Buying Real Estate a Bad Idea?

You don’t always make money when you buy your home. The costs associated with owning real estate can quickly add up.  There are transfer taxes, closing costs for a lawyer/notary, property taxes, city utility fees, replacement insurance, mortgage insurance, mortgage interest fees and finally real estate agent fees. Picking the right house can be crucial to better your financial position when owning real estate and picking an agent can help you pick the right home.

Typically Buyers don’t pick buyer agents.   The majority of the time the Buyer agent tries to “pick” a client and this happens either through an online inquiry, phone inquiry or open house. Occasionally a Buyer will be referred to an agent and a few times a buyer goes actively looking for a buyer agent themselves.  When you go looking for an agent you quickly realize that there are 100’s of agents and we all say the same thing.   Background information on agents are usually missing or minimal so it is normal for buyers to wind up working with an agent they did not choose.

The value the buyer agent brings to a Buyer, generally speaking, is as follows:

  • Buyer agents make it easy for Buyers to look at multiple homes and keep their identity private rather than having to contact multiple sellers or seller agents. This means the agent needs to be available even on short notice.
  • The Buyer agent makes it easy to write an offer on a property.  Generally a custom legally binding contract can be created within an hour of looking at a property, any day of the week.
  • They give advice and have a fiduciary duty regarding contractual subjects and conditions on any one particular property.  In this respect Buyer agents give Buyers assurance backed up with actual liability insurance usually up to $3 million dollars.
  • The buyer agent can connect the Buyer with reputable sub contractors, mortgage specialists, and home inspectors to help ensure that the home buying process goes as smoothly as possible with minimal stress.
  • They give advice about general market conditions as well as specific advice down to a single segment and single property, ideally speaking, helping the buyer ultimately find the right property for them so that the buyer can have the best chance of building wealth.

The first two points are probably the most important practical values a buyer agent can bring to the table and these two points also require the least amount of knowledge/experience.  Just by doing these two points, a lot of Buyers appreciate the services of their agent and just these two points can mean the difference between securing a great property or getting ‘stuck’ with a not so great property or renting. These are the passive things an agent can help a Buyer with.

The last three points generally require more knowledge and experience to do well.  The agent becomes more of an advisor than a passive participant.  These points require more of an active approach where the agent tries to actively ask questions that can help them better understand the needs of a particular Buyer. Outside of being available, typically the biggest difference between one agent and another one has to do with these last three points.

Picking the right agent can save you a lot of time and be the difference  between finding a property you want to hold on to and build wealth or buying a property that could literally lead to financial trouble. The difference can be based on who you decided to use as your buyer agent.

Are you looking to buy a property in and around Kamloops?  If you would like some help feel free to contact me when you are ready.

Andrew Thompson

andrew.thompson@century21.ca

Call or text: 250-320-0154

Office: 250-377-3030

It Sucks to Sell Your Home!

You have put down roots, made great memories, have friends close by, but now you have to sell. The costs associated with selling are not small by any measure – moving costs, lawyer or notary fees, transfer taxes (on your new purchase), and real estate agent fees quickly add up.

Real estate agent fees are one of the greatest costs, but despite this, not a lot of people (less than 5%) try to sell their property themselves. Most people decide to use a real estate agent to sell their home for the same reasons they use a mechanic to fix their automobile or a lawyer to deal with a legal matter. It is possible to sell your property yourself,  but what you save in commission you could lose in sale price and there’s a chance you can expose yourself to legal issues.

As you know, real estate agents provide the following services:

  • answer questions;
  • prepare listing documents;
  • Sell your property
  • keep you at arms length from potential buyers so that you can maintain your privacy and not get emotionally involved with a potential buyer;
  • offer insight on current market conditions and provide real estate advice when needed;
  • help your property standout;
  • limit your liability;
  • Give advice on how to negotiate a good price for your property;

Based on my experience, generally speaking, this is the order of importances most people have when deciding who to use as a real estate agent or brokerage and why most people just rely on a referral from a friend or number of listings agent has to sell their property.

The real estate industry is big business. For example, in Kamloops with a population of about 95,000 on average there is about $75 million of transactions per month in our real estate market. Collectively, real estate agents are trying to make that number as big as possible. Real estate agents are like the managers of the real estate industry and for their services they charge Sellers a commission usually of no more than 4%.  In return, Sellers hopefully get a good management team that consistently makes their wealth improve by more than 5% to offset this cost. I say management team because when you hire one agent you are indirectly hiring all agents. In theory, your listing agent is trying to help you achieve the highest sale price while a buyer agent is trying to help buyers achieve a lower sale price.

