine the home that you really like, only to find some major issues that weren’t apparent to you when you first looked at the house. If you have to walk away, you can think of the fee you paid to the appraiser as an insurance premium that saved you from major financial difficulty down the road.

So, how can you find a reputable inspector? Well, it’s comforting to know that inspectors in BC are now licensed, so you could search Google for home inspectors, or look in the Yellow Pages. You may also ask your REALTOR® who he or she recommends. I have three or four inspectors whose cards I carry and would be happy to recommend any of them.

For more information about home inspection or any other real estate questions, call me at 250-885-0512, e-mail me at Tim@TimAyres.ca or fill in my contact form. Connect with me on Twitter at Twitter.com/TimAyres.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #7 – BC Property Transfer Tax (PTT) Exemptions

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

The home buyer in BC gets shaken for more money

The home buyer in BC gets shaken for more money

Q. What’s this about Provincial tax when I buy a home? How much is the Property Transfer Tax (PTT)?

A. I touched on this briefly in my post about closing costs in BC. The BC Property Transfer Tax (PTT), sometimes known as the Property Purchase Tax (PPT) has been a thorn in the side of home owners since its inception in 1987. BC REALTORS® have been actively lobbying the provincial government to reduce or eliminate the tax, as it places an unfair burden on home buyers.

The BC PTT is calculated on the sale price of the property (or the “fair market value” if the transfer of property is a gift or bequest), at 1% on the first $200,000 and 2% on the balance. So, a $500,000 property would incur an $8000 tax in order to change hands. This is money that comes directly out of the pocket of the buyer. It cannot be financed, eating up a nice chunk of a down payment on the purchase.

There is some relief for first-time buyers, however. First-time buyers qualify for an exemption in many cases. You do not have to pay the PTT if you are:

  • a Canadian citizen or a permanent resident as determined by Immigration Canada,
  • a person who has resided in British Columbia for 12 consecutive months immediately prior to the date of registration of the transfer, or who has filed two income tax returns as a British Columbia resident within the last six years,
  • a person who has never, at any time, held a registered interest in a principal residence anywhere in the world (a principal residence is defined as the usual place where an individual resides), and
  • a person who has not previously received an FTHB exemption or refund.

The purchase price of the property must not be more than $425,000 to qualify for an exemption. Government has raised the exemption threshold in recent years, reflecting the increase in property prices across the province. For properties between $425,000 and $450,000, a partial exemption applies.

To calculate the partial exemption, you first need to figure out the tax that would be payable without an exemption. Let’s use a $435,000 property as an example. The tax at 1% on the first $200,000 an 2% on the balance on that property would be $6700. Then plug it into this formula:

(Partial exemption max price – purchase price) x Tax = exemption, subtract from tax.
(Partial exemption dollar threshold)

So, for this example,

(450,000 – 435,000) x 6700 = $4020. $6700 – $4020 = $2680 tax payable.
(25,000)

There are several other conditions and details about the PTT exemption, that are covered in this PTT Brochure.

If you have any questions about the PTT or any other real estate matter, please contact me at 250-885-0512, e-mail me at Tim@TimAyres.ca or use my contact form.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #6 – What Does My Money Get Me?

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

house-money

Q. I want to spend about $400,000 on my first home – what can I buy for that kind of money?

A. Let’s break this down and see what $400,000 would cost first. To buy a $400,000 home, you’d need 5% down at a minimum, which is $20,000. The remaining $380,000 would need to be mortgaged. If you were to get a 5-year fixed rate at 4%, amortized over 35 years, your monthly payment would be about $1675. A two-income family should be able to afford that payment.

Keep in mind that you should think long-term. While interest rates today are at historic lows, you need to think about what happens in 5 years when it’s time to renew. No one knows where interest rates will be at that point, and you should build in a comfort zone by calculating the payment at a higher rate of interest. At 5%, the same mortgage estimated above would be $1905 – at 6%, $2150, and at 7%, $2401. The risks of this can be offset by choosing a shorter amortization period (25 or 30 years, instead of 35), which would allow you to pay off more of the principal before it’s time to renew, or you could make extra payments where your budget (and mortgage terms) allow.

So, now that we’ve established what $400,000 looks like on a monthly basis, let’s have a look at what that sum would buy you in today’s market.

In the Victoria core area (Victoria, Oak Bay, Saanich, View Royal and Esquimalt) there are 27 single family homes under $400,000 as of writing this post. Most are small, and old, but there are always a few gems in this price range. There are plenty of condos under $400,000 – 384 to be exact. In the higher end of the range, there are brand new suites at The Juliet, The Ovation, The Monaco, and other brand new high end developments in the core. At the lower end of the range, older buildings (which usually mean larger suites) offer stability and peace-of-mind for less than $250,000. There are 45 townhouses in Victoria and vicinity under $400,000 as of writing, with lots of variation in style, age and location.

