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41% of homebuyers would go over budget by $25K for the perfect home

Mon, 08 Jun by Pauline Relkey

I remember when I first started in real estate in 1991, someone told me that buyers would, on the average spend $15,000 more than they anticipated on a home purchase.  Back then, I thought that was a lot of money to extend your budget for house buying, but I have seen it happen more and more.  We usually have a picture in our mind of what we want, including price, and that can easily adjust and change as we start our search.  The more flexible you can be when looking to buy a home, the more choices you will have.  There are ‘needs’ in buying a home, that shouldn’t be compromised (for instance, not spending more than your maximum qualified price, number of bedrooms, location, garage) but the’wants’ (ensuite, fireplace, certain flooring or kitchen, etc) can be changed later.

In this recent study, although 80% of home buyers consider price to be the most important consideration of a purchase, 41% were willing to go above budget by an average of $25K for the perfect home.

There are many factors to consider when buying a home. And, although 80 percent of home buyers consider price to be the most important consideration of a home purchase, 41 percent of home buyers also are willing to go above budget by an average of $25,000 for the perfect home.

1,794 homeowners were surveyed between February 28 and March 6, 2020 who had all purchased a home within the last five years to learn what they desired most in a home. Survey respondents were an average of 38 years old, and 63 percent were married, 22 percent were single, 8 percent were engaged, 6 percent were divorced and 1 percent were widowed.

After home price, location, neighborhood, the size of the home, and the home’s layout were the most important factors in making the decision to buy.

Buyers spend an average of 4 months conducting a home search and view an average of 19 properties before deciding on the one. Remember this includes the online searching and viewing.

Most home buyers use a real estate agent to help them with their home search, with 51 percent opting to enlist an agent’s aid. Thirty-eight percent of home buyers shop for their home online while 11 percent find their home just by passing it on the street.

In terms of home features, buyers are most concerned with the home’s layout, with 71 percent of survey respondents reporting that layout was the most important home feature. Storage space (59 percent of respondents), an outdoor living space (57 percent), a large kitchen (53 percent) and having an updated kitchen (53 percent) were also important features for home buyers.

While most of us would like to buy our perfect home, it’s not always feasible. One in three survey respondents reported compromising on some part of their home purchase, usually because of budgetary restrictions.

Most often, home buyers opted to compromise on layout or the age of the home or repairs needed, with 29 percent of survey respondents compromising on these features. However, 26 percent of buyers compromised on home size, 23 percent compromised on having an updated kitchen, and 19 percent compromised on having updated bathrooms.

Out of the one in three survey respondents who reported backing out of buying a home, most did so because something was found during the home inspection (34 percent) or because they changed their mind about the home (29 percent).

Over half of home buyers stated that the home’s age or necessary repairs were the biggest deal breakers, while others said home size (40 percent), neighborhood (37 percent) and school system (20 percent) were their biggest deal breakers when considering whether or not to buy a home.

 

More than half of home buyers likely to buy a home within next year

Mon, 08 Jun by Pauline Relkey

I know. I can’t believe it. I just read this in a report from Inman, a real estate news company for realtors and brokers. They said 53% of home buyers say they now plan to buy a home within the next year as a result of factors surrounding the pandemic, according to online lending marketplace LendingTree.

The corona virus pandemic has significantly altered the home buying process, and now there’s evidence that it’s also impacted how quickly buyers want to seal the deal.

More than half of home buyers (53%) say they now plan to buy a home within the next year as a result of factors surrounding the pandemic, according to a new survey conducted by online lending marketplace LendingTree.

Between April 24 and April 30, LendingTree enlisted Qualtrics to survey 1,006 prospective homebuyers with a sample base proportioned in line with the general population.