What Should you look for in a good Agent?
Every consumer is different but in my experience, marketing and real estate advice are typically not a top concern for most consumers when it comes to picking an agent. Typically, Sellers rely on referrals or superficial metrics like how many listings an agent has when determining which real estate agent/brokerage to hire.

When choosing a real estate agent, Sellers should look for good management skills and an entrepreneurial spirit. Good managers not only have good people skills, work hard, and are honest, but they also look for ways to make things more informative and transparent. Good entrepreneurs always have the energy to try to become more efficient and effective. When you are seeking a real estate agent keep these managerial skills in mind because they should be at the heart of any good real estate agent’s business. One way to show entrepreneurial spirit is to be proactive in marketing a home with high quality pictures, and even videos that give your property a story so that there is a great first impression of the property.

Obviously selling your home doesn’t suck.  But chances are you would not have read this article if I called it, “Sell your property with me for top dollar quickly!”.

 

Andrew Thompson,REALTOR(R)

andrew.thompson@century21.ca

Call or txt: 250-320-0154

Office: 250-377-3030

 

 

 

Finding Downpayments for a Rental Property

In a Buyer’s market where prices are coming down more people are thinking about buying rental properties.  If you are one of those people you will be one of the elite!  In fact only about 4 percent of Canadians decide to buy rental properties as part of their investment portfolio.

One of the herdles that investors have to get over to begin buying rental properties is finding down payments!  Here are 7 options for you to consider to get those funds:

  • 1. Liquid Assets

You can sell off some stocks, sell your car, your coin collection, or rare doll collection etc.

  • 2. Real Estate equity

Properties tend to appreciate over time you can now take up to 85 percent (as of March 2011) of your equity out of one of your other properties! You usually have two options take out a mortgage for the full amount of equity (usually at lower interest rate or get a line of credit (LOC) for the amount.  By getting a LOC you don’t have to borrow the full equity amount. You bank might offer a ‘re-advanceable mortgage/LOC’ combination where every time you make a principal and interest payment on your mortgage, the amount of principal that is reduced in the mortgage is automatically available to you on your LOC.

  • 3. High-ratio insured Mortgages

Put less money down on a property. This is a very difficult option in the present market conditions, as described below:

Up until 2006 The Canada  Mortgage and Housing Corporation (CMHC) was the  only mortgage insurer who would insure rental properties. AIG United Guaranty entered this market in late 2006 and targeted the residential market coming up with 90% financing for investment properties.  As well GE Financial entered the market and matched any service AIG would offer. Then in August of 2007 a rumbling from a hedge fund in France led to an avalanche called the “sub-prime crisis.” As a result GE and AIG both withdrew from the market of residential rental properties in Canada even though Canada was relatively impervious to the sub-prime crisis.

In April 2010 bowing to the concerns that the Canadian housing market had not only recovered from the recession, but was in fact getting overheated once again, the government stepped in and annouced further changes. They simply eliminated any CMHC-insured high-ratio mortgages for real estate investors with less than 20% down.

  • 4. Sub-prime Mortgages

Not many people understand sub-prime mortgages.  Sub-prime mortgages are lent out when the person or the property is ‘sub-prime’.  In Canada the number of sub-prime mortgages represented less than 5% of the mortgage market where as in the US sub-prime mortgages represented up to 25%. Sub-prime mortgages came about to service the individuals who had a hard time proving their income (for example the self-employed).

Ever since the sub-prime crisis virtually no lendersare active in this market. The few that remain will go up to 85% but that changes every month depending on market conditions.

  • 5. Private Money

When every option is exausted to get cheaper conventional money look at private money. Private money is not for everyone.  Private money is best used on a short term basis. Suppose you find an ideal property but the current owner has the rent well below market value, but you have to wait a year to increase the rent. At present the CMHC will only grant you a first mortgage for up 55% of purchase price based on the current DCR calculations.  If you are very confident in the market and value of the property private money might be a great short-term solution. Financing for flips might also be a good option.

Don’t confuse private with a zero-down option.  Just because the money comes from a private source and not a bank doesn’t mean that the lender doesn’t worry about risk. Some private lenders worry more about security than the banks.

  • 6. Vendor take-back mortgage

In the case where the market favors the buyer vendors might be willing to do a vendor take back mortgage (VTB). VTB’s are essentially a second mortgage that is arranged by the vendor. Say for example, you wanted to buy a property but didn’t have 20% to put down you could approach the seller and ask them if they would ‘take back’ or grant you a portion of the down payment say 10%.  There is currently no Canadian bank that will allow the VTB to be as high as 20%.  Banks typcally only allow up to 10% of the mortgage to be VTB on rental properties.

