What to Expect: Completion Costs

GST – If you buy a newly constructed home, you must pay the 6% GST. However, if your house is less than $450,000 you may be eligible for a rebate. For more information, please visit www.cra-arc.gc.ca/tax/business/topics/gst/construction/menu-e.html
Property Transfer Tax – When a residence is purchased a Property Transfer Tax (PTT) is applied. The tax is calculated at 1% on the first $200,000 and 2% on the remainder. The First-Time Home Buyers’ Program offers an exemption to PTT if the fair market value of the residence is $325,000 or less, in the Greater Vancouver, Fraser Valley and Capital Regional Districts. The threshold for the rest of BC is $265,000. In all regions there is also a proportional exemption for first-time buyers of homes with a fair market value up to $25,000 above the thresholds. This means in the Greater Vancouver area, homes valued up to $350,000 ($325,000 threshold + $25,000 proportional exemption) will be charged a pro-rated PTT. For more information please visit: www.rev.gov.bc.ca/rpt/ptt/ptt.htm
Prepaid property taxes or utility bills – You will have to reimburse the sellers for any prepaid property taxes or utilities.
Mortgage loan insurance and application fee – If you get a high-ratio mortgage (a mortgage where you pay less than a 25% down payment) you will have to buy mortgage loan insurance from CMHC or a private company. If you qualify for a 5% down payment, CMHC charges an insurance fee that equals 3.25% of the mortgage. If you put 10% or 15% down, your insurance fees will decrease to 2% and 1.75% respectively. The insurance premium usually gets added to your mortgage.
You will also have to pay an application fee. CMHC’s standard fee is $235. CMHC also offers a basic service for a $75 fee but it must be accompanied by an appraisal.
Appraisal – Before your lender approves your mortgage, you may be required to have an appraisal done. Sometimes your lender covers this cost otherwise you are responsible for covering this cost. The fee ranges from $150 to $350.
Survey fee – Your lender may require an up-to-date survey of the property. If the seller did not provide you with one, you will have to pay to have one done. The fee ranges from $150 to $350.
Home Inspection fee – Most REALTORS® recommend that you get a home inspection by a certified home inspector. It will cost you from $150 to $350 for a smaller house. Large houses may cost more.
Legal fees – Lawyers/Notaries fees for closing the sale range according to the complexity of the deal but they will probably be at least $400.
Disbursements to Land Titles Office – These fees are approximately $300. Your lawyer/notary will arrange this payment.

CHOOSING AND USING A HOME INSPECTOR

Most homebuyers will use a home inspector when they purchase their home.  Below are some suggestions that will help you find a reliable home inspection company.
A home inspection is a 2-3 hour visual inspection of the home.  Its goal is to identify and report any major deficiencies.  It will often be accompanied by a written report that documents the inspector’s observations.  A home inspection is not a guarantee that your home will not have potential issues in the future.   It is just designed to minimize your risk of potential future costs and issues.  It doesn’t eliminate it.
How should you choose your inspector?
Most realtors will not recommend specific companies but they can provide you with a list of a few companies for you to choose from.  You can also ask family and friends for their recommendations of home inspectors they used in the previous purchases.
Make sure that the inspector is a member of the CAHPIBC (Canadian Association of Home and Property Inspectors). This ensures that the inspector has passed a series of technical exams, follows a wildly recognized Standards of Practice of Code of Ethics and meets a required standard for continuing education.
We recommend that you call several inspection companies before making your final decision.  You should always find out what is included in the inspection, the inspection report, how long the company has been in business, follow up service, limited liability etc.  You should also be present during the inspection.
Once you decide on an inspection company make sure that their contract is delivered to you prior to the inspection so you have a chance to review its terms and conditions.

