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Building an all-star real estate team

Kristin Kent
September 14, 2013
Toronto Star


The right experts on your side can smooth the path to home ownership

Richard Silva wanted out of his rental.

With his rent on the rise and a down payment saved, Silva knew his next move was into home ownership.

“It’s getting very expensive to rent,” he says.

“If you’re going to pay $1,500 per month on an apartment, you might as well pay yourself. Then, in 25 years it will be yours.”

He started by calculating costs to learn what he could afford.

Armed with the mortgage loan preapproval he was expecting, he went shopping.

“I knew my price range and I knew where I wanted to be. I also wanted to stop renting and get out of there quickly,” he says.

He sought the advice from a friend, who pointed him toward a great real estate team.

In less than one month, Silva owned his first home.

“It was a lot of paperwork and a lot of back and forth in a very short time,” he says.

“There was just so much documentation, verifications, identifications, bank statements, paycheque statements, a credit check, proof of funds,” he says. “It was really quick, but I’m happy with the result. And I’m happy I’m not paying someone else.”

Toronto’s rental market is growing fierce, with ultra-low vacancy rates of 1.4 per cent. Rent is continually increasing, and bidding wars are becoming commonplace.

According to the Toronto Real Estate Board, the cost of renting a condominium apartment has increased beyond the rate of inflation.

Renters can expect to pay $1,611 per month for a one-bedroom and $2,174 per month for a two-bedroom — that’s an increase of 3.5 per cent and 4.1 per cent respectively from the year before.

It is no wonder would-be homebuyers like Silva are eager to stop renting.

Once you’ve crunched the numbers and you’ve determined home ownership is right for you, start building a team of real estate experts to help you through the process.

Mary Stergiadis, spokesperson for the Canada Mortgage and Housing Corporation (CMHC), says homebuyers tend to seek out consultation from their loved ones before seeking out a mortgage professional.

“Individuals may not think of friends and family as part of a team, but they are,” she says. “They can then tell you about a real estate agent or a banking professional they’ve dealt with. That word-of-mouth referral is valuable and based on their objective experiences.”

It is important to interview an array of potential team members.

All questions are fair game. It is, however, important to gauge the scope of someone’s expertise.

A real estate professional, for example, may give you a broad answer about financial questions. Likewise, a financial professional may not be able to speak to the specifics of the real estate market.

On your team you’ll need a lender (also known as a mortgage specialist), a real estate agent, a real estate lawyer, an insurance professional, a home inspector, an appraiser and, at times, a land surveyor.
A lender helps you get financing and guides you through the flurry of mortgage options.

It may be helpful to learn common mortgage jargon before you meet with a specialist.

You may want to research mortgage rates and know what’s on offer at other institutions. This may help you negotiate a better deal.

Many financial institutions offer mortgage loans, including banks, trust companies, credit unions, pension funds and insurance companies.

Another person you’ll want on your team is a licensed real estate agent.

He or she helps you find a home, negotiates the purchase price and writes an offer of purchase. If this person specializes in a particular area, he or she may be able to provide valuable information about the community.

Be sure you understand all charges involved. Ask your realtor about commission fees. Also, if he or she works with an assistant, will you be charged an extra fee?

Areal estate lawyer reviews all contracts before you sign them and makes sure the property does not have outstanding charges, such as a cleanup order.

Be sure to choose a lawyer who is fully licensed, specializes in real estate law and works in the region where you are buying.

It may be a good idea to choose one who frequently works with firsttime buyers and is able to clarify contracts in plain language.

Be sure you know the costs involved. A lawyer’s fee can range from $500 to $2,000 plus HST. Other charges include registering a mortgage, land transfer taxes, title searches, plus out-of-pocket expenses such as fees for a courier service.

If your friends and family can’t provide a reference, you can find a lawyer through a local law association.

A property inspector is next on your list.

These professionals point out needed improvements and safety concerns before you make an offer.

They will provide you with a detailed report about the home’s condition, including its foundation, roof, heating system, insulation and more.

If you’re purchasing a condo, the inspector will examine the structural integrity of your unit, the common areas and the building itself.

This report can help you determine the home’s worth and help you negotiate a better price.
Home inspectors are not licensed in Canada. Seek out individuals with accredited training and who belong to industry associations. A real estate agent can often help source a reputable inspector.

Property inspectors may charge a percentage of the home’s purchase price or they may charge a flat fee based on the size and age of the house.

Next up is the home appraiser. Essentially, this person ensures the value of the home is in line with its purchase price.

This person will compare sales in the neighbourhood and reveal situations that could affect the property’s value.

It may be a good idea to seek out an independent appraisal before you make an offer. Costs run between $300 and $500 depending on the size of the home.

A mortgage lender may have asked for a certificate of location. If the seller doesn’t have one or if it has not been updated in the last five years, you will need to purchase one. You do this through a land surveyor.

A land survey can cost a few hundred to a few thousand dollars, depending on the scope of the project and size of the land.

The last person you may need on your team is an insurance professional, as you can’t get a mortgage without property insurance.

Premiums range in price and largely depend on the cost to replace your home.

Your lender may offer this kind of insurance. Ask them about bundles or package deals.

It’s important to note that property insurance differs from mortgage default insurance.

If your down payment is less than 20 per cent of the purchase price, you’ll need this type of insurance too.

 

Posted on Saturday, September 14, 2013 at 01:31PM by Registered CommenterElaine in | CommentsPost a Comment | References1 Reference

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