Aurel Zaloshnja - THE COMPLETE GUIDE TO BUYING A HOME

THE COMPLETE GUIDE TO BUYING A HOME

Aurel Zaloshnja

Table Of Contents

How Real Estate Brokers Help Home Buyers

Owning vs. Renting

Buyers' Needs and Desires

Searching for the Right Home

Buying a House: Negotiation Dos and Don'ts 37

What to Know About Home Inspections

Shopping for a Mortgage

Organizing Your Move

Introduction 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 home buyers, you may be nervous about the entire process. But that’s why I’m here! My job is to make your job as a buyer as easy and seamless as possible. Throughout my years of experience in the real estate industry, I’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 me to help you find your next home. Yes, buying a home can be stressful, but with this book (and my help!), we can make the process as seamless as possible.

About Aurel I have been a Real Estate Broker since January 2005. My goal is to provide service that is heads above the

competition. To accomplish this I continually improve upon my skills as a real estate broker and advance my business techniques as well as my marketing strategies. I’m certified in Residential and Commercial properties by having completed both Affiliated Real Estate certification followed by the Chartered Real Estate Broker designation. I believe that an excellent real estate professional must possess many qualities and skills including a strong in-depth knowledge of the local community and the local real estate market, integrity, the ability to make sound marketing decisions, solid negotiation skills and a first-rate professional network. An excellent Broker must also respond quickly to your needs, be assessable, be an excellent listener and a good communicator. It is important to me that every one of my clients feels like they are my most important and walk away feeling that they have received the great service they deserve. My goal is to advise my clients on every aspect of the transaction, so they feel confident that they are making the right choice that they will be happy with for years to come. I specialize in the Greater Montreal Area and have worked in both the North Shore and South Shore real estate markets. I would be pleased to assist you in either areas whether buying, leasing or selling real estate residential or commercial. Education 2004 - Real Estate Broker program - Lasalle College 2008 - Certified Real Estate Broker Program - College

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Immobilier du Quebec 2015 - Create 21 - Century 21 Canada program 2018- Canadian Management Academy - Century 21 Canada Member of CREA - The Canadian Real Estate Association OACIQ - The Organisme d'autoréglementation du courtage immobilier du Québec APCIQ - The Quebec Professional Association of Real Estate Brokers

Recent Awards

2020 - Master Ruby Award

2021 - Centurion Producer Award iv

WHAT MY CLIENTS SAY Un excellent service. Un gros merci de notre part pour votre excellent travail lors de l’acquisition de notre maison de rêve. L’expérience avec Aurel Zaloshnja comme un courtier immobilier fut des plus efficaces.. ~ Gelina and Tani My husband and I have had the pleasure of working with Aurel to purchase a house. Aurel Zaloshnja is a true professional. He is bright, thorough, and honest. I would not hesitate to recommend him to all my friends. ~Jeta, Chambly, QC It was a pleasure working with Aurel, as a first time home buyer Aurel went the extra mile to ensure that I fully understood the process and clear up any doubt that I had. He did an excellent job during the viewings to thoroughly to check all aspects of the home and ask all the important questions. I confidently felt that my best interest were well presented. I would strongly recommended Aurel to anyone who is looking to purchase a home. Thank you Aurel Zaloshnja ~ Merald Ferro The best real estate agent I have ever dealt with ,very professional experienced and helpful , he was always available to answer our questions and kept us apprised about available appointments very honest upfront about the house appraisal highly recommended! ~~Written by D.M To see more testimonials please see; directory.testimonialtree.com/profiles/aurel-zaloshnja-288009 a-288009

CHAPTER 1 How Real Estat eal Estate Brokers Help Home Buyers

I’ll come right out at the start and tell you I’m a real estate broker — proudly so! Nice to meet you! I’m not trying to sell you anything, but I’m pleased to be of service. In fact, generally, real estate broker for buyers are paid for out of the listing broker’s commission. So, I’m not looking to part you from your money. Instead, I’m giving you the benefits of experience and advice I have gleaned throughout my career selling houses and being in real estate transactions — for both sellers and buyers. If you want me to help you find a house, we can talk. Call me if you need me. 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 via the internet, through sites like Centris.ca, Prelist.org and Realtor.ca. So that means there’s no real need for a buyer’s real estate broker, right? The reason to use a real estate broker is to find a home and show homes available for sale, right? If a buyer can find and visit a home on the web all on their own, why involve another party?

