FAQs for Buyers

Why should I use a Realtor to help me buy a home?

While buying and selling privately there may be money to be saved but the money is usually saved by the seller.  Buying or selling a home is a major financial (and emotional) undertaking so find out why you shouldn’t discard the notion of hiring an agent just yet.

 

1. It’s Usually Free

Commissions are usually paid by the seller so having a Realtor on your side will give you their expertise and often won’t cost you a thing.  A buying Realtor may require a contract to ensure he/she gets paid a fee but that rate is usually paid by the seller unless you purchase a home by an unrepresented seller.

 

2. Better Access/More Convenience

A real estate agent’s full-time job is to act as a liaison between buyers and sellers. This means that he or she will have easy access to all other properties listed by other agents. Both the buyer’s and seller’s agent work full time as real estate agents and they know what needs to be done to get a deal together. For example, if you are looking to buy a home, a real estate agent will track down homes that meet your criteria, get in touch with sellers’ agents and make appointments for you to view the homes. If you are buying on your own, you will have to play this telephone tag yourself. This may be especially difficult if you’re shopping for homes that are for sale by owner.

 

3. Negotiating Is Tricky Business

Many people don’t like the idea of doing a real estate deal through an agent and feel that direct negotiation between buyers and sellers is more transparent and allows the parties to better look after their own best interests. This is probably true–assuming that both the buyer and seller in a given transaction are reasonable people who are able to get along. Unfortunately, this isn’t always an easy relationship.

What if you, as a buyer, like a home but despise its wood-paneled walls, shag carpet and lurid orange kitchen? If you are working with an agent, you can express your contempt for the current owner’s decorating skills and rant about how much it’ll cost you to upgrade the home without insulting the owner. For all you know, the owner’s late mother may have lovingly chosen the décor. Your real estate agent can convey your concerns to the sellers’ agent. Acting as a messenger, the agent may be in a better position to negotiate a discount without ruffling the homeowner’s feathers.

A real estate agent can also play the “bad guy” in a transaction, preventing the bad blood between a buyer and seller that can kill a deal. Keep in mind that a seller can reject a potential buyer’s offer for any reason–including just because they hate his or her guts. An agent can help by speaking for you in tough transactions and smoothing things over to keep them from getting too personal. This can put you in a better position to get the house you want.

 

4. Contracts Can Be Hard To Handle

If you decide to buy a home, the offer to purchase contract is there to protect you and ensure that you are able to back out of the deal if certain conditions aren’t met. For example, if you plan to buy a home with a mortgage but you fail to make financing one of the conditions of the sale–and you aren’t approved for the mortgage–you can lose your deposit on the home and could even be sued by the seller for failing to fulfill your end of the contract.

An experienced real estate agent deals with the same contracts and conditions on a regular basis, and is familiar with which conditions should be used, when they can safely be removed and how to use the contract to protect you, whether you’re buying or selling your home.

 

5. Real Estate Agents Can’t Lie

Well, OK, actually they can. But because they are licensed professionals there are more repercussions if they do than for a private buyer or seller. If you are working with a licensed real estate agent under an agency agreement, (i.e., a conventional, full-service commission agreement in which the agent agrees to represent you), your agent will be bound by common law to a fiduciary relationship. In other words, the agent is bound by license law to act in their clients’ best interest (not his or her own).

In addition, most realtors rely on referrals and repeat business to build the kind of clientèle base they’ll need to survive in the business. This means that doing what’s best for their clients should be as important to them as any individual sale.

Finally, if you do find that your agent has gotten away with lying to you, you will have more avenues for recourse, such as through your agent’s broker, professional association or possibly even in court if you can prove that your agent has failed to uphold his fiduciary duties.

When a buyer and seller work together directly, they can (and should) seek legal counsel, but because each is expected to act in his or her best interest, there isn’t much you can do if you find out later that you’ve been duped about multiple offers or the home’s condition. And having a lawyer on retainer any time you want to talk about potentially buying or selling a house could cost far more than an agent’s commissions by the time the transaction is complete.

 

6. Not Everyone Can Save Money

Many people eschew using a real estate agent to save money, but keep in mind that it is unlikely that both the buyer and seller will reap the benefits of not having to pay commissions. For example, if you are selling your home on your own, you will price it based on the sale prices of other comparable properties in your area. Many of these properties will be sold with the help of an agent. This means that the seller gets the keep the percentage of the home’s sale price that might otherwise be paid to the real estate agent.