The Most Common First Time Home Buyer Mistakes

1. Going House Shopping Without Knowing What You Can Afford
Every first time home buyer should make a list of expenses that they incur every month including hydro, electricity, cable, groceries, entertainment, student loans, car payments as well as their yearly costs including property tax, home insurance, car insurance etc. Subtract this total from your take-home pay and you’ll know how much you can spend on your new home each month.
If you start looking at homes outside of your affordability, you will often be working to live instead of living!.  You may find out that you are not satisfied with size or location of the properties that you can afford so you may try to reduce your expenses or increase your income before you even start looking for your new place.
2. Going House Shopping Without a Mortgage Qualification
What you can afford is not necessarily the same as what you can actually qualify for.  The lender will require you to fill in an application form attaching copies of your T4 statements as well as a list of your expenses and any debt you might have including student loans, car payments, etc.  Your pre approval will also be dependent on how good your credit score is and how stable your income is. 
When a first time home buyer starts looking at properties before they get pre-qualified, they are not only wasting their own time but the time of the seller, the sellers’ agent, and the buyers’ agent. Imagine looking at properties for a month and finally you, the first time home buyer, find a property that you absolutely love so you write an offer on the property.  The buying realtor goes through all the minutes and the inspection with you and you are completely satisfied and excited to remove all the subjects and provide the deposit cheque only to find out that your financing fell through because you were not able to afford the mortgage.  This could easily be prevented by taking the time to get pre-qualified before you start looking.
3. Forgetting to Include Taxes, Fees, Maintenance, Closing Costs and Insurance
After a first time home buyer officially becomes an owner to their first place, they often forget to include the costs that you would not have to incur if you were renting.  Property taxes and condo insurance are charged yearly but you can pay for them on a monthly basis.  Your property taxes will vary depending on the size of the unit and the location and can be tacked onto your mortgage if you wish.  Condo insurance ensures that the contents within your home are protected in case of unexpected events including leaks, earthquakes and fire. 

Maintenance costs are also taken out monthly and vary depending on the size of your unit, the location, the ammenties and the age of the building.  Therefore, when you are looking for a place, make sure you have a list of the monthly expenses you will incur on top of your mortgage payment.  For the annual expenses, take the amount and divide it by 12 and add it to your mortgage payment.  This will provide you with a more accurate idea of what your monthly expenses are.
4. Being Too Picky
Everyone including first time home buyers have a list of what they want their ideal home to be and often times they are fixed on the list and will not even consider homes that do not have every single point on that list.  This is dangerous because you may end up renting for significantly longer than expected and the money that you are putting into rent every month could be put towards your mortgage.  Why pay for somebody else mortgage when you can pay your own?
First time home buyers may have to prioritize what they want as they often have to sacrifice certain items on their list for other things as they often have limited funds for their first purchase.  For example, you may value having a large space but be on a busy street or be on a lower floor or you may value being in the downtown core and so you sacrifice having a smaller home to be downtown. 
You could continue to rent until you find your ideal place but this could mean that you will be renting for another couple of years and you have to ask yourself, how much of that money could have been invested in my own place?
5. Rejecting a Great Place Because of Lack of Vision
You may not like the finishings of the inside or the appliances may be outdated however you should not reject a place for those reasons.  All of those things can be changed in time.  When a first time home buyer walks through a unit, they should be looking for whether they like the layout of the home.  Everything else can be changed over time when more funds are available.  As mentioned above, you could continue to rent until you have enough money to renovate everything before you move in however are you willing to invest more money into someone elses mortgage when you could be starting your own real estate portfolio?
6. Being Swept Away by Staging and/or Minor Upgrades
Repainting a unit and changing floors often does not cost much for the seller but will increase the value of the property tremendously.  The owner could spend about $10,000 in minor upgrades but add $40,000 onto the purchase price.  As a first time home buyer purchasing on a budget, look for homes that may need a little work so that you can maximize the equity in your property later on when you decide to sell or purchase another property.
7. Compromising on the Important Things
If you are planning on expanding your family in the near future don’t purchase a studio or one bedroom.  If you are extremely sensitive to noise don’t buy in a wood frame building.  Some things on your list are non-negotiable.  Make sure you keep it that way otherwise you will be living in a home that you will be unhappy with for the next year or two.
8. Getting Your Heart Set on a Home Before It’s Been Inspected
Don’t let your emotions get in the way of your decision.  Many times first time home buyers have their heart set on the home the moment they get an accepted offer.  Make sure you that you are still rational when the inspection is done otherwise you may end up with a property that will cost you alot more after you move in than it is worth. 
9. Not Choosing to Hire an Agent or Using the Seller’s Agent
Always make sure you hire an agent to represent you.  First of all, it is free for the buyer as the seller pays for both the buying and the selling agent so why not take advantage of the expertise and knowledge of the buying agent?  Using the selling agent to represent you is not in your best interest as the sellers agent will always be working on the interest of his/seller first and foremost. 
10. Not Thinking About the Future
When you are purchasing your first place, make sure you ask your agent about the area you are purchasing in.  Ask yourself,” is there is potential for growth in the area?”.  You may also want to forecast how long you plan on living in this first home and what is your ultimate purpose for purchasing this home.  You may be purchasing this home as a temporary place that you will eventually rent out and then purchase something bigger two or three years down the road.  You may want to purchase a house in 5 years so this home that you are purchasing may eventually be that investment property so you need to consider how much rent you can get in that area, the vacancy rate in the area, etc.
Purchasing your first home can often be an exciting but often overwhelming experience.  If you have any other questions or concerns about purchasing as a first time home buyer, please don’t hesitate to contact me at 604-780-7877