The pandemic has especially spurred first-time home buyers into action with 73 percent now planning to buy a home within the next year. Likewise, millennials are also now more motivated to buy in a timely fashion, with 66 percent aiming to buy within the next 12 months.
Most buyers cite wanting to take advantage of current low mortgage rates as a specific reason for wanting to buy soon, with 67 percent inspired by this reason. Most other respondents said they plan to buy in the next year because they’ve been able to save more money as a result of reduced spending during quarantine (32 percent) and because home prices have dropped (30 percent) — a factor that can’t necessarily be applied to every region of the country right now.

The coronavirus crisis has moved 44 percent of home buyers to buy a less expensive home than they had originally planned, compared to 21 percent who said the pandemic has made them want to purchase a more expensive home.
LendingTree’s survey also found that the vast majority of home buyers have either already toured a home virtually (61 percent) or plan to do so (33 percent). However, only 3 in 10 buyers said they would buy a home without doing a walk-through in-person. Still, among first-time home buyers, 53 percent said they would buy a home without seeing it in-person. Across gender lines, only 16 percent of women said they’d buy a home without seeing it in-person in contrast to the 43 percent of men who would buy a home sight unseen.

Perhaps as a result of lenders tightening minimum requirements for lending, 44 percent of home buyers are more concerned about qualifying for a mortgage in the wake of the pandemic. In particular, first-time buyers (58 percent) and millennials (52 percent) are especially worried about qualifying.

Out of those buyers who said they were less likely to buy a home within the next year because of the pandemic, 70 percent said the current economic uncertainty was their main reason for waiting things out. The next most frequently cited reasons for waiting to buy included the inability to see a home in-person (42 percent) and a loss of income as a result of the pandemic (38 percent).

CMHC’s latest survey

Mon, 20 Jan by Pauline Relkey

The 2019 findings are in.

Canadians across the country were asked about their thoughts, attitudes and behaviours about and the process of buying a home in the annual Mortgage Consumer Survey and this is what they said.

Affordability continues to be the most important factor when it comes to buying a home.

One of the biggest stories of 2019 was the dramatic decrease in the number of home buyers who spent the maximum amount they could afford. The cost of becoming a homeowner is at the top of Canadians’ “must-haves”:

Price/affordability (80%)
Number of rooms (73%)
Proximity to public transit (67%)

The majority of Canadians are aware of the mortgage qualification rules (“stress test”). In fact, 65% of buyers said they believe the new mortgage qualification “stress test” will keep more Canadians from taking on a mortgage they can’t afford.

Despite debt levels, consumer optimism is on the rise.
Nearly one third of home buyers don’t expect interest rates to rise in the next year – up from just 20% in 2018. More than 8 out of 10 home buyers also feel confident that buying a home is a sound long-term investment.

The majority of home buyers have a positive attitude towards the idea of buying a home. Close to 9 out of 10 buyers were “happy” or “excited” about buying a home. However, more than one third also said that buying a home made them feel “stressed.”

Most home buyers are satisfied with their experience with their lender or mortgage broker.

The top reason for selecting a lender or broker is the interest rate offered. Despite high satisfaction levels, only less than half of home buyers received a follow-up call from their mortgage professional.  Hmmm a lesson to be learned. Always stay in touch with clients!

First Time Home Buyer Incentive Program

Mon, 20 Jan by Pauline Relkey

Have you heard about this program that just started in September 2019?

First time home buyers who have 5% down payment can apply for this program and get another 5 or 10% as a shared equity mortgage. Existing homes = 5% and newly constructed home = 5 or 10%.

This helps first time home buyers to reduce their monthly mortgage payment without increasing the amount that they must save for a down payment. No on-going repayments are required, this incentive is not interest bearing and you can repay the incentive any time without a penalty. This shared equity mortgage means that the federal government shares in both the upside and downside of the property value.

Your total income must be $120,000 per year or less. The property must be located in Canada and suitable and available for full time year round occupancy.

The homeowner repays the incentive amount after 25 years or when the property is sold, whichever is earlier. The property value determines what you get and what you pay back. Example if you are buying a $300,000 resale property and have your 5% down payment of $15,000 and you qualify for this incentive, you can get another $15,000 from the federal government to put towards your purchase. When you go to repay this amount, it will be based on the value of your property at that time, either in 25 years or earlier if you are selling the property. If the property is then worth $350,000 you will pay back 5% of the amount ($17,500). If the value is down and the property is worth $250,000 you will pay back 5% ($12,500).

