Vernon Real Estate – Blog & News

Subject to Sale Offers

Posted by admin on June 28, 2011 | No Comments

 When selling, have you ever wondered why you should or should not consider offers which are subject to the sale of a Buyer’s property?
 Many possible factors can influence your decision.  At the top of the list would be to find out if the Buyer will accept you adding a “time clause.” A time clause allows the seller to keep their property on the market.  If the seller receives another acceptable offer then the Seller notifies the first buyer (through their Realtor®) that they have so many hours to remove any and all conditions from their offer or step back and let the second Buyer proceed to buy the property.  The number of hours for notice is set at the time the purchase price, possession etc are negotiated.  Sellers should be aware that the higher the number of hours, the more of a deterrent it is to any other buyer.  Commonly 24 to 72 hour periods are used.
 In a time clause, buyers sometimes ask to exclude weekends, or at least Sundays and statutory holidays from the calculation of time.  Sellers need to be cautious about such exclusions. This can directly affect out of town buyers who come to the area to look on weekends.  If that buyer must make their choice, or even prefer to make their choice on the concerned weekend, they may be put off by the existence of a time clause.  The shorter the time clause, the less effect it has on the saleability of the property.
 If you are a buyer and you have made your offer subject to the sale of your current home, it is best you decide early if you would actually finance the purchase of you new home, rather than wait to sell your existing home.  Even if you only think you might wish to bridge/interim finance then go see your banker or mortgage broker as soon as you sign the purchase contract.  Don’t wait until a second buyer comes along and triggers the time clause.  You may find your banker needs more time to process your loan application than the time clause allows.  Better to be safe than sorry.
 As a seller, another question you may have is trying to assess if there would be fewer showings, if you have accepted an offer to sell that is subject to the sale of the Buyers home.  The answer is that it doesn’t change the number of showings substantially.  Realtors® accept that “subject to sale” seldom means they will not be able to bump the first offer, and they are therefore usually happy to show the property.  Of course the shorter the time clause, the less the effect it has on showings.
 Sellers, please know that your Realtor® is not required to notify the Multiple Listing Service that a subject deal is pending.  In the case of “subject to sale” it is doubtful your Realtor® would report the sale and it is your right to ask your Realtor®  not to.  Your Realtor®  will have to tell Realtors® who show your property of the existence of a time clause; however.  Once the Realtors® get the details, they usually do continue efforts to show the property.
 All in all, I think “subject to the sale” offers can be managed to not have too much negative effect on the Sellers position.

Jane Field works with RE/MAX Vernon.  To suggest topics for future articles or to ask Jane questions, email her at jane@vernonrealestate.ca or call 250.503.3755. 

Downsizing

Posted by admin on May 31, 2011 | No Comments

 Downsizing is a popular trend.  This type of consumer forms a large part of our current pool of buyers.
 Most downsizers don’t choose a smaller house, but rather they choose to go to apartment condos or townhouses.  Part of the joy of downsizing is the joy of no longer being a slave to yard work.  Yard work is just fine if you have physical health and you enjoy the gardening and upkeep as a hobby.  Somehow though, most empty nesters call it work and look to other activities to fill their leisure time.  They choose golf, camp, boat or do any number of other activities that potentially conflict with maintaining their own lawns and gardens.
 Deciding on what type of real estate the downsizer will choose can be a multi-faceted question.
 The first basic decision is between apartment-style or townhouse style.  In an apartment you generally have more privacy.  Your neighbours don’t see your comings and goings.  Usually they don’t even know if you are at home.  You enjoy lower heat bills in most apartments and good views are easier to come by.  However, the amount of daylight in units with only one face to the sunlight can be an issue.  Storage can be a factor.  Many apartments have both a utility room and a storage locker, but not always.  Secure underground parking is commonly available.  The majority are in downtown locations and so one can benefit by using one’s car less or even not at all.
 Adult community townhomes offer different benefits.  Firstly, you have a front door and back door and no elevators.  So, it feels like a house.  You usually have the use of a rear green space.  Sometimes one can find green space in both front and rear yards, as in the case of detached bare land strata developments.  Your covered parking is commonly attached in most cases.  That saves the trips with the grocery cart from the parkade that apartment dwellers experience.  Adult communities are generally safer than regular communities but apartments are safer yet.  Access is more difficult for thieves and so on.
 The transition for a homeowner from a house to a townhouse is easier.  It is not such a stark change.  Many adult community townhomes feel almost exactly like homes on their own lots.
 You can see there is diversity in the benefits and the differences.  I recommend that if you are downsizing, you look at both types of properties.  You will soon know which type feels the most like home to you.