Home Insurance. Is it neccesary?

OK, you’ve just bought a Vancouver home or Vancouver condo, or, maybe, you’ve bought a place and are renting it out to people or, maybe, you just rent yourselves, either way, whichever situation you are in, I’m sure you’ve asked yourself, do I need insurance? What will it cover and of course how much will it cost?

One of the first questions, if not the first question I get asked by my prospective clients is: “I need insurance that will cover fire, do you do that???” My answer in short, is, “Absolutely!” Since the earlier part of the latter century it was legislated in Canada that ALL types of insurance covers fire (subject to specified exclusions in the policy). Where one must pay attention is what your insurance will not include and that usually depends on the type of policy you need: Homeowners Insurance, Condo Insurance, Tenants Insurance or Rental Insurance.

Your Insurance Advisor should be going through this with you, however, not all insurance Advisors come from the same tree, and therefore it is important to understand what you are purchasing (and indeed what you are not purchasing). Take a quick read of just some of the most popular items I see on a day-to day basis, and the items you should be thinking about when figuring what you need for insurance.

Condo Insurance (Mainly for those people who own and live in their condo)

You have equity in your condominium and you want to protect that from a variety of factors, and not just its contents.

One factor is any type of legal liability; Just as you could be liable if you hit someone in the eye with a golf ball while you play golf, or if a pipe burst in your suite causing water damage to trickle down to the suite below and heaven forbid the suite below that, you want to make sure your Insurance will cover the damage you caused to another person’s property.

As water damage in Condo policies have become a hot topic with insurance companies as of late you should check the ‘Strata Water Deductible’ in your Strata Bylaws. I’ve seen the deductibles range from as low as $5,000 up to an obscene $100,000! Once you know this, you will need to refer back to your insurance policy and see what their cap is on the ‘Strata Water Deductible’ clause.

What is the strata water deductible clause you ask? Depending on the exact wordings of your Strata Bylaws, this clause illustrates that if there is water damage to strata property, owners MUST pay the deducible first before the strata’s insurance will kick in. Example: If a dishwasher leaks or a water supply line to a toilet bursts and the owner is responsible, the Strata Council may ask the owner to pay up to the amount of the insurance deductible. This can amount to several thousands of dollars. Please check the deductible amount with your strata and then refer back to what your current insurance policy will cover.

 

Tenant’s Insurance (this applies to you if you are renting a condo or house that you do not own)

When you rent an apartment or house it is a good time to start thinking about getting insurance. Sure you don’t own the house or condo and you might not have a financial stake in it, but you do have a financial stake in the contents of your suite. Your flat-screen TV, designer handbags, engagement rings, art etc are items you own and paid for and you don’t want to be out of pocket should something happen.  

Liability coverage protects Tenants the same as it would protect a homeowner. As with all types of home insurance policies, should something happened where you are found negligent you could be sued, and indeed your financial assets could be put at risk. -Insurance is handy in this instance. For example even as a Tenant, suppose you were found responsible for starting a fire? You may be expected to fork out for the damage.

Did you know one of the factors that dictate your insurance premium is based on how long you have consecutively carried insurance for? Regardless if you are renting now with the idea of owning in the future, building a solid insurance history may prove beneficial to you when you come to purchase a condo or home, as you may be eligible for insurance discounts!