However, buyers who are looking to purchase a home sold by owners may also believe they can save some money on the home by not having an agent involved. They might even expect it and make an offer accordingly. However, unless buyer and seller agree to split the savings, they can’t both save the commission.

 

The Bottom Line

While there are certainly people who are qualified to sell their own homes, taking a quick look at the long list of frequently asked questions on most “for sale by owner” websites suggests the process isn’t as simple as many people assume. And when you get into a difficult situation, it can really pay to have a professional on your side.

How much can I afford to spend on a new home?

 

As a general guideline, total monthly housing costs for your primary home, including mortgage payments, taxes, maintenance fees, insurance, interest charges and utilities, should not exceed 32 percent of your gross monthly income.  Many financial advisors suggest that the total monthly debt, including mortgage payments, credit cards and car payments should not exceed 40 percent of your income.

If you are interested in purchasing a real estate investment property, we recommend that you consult your real estate and financial advisor to understand the tax and financial implications of your purchase.

More precisely, the price you can afford to pay for a home will depend on six factors:

  • Your income
  • The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.
  • Your outstanding debts
  • Your credit history
  • The type of mortgage you select
  • Current interest rates
What’s the difference between a mortgage broker and the bank?

 

The Mortgage Consultant/Broker
Mortgage brokers offer specialized knowledge about mortgage products and work on your behalf to get you the most competitive mortgage rates. They can assist you in selecting the right mortgage product for your needs from over 30 mortgage lenders across Canada, including the major banks, trust companies, credit unions, finance companies and private lenders.
A broker saves the time and energy of applying to various financial institutions on your own.  Based on your application and financial details, the broker will search the marketplace for the suitable mortgages. By reviewing your financial situation as well as your future plans, a mortgage broker will search the marketplace and work with you to select a mortgage that will meet your needs and help you achieve your goals, while integrating your comfort for risk as well as helping you develop strategies to pay off your mortgage sooner.
When mortgages are arranged through a major financial institution, brokers do not charge a fee to you. Instead, the lender pays the broker a fee when the deal is funded, for sourcing the deal and handling the documentation. The broker helps you to do the research and only gets paid once the proper service has been delivered.

 

The Bank
Your bank can help you choose the homeownership solution that is right for you. By devising a solution that minimizes your borrowing costs and maximizes your opportunities, your personal banker can help you select the best products and services to meet your needs. This expert advice can be invaluable and save you thousands of dollars in interest expenses by customizing a unique borrowing strategy. By taking into account mortgages, credit cards, and lines of credit as part of a comprehensive strategy, you can improve cash flow, minimize your borrowing costs, and borrow to be better off by reviewing your needs and wants to find the right products and tools for you. With a full range of personal banking solutions, your bank can help you reach all of your financial goals, from day-to-day banking to creating borrowing and investing strategies.

Do I need a pre-approval for financing?

 

It doesn’t make sense to start shopping until you know what you can afford or more importantly, what the bank will lend you.

Once you determine what you can afford, you can have your lender provide a pre-approval for your mortgage.  A pre-approval can lock in an interest rate for a set period of time while house hunting, usually 120 days.  There is no obligation and you can renew your pre-approval at the current interest rate if you don’t find a home in the 120 days.

Pre-approval is a very important part of the home buying process though it does not guarantee a mortgage.  Changes in employment, credit or the house you chose can effect the mortgage approval.

What are the basics I should know when looking for a mortgage?

 

There are many items to consider when shopping for a mortgage:

 

Interest Rates

Fixed Rates: A fixed mortgage rate is a locked-in rate that will not change for the term of the mortgage (usually 3-5 years).  This will guarantee your mortgage payment for that term.

Variable Rates: A variable rate fluctuates pending market conditions while the mortgage payments itself remains unchanged.

Adjustable Rates: With an adjustable rate, both the interest rate and the mortgage payments change based on market conditions.

Open vs Closed Mortgage

Open mortgages can generally be paid off at any time without compensation.  They are suited to homeowners who are planning to sell in the near future or those who want the flexibility to make a large, lump-sum payments before maturity.

Closed mortgages are commitments for a specific term.  If you want to pay off the mortgage balance, you will need to wait until the maturity date or pay compensation.