There are qualifying factors to this program. Give me a call if you or someone you know could take advantage of this program.

Why Put Money into a House You are Leaving?

Mon, 08 Apr by Pauline Relkey

I received some great info from a home stager that I work with, Dianne Thompson with Simply Stunning Designs.

“I am selling! Why would I put money into a house I am leaving?” I would say this is the most common question professional stagers field every day! On the surface, you can certainly understand why the question is being asked. There are many reasons to support the process of staging a property before showing it to the public.

Who Is Buying?
Whether you know it or believe it, it is true; the buyer will determine if, when, and for what price your house will sell. You can have your hopes, wants and dreams but ultimately the power lies with the buyer. A great staging professional is knowledgeable about which demographic is most likely to purchase your property and will make recommendations to improve condition and presentation. The largest property buying demographic today is the millennials. The younger members of this generation may still favour renting; however, once they hit their thirties and begin to settle down, they want their version of a great house.

What they want is move-in ready. Why? Pressing student debt is already a worry, so they scrape together as much as possible for the down payment and simply don’t have extra cash to invest in fixing up the things you couldn’t get to do. The other factor to consider is this group of people do not want to be DIY Weekend Warriors; they want to have fun on the weekends! Also, they don’t have the skills to do the work and they aren’t interested in learning how to do it.

You many have finished with this property, but to them it is their new home. They want it to look and feel fresh and new. In fact, research shows they want the feel of new so much; most of them are willing to pay more money to get it. What that means to you is this: If you choose to bring your property onto the market “as-is,” you risk:
a) being on the market longer than you want or
b) having offers for less than you expect.

Why Stage?
Staging is a service for selling property that has measurable value. Whether the market is a buyers market, sellers market or a balanced market, staging is a powerful marketing tool that should never be discounted because of the outlay of money. If you were selling your vehicle, wouldn’t you clean, fix and polish it to make it feel new? Why would your house be any different? Especially when the return of investment comes at a much greater margin.

The largest investment most people ever make is in real estate. Sellers want the most money possible in the shortest time for no effort and no money. But, that’s a pipe dream. 97% of prospective buyers look on the internet first, which means you need lots of great photos to capture interest and get on the must-see list. Don’t play with your investment! When you are competing with new houses, your house must look and feel new too. Failure to meet this expectation will just have millenials favouring other properties.

   

The Difference Between a Banker and a Broker

Tue, 26 Feb by Pauline Relkey
A mortgage banker works for a bank or similar lending institution which actually provides you the money for the mortgage. A mortgage broker works with many lending institutions to shop for a loan for a specific individual. The broker is a middleman between you and the lender.

The difference between a banker and a broker comes down to the products each can offer and where their allegiances lie.

While using a mortgage broker seems like it would save you money because they have access to many lenders and programs, brokers are paid commissions by the mortgage company and some lenders pay more than others or offer perks. When working with a Bank, that loan officer only has access to their own mortgage  programs and mortgage rates. A banker is paid by the bank, to make the bank money, by selling you services, while a mortgage broker is paid by the lender they choose for your mortgage provider.

Either way has its pros and cons.

Both have access to various mortgages. The broker might have more companies to work with, but banks and credit unions are becoming more flexible with their products in order to compete.  You still need to shop around. Word of mouth from a trusted friend or family or from your realtor is a good way to start. Friends and family do mean well, but as a Realtor I can tell you that I have come into contact with many bankers and mortgage brokers over the last 28 years and always try to find you the best match.

You will likely have to meet with either a mortgage banker or mortgage broker, as they need some basic info about you and your income and expenses.  You typically don’t pay either for their research or time. When you choose your mortgage and get it in place, either will then be paid.

You will still negotiate on terms and rates with either.

Renewal Time?