Homeowner’s Insurance (If you own a house that is not part of a strata)

Ah the big one! So much to think about when every wall, pipe and roof shingle is your responsibility to maintain, protect and even upgrade!

Homeowner’s insurance is more often than not mandatory when securing one’s mortgage. Your lender will require it and often impose minimum amounts of coverage. By and large their standards are quite easy to comply with and the rest is up to you and what you have to insure.

There are several steps to setting up Homeowners Insurance. The first step will be to go through an industry standard evaluator that will calculate how much it would cost to replace your house prior to a loss with your Insurance Advisor.

 The main dialogue that I like to have with all my homeowner clients is the difference between GAURUNTEED Replacement Cost (GRC) and just Replacement Cost. Most homeowner’s policies nowadays will include GRC, unless it is an usual type of homeowners policy like Heritage homes, homes built by owner etc – these types of insurance policies may have to be looked at more closely by the insurance companies to see if they will offer GRC or not – your Insurance Advisor will coordinate this for you. GRC means that you are entitled to get the full replacement cost of the home should it be a total loss by an insured peril.

 Next, we usually get into the details about what you’ve got in this new home of yours. I particularly focus on items that would qualify as ‘Special Limits of Insurance.’ These items are true to other types of policies e.g.: Condo and Tenant’s policy but usually appear more abundant in Homeowner’s polices, hence I mention them here. Items like Fine Art, Jewelry, and Collectors items to name a few, (please see your policy wordings, or ask your Insurance Advisor for a full list), will have a capped amount of insurance on them. This means regardless of what how much you have listed in the ‘Personal Property’ section of your Homeowner’s Policy, Insurance companies may only pay up to a maximum amount for items that fall under a ‘Special Limit’ Category. So, for example, if you have a couple of Picassos in your home, your insurance policy may only over the Picassos for maximum of $6,000! Some may cover up to more, but it is important that you take a look at your policy and call your Advisor or Insurance Company to make sure those Picassos are insured to their value!

 Another point I’d like to mention is Age. Yes we are all getting older, but once our home’s start to hit their mid 20’s they may be condisered ‘over the hill’ as far as Insurance companies are concerned. Usually, any home that is 20 or more years old will be required to have a minimum set of upgrades to the Roof, Electrical, Plumbing and Heating in order to be accepted by an Insurance Company. It may be a good idea to look at these components when buying your house since most Insurance companies will NOT insure a home that has not had its upgrades done. My main advice to you when looking to, or in the process of purchasing a house, please give an Insurance Advisor(s) a call to check into what you are looking at for insurance requirements for your home. – Quite a bit of upgrading may be required if the house is not up to par prior being accepted for insurance.

Rental Insurance (you own a condo or house and are renting it out to a family/persons

 A lot of my clients do this: whether they have a family living in the basement of their house to help pay their mortgage or have an investment property and also rent it out, Rental Insurance is an easy policy to add on to any of the existing policies above. In some cases Insurance companies will even just insure the rental place by itself – please ask your Advisor for more details

Please note! Most Rental policies WILL NOT cover you for Theft. So if your renters run off with any of your property, you may be own your own financially. A large portion of the public is under the impression that having a rental insurance policy will protect you from your renters running off with your property. Sadly it is not the case. Rental Insurance covers you for Fire and Water Damage to name a few perils (subject to the exclusions on the policy). For example, if you are renting your condo and a pipe bursts, your insurance could cover you for the damage that ensues due to the rupture. It is important as with the types of insurance afore mentioned in this article that you talk to your Insurance Advisor so that they can search for the best type of coverages that fit your needs

My final point is the common questions clients often ask when trying to get Insurance: Who do I deal with? An Insurance Brokerage, or directly with an Insurance company? Well being a bit on the bias side, one advantage of working with an Insurance Brokerage is that they will have access to a number of insurance providers and are generally more equipped to find the right policy for you, with the right premium and coverages. Each year when they get your policy renewal they are able to review it for you, discuss with you and recommend any changes or even, if the market allows, shop you around for a better deal! So, with that in mind, give me a buzz! I’d be happy to answer your questions and point you in the right direction. I know, I know, Insurance is boring….but you need it!For all Insurance related matters including home, travel, and auto, please contact Rebecca Al-Sadiqq at Thomspson Insurance!

