Market Conditions Explained
The real estate market is always changing. It helps to understand how market conditions can affect your position as a buyer. I can provide you with current real estate market conditions and explain their impact.
The supply of homes exceeds the number of buyers (supply is greater than demand). In this market prices tend to drop and the homes stay on the market longer. Thus your home may take longer to sell and you will have less negotiating power in terms of the selling price. Fortunately you will be in the driver's seat when making an offer on your next home.
The number of buyers exceeds the number of homes on the market (demand greater than supply). In this market prices are increasing and homes sell quickly. As a seller you will probably have more negotiating power and obtain a higher selling price for your property. Unfortunately you will be on the other side of the fence when purchasing your next home.
The number of homes on the market is equal to the number of buyers (supply equals demand). In this market, prices are stable and homes sell within a reasonable period of time. It is a calm atmosphere with buyers having a satisfactory number of homes from which to choose.
Why a Pre-Approved Mortgage?
Having a pre-approved mortgage will give you the confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest rate increases while you look for your new home. Your Mortgage Specialist will answer your questions and help you determine which financing terms and options are right for you. Your Mortgage Specialist and I work as a team to help you find the right home and select the best financing.
The Importance of Home Inspections
Buying a home is one of the most important investment decisions you will make in your lifetime. As such, it makes sound financial sense to enlist the services of a qualified home inspection company to ensure your home is as solid and secure on the inside as it is on the outside.
A home inspection will determine the structural and mechanical soundness of your home. Your home inspector will identify existing and potential problem areas, suggest practical low-cost solutions, and provide estimates regarding costs for any work required. Shortly after the inspection has taken place, a report summarizing the findings is generally provided to the potential purchaser.
By commissioning a home inspection prior to purchase, you're protecting both yourself and your investment, as well as buying a little peace-of-mind.
Home inspection costs often range according to size, age, and location of the home. Your sales representative can recommend a reputable home inspection service or arrange for a home inspector to visit your property.
Hiring a Lawyer
A legal professional is there to represent your interests and to process the legal documentation required. As your Real Estate Professional, I can provide you with the names of legal professionals who specialize in real estate. The legal process differs from province to province. Your lawyer will advise you on the steps to be taken before the keys to your new home are presented to you.
The number one question that all Buyers ask is what are the costs involved in purchasing a property. Listed below are costs that you may incur during your purchase.
The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower's responsibility and it ranges as low as $100 for a drive-by appraisal to as much as $200 for a full appraisal, and the average being $175, plus G.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.
Home Inspection Fee:
A professional inspection of the home, is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but is well worth the investment. For Buyers of newly constructed homes, an inspection may not be necessary, but is strongly recommended for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.
All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.
Provincial Sales Tax of 8% (P.S.T.):
If your mortgage is CMHC or GE Capital insured (less than 25% down payment), there is P.S.T. of 8% in Ontario, payable at closing. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing.
Land Survey Fee or Title Insurance Fee:
A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225.
Legal Costs and Disbursements:
A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T.
Land Transfer Tax:
Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price. In Ontario, first time home buyers who purchase a new home get a refund up to $1725.
Ontario New Home Warranty Program:
In Ontario, new homes are covered by a new home warranty program. The cost to the Buyer for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.
Mortgage Application and Processing Fee:
On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.
An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.
On the purchase of a newly constructed home, GST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus GST" or "GST Included", and who gets the GST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).