Moving further out of the Victoria core area, you’ll get more bang for your buck. In Langford and Colwood as of this writing, there are 30 single family houses and 44 townhouses in Langford and Colwood for sale under $400,000 – including brand new homes in the Happy Valley area, and townhouses at the foot of Bear Mountain. $400,000 would get you nearly any condo, with 215 condos under $400,000 in Langford and Colwood to choose from. Only 21 are above $400,000, mostly on Bear Mountain, or in that new development on the waterfront in Colwood at Esquimalt Lagoon.

Further out west to Sooke is where many first-time buyers are choosing to go (here are 10 good reasons to move to Sooke.) The drive to Victoria is a little longer (but it’s nice!) and the town smaller, but that means that you get a lot more for your money. There are 49 houses for sale in Sooke under $400,000, including many brand new beautiful houses in new subdivisions. If you buy in Sooke, there is also the option of buying an older home to renovate to your liking. Older homes will most likely have a larger lot, too. There are not many condos or townhouses in Sooke, but more are being built all the time. Almost all of them are under $400,000, including the brand-new townhouses at The Pointe in Sun River Estates and waterfront condos along Kaltasin Road. As of writing, 29 condos and townhouses in Sooke under $400,000 are for sale.

I have found that first time buyers are often surprised by 1) How much they can afford, and 2) What that money will get them. There’s plenty of product out there, prices are declining, and with the Bank of Canada reporting that interest rates will remain low until at least the second half of 2010, there hasn’t been a better time to buy in a long time – if it’s right for your situation.

It may or may not make sense for you to buy right now. To get a clearer picture, or for more information about any of the homes mentioned in this post, give me a call at 250-885-0512, e-mail me at Tim@TimAyres.ca or fill in my contact form. Connect with me on Twitter at Twitter.com/TimAyres.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #5 – Do I Need A REALTOR®?

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

The right agent can make all the difference.

The right agent can make all the difference.

Q. I can search the MLS® myself, go around to open houses myself, and call the number on the sign or ad of any home I want to look at, so why should I work with a REALTOR®?

A. While it’s true that you can do all of the above, it’s really worth your while to find a dedicated agent to work with. The role of an agent has changed drastically in the last few years. In the past, an agent would be the sole source of information on properties for sale, using a paper-based MLS catalogue. However, in today’s world, with property information available 24/7 on the Internet and in real estate publications, real estate agents are no longer the gatekeepers of all the information on real estate (although some would still like to believe that they are).

Before, all agents were assumed to be working for the seller; buyers were offered very little in the way of agency representation. Even the REALTOR® that would take you around in the back of his or her car and write offers on your behalf was technically working for the seller, with no direct legal responsibility to look after the buyer’s best interests. Today, there are agents that work only with buyers. An agent working with a buyer now works directly for that buyer and has the legal obligation to protect that buyer’s interests.

Working with an agent today is about convenience and care. If you see 4 or 5 houses you want to look at, rather than waiting around for 4 or 5 agents to call you back, you make one call to your  dedicated agent who will organize the listings in a logical showing sequence and book all the appointments for you. All you need to do is show up and check out the homes.In most areas, including Victoria and Sooke, a REALTOR® can also set up a personalized client account which will send you the most current listings, and will notify you of price changes for the type of property you are looking to buy. The private client accounts have much more information than you can find on the consumer-oriented real estate search portals like REALTOR.ca.

An agent also looks at things objectively, pointing out practical things you might have missed while being distracted by the stainless steel appliances! Over time, an experienced agent gives a wealth of information about the city in which he or she works. He or she will know which condos are the best, which buildings have problems, where the best pubs and cafes are.

An agent looks after your best interests. He or she will ensure your rights, needs, and wants are reflected accurately in the purchase agreement, and that the contract is legally enforceable. A good agent will pull up recent comparable sales to ensure you’re paying a fair price. A REALTOR® will help you take care of the details of closing, and can refer you to other trusted professionals you’ll need along the way like a lawyer or notary for conveyancing, home inspector, tradespeople, and so 0n.

Also, by working with an agent, you’ll get to know him or her and develop a long-lasting working relationship that continues after the sale in the years to come. He or she will get to know you and anticipate your needs and wants, and won’t waste your time showing you properties that you won’t like.