  • 7. Joint Venture partners

A joint venture partnership (JV) can be structured many ways but the most popular is when one partner does all the leg work while the other provides the cash. Both parties would be on the title and therefore responsible for the mortgage. The JV can be for whatever percentage you negotiate.

I hope you have found this information informative.  Finding a good rental property includes using a good Realtor.  Please contact me if you are considering buying rental property in my area!

How Marketing Homes has Changed – Kamloops Real Estate – Efficiency in the Selling Process

As the old saying goes…”Times change.”  That is never more true than with the real estate business.  Back before there was internet marketing running ads in the newspaper for your home became a vital part of the selling process. Newspaper ads were vital in getting the word out that a property was for sale.  Buyers were far less sophisticated and at the mercy of the local information that was available to them and that information was limited to their individual agent or brokerage that they were dealing with at the time.  Buying a home back then could be a lot harder and depended greatly on brokerages to give out information.

Since the internet age the marketing of a well known product, like a house, has been dramatically streamlined and made easier. The internet has allowed organizations to easily gather information and sort it so that it can be easily viewed and analyzed.  Everyone knows that if they want information on a certain topic they can “google it” and answers to their questions will magically appear before their eyes.   As real estate professionals in Canada we enter listings into a large data base following strict guidelines that keeps track for past sales, expires, and active listings.  We even made it easier for Buyers looking for homes to find them, no website is required, just an email account. In fact, properties that meet a Buyer’s criteria can get emailed to them directly as soon as they hit the market or change in price.

Before the internet it was not hard to see where the value was in using a brokerage to sell your house. Today the value of real estate agents have shifted to analysis of the data that is now available and analysis of the buying processes itself. Today, just like in any established industry, the value of a good real estate agent is all about making the home buying process more efficient.  There are a lot more options out there for the average buyer and a lot of potential risk they might run into. Prices of homes have dramatically gone up and there is an expectation of transparency from the public to insure that confidence remains as high as possible.  It is now the real estate agents job to insure that Buyers are treated with VIP treatment and guided to make the right choice(s) when it comes their home purchase.  Every buyer has their own needs that is based on their particular personality and lifestyle. As a sophisticated real estate agent I know it is in everyone’s long term interest that they find a house that best meets their needs so that financial freedom and not hardship can be had through real estate ownership.

Interested in finding more information on the Kamloops real estate market?

Why did your property not Sell? – Two important Factors

Have you been trying to sell your property with no luck? You are not alone every month there are about 300 listings in the Kamloops area that come off the market without selling. Here are two important factors that surprisingly get over looked or ignored.

First, price is a huge factor on whether or not you get an offer from a potential buyer because buyers always want to see value in what they are buying. When you are trying to determine the right price for your house the best way for you to know that number is by knowing what comparable houses have sold for recently. You should never really take an appraisers evaluation or even real estate agents valuations to heart unless particular comparable houses back it up. The market is dynamic so you should get updates on those houses to see where the market is going. The market can change after just one sale or even before a sale happens. These market changes occur for a number of reasons but they can be monitored to a certain extent with inside industry information. Real Estate agents earn their pay by converting as many potential buyers into actual buyers and by limiting unnecessary risks. As a general rule of thumb, in the real estate business poor real estate agents perform 5%‐15% worse than a good real estate expert.

Secondly, when a buyer is trying to buy something outside of their disposable income it becomes a huge decision for them, a life changing event. Whenever I deal with a buyer I always sit them down and ask them about their particular needs and wants. I use this time with them to educate them about the market conditions just so they know what to expect before we even start going to view houses. The information they give me and information I provide them greatly increases the speed and likelihood they will make an offer on a house I show them because I am going to do a very good job of identifying their needs. I will just show them properties that meet their needs then I will gain a commitment from them. If I don’t go over their needs then it is likely I will be running around town with them looking at so many properties everyone’s head will start to hurt, and a top quality sale will be hard to come by. Buyers are free agents they have no commitments– they can be in the market one week and out of the market the next so it is important to get them to commit sooner rather than later and address their needs to help insure every sale is a win/win situation, for both the seller and the buyer.

If you are thinking about selling in the Kamloops area contact me for a no obligation real estate consultation.  I want you to make the most amount of money for your property.

Should You list your Property during the Winter?