If you have a mortgage up for renewal, or you would like to refinance, it is always in your best interest to check around with a mortgage broker and/or with the lender who currently holds your mortgage. Just because they were the best option previously, that doesn’t mean they will be the best option in the future.

If you or someone you know is considering a new mortgage or renewal, let’s connect to get you the best mortgage options available!

Tips for the First-Time Home Buyer

Wed, 25 Apr by Pauline Relkey

When venturing into the world of home ownership, first-time buyers often find themselves having to make important, fast decisions in what feels like a surreal situation — after all, it might have only been a few weeks since owning a home seemed more like a far-off daydream than an immediate reality. A few common sense tips will help you navigate these unfamiliar landscapes as you move towards one of the biggest financial decisions of your life.

1. Get pre-approved
Though a pre-approval isn’t a guarantee that you’ll get a mortgage when you’re find a property, having one can give you a firm grasp on what you can afford before you start looking. A pre-approval from your bank or lender will save you time by narrowing your search to a more precise selection of homes, and this, in turn, can protect you from the all-too-common disappointment that follows setting your heart on a house you can’t afford.

2. Don’t expect your standards of living to change
It’s bound to happen: you see a house that maxes out your budget, but you imagine you can make it work by cutting out things like morning coffees, cellular data and cable TV. Remember, ‘roughing it’ for the sake of your house quickly loses its charm, and you’ll soon regret the lack of wiggle room for things like new furniture, redecorating, or unexpected repairs. Don’t regret your first home — avoid becoming ‘house poor’ by staying below the upper limit of what your bank is willing to lend you.

3. Make a list and check it as many times as it takes
Each property you consider will have its own unique combination of pros and cons, and going through them can feel a little like comparing apples to oranges. Don’t expect to stay clear-headed when the house with the poor walking score has the kitchen of your dreams; instead, stay on track by building a list of “must haves” and “nice to haves.” Though your list might evolve over time (especially if the “must haves” are rare for your price range), having a set of self-imposed guidelines can keep your search on course when you’re feeling overwhelmed by options.

4. Don’t confuse “first home” with “forever home”
Most first-time buyers start out a little starry-eyed, imagining that new home will be stylish, spacious, efficient … basically, everything they’ve been dreaming of. In reality, being able to afford a house that has everything you want is pretty rare in the first go-round, which can make you feel so discouraged you start closing yourself off to the available options. Remember, your ‘starter home’ doesn’t have to meet all the criteria of your ‘dream home,’ and the equity you’ll build for the next few years will get you closer to your goal.

With so much new information to absorb, steps to take, and decisions to make, buying a first home can feel like a rollercoaster ride. It’s important not to lose your head throughout all of it. Taking a few steps to keep your expectations rooted firmly in reality can help you glide through the process and feel confident in your final decision.

8 Things to Consider Before Selling Your Home

Mon, 26 Feb by Pauline Relkey

As winter moves closer to the finish line, the annual spring real estate market heats up. There are many things to consider before you put your home on the market – here are 8 of the more critical ones.

1. Budget

Know what you can afford so that you don’t stretch yourself thin. Talk to your mortgage person.

2. Know the costs.

There are plenty of expenses when selling your home. Some are straightforward such as renovations and paying for movers. Others may not be as obvious – nor who pays for them – such as land transfer taxes (buyer pays), real estate agent commissions (seller), mortgage insurance (buyer), legal fees, bank fees and possibly capital gains taxes.

3. Find out your home’s worth.

Knowing how much you’re likely to get for your home can dictate how much you may be able to afford when buying another house. Do your research by checking what similar homes have sold for in your neighbourhood. The best way to do this is to meet with your Realtor who will be listing your house for sale.

4. Choose a real estate agent.

You can choose to sell your home yourself to save the commission fees – but you also incur all the responsibility for writing legal contracts. Of course, I suggest that you choose a trusted real estate agent who knows your area and by asking for referrals. If your Realtor helped you find your present property and has stayed in touch with you, give her/him a call.

