Rob Vanovermeire - YOUR GUIDE TO PURCHASING A HOME

YOUR GUIDE TO PURCHASING A HOME

YOUR GUIDE TO PURCHASING A HOME SING A HOME

Rob Vanovermeire

Table Of Contents

How Real Estate Agents Help Home Buyers

Owning vs. Renting

Buyers' Needs and Desires

Real Estate Stories To Learn From

Searching for the Right Home

Buying a House: Dos and Don'ts

What to Know About Home Inspections/Condo Docs/Appraisals

Mortgage Financing

Getting to the Finish Line

Foreword Hi there! It’s nice to meet you. If you’ve received this book, it’s probably because you’re thinking about buying a home. And if you’re like most homebuyers, you may be nervous about the entire process. But that’s why we're here! Our job is to make your job as a buyer as easy and seamless as possible. Throughout our years of experience in the real estate industry, we’ve amassed insider knowledge to help home buyers get great deals on their home purchases. And now, you’ve got all of that information at your fingertips.

In this book, you’ll find:

• An overview of the buying process • How to determine your wants vs. needs in your next home • Information on securing a home loan • Common mistakes to avoid • A negotiation guide to save money on your purchase • And much, much more Sure, you can try to employ these strategies yourself, but you should know that it costs you absolutely nothing to hire us to help you find your next home. Yes, buying a home can be stressful, but with this book (and our help!), we can make the process as seamless as possible.

Rob Vanovermeire, Broker/Owner Coldwell Banker Mountain Central rob@robvanoteam.ca 403-870-8704 v

About Rob Vanovermeire Rob was raised in Edmonton Alberta with 4 siblings. As a child, Rob had aspirations of being self-employed. Never in a million years did he think he’d stumble into the real estate industry, but you can’t always predict where or when you’ll discover what you’re meant to do in life. Rob got into the real estate industry in 1999 when he realized how much he enjoyed helping people at a personal level. He set out to grow his business primarily on referral, so he knew he needed to provide a high level of skill. As his career advanced, Rob found his stride working with clients moving up to larger homes or downsizing. He’s considered an expert negotiator, with the ability to work with every personality type he comes in contact with. Throughout his career, Rob has earned numerous accolades, including:

• Rookie of the year his 1st year • Top 1% of Alberta Realtors • Real Estate Instructor for The Alberta Real Estate Association from 2005 to 2015 • Summit Award for Broker/Owner Achievement • Coldwell Banker International Presidents Circle • Master Certified Negotiation Expert • Condominium Specialist • Accredited Buyers and Seller Representative • Coldwell Banker Global Luxury Specialist

Rob has two daughters and two stepchildren & he lives in both vii

Calgary & Canmore with his wife Kathleen. In his free time, he enjoys rec hockey, downhill skiing, mountain biking, and hiking. Rob made a decision when he started in Real Estate that it would never be about him. His commitment has always been to put the needs of the clients he works with first above anything else. Feel free to ask for any references.

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CHAPTER 1 How Real Estat eal Estate Agents e Agents Help Home Buyers

I’ll come right out at the start and tell you I’m a real estate agent — proudly so! Nice to meet you! Even though I'm in the business of selling homes, I’ve never really referred to myself as a salesperson. My thinking is that I represent clients by providing accurate information they need to make a solid informed decision. If you've never purchased Real Estate before, agents that represent buyers are usually paid from the proceeds of the sale so, I’m not asking you to part with your money, Instead I’m giving you the benefits of experience and advice I have gleaned throughout my career representing people just like you — for both sellers and buyers. If you would like some help to buy or sell a home, acreage, condo, or investment property just reach out and I'd be happy to offer a free no obligation consultation. Technology has changed the way homes are sought and bought today. In this “Information Era,” most buyers are first introduced to the home they eventually purchase is via the internet, either through agent sites like mine viewcalgaryareahomes.com or Realtor.ca. So that means there’s no real need to hire a buyer’s real estate agent, right? If you can find and visit a home on the web all on your own, why involve a buyer's agent? This book will more than answer that question.

WHY HOME BUYERS NEED A REAL ES UYERS NEED A REAL ESTATE AGENT

The reasons to use a real estate agent today are as valid as 2

yesterday. The ease of online transactions and proliferation of services to assist buyers in handling their own real estate transactions came about recently, throughout the last decade. This has caused some buyers to wonder if using a real estate agent is no longer necessary or if it's an expense that can be avoided. For some buyers, they will approach the seller's agent believing they will get a better deal, but you can take on additional risk that could end up being pricier than a real estate agent’s commission in the long run. I talk a lot more about this topic later so keep reading. Buyers generally have two major concerns when buying a property. #1. They don't want to overpay. #2. They don't want to move in a find something negative that they wish they knew about before buying. Buyers generally don't pay any commission to an agent on a house purchase. On most home sales, there is a listing agent (the agent engaged by the seller to sell the property) and a selling agent (the agent who introduces the eventual buyer into the transaction). The selling agent is sometimes called the “buyer’s agent” because he or she is often working on a certain buyer’s behalf, and it’s easier than explaining that the selling agent is not the listing agent but really the buyer’s agent. There are some real estate agents that market themselves as “buyer’s agents,” A.K.A. “exclusive buyer’s agents,” or “buyer’s representatives.” These real estate agents have chosen to make a business of finding homes for prospective buyers and handling the negotiations and manage the entire transaction right to possession day. These agents want to accentuate the reasons a buyer shouldn’t go directly to the listing agent when they purchase real estate.

