How To Negotiate the best Deal

Buyers are finally being able to take advantage of cooling trends in previously hot markets. Multiple offers are no longer being thrown at sellers as soon as the For Sale sign hits the front yard.
 
Competition has dwindled in many areas as investors disappear and buyers take to the sidelines. Unless a buyer thinks his local market is headed for a big downturn, this could be the pause that allows him to get into the market with a few perks unheard of in recent years as a bonus.

So how do you know what shape your market is in? Economists believe that real estate is closely tied to employment, so if you’re in an area of growing employment, don’t expect to see double-digit depreciation anytime soon. In areas such as the Midwest, where auto manufacturing is king, prices have fallen sharply and will likely continue until the industry rebounds.

 

Here are 10 things buyers need to know to negotiate the best deal in a market shifting to their favor:

 

1. Human nature is the biggest problem for sellers and buyers to overcome in a changing market. Prices stagnate or drop a few percentage points and it’s amazing how different buyers and sellers react. Sellers still think their house is “special” and immune to the market. Buyers figure every seller is about to be foreclosed on and make ridiculous low-ball offers. Smart buyers do their homework, know what size home they need, how much they can afford and then search the market for what they want and negotiate fairly.

 

2. When you make an offer, know the recent comparable sales; it’s the best bargaining tool. “See what’s going on out there,’’ says Beverly Durham of ReMax Gold Coast Realty in Camarillo, Calif., where entry-level single-family homes begin at $500,000. “Make an offer $10,000 to $15,000 under what the last one sold. Even in this market, if you insult your seller, they won’t want to deal with you. Sellers know what the last one sold for. You want them to at least look at your offer.”

 

3. Find out as much as you can about the seller’s motivation -- retirement, job, divorce, wants to move up but only if he gets the right price. Durham says if a buyer knows the seller’s motivation they can negotiate a better deal or move on to the next property.

 

4. Multiple Listing Service (MLS) properties usually state what the seller owes. If not, your agent should be able to track down the figures. There’s a big difference in negotiating with an owner who owes more than the house is worth and one who has a lot of built-up equity.

 

5. “After 45 to 60 days the seller is usually absolutely sick of keeping their house spotless and sick of people walking through,’’ said Durham. This is when a seller may be the most anxious about selling their house as traffic to their house has likely fallen sharply.

 

6. Unless you’re incredibly handy and have time and cash, go after houses that are as updated as you can afford. This is easier to do in a stagnant or falling market and fixers aren’t usually discounted enough to be worthwhile.

 

7. In a tighter market, it’s not too much to ask the seller to add the closing costs to the price of the house. It’s better to put 20 percent down and add the closing costs to the loan than put 15 percent down and pay the costs upfront.

 

8. Items to ask for that shouldn’t offend sellers are paying for new kitchen appliances or washer and dryer. Most sellers will be willing to do so to close the deal. Durham also says it’s OK to ask sellers to pay up to the first year of homeowner association dues.

 

9. Don’t request anything that requires quality workmanship. “Don’t ask them to paint,’’ Durham said. “They won’t do it the way you want. They’ll do a lousy job.’’ Also, don’t get carried away and ask for the entire store. Be reasonable.

 

10. Make sure to look at the big picture. In changing markets you should be planning to stay for at least five years, so don’t get caught up in a $2,000 price difference. Remember, the goal is to get the house you want to live in for some time, not to impress friends with how you worked the previous owner.

Frequently asked questions about buying a home

 

“How can I compare my monthly rentalpayments to mortgage payments

Of course, the amount of your mortgage payments will depend on the price of the home you buy, the size of your down payment, prevailing mortgage rates

and the term and amortization you choose. But it’s actually quite easy to estimate typical payments using the mortgage calculators available online.

“How do I know how big a mortgage I will qualify for?”

 

A pre-approved mortgage is a great way to know how much you can borrow for your home. This, in turn, helps you set a price that’s realistic for your

financial situation. It’s important to note that having your mortgage pre-approved doesn’t obligate you to buy a home: it’s simply a way to know how much your mortgage lender will approve you for.