Amortization

Amortization is the length of time the entire mortgage debt will be repaid.  Many mortgages are amortized over 25 years, but longer periods are available.  The longer the amortization, the lower your scheduled payments but the more interest you will pay over the long run.

Conventional vs High Ratio Mortgage

A conventional mortgage is a mortgage loan that is equal to or less than 80% of the lending value of the property.  The lending value is the property’s purchase price or the market value – whichever is less.

A high-ratio mortgage has a down payment of less than 20% of the homes price.  A high-ratio mortgage usually requires mortgage loan insurance.  Your lender may add the loan insurance premium to your mortgage or ask you to pay in full upon closing.

Mortgage Terms

The term is the length of time that the mortgage contract conditions, including interest rate, are fixed.  The term can be six months to ten years.  It is important to consider term options as you many receive a lower rate on a shorter term but a longer term may protect you from interest rate increases and secure your payment rates.  Also, there may be terms that state high fees in cancelling the mortgage if you sell the home early.

Should I buy a new home or a re-sale home?

 

There are pros and cons to both options so it really depends on what suits you best.

 

New Home

  • Pros:  Modern design, personalized choices, up-to-date with latest building codes, low maintenance costs, builder warranty.
  • Cons: Neighborhood amenities may not be complete for years, GST applies, upgrades or completion costs, may not get to see completed home prior to purchase.

 

Re-Sale Home

  • Pros: You can see what you’re buying, landscaping/fencing complete, no GST.  Usually more willing to negotiate price.
  • Cons: Possible higher maintenance costs, may require renovations or redecorating.
What conditions should I consider on my offer?

 

There are many conditions that are available, in fact, you can create your own as well however the seller may not agree to them.  A few of the most common and important conditions include:

 

Financing Condition

Unless you are plan to pay cash for the entire purchase price, it is recommended that you include a financing condition.  This allows you the time to guarantee a mortgage on the property and at a desirable term and rate.
As soon as the offer is accepted, you will be required to provide your lender with a copy of the purchase contract and the MLS detail listing sheet.

Home Inspection Condition

You should consider having an inspection on any home you are thinking of buying – whether it is a resale home or a brand new home.

An inspection by a home inspector is a visual inspection.  They will give you a complete understanding of the condition of the home you are buying, before you buy it.

Condo Document Review

A condo document review takes the guesswork out of buying a condominium and we can connect you with the professionals you need. Their professional and comprehensive summary will not only simplify, but will also highlight the areas of serious concern. When buying a condominium always ask certain questions before finalizing your decision as there are many little things that can make a big difference to your future investment’s appreciation and or resale value.

Others

We customize additional conditions based on your lifestyle and needs.  Other buyer conditions could include the Sale of the Buyer’s current home, review of title or RPR, repairs or upgrades to be complete or anything else that the you may require.

Seller’s may also insert conditions onto a purchase contract such as a firm purchase of a new home.

What should I expect to pay upfront when buying a home?

 

There are several expenses when buying a home other than just the mortgage amount.  These expenses are often referred to as closing costs.  They may include but are not limited to:

 

  • Deposit: Written on the contract, due when offer is accepted, and held in trust.  Usually 5-10% of purchase price and goes towards the final down payment.
  • Additional Deposit: Not all offers include an additional deposit but uses to strengthen the offer.  Due when conditions are removed.  Often used when the buyer has to move funds to get access to the cash as it gives additional time.
  • Down Payment: 5-20% of purchase price.  All deposits go towards the down payment and the down payment is due on possession day.
  • Home Inspection: Approximately $500-$1000
  • Condo Document Review: Approximately $350-$600
  • Bank Ordered Appraisal: Approximately $200-$450
  • Legal Fees & Disbursements: This includes land transfer tax & fees, title searches, registration of mortgage, etc.  Often based on the value of the property and is approximately $1200-$2500
  • Mortgage Penalties:  This occur from a previous mortgage if you are unable to transfer it to the new property
  • Costs for newly constructed homes: Often not included in the final purchase price is GST, upgrades, paving, landscaping, etc
  • Title Insurance: Not everyone purchases title insurance but it works like a standard insurance policy. It protects against future discoveries about a property, some title-related and some non-title-related. It is a form of indemnity insurance for a mortgaged property that covers the loss of an interest in a property due to discovered legal defects.  Approximately $150-$400
  • Pre-paid Costs: If the seller has pre-paid taxes or utilities in advance, you may be required to repay
  • Home and Fire Insurance: Insurance must be in place on possession day. Approximately $500+ per year
  • Moving Costs: Movers, Uhaul or truck, cleaners, incidentals
  • Items you didn’t own but may need: Appliances, gardening/snow equipment, window treatments, decorating, furniture, etc
I’ve removed conditions, now what?

 

Prior to possession, there are a few final items you need to take care of including:

 

  • Meet with your bank/lender, insurance agent & lawyer to ensure that everything is in order and to eliminate any issues come possession date
  • Set up or transfer home insurance for possession day as your mortgage company will not complete the purchase without it
  • Arrange set-up or transfer of utilities, cable, internet, etc
  • Set up condo fee payment
  • Schedule movers, elevators and set up intercom system
  • Change address or set up mail forwarding with Canada Post
  • Get packing!

 

On possession day:

 

  • You must provide the balance of the purchase price (downpayment & closing costs) to your lawyer
  • Your bank/lender will transfer the downpayment & mortgage funds to the seller’s lawyer
  • Legal property ownership is transferred to your name and registered at Land Titles Office
  • Usually around noon, we will meet you for a walk thru to make sure everything is they way it should be and deal with anything that isn’t.
  • You get the keys, pop the champagne and celebrate!

FAQs for Sellers

Why should I hire a Realtor to help me sell my home?

 

While doing the work yourself can save you the significant commission rates many real estate agents command, for many, flying solo may not be the way to go–and could end up being more costly than a realtor’s commission in the long run. Buying or selling a home is a major financial (and emotional) undertaking.

 

1. Better Access/More Convenience

A real estate agent’s full-time job is to act as a liaison between buyers and sellers. This means that he or she will have easy access to all other properties listed by other agents. Both the buyer’s and seller’s agent work full time as real estate agents and they know what needs to be done to get a deal together.

If you are looking to sell your home yourself, you will have to solicit calls from interested parties, answer questions and make appointments. Keep in mind that potential buyers are likely to move on if you tend to be busy or don’t respond quickly enough. Alternatively, you may find yourself making an appointment and rushing home, only to find that no one shows up.

2. Negotiating Is Tricky Business

Many people don’t like the idea of doing a real estate deal through an agent and feel that direct negotiation between buyers and sellers is more transparent and allows the parties to better look after their own best interests. This is probably true–assuming that both the buyer and seller in a given transaction are reasonable people who are able to get along. Unfortunately, this isn’t always an easy relationship.

A real estate agent can also play the “bad guy” in a transaction, preventing the bad blood between a buyer and seller that can kill a deal. An agent can help by speaking for you in tough transactions and smoothing things over to keep them from getting too personal. This can put you in a better position to benefit from a hard-nosed real estate agent who will represent their interests without turning off potential buyers who want to niggle about the price.

3. Contracts Can Be Hard To Handle

If you decide to sell a home, the offer to purchase contract is there to protect you and ensure that you are able to back out of the deal if certain conditions aren’t met.

An experienced real estate agent deals with the same contracts and conditions on a regular basis, and is familiar with which conditions should be used, when they can safely be removed and how to use the contract to protect you, whether you’re buying or selling your home.

4. Real Estate Agents Can’t Lie

Well, OK, actually they can. But because they are licensed professionals there are more repercussions if they do than for a private buyer or seller. If you are working with a licensed real estate agent under an agency agreement, (i.e., a conventional, full-service commission agreement in which the agent agrees to represent you), your agent will be bound by common law to a fiduciary relationship. In other words, the agent is bound by license law to act in their clients’ best interest (not his or her own).

In addition, most realtors rely on referrals and repeat business to build the kind of clientèle base they’ll need to survive in the business. This means that doing what’s best for their clients should be as important to them as any individual sale.

Finally, if you do find that your agent has gotten away with lying to you, you will have more avenues for recourse, such as through your agent’s broker, professional association or possibly even in court if you can prove that your agent has failed to uphold his fiduciary duties.

When a buyer and seller work together directly, they can (and should) seek legal counsel, but because each is expected to act in his or her best interest, there isn’t much you can do if you find out later that you’ve been duped about multiple offers or the home’s condition. And having a lawyer on retainer any time you want to talk about potentially buying or selling a house could cost far more than an agent’s commissions by the time the transaction is complete.

5. Not Everyone Can Save Money

Many people avoid using a real estate agent to save money, but keep in mind that it is unlikely that both the buyer and seller will reap the benefits of not having to pay commissions. For example, if you are selling your home on your own, you will price it based on the sale prices of other comparable properties in your area. Many of these properties will be sold with the help of an agent. This means that the seller gets the keep the percentage of the home’s sale price that might otherwise be paid to the real estate agent but there is no benefit for the buyer as the discounts are rarely passed on.

Also, buyer’s often sign commission contracts with their agents and if they purchase a home without a commission payable by the seller, they may be required to pay it themselves meaning they will want to pay less for the house as they will have additional expenses.

6. A Good Agent Will Often Pay For Themselves

When selling your house, you rarely have expenses as they are paid by the agent via the commission.  These expenses may include staging consults, measurements, photos, advertising, open houses, the time and effort to show the house to potential buyers, and the completion of purchase documents.

Additionally, they will spend the time to ensure it is properly priced, marketed, and the deal negotiated to ensure you receive top dollar.  Often when selling privately, there is money left on the table, that money could be used to pay for the agent and save yourself the headache.

 

The Bottom Line

While there are certainly people who are qualified to sell their own homes, taking a quick look at the long list of frequently asked questions on most “for sale by owner” websites suggests the process isn’t as simple as many people assume. And when you get into a difficult situation, it can really pay to have a professional on your side.

What is my home worth?

 

A home is only worth as much as a buyer will pay for it.  There are many factors to take into consideration:

  • Current market & economic conditions
  • Location
  • Competition in the area
  • Your motivation to sell

Contact us today at 403.608.1112, dennis@plintz.com or on our live chat and we will do extensive research to provide you with a report that gives you a summary of recent real estate transactions in your area for selected homes that are similar to yours.

This will determine the market value of your home.  The value will be a range and you will decide the price depending on your needs and motivation.  A property priced at market value will attract more buyers than a home priced above market value. Consider that a competitively priced property will also attract a greater number of potential buyers and increase your opportunity for a quick sale.

What is an RPR and why do I need it to sell my home?

What is a Real Property Report?

 

  • A RPR is a legal document that clearly illustrates the location of all permanent structures on a property relative to the property line boundaries.
  • It takes the form of a plan or diagram of the various physical features of the property, including a written statement detailing the surveyor’s opinions or concerns.
  • It can be relied upon by the buyer, the seller, the lender, and the municipality as an accurate representation of the improvements on your property.
  • A registered Alberta Land Surveyor is the only individual who can legally prepare a Real Property Report.

 

 

Why do I need a Real Property Report?

 

  • The RPR and its predecessor have been an important component of the Real Estate transaction for more than 50 years; it is now a requirement of the Alberta Real Estate Association Listing Contract in all MLS sales.
  • A RPR illustrates any boundary problems related to the property, determining whether homes, garages, and any other structures adhere to local Land Use By-laws.
  • Due to the risk of potential legal complications that may occur if a property is sold without abiding by the Land Use By-laws, a RPR with municipal compliance acts as a form of assurance that protects buyers and sellers.
  • Identifying any issues with the property prior to closing on your new home ensures you don’t inherit a costly problem, saving you aggravation and money when you wish to sell or further develop your property.
  • If you are purchasing a home, new or used, insist that the seller supply you with a RPR with municipal compliance which reflects the current state of the property. This will ensure that what you are buying is situated in the correct location and that it adheres to the local Land Use By-laws.

 

 

What does my commission cover?

You do not pay commission until your home sells.  At that time, the commission is paid by your lawyer to the Brokerage out of the proceeds of the sale.

The Brokerage then pays the agreed upon amount (set in the Listing Agreement and advertised on MLS) to the buyer’s Realtor’s Brokerage.  The Brokerage then keeps a fee and the remainder is paid to the agent.

The agent pays for their time and efforts as well as all marketing costs out of their portion of the commission.  These costs often include professional photos, measurements, brochures, open houses, newspaper ads, signage, fees for MLS and other websites, etc.

 

 

Have a question you need answered? Contact us!