A buyer who goes directly to the listing agent and allows that

agent to “manage” both sides of the transaction is dealing with an agent who has conflicting responsibilities. Their job is to get a good price for the seller, meaning they might not ambitiously represent the buyer’s interests. The seller agent must disclose only the required disclosures called "Material Latent Defects". These defects are of great expense to remedy, missing permits, or can cause the property to have health risks such as mold. Other defects known as "Patent Defects" can be discovered through a reasonable inspection of the property but often do not get noticed by buyers. For example: Windows, cracks in concrete, mechanical, Poly B Piping, etc. Many buyers are quite surprised to learn that deaths in homes are not a required disclosure in Alberta. Also, any available public information that may be deemed negative is not required to disclose either. Example: The seller may have an encroachment agreement registered on title with the city. These agreements always have a caveat attached clearly stating the city can give you a 30-day notice to remove the encroachment. Can you imagine if the garage was encroaching and the city came along and told you to move it? That would certainly be expensive if you didn't have title insurance . In Alberta there are two ways for a seller's agent to deal with an unrepresented buyer: • Client Relationship • Customer Relationship It's required of every licensed agent to provide accurate information about the property they represent regardless of whether the buyer is a client or a customer but only in a client relationship can the seller's agent give the buyer advice. The seller's agent also must give the sellers permission in writing to provide advice to the buyer before they are allowed to. You can see how it quickly this becomes complicated not to mention the inherit conflict of interest the seller's agent is in. Those who market themselves as buyer’s agents indicate they’re only working for the buyer in a real estate transaction. If any 4

agent is only working for the buyer, it's their job to uncover any information that may affect the buyer's decision to buy the property. Example: I once represented a buyer who wanted to buy a home with Pine Shakes. The buyer was under the impression the shakes were cedar, after learning the maintenance pine shakes require, he decided to purchase another home. A good buyer's agent uses technology, networking, and marketing to locate the right property for their client, but the most important job begins once they find the right property the buyers want to make an offer on.

MORE ACCESS TO THE REAL ES O THE REAL ESTATE MARKE TE MARKET

A real estate agent will have better access to the market and a special knowledge of local conditions. The agent is a full-time liaison between sellers and buyers. An agent who is a member of the Canadian Real Estate Association (AKA) Multiple Listing Service or (MLS) uses a software program that gives them access to all properties listed in real time. Realtor.ca and other agent websites can have a delay of anywhere from 12 to 24 hours. Some of the most well priced and desired properties can sell within that time frame. A real estate agent will track down homes that meet your criteria, contact the sellers’ agent, and secure appointments for viewing the homes. On their own, buyers have a more difficult time with these things especially since agents have key access and can book several properties to view consecutively in the same day. Without a buyer's agent this can be even more difficult when a buyer is relocating, on a time crunch due to a divorce, or new employment opportunity where timing is crucial.

NEGOTIATING IS HARDER ON YOUR OWN

A real estate agent will keep the transaction “at arm’s length,”

such that personalities and emotions do not become involved. Price negotiations take a special skill and understanding of the psychology of offering and counter-offering. Skilled agents keep the transaction dispassionate and rational. For example, a buyer (you) might like a home but despise its wood-paneled walls, shag carpet, and lurid orange kitchen. When you work with an agent, you can express your opinions on the current owner’s decorating skills and complain about how much it will cost to upgrade the home without insulting the owner. Your agent will translate that to the seller — that you very much like the property but can see having to spend a certain amount in decorating costs, and thus the reason the offer is maybe lower than the seller was hoping for. We all look through different lenses when we make big decisions which affect how we determine value. Agents are able to navigate that and help both buyers and sellers remove the lenses to a degree.

CONTRACTUALLY SPEAKING…

There are contracts and documents involved in purchasing a house. The stack can be daunting. Unless you’re a real estate lawyer, mortgage broker, or highly experienced at Real Estate these documents will be foreign to you, yet they require detailed and accurate completions. Buying a property is not necessarily a “fill-in-the-blanks” transaction. One mistake, let’s say in the legal description, could create an non enforceable contract. A few years ago I sold a property to some buyers moving from Fort McMurray to Calgary. The home backed onto a school which was a very important feature for the buyers as they had children that would attend the school. To our surprise the seller announced one week before possession that they had changed their mind and no longer wished to sell the property. This was devastating news to the buyers as they really wanted that home.