Our mortgage specialists can meet with you in your home, at your workplace or at a branch to take you through the pre-approval process. Simply call

1-800 ROYAL

® 7-0 (1-800-769-2570)

to arrange a convenient meeting time.

“I want to become a homeowner as quickly as possible but I haven’t saved a large down payment. Any suggestions?”

You’ll be glad to know there are different options available, depending on how much of a down payment you can afford. A low down payment mortgage is required when your down payment is less than 20%. You can purchase a home with as little as 5% down. All low down payment mortgages require mortgage default insurance. Mortgage default insurance premiums can either be paid up front or added to the amount you borrow.  With the federal government’s Home Buyers’ Plan, you can use up to $25,000 in RRSP savings ($50,000 for a couple) to help pay for your down payment on

your first home. You then have 15 years to repay your RRSP.

 

“Where can I find up-to-date information on home prices and the real estate market in my area?”

The Multiple Listing Service (MLS) offers an easy way to browse through home listings in every part of Canada. Easy links let you look at the housing market in specific cities by neighbourhood, price range, type of home and other parameters. It’s a great way to get a sense for the types of homes available

in your community and their features and price ranges. Visit  www.mls.ca.

The Canadian Real Estate Association (CREA) website helps you look at average home prices in communities across Canada and locate a realtor in your area. The site also includes useful home-buying tips and a glossary of common real estate terms. Go to www.crea.ca.

 

The Canadian Mortgage and Housing Corporation (CMHC) provides a content-rich website with detailed, step-by-step information on buying, selling and

renovating a home, as well as up-to-the-minute news of interest to homebuyers and sellers. Visit www.cmhc.ca and click on “Buying or Renting a Home”.

Buying A Home- What Can You Afford?

It's a Personal Decision

While you may qualify for a certain mortgage amount, you should also consider how it will impact your lifestyle and other things that are important to you.
Will you be able to maintain your current lifestyle with the mortgage payments you're considering. Are there changes to your current spending that you can make to be able afford that new home?

Be Honest

Be honest in deciding what you can afford! Small minor changes to your lifestyle are likely doable - however major changes really need to be considered.
Look hard at your current lifestyle - how much do you spend on going out to dinner, movies, travel, etc. You may decide to eat at home more often, watch movies at home instead of going out; whatever your change, you need to assess how drastic is this change in your lifestyle. Will you be satisfied with the changes you've made? A dramatic change in your lifestyle would not be recommended or may not necessarily happen. You still need to lead your life!

Future Considerations Too!

It is also important to think ahead. Where will you be in a few years - kids, new job, etc. How this will affect your future cash flow? Future changes to consider:
The impact of family changes will affect cash flow and your ability to meet your monthly financial obligations. For example, the birth of a child can mean less income coming in due to maternity leave, increased expenses with new clothes, furniture for the baby's room, strollers, car seats, etc.
Look at your employment situation - will you be getting a salary increase soon? Is your spouse/partner going back to work? You may then want to look at stretching yourself now, for the added flexibility later - getting into that home you really want now.
Some additional thoughts - if you have never owned a home before think about the additional costs associated with owning a home that will impact your cash flow:

• Utilities - heat, hydro, internet, etc.
• New fencing, deck
• New furniture, window coverings
• Shovels, rakes, etc.

Think About Balance

So you will need to decide. Is the starter home right for you? Something that will allow you to be a home owner now, understanding that in a few years as your family grows and changes, you may need a larger home. Or do you want to stretch and get that dream home now - and potentially never have to move again.
You'll be living with this decision beyond today so you need to think about balance. Remember you want to be able to sleep at night knowing you can make your payments!

5 Tips about income properties

1. Your income property should meet your own standards. Tenants won't settle for less than you would. Fix the place up so you can charge more and attract better tenants.

2. Don't skimp on the drywall, especially on the ceiling. Not only as a fire barrier between you and your housemates, but also as an extra layer of sound-proofing.

3. When renovating your space, add 25% over a professionally quoted budget. If you do go over, at least you were expecting it. If not, nothing lost.