Some people believe that by working directly with the listing agent they’ll be able to get a better deal, but generally, this is a misconception. While REALTORS® are legally able to work with both a buyer and  a seller, if both consent, that agent already has a close working relationship with the seller  and is unlikely to give you a better deal, because he or she is already looking after the seller’s best interests and has a legal duty to the seller to obtain the best deal possible.

Finally, working with a REALTOR® to find your first home costs you nothing. A buyer’s agent is paid by the seller of the property you buy. You’ll appreciate the guidance and support of an experienced REALTOR®, who has helped dozens or even hundreds of people just like you get into their very first home.

Tim Ayres – Sooke Real Estate Professional

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First Time Buyer Friday #4 – Closing Costs

Closing Costs

Closing Costs

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

Q. What additional closing costs are associated with buying property in Victoria, Sooke, or anywhere else in British Columbia?

A. “But wait! There’s more!” This is how it can feel sometimes when you’re buying your first home. It seems sometimes that there is a big vacuum cleaner that is after your money. Welcome to closing costs.

When many first-time buyers start looking at homes, they often very carefully examine their credit, their savings, and calculate out to the penny what their anticipated monthly payment will be. Often, a large oversight is that they do not calculate closing costs or are completely unaware that they exist or just how much money they’ll need.

The largest chunk of the closing cost for most first-time buyers in BC is amount that you have to spend on legal fees. In order to register your mortgage on the title and register the title in your name, you must use either a lawyer or notary public to act on your behalf to convey the property from the sellers to you (often called conveyance or conveyancing).

There are advantages and disadvantages to using either a notary or lawyer. I spoke to Notary Public Sabrina Hanousek of Notaries on Douglas about her side of the story. Recently, Sabrina did an absolutely outstanding job and went above and beyond the call of duty for some of my clients who had a difficult situation arise at closing.

Sabrina says that people who choose to use a notary usually do so because they charge less than a lawyer, which is often the case, but not always. What they find out, however, is that notaries tend to have a lot of experience with real estate conveyance, because that is the bulk of their business in many cases. She also finds that notaries are more “hands-on” and rely less on support staff, and meet directly with the clients rather than delegating this task to secretaries. If things go wrong, she has access to experienced lawyers who can try and fix things. Sabrina charges $795 for a purchase, and $495 for a sale, all disbursements and taxes in. Some items like strata forms would be extra, and a purchase and a sale would sometimes be eligible for a small discount.

I spoke to Rob Connolly of Victoria law firm Jones Emery Hargreaves Swan about how a lawyer is different from a notary. While a lawyer’s fees are sometimes higher, they can deal with issues directly if they come up, rather than having to refer the file to a lawyer if the client used a notary, if, say, a dispute arose about something in the contract. There are also lawyers who specialize in nothing but real estate law, and would be very well equipped to handle any conveyance file. Most people that choose to use a lawyer to handle their real estate transactions do so for peace of mind, and they may already have a lawyer for other legal matters. Rob’s firm charges $800 for a purchase, plus $300-$500 for disbursements (documents, copying, etc). For a sale, it’s $600 plus $50-$75 for disbursements.  A $200 discount is offered if the client does both a sale and a purchase.

It’s best to get a referral from a friend or your real estate agent and to call around to get a few different quotes.

Another source of closing costs are any taxes payable on the purchase. GST is not payable on resale housing, but is payable on new housing, although it’s often included in the purchase price. The provincial property transfer tax (PTT) is calculated at 1% on the first $200,000 and 2% on the balance of the purchase price. However, most of the time, first-time buyers are exempt from paying it.

Depending on your financial institution, you may have to pay for an independent appraisal of the property you’re buying. Often, a mortgage broker will pay for the appraisal, that would be a good question to ask before deciding on who to get your mortgage from. If you have to pay, budget around $300-$500 for this.

Again, depending on the financial institution and type of property, you may need to have the property surveyed. In the Contract of Purchase and Sale, the seller has to provide a survey if it’s available, but often, especially with older properties, the survey is gone or outdated. Surveys can cost over $1000, but most financial institutions will accept title insurance instead, which insures the lender against depreciation caused by something that an up-to-date survey would discover, for example, that the house is not where it is supposed to be on the lot due to an error by the builder. A title insurance policy costs around $400.

Last but not least, you’ll need homeowner’s insurance. If you’re buying a condo, you’ll just need contents and liability insurance. These policies cost $300-$500 per year.

So, all told, you’ll want to set aside $1700-$2200 in addition to your down payment to cover closing costs. Remember this when calculating how much you can afford. And don’t forget a hundred bucks or so for pizza and beer for your friends when they help you move!

If you have any questions about buying your first home, or any real estate matter, call me any time at 250-885-0512 or e-mail Tim@TimAyres.ca. Be sure to check out the other First Time Buyer Friday posts!