5. Decide when to sell.

Do you sell during the traditional peak markets of spring and summer or or off-season? Selling during the peak means more buyers and possible bidding wars, while selling off season means fewer homes competing with yours. As the saying goes, 6 of one and half a dozen of the other.

6. Add visual appeal.

Creating curb appeal is an obvious benefit, but don’t forget to freshen up the interior as well. Make any minor renovations, declutter and consider staging, because professionally staged homes typically sell faster and for more.

7. Get a home inspection done.

While buyers will probably get their own inspections done, having one ready says that you’re confident in your home and have nothing to hide because you have taken care of what work is needed – it provides peace of mind for everyone.

8. Coordinate closing dates.

Being able to move from one home to another on the same day can be hectic and cause you stress. Hopefully you can take possession of your new place before you have to be out of your present one. If not, you may have to either rent another home short-term, put belongings in storage and generally cause unnecessary upheaval in your life. Talk to your bank about bridge financing.

How to Use Prepayments to Be Mortgage Free, Faster

Wed, 14 Jun by Pauline Relkey

Using your mortgage prepayment options can drastically reduce the total amount you spend on your mortgage and shorten the time it takes to pay it down. If you follow these 3 steps, you can be mortgage free sooner than ever!

1. Know your prepayment privileges
Most mortgages have allowances for you to prepay down your mortgage faster. The standard prepayment amount allowed per payment can vary depending on your mortgage provider.

Your mortgage provider may be able to increase and decrease your prepayment privilege at any time throughout the life of your mortgage.

This means that if any life event occurs and you need to reduce your payment to the minimum, you might be able to. Most mortgage providers allow this free of charge, but with some providers you can only change your payments a set number of times throughout the year.

2. Increase your payments
Anytime you increase your payments, the excess that you pay per payment goes directly onto the principal portion of your mortgage. This is a great way to drastically reduce the interest you will have to pay over the term of your mortgage.

Typical prepayments allow you to add between 10% to 20% of your payment amount to each payment, depending on your lender. Some lenders also allow the use of “double up payments” which let you double each payment!

Here’s an example of prepayments being used on a typical mortgage:

All calculations are based off of a $400,000 mortgage with a 5 year term and 25 year amortization at a rate of 2.59% with monthly payments.

No Prepayments:
Monthly payments: $1,809.84
Principal paid over 5 year term: $60,836.51
Interest paid over 5 year term: $47,753.89
Mortgage amount remaining: $339,163.49
Years remaining on mortgage after 5 years: 20 Years

Adding a 15% Prepayment:
Monthly payments: $2,081.32
Principal paid over 5 year term: $78,201.00
Interest paid over 5 year term: $46,678.20
Mortgage amount remaining: $321,799.00
Years remaining on mortgage after 5 years: 15 years & 9 months

As you can see, the mortgage was reduced by $17,364.49 and you saved $1,075.69 in interest! The mortgage term was reduced by 9 years and 3 months in only 5 years!

3. Make a lump sum prepayment
Making a large payment can be a great option for paying down your mortgage, but may not be ideal for everyone. Lump sum payments help you reduce the amount of interest you will be required to pay on your mortgage. They can also be used to reduce your mortgage amount before selling your home and will reduce the penalty you will be required to pay.

Lump sum payments are usually between 10% – 25% of the mortgage total. Typically, you can make a lump sum payment onto your mortgage once a year. Every mortgage provider has their own specific guidelines for how you can make a lump sum payment in a calendar year. Your provider may require you put down a minimum amount for a lump sum prepayment, or you may only be eligible for one on the anniversary date of your mortgage.

If you decide that prepayments are for you, you can achieve mortgage freedom sooner than ever!

Contact me today if you are looking for a mortgage person and I will be happy to connect you with a couple of great people I have worked with.