To suggest topics for future articles or to ask Jane questions, email her at jane@vernonrealestate.ca or call 250.503.3755.  Previous articles published in the Morning Star appear on Jane’s website – www.vernonrealestate.ca

Importance of Deposits

Posted by admin on April 28, 2011 | No Comments

 When making an offer to purchase, it is a good idea to show your sincerity by offering as good a deposit as possible. Sellers look most favorably at offers that give them peace of mind. 
 Every aspect of an offer effects the seller. For instance, if your offer is subject to financing the seller is aware that they cannot be sure your offer will become firm. The same thing applies if you have made your offer “subject to the sale of your present home”. Again, your offer is not a “sure thing” to the seller. All conditions have some effect on the confidence of the seller.  The more confident you can make the seller, the more favorably the seller looks at your offer. Deposits are a vital part of this picture.
  (I am not suggesting for even a minute that you should refrain from putting your necessary conditions on your offers. You absolutely need the protection these clauses provide. i.e. subject to home inspection, financing, sale of home etc.)
  If you tender a poor deposit , the seller is less assured that they can rely on you. Alternately, if you offer a generous deposit, the seller knows you mean business.
 Remember to, that most sellers will become buyers themselves, as soon as they accomplish a sale on their present home. If a sturdy deposit is part of the contract of sale on their existing home, they can go forward to buy, having the necessary faith that nothing is likely to happen to their sale.
 In our area, deposits are sometimes tendered in two parts.  A small amount of perhaps only $1000 at the time of the offer, and then significantly more, often $9000 to $20,000, when you remove your conditions and make your offer firm and binding.  This practice works quite well as it keeps the buyer from surrendering savings account interest or avoiding borrowing charges until and unless they are actually going ahead with their purchase.  Deposits are often even larger on more expensive properties.
  Your deposit is not an added expense. Rather it forms part of your purchase price and it goes towards the monies you will need to complete the transaction.
 Deposits are not paid to the seller until the property actually goes into the buyers’ name. Instead, they are typically held in trust by the buyer’s real estate company. In private sales, notaries or lawyers hold the deposit monies in trust.
 In the United States, they call deposits “Earnest Money”.  That pretty much says it all, does it not?

Jane Field works with RE/MAX Vernon.  To suggest topics for future articles or to ask Jane questions, email her at jane@vernonrealestate.ca or call 250.503.3755.  Previous articles published in the Morning Star appear on Jane’s website – www.vernonrealestate.ca

2287 Catt Avenue, Lumby BC.

Posted by admin on February 22, 2011 | No Comments

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What’s up for 2011?

Posted by admin on February 22, 2011 | No Comments

This truly is a multi-faceted question. The MLS system still maintains a large inventory.  The North Okanagan residential  listings, combining both single family homes and strata homes is already numbering close to 1300.  Many more listings are expected to arrive on the marketplace as Winter gives way to Spring.  More listings means the laws of  supply and demand are activated.  When sellers outnumber buyers, buyers maintain the stronger position when making offers.  As long as that situation is present, downward pressure on prices continues and prices inch downward.

A change in this pattern may be just around the corner. I am pleased to be able to say that there appears to be a lot more interest from buyers. I am getting a considerably higher number of inquiries and more showing appointments are being booked on my listings. I assume this is true for many other Realtors®. That is certainly a welcome market indicator after several months of a less than exciting market.
Buyers are likely back on the scene because it is simply a good time to buy.  Prices have been corrected and our record low interest rates have moved only very slightly upward on some of the fixed rate mortgages. According to many reports that cross my desk, the economy is showing renewed strength. The bond markets will reflect that and the mortgage interest rates will be raised, accordingly.
One has to think this is an excellent time to buy. If enough buyers make their move and make a purchase soon, that will curb the decrease in prices. So, as long as the economy continues to recuperate, the possibility of a return to increasing prices is feasible.  Although, I can see it will take a while to consume the excessive number of listings.  I would just be pleased to see the prices stabilize, never mind rise.
My hope is that this renewed interest from buyers is the beginnings of a return of a healthy, balanced market.

Originally published in the Vernon Morning Star Feb. 20, 2011.   To suggest topics for future articles or to ask Jane questions, email her at jane@vernonrealestate.ca or call 250.503.3755.  Previous articles published in the Morning Star appear on Jane’s website – www.vernonrealestate.ca

Purpose of Deposits

Posted by admin on February 9, 2011 | No Comments

It is customary to tender a deposit when making an offer to buy real estate. Usually within 24 hours of acceptance of the offer, all or part of the deposit is collected from the buyer and placed in a trust account. Most often it is the real estate company who is representing the buyer who places the buyers’ deposit into their trust account. Occasionally, there are some special circumstances and the deposit is placed in the buyers or sellers lawyers trust account. In all scenarios, the buyer can only take their deposit back with the written permission of the seller.