Rebecca Al-Sadiqq

Thompson Insurance

604-626-3475

What are the qualifications to be exempt from the Property Transfer Tax?

As a first time home buyer, you are exempt from paying the property transfer tax.  There are certain requirements that you must meet in order to qualify.  They are stated below:

• You must be a Canadian citizen or permanent resident of Canada.
• You must be the purchasing a principal residence.
• You must not have previously owned an interest in real estate anywhere in the world.
• You must have resided in the province of B.C. for at least one year (12 consecutive months) immediately prior to the application to register the purchase of the principal residence.
• The maximum purchase price that will qualify for the exemption in Vancouver is $425,000 (A partial exemption is available for homes between $425,000.00 and $450,000.00).
• The term of your mortgage must be at least one year.
• The purchaser must occupy the property as their principal residence within 92 days of completion.
• The purchaser must continue to occupy the property as their principal residence for at least 1 year from the date the transfer was registered.
• For more information on this and the first time home buyers program, please visit http://www.sbr.gov.bc.ca/documents_library/brochures/FirstTimeHomeBuyer.pdf

Do you have more questions about first time home buyers?  If so, please contact Leilani!

How do I increase the value of my vancouver condo?

Before my clients sell their property, they often ask me the question, “If I were to do 3 things to my vancouver condo to increase the value of it for resale what would they be?

Most of my clients don’t realize that there isn’t much that you need to do when you sell your home:  Below are 3 cost effective ways to increase the value of your home before putting it on the market:

1)Paint-A new coat of paint is a cost effective and easy way to increase the value of your home.  Most potential purchasers (especially first time home buyers) often want to do as little work as possible when they move into their home.  A neutral color of beiges, tans, and browns seem to be the most desirable colors of yaletown and downtown condos.  These colors seem to appeal to a large audience probably because they are easy to work with. 

2)Floors-In Vancouver, having hardwood floors is worth more than having carpet.  Hardwood or Laminate flooring is easier to clean and more attractive in condo living.  It often makes the space look larger and more modern.  Laminate  and hardwood flooring can range from $2/sqft to $8/sqft. 

3)Declutter-  Moving as much of your personal items into storage including your pictures is always important.  When a potential purchaser walks into a home, they automatically imagine the home as if it were their own.   With staging and decluttering companies like http://www.chandeliershomestaging.com, it is easy to make your space appear larger and more desirable for the potential purchaser.  Sometimes it is easy as rearranging your furniture and adding a few small items to your home.

What are the differences between concrete condos and wood frame condos?

What is the difference between concrete high rise buildings and wood frame low rise buildings?  This is a common question I get asked on a regular basis.  There are a few differences between the two types of homes however neither one is better than the other.  It is based soley on your personal preference.

Wood frame units are not as noise friendly as concrete condos.  However the newer wood frame condos are attractive to first time home buyers because they often offer larger spaces for the same price as a concrete condo.  For example, in the burnaby north brentwood mall area, a one bedroom in a newer wood frame building around 650 sqft will go for around $249,000 to $289,900 whereas a similar unit in a concrete highrise will go for $289,000 to $320,000. 

The home insurance on wood frame units will be a little higher than on concrete condos.  Wood frame units are more prone to fire and as such the home insurance on these homes will be a little higher. 

There are also certain areas in which all or most of the homes are wood frame so if you wanted to live in those areas you would have to purchase a wood frame unit.  For example in the UBC area, most of the homes there are low rise.  They do also have some concrete low rise condos available as well.  Most of the units in this area are leasehold.  Another area where the majority of homes are low rise condos would be in kitsilano.   I hope this helps.

Do multiple offer situations still exist in this market?

It has been a crazy weekend showing about 4 new first time home buyers properties downtown and in the burnaby north area.  I wrote two offers this weekend and guess what?  In both situations with two separate buyers, we ended up in multiple offer situations.   One offer was on a 2 bedroom in the Tandem towers in Burnaby north.  It had its first showings on Saturday and 4 offers on Sunday!.  I am looking for sellers of 2 bedrooms in those 3 towers so if you know anyone that is interested in selling please let me know.  NOW is the time to purchase Vancouver real estate and start that real estate portfolio you have always wanted

What is the difference between variable and fixed mortgages?