Thankfully for the buyers the contract was reviewed carefully by lawyers on both sides, and it was deemed an enforceable contract. In the end we were able to exercise specific performance (meaning we can legally foreclose on the property and take ownership) but it also could have easily gone the other way if there were any errors on the contract. In Alberta there are 5 essential elements that must be met in contract law, if one had been missing the buyers would have lost the home. It was a stressful process to enforce the contract but in the end the buyers moved into the home. An experienced real estate agent deals regularly with these contracts, conditions, and unexpected situations and is familiar with which conditions and/or terms should be used & when they can safely be removed. The contract is designed to protect you but also obligates you once conditions are removed.

YOU WON'T NECESSARIL N'T NECESSARILY SAVE MONEY

The point of not using a real estate agent would be to save money, right? Otherwise, why would someone turn down professional assistance in finding a home? However, it’s unlikely that both the buyer and the seller will reap the benefits of not paying real estate agent commissions. It works like this: If a property owner is selling on their own, they are trying to accomplish two things: 1. Sell at market value. 2. Save money on commissions. It would make sense that the seller will price the house at the same price they would if they were hiring an agent. If they priced it lower, it would defeat the purpose. Now you have a situation where the seller is expecting the buyer to pay the same price they would if an agent were helping them but without any help or advice.

Buyers looking to purchase a home sold by an owner without

an agent also believe they can save money on the home by not having an agent involved otherwise why not have a professional help you if you're paying the same price right? Unrepresented buyers expect money to be saved and usually make offers accordingly. This is a problem, both the buyer and seller can't save the commissions; something has to give. Often times the negotiations between unrepresented buyers and sellers result in a stalemate and both leave frustrated. Another scenario that benefits buyers is when the buyer has an experienced agent representing them, but the seller does not. The seller is at a huge disadvantage as they are up against an agent that knows all the negotiation strategies to get the seller to come down for the benefit of the buyer plus potentially negotiate extra chattels or terms that benefit the buyer. I've been in many situations where I've negotiated with an unrepresented seller and helped my buyer get a great deal. Here’s a short list of the advantages that using a real estate agent can bring to your buying experience: • Education and experience • Agents carry errors and omissions insurance. • Relationship with good service providers. e.g. Inspectors, lawyers, contractors, plumbers, electricians, etc. • A buffer between you and the seller • Community Knowledge • Price guidance • Market condition information • Negotiation skills and confidentiality • Knowledge of the Purchase Contract clauses and phrases • The ability to deal with potential challenges at closing. • Connection to skilled mortgage brokers • Connections to top Mobile Mortgage Specialists from banks like RBC

• Access to pulling titles and researching registrations. • Can provide advice on the ReSale ability of the property

It’s extremely important to know the “ins and outs” of real estate agents before you bring one along with you to help in your search for a home, just so that you might know what to expect, and what will be expected of you.

WHO A REAL ESTATE AGENT IS GENT IS

Simply put, a real estate agent is someone licensed to list and sell real estate, including homes, multi-family properties, commercial, and industrial buildings. Most Provinces in Canada have a governing organization called "The Real Estate Council" that oversees Real Estate, determines licensing requirements, and enforces the Rules and The Real Estate Act. A Realtor® is a member of the Canadian Real Estate Association® (CREA). Agents that are not members of CREA would not be considered a Realtor®. Realtors are held to an even higher standard as they must also follow the rules set out by CREA. Real Estate Boards in each Province can also discipline agents for any misconduct. As mentioned, real estate agents who work on behalf of the best interests of the buyer are commonly called "buyer’s agents". In Alberta, all buyers and sellers are required to sign a written service agreement. All listing agents that represent the seller will get one signed as you are not allowed to list on MLS without one, but many buyer agents don’t have clients sign one until the buyer finds a property. Is it really in the buyer's best interest to sign a written service agreement before they begin looking at properties. I'll will do a deeper dive into that subject later on.

HOW TO CHOOSE THE BEST AGENT FOR YOUR NEEDS UR NEEDS

Most buyers are not too picky on which agent helps them. You might feel the urge to pick the first real estate agent who appeals to or approaches you, but that’s something to avoid. As with any professional, there are degrees of professionalism, dedication, and experience. Most sellers tend to interview more than one agent before hiring, but buyers generally don't. My theory is that buyers don't feel they are paying commission and sellers do, so the sellers want to hire someone they feel confident with. Many buyers will search online, find a home they like, contact an agent to have them show it, then choose that agent to work with if they seem nice. There are lots of nice agents that lack knowledge & experience, so if that showing agent doesn't take the time to educate you & explain how they work, you may want to interview another agent. When possible, I suggest meeting with prospective buyer's agents at their office. At my office I have a beautiful board room with a large flat screen that allows me to show the listings and teach you how to buy successfully with lots of visuals. A good buyer’s agent will want to know whether you’re preapproved for a mortgage and what kind of terms you’re getting. They should spend adequate time to understand what you’re looking for in a house & your situation. The agent should listen to you carefully & ask questions. Watch to see if the agent makes notes. Agents are supposed to explain agency relationships and obligations to you. The law requires agents to explain whether they’ll be working for the buyer or the seller whenever they have a substantive contact with a customer or prospective client. In Alberta all agents are required to provide a document for each

customer or client to sign called the "Consumer Relationship Guide". Every client is also required to sign a written service agreement which outlines the role & service the agent is to provide. If you choose a client relationship you will receive advice & the agent now takes on more responsibility to ensure you are properly represented. In Alberta agents are required to provide all the information possible about each property to members of the public regardless of whether the buyer or seller are clients or customers, again the only difference is that clients receive advice while customers do not. If you were in a client relationship and your agent provided poor advice that caused damage or financial loss all licensed agents carry errors and omissions insurance as an added layer of protection to you. In a customer relationship all decisions are yours to make good or bad. If you have a client relationship your agent will be showing you all the listings or properties on the market that meet your requirements. Buyer’s agents have the legal duty to put the buyer’s needs ahead of their own. Even when an agent will be paid more for selling an in-house listing, they must inform you about other available, suitable listings and offer take you to see any other viable prospects. A good buyer’s agent will provide a home-buying education. The listing agent will point out all the features of a home; a good buyer’s agent will point to the faults — or advise when they can be overlooked. Competent buyer’s agents help their buyers to think clearly as the home-buying process unfolds. For example, if a house is a good buy, a buyer’s agent might suggest looking past the dated bathroom and kitchen and look at the bonus room above the garage that will make the perfect art studio you desire. Likewise, a cute house with all the amenities but with Poly B piping or a

40-year-old roof it might not be worth the asking price. If you decide to buy with the intention of building an addition, the agent should advise you to check the Title, Real Property Report, & zoning before making an offer, or at least add a condition to the contract allowing time for due diligence. There are advantages to signing an exclusive buyer’s agency agreement after you have met with an agent. All buyers want to find the right property, for the right price, and not find any negative surprises later. The best working relationships are committed ones (client over customer). When your committed to each other you'll find your agent will spend more time searching & will point out every positive & negative feature. Agents can feel pressure when they have non committed clients because their buyers maybe working with more than one agent. Its far more comfortable for both the buyers and the agent when a client relationship is formed. Once you are a client you'll find your agent becomes as committed as you in finding the right home regardless of how long it takes. Working directly with a seller’s agent is a mistake, according to an article by Amy Fontinelle of Forbes’ Investopedia. Any information you reveal will become leverage that the seller can use in a purchase negotiation. A buyer’s agent is legally required to maintain your confidentiality, disclose material facts to you, and maintain loyalty to you. These are fiduciary duties.

LOOK FOR PROPER CREDENTIALS

You wouldn’t trust a doctor who didn’t have the proper credentials and licensing. Don’t trust a real estate agent who doesn’t present theirs or doesn’t have them at all. It’s easy to find real estate agents who can take the job, but finding agents with special credentials is something else to consider — those who have gone that extra step to take additional classes in certain

specialties of real estate sales — is worth looking into.

Here are just a few credentials within real estate that you should be on the lookout for: • Accredited Buyer’s Representative (ABR): Completed additional education during representation of buyers in their transactions. • Accredited Seller's Representative (ASR) Completed additional education on dealing with issues pertaining to selling a home. • Certified Residential Specialist (CRS): Completed additional training during the handling of residential real estate, detached and semi-detached homes. • Certified Condominium Specialist (CCS). Additional training on handling the complexities of condos and condo documents. • Seniors Real Estate Specialist (SRES): Completed training for the purpose of helping sellers and buyers 50+ years old. • Master Certified Negotiation Expert (MCNE): Completed training on how to negotiate effectively. • Luxury Home Specialist - Agents that have completed a course on how to market and represent buyers and sellers of Luxury Homes. These agents sell a minimum 4 luxury homes per year. • Rural Designation - Agents that have training and education on selling Acreages, Farms, and Land. Similarly, if you choose to use a real estate agent who’s also a member of the Canadian Real Estate Association®, it will be a bonus. However, ensure they have credentials & experience that

are relevant to your need(s).

RESEARCH LICENSING

Each province provides a website for the council which you can easily access. In Alberta its RECA.ca, you will be able to determine if the agent is actively licensed and it shows any disciplinary actions that can help influence your decision — especially since most of the information is now posted online.

GIVE THE “WHAT ELSE” TEST

A good agent will know about all the other properties for sale in the area. Also, a good agent always does their research regarding the events in the current market, and those homes that are out there for the taking. In short, you want an agent who’s an expert of the current market, and someone who always stays on top of things. For a buyer it can sometimes be hard to choose a home, you may feel fearful that a better one will come up tomorrow but working with a good agent that has your best interest will give you the right advice and the confidence to make a decision.

RESEARCH THEIR BUSINESS ACTIVITY

Learning the type of market presence that a real estate agent has is the best way to figure them out. Ideally, you’re going to want an agent who specializes in one or two real estate markets, and who understands which types of homes and amenities are available within your price range. You can unearth this information by asking them or by asking the provincial licensing authority if you’re not comfortable with asking the agent directly. Don't be afraid to ask the agent questions about what areas they have sold homes in before. Remember Real Estate is local and each community has different pros and cons, the agent you choose should know them all.

GOING THE BUYER'S AGENT ROUTE

So, you’re ready to take the plunge and look for a place to call “home.” To get the most out of it, use a buyer’s agent to avoid a flurry of paperwork, stampedes of buyers competing for the same property, and other challenges. Home buying can be exciting and exhilarating, but it can also be complex and stressful — which is why having a pro by your side can make an enormous difference. As discussed, your now more familiar with difference between seller’s agents, buyers' agents, listing agents, and so on. You’re a buyer, so what’s a buyer’s agent? True to the name, buyer’s agents assist home buyers every step of the way. Buyers' agents will refer you to the best Mortgage Brokers, Home Inspectors, Condo document review companies, and Lawyers. In other words, your agent has a whole team of professionals that will help you ensure you are making the right decision plus they will save you a lot of money & help remove the stress of buying.

WHAT ELSE BUYER'S AGENTS DO FOR YOU

Your buyer’s agent will have a vast knowledge of the current real estate market for the area you are wanting to buy in, which will include title insurance, neighborhood amenities, re-salability, zoning issues, price trends, Poly B, asbestos, property taxes, wood foundations, encroachments, restrictive covenants, insurance, and many more issues. Once you meet with the buyer’s agent, they’ll generally help you determine your needs and wants when it comes to finding a home and a neighborhood. The agent will teach you what you can afford, help you set a budget, provide some insight on the current conditions of the market, and explain what you should expect while shopping for a home.

During the shopping period, you’ll meet with your agent for tours of homes in which you might be interested. They will give your insight into the floor plans, the home’s pertinent selling points, and the overall crime rate of that neighborhood. They will also give you the rundown for local activities, restaurants, shopping centers, and schools nearby. Your agent is responsible for ensuring inspections of the homes are complete, as well as the disclosures therein. They’re also in charge of ensuring coordination and completion is done with the appraiser, inspector, lawyer, lender, and all other professionals involved with the purchase of the home. When it comes to the price, you won’t have to negotiate yourself, your buyer’s agent will do that for you. Once you have a signed offer, your buyer's agent will arrange everything needed to be done plus keep you informed with lots of advice all the way to possession day.

DUAL AGENCY: MORE DETAIL

A “dual agency” relationship occurs when a buyer is being represented by an agent who is also representing the seller. Once an agent represents both the seller and the buyer within the same transaction, the situation is known as “dual agency.” In some Provinces this is not allowed because of the conflicts of interest that can arise, but Alberta does allow it. All agents hold the same responsibility, which is to inform interested buyers of all potential risks that could arise due to conflicts of interest. Legally, agents are not allowed to work on both sides of any transaction without written consent from both the buyer and seller.

If you’re selling your home and you don’t want your agent to also work with the buyer of your home, it’s your right to say so in the listing agreement. This is also true for buyers. A buyer can get out of an agreement with an agent if they are interested in purchasing a home their agent has listed. There are strict rules agents must follow in Dual Agency. 1. The agent cannot disclose personal reasons why the buyers are buying or why the sellers are selling. 2. The seller's agent cannot discuss any pricing with the buyers lower than what the asking price is without the seller's consent. 3. The buyer's agent cannot discuss any pricing with the sellers higher than what the buyers are offering without the buyer's consent. When it comes to dual agency, there are definite advantages for the seller. • Trust & a relationship has already been gained with your listing agent so the seller can be confident their interests are going to be protected. • Your agent brought you the buyer knowing that you’re selling, even if your property has not yet hit the market. • Your listing agent will have already covered and researched your neighborhood’s market to gain buyer inquiries, which means your agent will be working from all sides of the deal to sell your house faster, and with more incentive. • Your agent works together with corporate relocation buyers who need to find a house quickly, and they will ensure it’s your house that’s bought. • Your agent knows the buyers ability to buy and if they are qualified. 17

• The buyers know more of the final details of the home and its history which can make them feel more comfortable There are also cons for the seller when it comes to dual agency, and they are: • You can’t be advised by your agent as thoroughly when they must act as a dual agent because impartial facilitation is required. • Its difficult to negotiate the best or highest price for you if also negotiating both the best and lowest terms for the buyer. To avoid surprises or missteps in a dual agency sale, always ensure you have clarified important details with your agent ahead of time. You can do this by using an exclusive buyer agency agreement or a listing agreement.

HOW REAL ESTATE AGENTS ARE PAID

The Canadian Real Estate Association® 2021 Profile of Home Buyers and Sellers states approximately 8% of homeowners opted to put their homes up for sale in 2021 without using a real estate agent or Realtor®. A handful of For Sale By Owner (FSBO) transactions dealt with sellers and buyers who previously knew each other or were directly related; 87% of buyers chose to work with a real estate agent or Realtor®, on the buyer’s side. Real estate agents and Realtors® — unlike professionals in different categories who bill by hourly rates or earn a salary — get paid through a transaction (commission) at the end of each sale. 18

For example, if an agent has worked with a seller or a buyer for months, they don’t get paid for the time spent if there is no transaction during that period. Agents receive a commission once the transaction closes and money is transferred based on the selling price of the home. At that point, the commission is earned. The commission itself is negotiated — According to the competition bureau of Canada commission rates are negotiable between the consumer and the agent. All commission rates are established between the client and their agent however its typical the rate your agent charges will be the rate already offered to the buyer's agent built into the home prices you see online. Even though its rare, in some cases the fee your agent is charging maybe higher than what the seller is offering. In these cases, your agent can either accept the lower rate being offered or you can build the difference into the negotiations of the sale price. Agents are not allowed to accept any remuneration of any kind directly or indirectly except through the brokerage they are affiliated with. Real Estate in Canada is transparent which requires each brokerage to keep all records in case of an audit.

PAYING AGENT COMMISSIONS

The overall agent commission is paid at closing. The buyers lawyer will send the sellers lawyer the balance between the deposit and the purchase price that was agreed upon. The agent fee is then taken from the proceeds of the sale of the the property. Most buyers don't feel like they are paying any agent commissions because they are not paying their agent directly but

consider this: Each seller I've ever worked with always calculated how much commission was coming out of the purchase price into what offer they would consider accepting. If you think about it, they are now making the buyer contribute indirectly in the commission fees. When you consider the fact that both buyers and sellers are contributing to the cost of their agent it seems logical that you should get proper representation because after all you are paying for it.

CHAPTER 2 Owning vs. Renting

Owning your own home might be one of the defining qualities of the “Canadian Dream:” the set of ideals that includes opportunity for prosperity and success and an upward social mobility for the family and children, achieved through hard work. Home ownership is surely ingrained as one of the strongest representations of that vision — 68% of Canadians own their own home, and more hope they will or wish they did. Something about home ownership plucks a strong chord with Canadians. Financial security, permanency, status, and pride are values many of us seek. Most first-time buyers I meet often tell me they want to buy a home because they don't want to pay off their landlord's mortgage for them, but I usually find out later that lifestyle plays just as big of a role in the decision to own versus rent. Even though home buying does pay off financially over time most buyers are motivated by household formation, such as partners moving in together, marriage, and a growing family. Less than 40% of people under 35 years old own homes, 60% of people over 35 years old own homes, and more than 80% of people 65 years old or over own homes. Interestingly, for the millennial generation, the primary reason for buying a home? Owning a dog. One of the reasons I bought my first home is wanted the security if being in control of when I want to move. I didn't want my landlord deciding one day they want to sell and I'm now looking for a new place to live. The Canadian homeownership rate has fluctuated between 62% 22

and 70% since the 1950s. Most young people begin their independent lives renting an apartment, maximizing lifestyle flexibility and minimizing the hefty upfront costs associated with purchasing a home. As they build careers, save money, and start families, many choose to buy a home, recognizing that home ownership, as opposed to rental living, is more appropriate to their growing family needs. At the other end of the age spectrum are homeowners nearing retirement who may desire to sell their homes, downsize, avoid the maintenance and other obligations, and go back to renting.

WHICH IS BEST?

Is it better to rent or buy a home? Most adults ask themselves this at some point as they form their goals and plan for the years ahead. Before you answer the question, here are some things to ask yourself. Owning and renting each have their advantages, but what’s best for you depends on your circumstances. What will be the duration of your stay in t y in the home? Each Province in Canada is different, but whether the time you plan to own the house warrants its purchase is possible to predict. On average, it takes three to five years to break even on a home (i.e., where there has been enough appreciation to pay back the cost of the transaction and cost of ownership). If you’re thinking about buying a home and selling it in two years or less, buying is very unlikely to be cheaper than renting, unless you get lucky and buy just before a sellers' market.

Timing

Many buyers make the mistake of trying to time the market. In Alberta we have cycles that tend to be around 7 years mainly due to the price of oil and gas. The problem is you can't predict with certainty where we are in the cycle. I've had many clients put

their purchase on hold thinking they could buy for a lower price 6 months to a year down the road. Most of these buyers were wrong and ended up paying more, not less. I've often said you will never know where we are in the cycle until 6 months from now when you look back. The bottom line is if you are buying to own for a minimum 5 yrs. even if the market does correct after you purchase it will most likely rebound within 5 yrs anyway. I once bought a property in 2007 just before the crash of 2008, my value dropped 18% in a year but by 2011 my value was right back to what I paid for it. Do you think you will need your house to be part of your retirement plan? Canadians are used to their homes being a store for wealth to liquidate in retirement when downsizing their lifestyle. There are many strategies you can use when you have a clear title or at minimum good equity. I've assisted many people downsizing from a larger home to a smaller home and pocket some equity to help with retirement. We've witnessed many people sell their home in the city and move to a small town within 45 minutes from Calgary or Edmonton. Another strategy is a CHIP mortgage that allows you to take equity out and never make a payment or pay it back. The bottom line is a healthy retirement plan would include a home paid for. Having a home paid for protects you from souring rental increases that could really be difficult in your fixed income retirement years. Eg. I know many seniors that don't have a big retirement nest egg but they at least have their home paid for, so their monthly expenses are quite low. I also have seen several seniors rent out their basement for added income. Are you financially ready? Owning a home is a financial commitment that requires planning how home ownership fits into where your life is headed. Ask yourself what your budget is and if either buying or renting would require you to stretch your finances. Crunch all the numbers. A frequent mistake of

first-time home buyers is comparing a month’s rent to a month’s mortgage payment. Many people don’t have all the numbers. There are additional costs necessary to include to make a fair comparison: principal interest, property taxes, property insurance, condo fees (if applicable), and maintenance. Are you prepared for the down payment? This is the lump sum payment that funds your equity in the property (how much of the property you actually own). Down payments vary; 20% is preferred as you can avoid CMHC fees however some lenders will give better rates for an insured mortgage. Most lenders will allow down payments as low as 5%. Some lenders will give cash back at closing or even pay off your credit card in order to help you qualify. You can also get a gifted down payment from a family member. If you have a choice, take a gift rather than a loan because lenders will add the loan debt to other monthly obligations and potential mortgage payments to determine your debt-to-income ratio, which generally can’t top 40% to qualify for a mortgage. Can you afford the monthly mortgage and its components? Generally, a mortgage includes mortgage principal and interest. The other extra costs are property taxes, utilities, & condo fees (if applicable). Obviously, interest rates can affect the monthly mortgage-only payment by several hundred dollars. Are you emotionally ready? Can you handle the responsibility? A big factor to consider when buying a home is the stress. The Holmes and Rahe Stress Scale, a landmark stress study, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28), and change in residence (No. 32). If someone has recently made other life changes, such as marriage (No. 7), switching careers (No. 18), or having a child (No. 14), it might be wise to postpone buying a

home. Stress overload can lead to poor health resulting in missed payments. Missing payments can result in destroyed credit or even losing your home. It may be better to rent if your life is in flux and then buy when your stress levels are lower. Are you ready for commitment? Are you ready to make lots of decisions, from picking a real estate agent to writing an offer on a home you want? Do you feel ready to choose a home that will have most of what you are looking for? Its not easy to get 100%, there is usually some give and take. (i.e., floor plan, price, condition, proximity to schools, shopping, recreation, etc.)? Are you ready for devoting the time and attention to maintaining a home (i.e., leaf-raking, grass-cutting, appliance maintenance and repair, etc.)? Taking care of your biggest investment can be gratifying, but only if you’re ready.

FIXED RATE OR VARIABLE

If you are like most people, you may want the peace of mind knowing how much the mortgage payment will be each month. A fix rate mortgage maybe the best solution for you that you can lock in for 3, 4, or 5 years. Over the past 30 years a variable rate mortgage has proven to save the most interest, but it comes with risk. Your mortgage payment will float with the Bank of Canada rate. Some variable mortgages offer a "prime minus" rate so it could be ".5%" below prime for example. You should pay attention to the payout penalty when select a mortgage. If you decide to pay the mortgage off early or sell your home the penalties can be significate. The lenders have a right to charge (IRD A.K.A. Interest Rate Differential) or (3 months' worth of interest) whichever is greater. The penalties on variable are 3 months interest but fixed rates are usually IRD which can be substantial. You build equity. Some of the monthly mortgage payment goes toward the loan’s interest the remainder pays down the loan

principal. Every dollar put toward your loan’s principal represents a dollar of equity — actual ownership of the property. Further, the property should appreciate in value over the life of the mortgage, further adding to equity (what the house could be sold for versus what is owed on it).