But, why is the deposit important? It used to be that it was necessary to show what is legally called “consideration.” Even the sum of $1.00 was considered necessary to make a contract binding. This has not been the case for many years. Consideration has evolved to be simply that the parties are both receiving some benefit by entering into the contract. Those benefits can be defined by the sellers’ expectation of receiving money and the buyers’ expectation of receiving ownership of the property.

So “consideration” is not the main point of the deposit.

The deposit is intended to demonstrate the good faith of the buyer. It is felt that buyers would not tender deposits unless they are seriously interested in contracting to buy the property. Americans call deposit monies “earnest monies” – very appropriate words. That is exactly why we care about deposits and about the amount of deposits. The higher the deposit, the more peace of mind the seller has.

The deposit is normally returned to the buyer if they are unable to remove their subject clauses. Examples of this would be subject to financing or subject to satisfactory home inspection. But when in those cases, both the sellers and buyers signatures are required when releasing deposit monies back to the buyer. In the case of the seller refusing to sign the deposit release form, the money is forthwith paid into court and a judge will decide the fate of the deposit monies. This is extremely rare. As long as the buyer has made sincere and reasonable efforts to remove their conditions, there are typically very few problems with the return of deposits.

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Back Up Offers

Posted by admin on February 1, 2011 | No Comments

 Back up offers are offers that are accepted by a Seller, after they have already accepted an earlier offer.  The back up offer is accepted “Subject to the Seller ceasing to be obligated in any way under the previously accepted Contract of Purchase and Sale on the subject property by a certain date”.   Realtors® are very careful in assisting the Sellers they are representing so as to prevent the Seller from inadvertently being under contract to sell the same property to two different Buyers.
 An interesting question arises when the Seller and the first Buyer wish to amend the first contract.  Does the second Buyer have a right to protest that any change to the first contract constitutes a collapse of that first contract?  The answer is “that depends”. 
In a recent Provincial Court of British Columbia decision the court concluded that amending non fundamental terms of the contract did not cause the first contract to collapse.  In that particular case only the completion dates and deposit amount were being changed. 
What if something as basic as the price were changed?  The court ruling might well have had a different outcome.
Bottom line is that if you are a Buyer in backup position and you become aware of changes on the first contract, get legal advice.  If you really want to be able to buy that property you’ll need your lawyers’ opinion as to whether or not you can challenge that amended first contract.

Originally published in the Vernon Morning Star – July, 2009.      To suggest topics for future articles or to ask  questions, email Jane at jane@vernonrealestate.ca or call 250.503.3755.

HST and Real Estate

Posted by admin on February 1, 2011 | No Comments

 It will take more than one of these articles to explain the details of the anticipated new Harmonized Sales Tax.  This week I’ll give you the basic information I have received so far on this topic.
 Firstly, the HST will not apply to sales of used residential homes.  In general, HST on real estate will be applied in the same situations as the GST is applicable currently.
 The HST is to take effect July 1, 2010.  If you entered into a contract to buy a new home on or before Nov. 18, 2009 and you take ownership or possession after July 1, 2010 you will pay GST, not HST.  If you enter into a contract to buy a new home after Nov. 15, 2009 and take over ownership prior to July 1, 2010 you will pay GST, not HST.  If you enter into a purchase contract on a new home after Nov. 18, 2009 and take over ownership after July 1, 2010 you will pay the HST and you will probably be eligible for the New Housing Rebate (assuming it is your principle residence).
 Why is November 18, 2009 an important date?  The answer is that was the day the government announced their HST proposal.
 Under the current GST rules, the New Housing Rebate trailed off the zero at a purchase price of $450,000.  In the new HST proposal that limit will be raised to $525,000.  The total New Housing Rebate on a home bought at $525,000 is eligible for a rebate of $26,250.  That is the maximum rebate, and home purchases costing more than $525,000 will still only be able to get the rebate of $26,250.  If you buy a home for less than $525,000 the rebate is less.  For example, on a purchase price of $450,000 the rebate drops to $23,150.  Of course, the gross amount of the tax, being based on the purchase price, would also be less.
 The formula is as follows.  Buyers of new homes will be eligible for a rebate of 71.43% of the provincial portion (7% of the HST’s 12%) of the HST paid on a new home up to a maximum rebate of $26,250.  I can see most new home buyers will be well advised to go over the tax calculation with their accountants prior to solidifying their purchase contract.
 More information is available at www.fin.gov.bc.ca/rev.htm

Originally published in the Vernon Morning Star – April 6, 2010.      To suggest topics for future articles or to ask  questions, email Jane at jane@vernonrealestate.ca or call 250.503.3755.