Canadian Real Estate Association meets with Federal Government

Fri, 17 Feb by Pauline Relkey

Submission to the House of Commons Standing Committee on Finance:
Canadian Real Estate Market and Homeownership
February 2017

Gary Simonsen
Chief Executive Officer

EXECUTIVE SUMMARY

Thank you, Mr. Chair. The Canadian Real Estate Association would like to thank the committee
for the opportunity to participate in the study on the Canadian Real Estate Market and Home
Ownership. CREA represents over 120,000 REALTORS® from across the country. As one of
Canada’s largest single-industry associations, we represent real estate brokers and agents, as well
as home buyers and property owners throughout the country.

Canada’s housing market is a key component of Canada’s overall economic stability and an
important generator of jobs and economic security for the middle-class. In 2016, each home sale
generated over $52,000 in spin-off spending. This translates to one job for every three home sale
transactions. In addition, resale housing transactions through the Multiple Listing Service
(MLS®) generated more than $28 billion in consumer spin-off spending and created more than
198,000 jobs in 2016.

Most Canadians see their home as a source of pride, satisfaction and accomplishment not to
mention a safe environment in which to raise their family and create happy memories. This is
why CREA has been advocating for the indexation and modernization of the Home Buyers’ Plan
(HBP), a program that allows Canadians to use their RRSP savings to purchase their first home.
We were pleased to see that the plan was included in multiple election platforms in 2015 and we
will continue to work with the government to ensure it remains a valuable program for all
Canadians.

As all real estate is local, it is important to note that the housing markets in and around Toronto
and Vancouver have different realities compared to elsewhere in Canada – the vast majority of
which are either well balanced or amply supplied. It is crucial to consider and reflect upon
different areas of the country when enacting policy that affects a wide swath of housing markets,
including places not targeted directly by the government’s recent regulatory measures.
Consumer demand in markets like Toronto and Vancouver is at an all-time high and there is a
significant shortage in housing supply. Various factors have caused an imbalance on the supply
and demand of homes which in turn drives up prices significantly. As this is a complex matter,
CREA is encouraged that the federal government created a working group comprised of federal
officials as well as provincial and municipal representatives. The three levels of government will
be able to focus on the challenges in each region and recognize the local reality for all markets.
While the provincial governments in Ontario and British Columbia have recently introduced
measures to assist first-time home buyers, the federal government has tightened national
mortgage rules, thereby lessening affordability for those seeking to enter the market. If the
federal government continues to tighten mortgage rules, will this force the provincial
governments to implement further programs to assist-first time-time homebuyers? CREA and its
REALTOR® urges all levels of government to continue to work together to reach a healthy,
competitive and stable housing market. We are prepared to share analysis of local housing
market trends and apply our knowledge and data to help the government policy makers at all
levels better understand how changes to housing market regulations may affect communities
across Canada.

Assistance for first-time homebuyers should be top-of-mind for all levels of government. Firsttime
homebuyers need support to overcome the obstacle of saving for a downpayment in order to
reach their homeownership dream. The plan’s purchasing power is steadily declining and has
become less valuable due to the increase in home prices. We recommend the plan be indexed to
inflation to preserve its purchasing power and continue to help first-time homebuyers attain
homeownership.

Easing affordability concerns is a key principle of the plan and Canadians should be able to
benefit from this program more than once. Canadians and their families who face sudden life
changes such as job relocation, the death of a spouse, a marital breakdown or the decision to
accommodate an elderly family member may need support to maintain homeownership.
Expanding the plan for Canadians to use their RRSPs as a zero-interest self-loan is a fiscally
responsible way to support families through a difficult period of change.rrsp

In the last eight years, the federal government has implemented six rounds of changes to tighten
the rules for new government-backed insured mortgages and contain risks in the housing market.
These measures have been implemented over a short period of time and their full impact has yet
to be determined. We recommend the government take a pause to fully evaluate the cumulative
impact of the changes before looking at implementing additional measures.

Thank you for your time, I would be pleased to answer any questions the Committee might have.

The data included on this website is deemed to be reliable, but is not guaranteed to be accurate by the Association of Saskatchewan REALTORS®. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.