PAYING OFF YOUR MORTGAGE FASTER

One strategy is to pay your mortgage Biweekly rather than monthly as it makes about 3 extra payments per year. This strategy can pay your mortgage off 5 years faster and its hardly noticeable. Purchase Plus Improvements - You can add mortgage money for improvements. As homeowner you can increase a home’s value through home improvements, thus both making your home more comfortable and enjoyable while growing its loan-to-value (LTV) ratio. For instance, adding a bathroom or finishing a basement substantially increases the property’s functionality and appeal, while potentially boosting its value. Current mortgage rates are still relatively low. Interest rates vary through the years. In 2021 interest rates were well below normal averages making it easier to obtain a mortgage. Rates have now increased making it more expensive to own, but compared to the rental rate hikes it's still on average the same cost to rent as it is to own. Ownership rights and creative freedom. Your decorating and home-improvement choices are just that — yours, provided they don’t break building codes or violate restrictive covenants that maybe registered on your title. You can paint walls any which way, add fixtures, update or finish your basement, or build a patio or deck. Changing your environment to suit whims is a freeing aspect of homeownership.

A sense of belonging to the community. Homeowners tend to stay in homes for longer than renters and are more likely to grow roots. They might join a neighborhood association, volunteer at a nearby community center, join a school group, or align with a business improvement district. Renters might not do any of those things, particularly if they know their lease is up in a year and they might move. There’s an intangible pleasant feeling attached to owning your own house — a sense of freedom and independence. The home you live in belongs to you, and you can do what you want with it. You aren’t daunted about increases in rent or losing the lease. You’re free to make improvements and changes. Also, owning your home gives your children the guarantee of attending the schools in the area on a more permanent basis; you never need to worry about a notice from the landlord to vacate your rented house or apartment for a variety of reasons over which you have no control.

ADVANTAGES OF RENTING

Its a shorter list, but one person's pro is another person's con, and there certainly are advantages to renting when weighing out your buy-or-rent decision. No responsibility for maintenance. Admittedly, this is a big one. As a renter, you’re not responsible for home maintenance or repair costs. If a toilet backs up, a pipe bursts, or an appliance stops working, you don’t have to call an expensive repair person — you just call your landlord or superintendent, that is if you have a good landlord. Renters in condos, townhouses, or apartments also don’t have lawn and grounds care obligations. Relocating is easier. When renting, relocating for work is easier. Though a sudden move may require you to break your lease, you can partially offset the cost by subletting your apartment or

talking with your landlord. In Alberta you are allowed to break a lease if your must move for work. On the other hand, selling a home takes time and effort. If you have a short timeline to sell your home, you may be forced to accept a lower price and lose some of your investment. No real estate market exposure. Home values fluctuate and can increase or decline over time. If you’re a renter, that’s not your problem. If you’re an owner trying to sell — it is.

DISADVANTAGES OF OWNING

Maintenance. The renter’s largest advantage might just be the homeowner’s major disadvantage. While insurance might be available to protect against expense from major catastrophe, usual maintenance items are on the homeowners’ dime. Maintenance and repair can be as simple as repainting the baseboards and can also be as extensive and expensive as replacing a HVAC system or sewer pipe. The expense will vary from year-to-year; however, you can expect to pay about 1% of the value of your home annually toward these expenses. If you live in an $800,000 home for 10 years, that’s $80,000 over the period, and perhaps more if you must replace a costly, long- lived mechanical item, such as a furnace. Keep in mind the usual homeowner’s chores of lawn care, snow removal, gutter cleaning, and other regular home maintenance needs. Upfront and closing costs. Buying a home entails some upfront costs. Some are paid out-of-pocket after the seller accepts your purchase offer, while others are paid at closing. These include the deposit, down payment (typically ranging from 5% to more than 20% of the purchase price), home inspection, and property taxes. Loss of relocation flexibility. It’s much easier to break a lease and move out of town than to arrange for the sale of a residence. Selling the home from out of town involves special logistics and

financial matters, such dealing with the mortgage while the home is on the market. Financial loss potential. Homeownership builds equity over time; however, equity doesn’t equate to profit. If home values in your area go down or remain stagnant during your time as a homeowner, the appraised value of your home could decrease, putting you at risk of a financial loss when you sell.

DISADVANTAGES OF RENTING

No equity building. The monthly rent you pay goes to the landlord. It represents the fee you pay for using the property. You gain no ownership in the property, no matter how long you live there. Home improvements go to the landlord. Any structural and decorative home improvements that renters make belong to the building owner and will have to stay behind when you move to a different place. Additionally, approval for desired major redecoration will be necessary. After all is said and done, the decision to buy or rent depends on the prospective home buyer’s circumstances. There’s no denying, though, that a home of your own is a good financial and a great emotional investment. An investment in a home can also mean an investment in your future. There is much to consider when you want to buy a home. Switching from renting to homeownership is highly challenging, but an exciting and amazing decision to make

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