4. Look for an income property that's close to home, ideally within an hour's drive of where you live. It has to be convenient for you to check up on and manage.

5. Beware, houses are like onions. The more layers you peel back, especially while demolishing, the more problems you're likely to find. Count on hidden issues like mould, live wires and any other hidden costs, just in case

Women Love to Shop — For Real Estate!

The demographics of the typical first-time homebuyer are changing these days. More and more women today can afford to purchase a property on their own to build up valuable equity and are no longer waiting to find a life partner before they pursue the financial and lifestyle benefits of home ownership. One in four buyers these days is a single female, and new home marketing is actually starting to reflect that. We may be ready to jump into the commitment of home ownership but not all of us are willing to give up our valuable free time to outdoor chores. So single girls tend to look for homes that require little or no maintenance with an option to plant container gardens. Sound familiar girls?

The easiest and most popular way to hold on to our maintenance free lifestyle is to purchase a condominium. Its problem-free upkeep and unencumbered lifestyle is an obvious benefit to people who don't want to be tied up every weekend with chores—there are no lawns to water and mow, and no leaves to rake. No yard means there's no fence or deck to repair, and no driveway to shovel in winter. Choose a condo and you’ll never have to worry about this stuff. Condominium members are charged a flat monthly fee to cover maintenance of the common areas as well as provide prompt service by reliable tradespersons if there are maintenance problems in your individual unit. Heating, air conditioning, plumbing and electrical problems are handled by maintenance staff or service agreements set up by the condo association, so good help is available at a moment's notice.

Security is also an important consideration for single women living alone, and the condo lifestyle can offer such measures as restricted access, a concierge on duty screening visitors, closed circuit TV monitors, patrolling security guards and panic buttons in garages to add to peace of mind.

Some single women still prefer a more traditional home as their first property. The appeal of having an outdoor space of your own to entertain, putter about in a garden and relax in can be inviting. A single family home sometimes offers more privacy and is also better suited to larger pets. Make sure to check if your pet will be warmly received by the condo board—they uphold the rules that the condo owners have set in place.

How much should I pay?

In many Canadian real estate markets the pace is quick and prices can move so quickly that it’s difficult to judge whether a listing is over-priced. If you’re a buyer, there’s a very simple solution—work with a professional real estate representative who knows their local market. While most Canadians begin their home search on the Internet, and by reading the paper or just driving around areas they like to see what signs are posted, these methods don’t give a buyer any indication of what pricing is realistic for that market. What you see is just the tip of the iceberg. You need an expert who has access to literally up-to-the-minute information to help you gauge just where the market is going and how to price an offer that is attractive enough to be accepted, without paying more than you should.

Real estate professionals stay on top of current pricing trends in a variety of ways. Through the realtor’s association database, your realtor will prepare a CMA, or Comparative Market Analysis for you. Real estate agents can review historical data, like what homes have sold for, and perhaps even more importantly, they can see what listings expired without selling. This is an excellent indication of what price the market will not bear at the current time. There are also reports published within the industry that are indicators of what price increases are projected for the upcoming period. An active real estate ‘pro’ will also have an extensive network of other real estate representatives, mortgage lenders and other sources of influence to help them keep their finger on the pulse of the current market.

Without a crystal ball, it’s impossible to predict what I like to call “market motivation." That is, if you are competing in a multiple offer situation on a home you wish to purchase, you never know how motivated the other buyer(s) may be. Have they lost out on 3 other homes and are determined to get this one? Is it right next door to their family home? Do they need a home right away and can’t afford to lose it? This type of buyer may be willing and able to pay more for the house than statistical data shows it could be “worth." Whatever that buyer wants to pay for the home becomes market value for the home at that moment. On the other hand, you could be competing against someone who is not able to pay more for the house, or doesn’t believe it could sell for more. In which case, a good solid offer from you can clinch it with ease.

No matter how you look at it, the best way to ensure you don’t waste your time or your money on an over-priced listing, is by working with a professional. Best of all, as a buyer, this expert advice doesn’t cost you a thing.