The Time to Buy is Now

Posted by admin on February 1, 2011 | No Comments

 If you are holding back and still paying rent, this is the time to “move on”.  Five percent down payments are still allowed.  Interest rates are at an historic low.  Prices in our area have not yet started to rise.  Selection of homes is good, although I do see early signs of lack of availability in certain price ranges and certain types of housing.  That factor is usually the first sign that price increases could soon follow.  Canada’s economy is showing steady signs of growth.  In my opinion, this is an ideal time to buy real estate.
 If you are buying your first home, you can withdraw up to $25,000 from your RRSP to use as a down payment.  That amount is equal to 5 percent down on a $500,000 purchase.  In our area $500,000 buys a lot of house! Probably more than you need.  You can buy a good home for much less and therefore you could elect to take less out of your RRSP.  Of course, you will have to pay back your RRSP over time to use this program.  If you buy a home at $425,000 or less and it is your first home, you are not required to pay the property transfer tax.  Considering that tax is 1% on the first $200,000 and 2% on the balance, it means a considerable saving to the first time home buyer.
 Some lenders will even provide you with the down payment.  In return they loan to you at the posted rate (today that is 5.25%) or a little more and lock you into your mortgage for 5, sometimes 7 years.  Prices don’t need to rise much at all, over those 5 to 7 years, to more than pay you back.  Paying rent for that same time period is simply money gone with nothing to show for it.
 This would be the time to either call the banker who knows you best or your chosen Realtor®.  Your Realtor® can provide a list of lenders and/or mortgage brokers whom they know to be good at what they do.
 This spring could well be a narrow window of opportunity.  It may be best to act now, rather than hesitate and later wish you had.

Originally published in the Vernon Morning Star -  March 28, 2010.      To suggest topics for future articles or to ask  questions, email Jane at jane@vernonrealestate.ca or call 250.503.3755.

Changes to Qualification

Posted by admin on February 1, 2011 | No Comments

 Last month Ottawa took some gentle steps towards less liberal lending policies.  I think there has been more made of this than there needs to be.  What is billed as major changes by some media is more like gentle tweaking.
 Before I elaborate on these changes, I’d like to dispel a rumor.  Buyers including first time buyers, can still purchase with 5 per cent down. 
The first change is that the lenders must now calculate the buyer’s qualification formula based on the posted five year rate.  For any of you out there placing mortgages over the last few years, you are probably aware that lenders negotiate their rates, they feature “specials”, or they give lower interest rates to especially good clients.  The posted rate is the non-discounted rate and it can be found posted weekly on the Government website www.bankofcanada.ca/en/rates/interest-look
 To qualify for a mortgage, lenders take 32%, depending on their policy, of one twelfth of the borrowers wage before income tax.  That gives a monthly figure that the borrower is allowed to use for principal, interest, property taxes on a mortgage and heat costs.  The lender then calculates to see how many borrowed dollars that monthly amount can service.  With the change, the lender must make this calculation using the posted rate of interest, even if the buyer is borrowing at a lower rate of interest.  The result is there is a fairly small difference in the amount buyers may qualify to borrow.  F.Y.I., the shorter the term, the lower the interest rate usually is.
 The second change is a tightening on equity take-out refinances.  Homeowners were borrowing to as much as 95% of the value of their existing home.  As an example, an owner has owned their home for enough years that they only owe 60% of its CMV (Current Market Value).  Previously they could increase their existing mortgage all the way up to 95% of the CMV and use those dollars as a down payment on a revenue or vacation home, or a new car, or any way they so chose.  Ottawa has intervened and said that they can no longer refinance to 95% of CMV.  Now a borrower can only go to 90% of CMV.  So the borrowing power for a person in a $400,000 home is reduced by about $20,000.
 The third change applies to non owner occupied homes. Lenders will now require 20-25% down and amortization periods no longer than 30 years.  This I think, will be barely noticed by this type of buyers.  The reason being that most buyers buying second homes or investment homes borrowed the 20-25% down payment against their primary residences in order to avoid paying costly high ratio fees to CMHC.  By putting 20-25% down, secured by their existing home, they are able to use what is called “conventional” financing and no CMHC fees are payable in this circumstance.
 So all in all these policies won’t change anything radically.  Ottawa is just trying to avoid the loose lending practices that got the United States in such hot water.

Originally published in the Vernon Morning Star -  March 14, 2010.      To suggest topics for future articles or to ask  questions, email Jane at jane@vernonrealestate.ca or call 250.503.3755.