Tim Ayres – Sooke Real Estate Professional

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First-Time-Buyer Friday #3 – Strata Properties

Shutters Spa and Residences

Shutters Condominiums on The Songhees in Victoria

In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

Q. I hear the terms “strata property,” “strata fee,” and “strata council” all the time when looking through listings and talking to real estate people. What exactly does strata mean?

A. Strata properties are just another type of property ownership. It’s a legal concept for dividing up a large property such as a condominium project into individual units that individual owners can own. Typically, a strata property will be either a condominium, townhouse, or bareland strata.

When you buy a strata property, you become a member of that project’s strata corporation, along with the other owners in the building. The strata corporation elects a strata council, which makes decisions and handles things like by-law enforcement, record-keeping, paying the common bills, and so on. Strata corporations are operated much the same as non-profit societies in this way.

A strata property is divided up into three types of property. There is the strata lot (SL), which is the unit that an individual can own; the actual townhouse or condo. There is common property (CP), which each owner in the strata corporation owns a proportion of, depending on the size of their strata lots. This would include things like the driveway, exterior of the building including the roof and exterior walls, hallways, elevators, and so on. Basically everything outside of the interior walls of the condo or townhouse. Finally, there is limited common property (LCP), which is common property designated for the exclusive use of an individual unit. For example, balconies are almost always LCP, and a parking space for a unit will often be LCP, especially in older stratas.

Strata fees are charged to each owner to cover the common expenses like heating the common areas, cleaning, maintenance, water, sewer, insurance, and so on. Strata owners are responsible to pay the strata fees (usually, once a month) levied to their strata lot. The amount each owner pays varies depending on their unit entitlement. Unit entitlement is a fancy way of saying the size of their strata lot in proportion to the other lots in the building or complex. So, the bigger in square footage you go, the more you can expect to pay in strata fees compared to smaller units in the same complex. Strata fees really to vary from property to property in Victoria and Sooke. I would budget about $200-$275 for a two-bedroom condo, and $100-$150 for a one-bedroom. I’ve rarely seen a monthly strata fee over $300 for either a townhouse or condo in Victoria or Sooke.

When buying into a strata corporation, you will be given the opportunity to read over records of all the meetings, letters, and financial statements from the last couple of years. You will also have a chance to read over the by-laws, to make sure they fit with your lifestyle. Many condominiums in Fairfield, for example, do not allow pets. Several others have an age by-law which restricts the units to those aged 19, 55, or even 65 and over. Some complexes allow rentals, and some do not, which is something to keep in mind, also.

All of this discussion about stratas has pushed me to start writing a new section on this blog focusing on strata issues. So, now we’ll have FTB Fridays, and Strata Saturdays Mondays (sorry, can’t guarantee writing on a Saturday!). For detailed information about British Columbia’s Strata Property Act, have a look at the Government of BC Website.

Thanks for reading! If you have any questions on buying your first or fiftieth home, I’d be happy to help. Call me any time direct at 250-885-0512 or e-mail me at Tim@TimAyres.ca.

Tim Ayres – Sooke Real Estate Professional

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First-Time-Buyer Friday #2 – Needs vs Wants

house-shoppingQ. There are lots of potential homes in my price range. How can I narrow down the field so I don’t waste time viewing homes I really have no interest in buying?

A. Many first time buyers are hit with this problem. Often, because they’re just starting out and want to make sure they don’t miss any potential homes, they search REALTOR.ca for all homes under a certain price level, and go from there. This is what I would call a shotgun approach. Sometimes, a buyer will get so many results it’s overwhelming. So an exercise I like to have my first time buyers do is the Needs vs Wants Inventory.

It’s simple really. Just take a sheet of paper and divide it into two columns, one entitled Needs, and the other Wants. Then think of all the home features or attributes of your lifestyle and put them in the appropriate column. For example, if you have pets and intend on taking them with you to your new home, then obviously “pets” goes on the needs side.

If you like stainless steel appliances, but are willing to cope with harvest gold, then that goes in the wants column. Thinking about this further, you could put the commute time to work in both columns. Put the maximum commute time you’d allow on the needs side, and the ideal commute time on the wants side.

Continue down the page and you should be able to come up with a pretty good summary of what you’re looking for. Talk to an agent and ask him or her to search for listings that match your criteria. This will really help narrow it down and will ensure that you find a home that will be the perfect balance between what you really need and what you want.

If you’re a first- second- or twenty-time buyer and have a question you’d like answered, contact me and I’ll get you a prompt, accurate response!

Tim Ayres – Sooke Real Estate Professional

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