There is a myth that listing your property during the winter months is a bad idea.   In reality if you are hoping to sell your property there is no bad time to list your property, especially in a Buyer’s market where you could potentially lose out on that elusive perfect buyer.  The Buyer that loves your house just the way it is and therefore is more likely to pay you a premium dollar.

In fact, a lot of sophisticated Sellers prefer to list their property in the winter.  During the winter months there will be less people “just looking” at houses which means that you will tend to get fewer viewings but is that truely a bad thing?  The buyers who are looking in the winter are usually more serious – they are typically out-of-towners who NEED to find a house in a short amount of time or another Kamloopsian who JUST sold their property and NEED to find a place of their own quickly as well!  Both types of buyers are just hoping to buy a property for fair market value and want to do it as quickly as possible so they don’t end up homeless or stuck in a long term rental.  Fair market value has a lot to do with what has sold recently (in the last couple of months) and usually has little to do with what is currently active on the market.

If you are considering Selling our house in the Kamloops area feel free to contact me for a free real estate consultation to determine if the market conditions are right for you to make that move you are thinking about.

Ask A Real Estate Expert: Should Sellers be present during a Property Showing?

So should Sellers be present during a property showing?  Sellers could answer any of the questions that the Buyer might have, and that would be good, right? In actual reality it is bad, believe it or not. The only question that the Buyer wants to know while looking at a property for the first time is if they can see themselves living there.   If the Sellers is present during the showing, or even if the Seller’s pictures are everywhere, that makes it harder for the Buyer to picture themselves in that house.

I have had experiences where the Sellers have been present during the viewing of their home.  They answered all of the Buyers questions and end up talking too much. In the end the Seller walks away thinking the Buyers are really interested in the property and the Buyers walk away thinking the Sellers really love THEIR house. Unfortunately the Buyers are looking for their own home.

If you are thinking of buying or selling kamloops real estate check out this great website.  I am a Kamloops real estate agent, or Kamloops Realtor and would like to learn about your real estate needs.

Ask A Real Estate Expert: What affect has the proposed mine had on Kamloops Real Estate?

The proposed AJAX is a hot topic in Kamloops. Everyone in town knows about it and everyone moving to town does too. On one side there are high paying jobs and an influx of tax dollars that could go towards better infrastructure and social programs for the city and on the other side there are legitimate environmental concerns. The project is currently going through a BC environmental review process.  I get asked a lot about what affect the proposed AJAX mine has had on the current real estate market. So I took a look at the sales of areas of Kamloops that would potentially be affected the most, areas closest to the proposed mine operation, Aberdeen and Pineview Valley. Looking at the sales figures for these areas over the last five years. You can see despite the increase in public awareness of the proposed mine there has been no noticeable decrease in sales for these areas. In terms of sale prices there is still a noticeable premium for houses in these areas.  For example, the average new home construction price of an Aberdeen home is about $40-$60k more than comparable new homes in Bachelor Heights and Juniper heights. What is also interesting is the Kamloops market is hot right now.  There are only limited number of lots available but there are no lots available in Aberdeen.  They are sold out. Why aren’t sales and land values decreasing with all this talk about the proposed mine? There can be a number of different reasons, but when it comes buying homes we have all heard location is really important. I have had clients tell me they would love to live in the country, have more land and enjoy the fresh air out there. But most don’t want to live far from their work, favourite grocery store and other amenities.

There seems to be a trend where desirable aspects of an area such as proximity to work, amenities and quality of schools can outweigh potential challenges associated with industrial and commercial realities. At least they have in the past.

Kamloops has been referred to as a working town in the interior of BC. Because it is constantly compared with more tourism friendly cities like Vernon and Kelowna which have geographically advantages that Kamloops just doesn’t have.

Ask an Expert. What should you be looking for when hiring a real estate agent?

Managing all of the details surrounding the sale of your home is one of the most important factors in getting the best results. One aspect of the managing process includes the advertising strategies a Realtor(R) implements for your property. Conveying the value of your home and targeting your ideal buyer is crucial. Your agent should take high quality pictures and advertise using a variety of mediums, such as websites, direct email, and other digital marketing mediums.

Another significant aspect of the managing process is concerned with dealing with people. In real estate, establishing good relationships with buyers is key as this enables an agent to investigate buyers’ needs to match them up with an appropriate property. This process leads to the best results which is a win/win situation where the seller sells their unique property to a buyer who appreciates the value.

Andrew Thompson a Kamloops real estate expert
Andrew Thompson is a real estate expert.
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