Commissions in Toronto and You "The Buyer"

Over the years, I've heard it countless times from Buyers....."If we use the Listing Agent, we will get a better deal"! Now, you have to know that I'm a Listing Agent as well as a Buyer Agent....so I'm not talking out of both sides of my mouth. Listing homes is an important part of my work and I spend time and money on this end. Here's the deal: commissions in GTA are typically 5%. 2.5% going to the Buyer Agent and 2.5% to the Listing Agent. Yes, Listing Agent's may cut their commission depending on their service offer. Some Listing Agent's will have a commission structure that is more accomodating for their Seller if the Listing Agent represents both buyer and seller. Let's say for arguement sake that Joe the Agent lists 1 Post Rd @ 5% commission. Now let's say that he has a side deal that if he secures the Buyer too, that he does the complete job for 4%. For the Seller and Joe the Agent, it's a win/win if he secures the Buyer too. Instead of Joe making 2.5% (the other 2.5% goes to Buyer Agent, if there is one) and the Seller paying out a total of 5%.....now Joe makes 4% commission repping both sides and the Seller saves 1% (again we're working off a 5% total commission). 1 Post Rd is asking 500k. In the Buyer's mind, if there's a 1% savings for the Seller then a 495k, ignoring GST or HST, offer using 1 agent (the Listing Agent) is a strong offer and saves the Buyer 5k.
Here's the thing...what if the house is 20k overpriced to begin with? Hopefully, the Buyer agent would have known this and saved you more then the 495k price you'd have paid.Remember pricing can be tricky.
Every dollar counts and yes a 5k savings is great. But...did you save??
Also, we discussed in the website that homes change hands quickly in this market. So if the Listing Agent doesn't know you exist and you're finding out about the Agent's listing via MLS.ca in absence of a dedicated Buyer Agent who would have pointed out the listing ahead of time guaranteeing you'd see it, in an attempt to squeeze out a deal by using 1 Agent...maybe you'd have missed the house to begin with? To be clear...there are great Listing Agent's who price well and are very ethical and you'd do just fine by using their services to represent you. But as a Listing Agent myself, I know there are absolute advantages in having your own represenation who knows you and your needs and has your vested interests in mind. Thx-

A big thank you

Let's remove the talk of interest rates and macro economics in this blog.

Just a quick note to thank past clients, friends and family for their support in helping get this site out there. There's a lot of places to stop in and get info for a home buyer along the never ending roadway that is the internet. I've tried, best I can, to create a site that highlights the questions/concerns/interests/experiences/red flags that I've come across as an agent assisting Buyers over the years. Somehow the faces have changed; the landscape has changed;the homes and neighborhoods have changed; the interest rates and market prices have changed, BUT the nervousness and the excitement I see in the Buyer's eye never changes. Regardless of a Buyer's budget, their home is their castle. Cliche-yup. True nonetheless. Arm yourself with knowledge; do your homework; ask meaningful questions and enjoy the work. When I remove myself from the business, I love walking in my front door at the end of the day and being "home". Every Buyer's goal should be to achieve that feeling. No, today's market is not an easy market to buy a home in. But, it is doable and looking at the stats--its happening for many. When I pieced this site together I knew that I'd be giving out a lot of information and I'm more then fine with that. It's yours to use. The information is solid, but the value added is my training and my experiences and my contacts and my track record of performance working with Buyers of all ages and demographics. Please don't hesitate to contact me with questions anytime or if you wanna talk shop-I'm game.
My appreciation for your time. Cheers-

The Economy and the Housing Market

I will try to do some justice here. For those economists, please don't write in and confuse the rest of us! Due to many forces not least of which was a deflationary economy, Canada injected various stimuli into the economy over the last year to boost credit/lending, backstop mortgages and other paper investments and has kept interest rates and historic lows, while unemployment, productivity, manufacturing and a strong loonie have created a tough environment. With that GDP growth in the final quarter of the 2009 calendar year, good profits by banks trading investments in a bit of a recovery mode with continued low rates has provided a platform for which the economy is attempting to stabilize from. Many have argued that we are witnessing a "housing bubble". Low rates and such intense demand (even in the wake of hightened selling prices and low demand) has caused some to postulate that we're in a tricky position. Other economists take it a step further and argue that our national debt is peaking and households are taking on excessive debts that may close in or surpass our neighbours to the U.S. That said, others will argue that good ole Canadians will pay down debt before they invest further. One of the means or stimulus that was put into practice here in Canada is known as quantitative easing. In its most basic form, this happens when the government buys up/loans of longer term bonds and/or securitizes mortgage back securities. It has the effect of keep interest rates artificially lowered and hence making mortgages more attractive. Now we are wondering when this unravelling will take place. When it does and the government makes its way out of this gig, private investors will be left to do the purchasing. Private investors though will want higher returns and hence this alone should cause a lift in interest rates. When the government bows out is not yet known. This will affect fixed rate mortgages. On the other end, variable rate mortgages will be affected by movement in the benchmark interest rate (prime rate) which affects consumer loans as well. In the U.S., they just increased the discount rate which affects the terms and rate at which the federal govenrment lends to banks direct. People are waiting for an indication that this will/will not affect the federal funds rate which would increase mortgages in the U.S. So for now, we should enjoy the lowered rates and be cognizant that this train will end. But so too shall the price increases we witnessed year over year from 2009. So we may see supply increased trim the price increases while rates climb. All in all, its not so bad.
This particular post had 2 goals. 1) to show my profs from MBA and my bosses from the banking days that I know something about the economy and 2) to provide a very basic synopsis of how the overall economy is impacting mortgage rates. This is one part of a very complex machine. So don't dare read the above and try to talk intelligently to an intelligent person. But hopefully this gave you some background into something you'd otherwise not read or care to know about!
Thanks!

Order of Operation

When you're ready to buy, here's what you need to do:
1) Have a preapproval certificate ready. Now more then ever, it's a good idea to get it and lock in a low rate
2) When you locate the house you wish to offer on, you should have earmarked approx 5% of the value of the house to put down as a deposit at the time of the offer.
3) In this market, you're either going in with an offer without conditions---that is if you find yourself in competition, you can arrange for a preinspection (sometimes the sellers do...but you may wish to have your own completed) and if your bank or mtg broker is comfortable they may provide an insturction that you can move forward with an offer void of a finance clause.
If you need to present a conditional offer 2 business days is becoming commonplace.
The deposit on a conditional (or firm agreement) needs to be certified to the Listing Brokerage within 24 hrs following completion of the Agreement. This is in the preprinted.
4) Once you have completed your conditional period (assuming all goes well) you will formally "waive" your conditions and go firm pending closing.
5)On closing, your lawyer will inform you of any "adjustments" (for example if the seller has prepaid taxes for the months following closing); you will sign your formal mortgage documents; affidavit; you will pay your Land Transfer Taxes and any rebates if they apply (for example Toronto first time home buyer). The deposit plus your downpayment plus your mortgage plus any adjustments will be transfered from your solicitors account to that of the Sellers solicitor.
6) Barring no hiccups you can expect keys typically in the afternoon of closing.
*7) As a special note, b/c of warranties the Seller makes in the Agreement, it is advised that you go to your new home on the date of closing and ensure that all chattels and fixtures included are in "working order".
8) When problems arise on closing, and they do from time to time, inform your agent immediately.
I like to meet my clients at the property and do a walk through with them.
***Note that if you are purchasing new construction from a Tarion registered builder, you are entitled to a "formal walk through" with the builder to compile a deficiency list that needs to be addressed. This is worked out in good faith between the two parties but should an incident arise, the Tarion body is there to assist.

Condos and Fees

Condo Fees or maintenance fees are monthly expenses each unitholder pays for common/shared elements. The fees can include insurance, water, utilities, parking, maintenance, etc. Each unitholder pays their proportionate share, most often using square footage as the benchmark. Fees can also be affected by things like ownership of parking spots, lockers, higher floors, views, etc. A Buyer will learn of the exact maintenance fee in the Status Certificate as a source of verifying what is on the MLS listing. Sometimes a vendor will not provide the updated fee or the fee could have changed since the listing. Approximately 10% of the maintenance fee goes into whats known as the "reserve fund", which funds for the most part the common elements and repair. In the event of a major repair, the Reserve fund is the first source. Should there not be enough funds alotted at the time of the repair, then there will be a Special Assessment. Each unitholder will be quoted an increased amount on top of their maintenance fees for a specified period of time to pay for the fix. What is interesting is that maintenance fees are often costly on a newer building as you have expenses like new windows and sodding and landscape, etc. With that it must be pointed out that older building with well established reserve funds and budgets can also face a period when windows need replacement and furnaces, etc. Like a lot of things in life, it really boils down to timing. If you get into a building in year 20 and in year 21 major expenses and updating is needed, then you'll pay for it! As I've always held, look to condos for ease of lifestyle and location. You can't get too hung up on the expenses. You need to understand the expenses and ensure that their affordable for you. You also want to make sure you're going to use the common elements. And finally know that each owner has a vested interest in the upkeep of the building, so when fees rise it often equates to an improvement for all to enjoy in the building, save for the opposite when you get dinged for a flood!

Is it still a First Time Buyer's Market?

You bet it is. Recent talks in Toronto have led to some seemingly more stringent tests for first time buyers who have less then the conventional downpayment and need to go direct for CMHC approval. Shortened ammortizations and the need to be approved at a 5 year fixed rate would appear to weed out some buyers. It may. But..it may not. You see banks have the authority to determine what a 5 year fixed rate is. There is the "posted rate" and then there's the "discounted rate". The banks do have the capacity to shift this rate at the end of the day. As well, most banks have been dilligent in applying this stress test for first time Buyers over the last many years. At least they should have been. Interest rates are historically low, supply will increase in this spring market and there's a window until these rules take hold. So at the end of the day, be excited to be a first time Buyer. The challenge as I see it is not getting the bank approval, its fighting like hell against a whole bunch of other sharp toothed grizzly Buyers to get the house/condo you want! Welcome to my blog. We're going to share insider knowledge here about the going on's in the market and how you can stay ahead in this everchanging market. Please visit my site TheSmithsBuyAHouse.com. The site is in my humble opinion, one of the best places to begin a practical step by step of buying a house in today's market. Follow The Smith's as they make their way through the craziness and excitement of buying a house. Follow their real world experience and enjoy!!