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

Ah, not so fast, friend. The reasons to use a real estate broker today are as valid as 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 1

last decade. This has caused buyers to wonder if using a real estate broker is no longer necessary or if it's an expense that can be avoided. While doing the work yourself can save you money if you buy a “For Sale By Owner” (FSBO) house and the seller agrees to reduce the price by 3% (half of what a listing broker would receive), for many, a do-it-yourself home purchase might be pricier than a real estate broker’s commission in the long run. Besides, a buyer generally doesn’t directly pay any commission to a broker on a house purchase. On most home sales, there is a listing broker (the broker engaged by the seller to sell the property) and a selling broker (the broker who introduces the eventual buyer into the transaction). The selling broker is sometimes called the “buyer’s broker” because he or she is often working on a certain buyer’s behalf, and it’s easier than explaining that the selling broker is not the listing broker but really the buyer’s broker . There are some real estate brokers that market themselves as “buyer’s brokers,” “exclusive buyer’s brokers,” or “buyer’s representatives.” These real estate brokers have chosen to make a business of finding homes for prospective buyers and handling the negotiations and transactions attendant to the purchase. These brokers want to accentuate the reasons a buyer shouldn’t go directly to the listing broker when they purchase real estate. Would you go to the court and hire the same lawyer as your opponent??? A buyer who goes directly to the listing broker and allows that broker to “manage” both sides of the transaction is dealing with a broker who has conflicting responsibilities. Their job is to get the highest price for the seller, and they might not ambitiously represent the buyer’s interests. Those who market themselves as buyer’s brokers indicate they’re only working for the buyer in a real estate transaction.

The buyer’s broker's commission is paid by the seller, except in rare cases. They either get paid directly by the seller or set up the transaction so that the seller provides a “credit” to the buyer for how much the real estate commission is — then the buyer pays the commission. A maxim in real estate is, “No matter how it’s set up, the buyer still walks away with the house and the seller still walks away with 94% of the purchase price.”

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

A real estate broker will have better access to the market and a special knowledge of local conditions. The broker is a full- time liaison between sellers and buyers. A broker will have ready access to other properties listed by other brokers. Buyers’ and sellers’ brokers know how to put a real estate deal together. A real estate broker will track down homes that meet your criteria, contact sellers’ brokers, and secure appointments for viewing the homes. On their own, buyers have a more difficult time with these things. This is even more so the case when a buyer is moving due to relocation or employment opportunity and does not engage a buyer’s broker to handle matters.

NEGOTIATING IS HARDER ON YOUR OWN

A real estate broker 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. Your broker also will make a market analysis for the property you like and make sure that you are not overpaying by checking other similar properties that have been sold and compare it. Brokers 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 a broker, 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 broker 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 can offer that much less.

CONTRACTUALLY SPEAKING…

There are many contracts and documents involved in purchasing a house. The stack is more than an inch thick. Unless you’re a real estate lawyer, 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 title work, could haunt the buyer well down the line after purchase. An experienced real estate broker deals regularly with these contracts, conditions, and unexpected situations and is familiar with which conditions should be used, when they can safely be removed, and how to use the contract to protect you.

YOU WON'T NECESSARIL N'T NECESSARILY SAVE MONEY

The point of not using a real estate broker 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 broker commissions. It works like this: An owner selling on his own (FSBO) will price the house based on the sale prices of other comparable properties in the area. Many of these properties will be sold with the help of a broker; therefore, the seller profits in getting to keep the percentage of the home’s sale price that might

otherwise be paid to the real estate broker (usually 5%).

Buyers looking to purchase a home sold by owner without a broker may believe they can save money on the home by not having a broker involved, and so they look solely at FSBO houses. They might expect money to be saved and make an offer accordingly. Unless the buyer and seller agree to split the savings, they can’t both save the commission — and that’s if the listing price was not already lowered by near the commission amount to make it more market-attractive. Here’s a short list of the advantages that using a real estate broker can bring to your buying experience: • Education and experience • A buffer between you and the seller • Neighbourhood knowledge

• Price guidance (market research) • Market conditions information • Negotiation skills and confidentiality • The ability to handle legal paperwork • The ability to handle closing delays • Relationships for Future Business

It’s extremely important to know the “ins and outs” of real estate brokers 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 BROKER IS? KER IS?

Simply put, a real estate broker is someone licensed to list and sell real estate, including homes, multi-family properties, commercial, and industrial buildings. He/She is a member of the Canadian Real Estate Association and Quebec Professional Association of Real Estate Brokers.

As mentioned, real estate brokers who work on behalf of the best interests of the buyer are commonly called buyer’s brokers. All listing brokers represent the seller, but other brokers who don’t have buyer-agency agreements with prospective buyers — even though they may show homes to those buyers — are working on behalf of the seller and must obtain the best price they can for the seller. In contrast, buyer’s brokers work on commission, which is contracted in the listing agreement. When a buyer’s broker brings the buyer, the listing broker must split the contracted commission with the buyer’s broker.

HOW TO CHOOSE THE BEST BROKER FOR YOUR NEEDS UR NEEDS

You might feel the urge to pick the first real estate broker who appeals to or approaches you, but that’s something to avoid. As with any professional, there are degrees of professionalism, dedication, and experience. The “wow factor” will simply wear off. Meet with prospective buyer's brokers in their offices. A good buyer’s broker will want to know whether you’re preapproved for a loan by a financer, what kind, and the terms of the loan you’re getting. They should spend adequate time to discover what you’re looking for in a house. They should listen as much as talk and ask questions. Watch to see if the broker makes notes. If the broker doesn’t broach the topic, ask for an explanation of his understanding of agency relationships and obligations to you. The law requires brokers to explain whether they’ll be working for the buyer or the seller whenever they have substantive contact with a customer or prospective client. If the broker doesn’t offer you a buyer’s agency agreement, that broker is representing the seller, not you. If the broker can’t explain agency concepts to you,

then move to the next broker.

Be sure that the broker will be showing you all listings or properties on the market that meet your requirements, and not only listings that are handled in-house. Buyer’s brokers have the legal duty to put the buyer’s needs ahead of their own. Even when a broker will be paid more for selling an in-house listing, they must inform you about other available, suitable listings and take you to see viable prospects. A good buyer’s broker will provide a home-buying education. The listing broker will point out all the features of a home; a good buyer’s broker will point to the faults — or advise when they can be overlooked. Competent buyer’s brokers help their buyers to think clearly as the home-buying process unfolds. For example, if a house is a good buy, a buyer’s broker might suggest looking past the dated bathroom and kitchen and look at the space above the garage that will make the perfect art studio you desire. Likewise, a cute house with all the amenities but with knob-and-tube wiring or a 40-year-old roof might not be worth the asking price. If you decide to buy with the intention of building an addition, the broker should advise you to check the zoning before making an offer. Agree to sign a buyer’s agency agreement after you have met with an broker. Some people sign an agency agreement after attending a showing given by the broker. Working with a seller’s broker 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 broker 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 broker who doesn’t present theirs or doesn’t have them at all. It’s easy to find real estate brokers who can take the job, but finding brokers with special credentials — those who have gone that extra step to take additional classes in certain specialties of real estate sales — is worth looking into. Choose to use a real estate broker who’s a member of the Canadian Real Estate Association and Quebec Professional Association of Real Estate Brokers it will be a bonus. However, ensure they have credentials that are relevant to your need(s).

RESEARCH LICENSING

Your province will have a license board for all active Realtors® and real estate brokers, which you can easily access. You will also be able to see their contact information, disciplinary actions, complaints, or any other information that you’ll need to help influence your decision — especially since most of the information is now posted online.

GIVE THE “WHAT ELSE” TEST

A good broker will know about all the other properties for sale in the area. Also, a good broker 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 a broker who’s an expert of the current market, and someone who always stays on top of things.

RESEARCH THEIR BUSINESS ACTIVITY

Learning the type of market presence that a real estate broker has

is the best way to figure them out. Ideally, you’re going to want an broker 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 broker directly. You’re better off with a broker who’s engaged actively in one area and price range — e.g., residential homes around the $400,000 to $600,000 range or the $600,000 and up range.

GOING THE BUYER'S BROKER 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 broker 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, you’ve probably heard of buyer’s brokers, seller’s brokers, listing brokers, and so on. You’re a buyer, so what’s a buyer’s broker? True to the name, buyer’s brokers assist home buyers every step of the way; they can also save you both time and money on the road to homeownership. When you find the right one for you, these real estate brokers will work day and night to ensure all your needs and requirements are met when it comes to finding the right home.

WHAT BUYER'S BROKERS DO FOR YOU

Your buyer’s broker will have a vast knowledge of the current real estate market for the area, which will include neighbourhood amenities and conditions, the law, zoning issues, price trends, negotiations, taxes, financing, and insurance.

Once you meet with the buyer’s broker, they’ll generally help you determine your needs and wants when it comes to finding a home and a neighbourhood. The broker 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 broker 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 neighbourhood. They will also give you the rundown for local activities, restaurants, shopping centers, and schools nearby. Your broker 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 through the roof inspector, notaries, lenders, and all other professionals involved with the purchase of the home. If bargains need to be made over the price, you won’t have to negotiate yourself. Your buyer’s broker will do that for you, along with signing the final closing documents. They will be present whenever there are documents to go through and sign.

DUAL AGENCY: THE BASICS

A “dual agency” relationship occurs when a buyer is being represented by a brokerage firm that controls the listing. Once a broker represents both the seller and the buyer within the same transaction, the situation is known as “dual agency.” In multiple places, this is illegal because of the conflicts of interest that can arise regarding the broker.

All brokers hold the same responsibility, which is to inform their clients of all potential risks that could arise due to conflicts of interest. Legally, brokers are not allowed to work on both sides of any transaction without consent from the clients. If you’re selling your home and you don’t want your broker 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 a broker if they are interested in purchasing a home their broker is listing. When it comes to dual agency, there are definite advantages for the seller. • Trust has already been gained with your listing broker, so representation for the buyer has been established. • Your broker brought you the buyer knowing that you’re selling, even if your property has not yet hit the market. • Your listing broker will have already covered and researched your neighbourhood’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 broker works together with corporate relocation buyers who need to find a house quickly, and they will ensure it’s your house that’s bought. There are also cons for the seller when it comes to dual agency, and they are: • You can’t be advised by your broker as thoroughly when they must act as a dual broker because impartial facilitation is required. • Your listing broker is not allowed to negotiate the best or highest price for you if also negotiating both the best and lowest terms for the buyer.

• Earning a full commission, if the opportunity arises, may tempt the broker to coerce a deal that you might not accept otherwise. • Your broker may inhibit all access to your listing through buyers with brokers. To avoid surprises or missteps in a dual agency sale, always ensure you have clarified important details with your broker ahead of time. You can do this by using an exclusive buyer agency agreement or a listing agreement.

HOW REAL ESTATE BROKERS ARE P KERS 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 broker. A handful of For Sale By Owner (FSBO) transactions dealt with sellers and buyers who previously knew each other or were directly related; Real estate brokers — unlike other 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. For example, if a broker 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. Brokers receive a commission once the transaction goes through to settlement (closes) based on the selling price of the home. At that point, the commission is earned. The commission itself is negotiated — in most cases, between the seller and the broker. Typically, a broker will earn a commission

of 5% from the sale price, but some brokerages have commission discounts for the sellers with whom they work. Essentially, the listing broker and the buyer’s broker will split the commission. That can bring forth some issues. For example, sometimes the split might not be negotiated evenly. A seller could have agreed to pay a commission of 5% that, if further divided, the buyer’s broker would receive 2% while the listing broker receives 3% of the commission. Even though some brokers are associate brokers, all commission payments are instructed to go through to the broker who’s managing the brokerage where the broker is working. From there, the commission is then split to the broker and the agency, according to the agreement that’s been made. The split will vary; sometimes, newer brokers will earn a small portion of the commission compared to the experienced or successful brokers who generally sell more expensive properties or homes.

PAYING THE COMMISSION ITSELF

The overall commission is paid for at the notary by the seller. The fee is taken from the proceeds of the sale of the home or the property. However, the buyers pay the commission because they’re literally paying to purchase the house, while the sellers take the commission for the broker into account during the process of determining the price for the listing. From there, the commission is then divided during the notary process between the buyer’s broker Agency and the listing broker’s Agency. Afterward, the brokers who made the real estate sale are further paid by their Agency.

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. Lifestyle plays a big role in the decision to own versus rent. Home buying is most often driven by household formation, such as marriage and 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. The Canadian homeownership rate has fluctuated between 62% 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 14

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 the home? Each market is different, but whether the time you plan to spend in the house warrants its purchase is possible to predict. In general terms, it takes four to seven 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, buying is very unlikely to be cheaper than renting. Do you think of or need your house as an investment in your retirement plan? Canadians are used to their homes being a store for wealth to liquidate in retirement when downsizing their lifestyle. According to Jacob Passy, a recent study from the Federal Reserve Bank of New York examined consumer preferences toward being a homeowner and how their perceptions have changed over the course of the COVID-19 pandemic. Survey participants were asked to rate which was the better investment—a home or stocks. The results showed that over 90% of the respondents preferred owning their residence rather than investing in the stock market. Majority of the survey participants also favored the idea of being a landlord to buying stocks, with more than 50% of the participating households preferring to own a rental property.

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 many additional fees necessary to include to make a fair comparison: principal interest, property taxes, property insurance, and ongoing 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 and gets the best rates. There are some loans that allow down payments as low as 5%. Sometimes relatives help with the down payment. 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 43% to qualify for a home loan. Can you afford the monthly mortgage and its components? Generally, a mortgage includes loan principal and interest plus property taxes. These items can affect the monthly loan-only payment by several hundred dollars. Are you emotionally ready? Can you handle the stress? A big factor to consider when buying a home is 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 missed payments, which can result in destroyed credit or even losing the home. It’s 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 broker to picking paint colours? Are you confident enough to choose a neighbourhood where you believe home values will continue to appreciate and that will serve your needs (i.e., 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.

ADVANTAGES OF BUYING YOUR HOME

Control over housing expense. By selecting a fixed-rate mortgage, the homeowner assures that the housing cost will not increase for the next 5 years. Mortgages are renewed after 5 years at the current rate of interest. You build equity. Some of each monthly mortgage payment goes toward the loan’s interest. Other portions may go toward property taxes to the city. 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 each year, further adding to equity (what the house could be sold for versus what is owed on it). Improvements increase your home’s value. A homeowner can also 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.

Tax advantages of home ownership. There are significant tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home: Current mortgage rates are relatively moderate. Interest rates vary through the years. In the last few years, interest rates dipped quite low, and for a little while it was less expensive to obtain a mortgage. While these costs have increased, good rates are available to borrowers who are ready to become homeowners. Ownership rights and creative freedom. Your decorating and home-improvement choices are just that — yours, provided they don’t break building codes or violate homeowners’ association rules. 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 neighbourhood 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

It seems a shorter list, but one man’s pro is another man’s con, and there certainly are advantages to renting to factor into 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. 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. 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 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 numerous 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 evaluation, 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.

CHAPTER 3 Buyers' Needs and Desires

After you’ve decided to buy a home, what sort of home it will be is your next decision point. It’s a better approach to have a concrete vision in mind of what type, features, and amenities you want in your home, rather than a “shotgun look” at every listing that’s out there in your price range. Imagine your dream house. It fulfills both your needs and desires. It fits the need for a good roof over your head, a sturdy structure, modern fixtures and appliances, living space (i.e., bedrooms, living room), and functional rooms (i.e., kitchen, bathroom[s]). Your needs fulfilled, you turn to your desires. Perhaps you envision a home on the beach or in the woods, a gourmet kitchen, a wood-paneled den, a crystal chandelier over a banquet table in the manor-sized dining room or an Olympic-sized swimming pool with a hot tub and sauna. Your priority in any home purchase should be ensuring all of your needs are met. Sometimes, you won’t find everything you desire in a home and if you do, you may not be able to afford it. It’s important to prioritize the things you want in a home by how important they are in your search. Decide your needs vs. your desires . • Would you like a swimming pool? