Buyer & Seller Toolkit

Financing & Mortgages

Most home purchases will involve some type of financing, meaning buyers will be using some form of a loan to pay for their home purchase. The type of loan could be one, or a combination of several types of loan products available, but typically include mortgages and / or lines of credit.

The first step in deciding the best strategy to pay for the home is to meet with a mortgage specialist, usually a banker or a mortgage broker. Bankers are typically employed by either banks or another type of financial institution and generally offer products offered solely through their company; mortgage brokers are usually independently employed and have access to loan products from a wide range of lenders. Upon meeting with a mortgage specialist, you will first find out how large a loan the lender will grant you. This is done through examining such factors as income, credit rating, other debts, the estimated operating costs of owning a home (i.e., utilities, condo fees, property taxes, etc.), and any other pertinent factors that may affect your ability to repay the loan. Working through this process will give you the maximum amount you can borrow. This amount, combined with your down payment, will yield your pre-approval.

The next step is to decide what type of loan you is best for you; this will usually be either a line of credit or a formal mortgage.

A line of credit for a home purchase is simply a revolving loan taken out against the equity in the property. The minimum amount payable each month equals the interest on the loan, beyond that you can pay as little or as much as you wish. The interest rate on the loan changes as does the prime rate.

As for mortgages, there are many types available and will be either high-ratio or conventional. A high-ratio mortgage is when the loan on the property is greater than 80% of the value of the property (or conversely, when the equity in the property is less than 20% of the property’s value); a conventional mortgage is when the loan amount is less than 80% of the value of the property. If a loan is high-ratio, the purchaser is required to buy mortgage insurance which gives protection to the lender in the event the homeowner cannot pay the loan commitment.

Open Mortgages allow you to pay off part or the entire mortgage at any time without penalties. Open mortgages usually have short terms of six months or one year. The interest rates are usually higher than those for closed mortgageswith similar terms.

With a variable rate mortgage, the lender will calculate a mortgage payment that includes principal and interest. For the term of the mortgage your payments usually do not change. However, as the prime rate changes so will your mortgage rate.

If interest rates are dropping, less of each payment will go toward interest and more will go toward principal. If interest rates rise, more of your payment will be interest and less money will be reducing your principal.

Some of these mortgages are completely open (you can pay off all or part of your mortgage at any time without penalties). Others that offer a ‘prime minus’ interest rate (e.g. prime – 0.375%) may charge a penalty. The interest rate on most variable rate mortgages is compounded monthly.

A fixed-rate mortgage is when you contract with the lender over a certain time period (i.e., 2 years, 5 years, 10 years, etc.), with an unchanging interest rate. The amount of the payment remains the same for the term of your contract. Any additional payments allowed, as identified in the contract, will be applied against the outstanding principal of the loan, but will not affect your monthly payments until the term expires and you refinance.

Looking for a Home

Before setting on the actual home search, we will discuss the type of home you would ideally like to purchase. Keep in mind factors such as:

• Are there neighbourhoods on which you would like to focus or avoid?
• What is the best range of size that meets your needs?
• Do you prefer a certain style of home?
• Is it important to be in close proximity to particular schools, transportation routes, medical facilities, etc.?
• How many bedrooms would be best?
• Would you prefer a new or newly renovated home? Or would an older home in need of renovation be better?

The more information you can provide, the more effective your time spent will be. Also, keep in mind that I can show you any property that is for sale, be it on the MLS or otherwise, and even if your dream property is not actually for sale, there are ways in which I can assist you with locating and securing the home that is best for you. (For various reasons, it is not uncommon for homes to be for sale while not being publicly listed.)

Offer Process & Negotiation

Once you locate the home that best suits your needs, we will draft an offer to purchase. Depending on the type of property, the complexity of the offer and the availability of all parties involved, the offer process and negotiation can take anywhere from an hour or two, to several days.

It is important to keep in mind the offer is a legally binding contract, and has significant implications. As such, it is vital that you understand the offer and what each term means.

Once we present the offer to the sellers and / or their representative, there will likely be several points of negotiation. These could include factors such as the price, possession dates, chattels or included goods, inclusions and wording of conditions or other terms, and any other detail noted in the contract. In order for the contract to proceed to a conditional acceptance or sale, both the buyer and the seller must agree on every term in the offer; failure to do so will result in non-acceptance.

Once both the purchaser and seller reach a conditional acceptance, the buyer pays the deposit on the home. This is held in trust, typically by the company that has listed the property for sale. This deposit forms part of the down payment (the remaining cash to close paid closer to the closing date forms the remainder of the down payment). Should the purchaser choose not to close on the sale, or cannot for whatever reason beyond those conditions identified in the purchase contract, the purchaser will forfeit the deposit, and could face further legal percussions.

Conditions

Once both the buyer and the seller agree on all terms in the offer, and assuming there is one or more conditions on the offer, the property is now conditionally sold. Typically the buyer will have a week or so address the conditions. The onus is on the purchaser to inform the seller of the status of each condition. Conditions typically include financing, property inspections, condo document review, review of zoning or land use, review of leases, and in some cases the sale of another property.

It is important to note that the more conditions the purchaser places on the contract, the less attractive the offer is to the seller. And, each benefit requested by the buyer (in the form of a condition) will usually have some sort of cost associated with it, which usually is a higher purchase price, or less flexibility of the possession date. Consider which conditions you would like to include such that you appropriately balance your benefits (i.e., conditions to purchase) with your costs (i.e., purchase price, other requests of the seller).

Closing

Once you have waived the conditions, the sale is now finalized. Between this time and the possession date, you will meet with your lawyer to sign off on the legal closing documents, title transfer, mortgage documents and any other requirements as included in the purchase. Also, any additional cash that you are using to pay for the home should be paid to your lawyer prior to the possession date.

On possession date, the seller will release the keys to the purchaser once the seller?s lawyer is satisfied they have received the balance of closing paperwork and purchase funds.

CMA & Pricing

A CMA, or comparative market analysis, essentially compares your home to others in the area that have either sold in the recent past, or are currently for sale. With most types of properties, the value of the home is affected by those comparable properties in the vicinity. Examining those that have sold and the features of those homes, as well as others that are currently for sale, your competition. I will offer you my opinion as to what a realistic list price, and likely sale price would be. I will advise as to what I believe the best list price is for your property, as well as the benefits and drawbacks of other possible list prices. The final decision at which to price your home, however, belongs to the homeowner.

Staging

Prior to the actual listing of your home, I will spend some time with you walking through your home as that of a potential buyer. Sellers are naturally accustomed to living in their own house and know the feeling and highlights the house has to offer. Buyers, however, do not have that luxury and so viewing the home from a different perspective will assist in prepping the home to show at its very best. I will offer some tips and insight, where necessary, that will display the home in its best light and be sure to make the best first impression for buyers when they visit.

In some cases, hiring a home staging company may be an option to consider. The services can range from the very simple (an hour or two consult using existing furniture and decorations) to a full furnishing.

Some general tips for getting a home ready to sell:

Exterior

Clean windows, mow the lawn, shovel any snow, clear any dead plants and trash from yard, organize patio furniture, paint touch-ups where necessary, ensure gates open and close properly

Kitchens & Bathrooms

Countertops, appliances and sinks squeaky clean, floors swept or vacuumed, garbages emptied, shower stalls and mirrors wiped down, caulking repaired if cracked, leaky faucets tightened

Bedrooms & Den

Bookcases organized and dusted, blinds or shades cleaned, beds made and clothes neatly arranged, surfaces tidy and organized, personal items and those of value locked away

Utilities & Miscellaneous

Burnt-out light bulbs replaced, floors vacuumed, surfaces dusted, furnace filter changed, furnace and water tank cleaned if necessary, common areas de-cluttered

Marketing

Marketing is a key component of selling any property, and can take place in many forms. If the right buyer for a property is not aware of the listing, the listing will not be very successful. As such, when putting a property up for sale, it is imperative to determine who the potential and likely buyers will be, and how to best reach that person and convince them your property is the best suited to them. This is a crucial component of the sale process that differentiates a good agent from a great agent.

I use a wide variety of mediums to market properties. These include, but are not limited to:

Additionally, a substantial component of my marketing campaigns entails advertising and increasing awareness of your listing by direct contact with other real estate representatives and word of mouth. I have found this tactic to be extremely effective. By informing other real estate associates of your listing and selling your property to them, they are in a much better position to relay all the highlights and features of your home to their clients. A simple, but effective and proven tactic!

Viewings & Feedback

While your home is for sale, other representatives and I will be showing your home to potential buyers. Usually, sufficient notice will be provided to you prior to their arrival. In the event someone wishes to come through last-minute, I will discuss with you and if the timing is not convenient we can try to reschedule with the other party.

For each showing that occurs, I will follow up with those that viewed your home in order to find out what they thought of your home and any comments they may have, and to gauge the level of interest. Most active buyers will have seen many other properties, usually those in the same area as you. Whether you agree or not with what they have to say, it is always helpful to find out what the buyers thought of your listing relative to those others currently for sale. If we notice a trend in the comments, it may be necessary to alter parts of the listing or marketing to better address those concerns.

Offer Process & Negotiation

Once the buyer writes an offer to purchase, be that with another associate or me, I will inform you immediately and make arrangements with you to present and review the offer. We will discuss the benefits and drawbacks of the offer, review all terms and conditions and other components included in the offer, and I will advise you on how to manage the offer and all following negotiations in order to position you best. My job is to keep your best interests at heart.