 

Many of my clients have been asking me what the difference is between variable and fixed interest rates so I decided to get my mortgage broker to write up an article on it and post it below.  Here it is:

Variable Vs. Fixed

 

Variable mortgage rates are tied to the bank’s Prime lending rate, which is directly linked to the Bank of Canada’s Overnight Rate. In most circumstances, the Prime lending rate will change in the same direction and by the same amount, as any change to the Overnight Rate. Therefore, if the Bank of Canada announces a decrease in the Overnight Rate by one quarter of 1%, then you can expect most Variable rate mortgages to also drop by one quarter of 1%. 

Fixed mortgage rates, in contrast, are determined by yields in the bond market, and do not fluctuate with changes in the Prime rate. Therefore, while the Central Bank’s decisions do impact Variable rate mortgages, these decisions do not influence Fixed mortgage rates. It is not uncommon, in fact, to see Fixed mortgage rates increase while the Prime rate decreases, and vice versa. So unless you are shopping for a Variable rate mortgage, don’t pay attention to the hype surrounding interest rate announcements by the Bank of Canada.

 

In order to determine where Fixed rate mortgages are headed, it is useful to study changes in the bond market. Consistent increases or decreases in the yield on the bond that corresponds with your mortgage term should give an indication of where your rate is headed. For example, if you are interested in a 5-year mortgage rate then track the equivalent 5-year Government of Canada bond; if you are interested in a 1-year mortgage rate then track the equivalent 1-year Government of Canada bond.

 

Given the current economic climate, consisting of historically low Government of Canada bond yields and Fixed mortgage rates, now is the ideal time for prospective homeowners to obtain a Pre-Approval. Not only does a Pre-Approval secure your financing in advance of the home search process, but it also protects you against potential future increases in interest rates. This is accomplished through a “Rate Hold”, which is typically valid for 90-120 days. Therefore, if rates increase while you search for your ideal home, you can rest assured that you still have access to financing at your Pre-Approved rate. However, if rates decrease during the interim period, your rate will automatically float down to the lower rate.

 

 

 

Property Listings Decrease as February Sales Improve

 

Property listings decrease, as February sales improve 

VANCOUVER, B.C. – Residential housing sales in Greater Vancouver rose 94 per cent in February compared to the month before, with 1,480 sales registered in February compared to 762 sales in January, which was the slowest month for housing sales in 25 years. Over the past 10 years, February sales have typically surpassed January by an average increase of 53 per cent. 

At the same time, new MLS® listings for residential properties continued to decrease for the fourth month in a row. New listings decreased 25.6 per cent in February compared to the previous year; 20 per cent in January; 8.6 per cent in December; and 10 per cent in November. 

“There are terrific opportunities out there right now, but with property listings continuing to decrease, those opportunities may be available only for a brief window of time,” said Dave Watt, president of the Real Estate Board of Greater Vancouver (REBGV). 

REBGV reports that year-over-year property sales in Greater Vancouver declined 44.7 per cent in February 2009 from the 2,676 sales recorded in February 2008. Year-over-year, those are the lowest sales figures for February since the mid-1980s. 

“REALTORS® are reporting more activity compared to recent months as people begin to see whether their position in the housing market has strengthened as a result of falling interest rates and improved affordability,” Watt says. “It took, on average, 67 days to sell a home in Greater Vancouver in February, seven days less than last month, but behind the seller’s market of last February when the average stood at 33 days. 

Sales of detached properties in February 2009 declined 41 per cent to 587 from the 995 units sold during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties declined 14.2 per cent from February 2008 to $653,452. 

Sales of apartment properties declined 45.6 per cent last month to 650, compared to the 1,197 sales in February 2008. The benchmark price of an apartment property declined 13.9 per cent from February 2008 to $333,143.  

Attached property sales in February 2009 decreased 49.8 per cent to 243, compared with the 484 sales during the same month in 2008. The benchmark price of an attached unit declined 9.7 per cent between Februarys 2008 and 2009 to $426,268. 

New listings for detached, attached and apartment properties declined 25.6 per cent to 3,916 in February 2009 compared to February 2008, when 5,260 new units were listed.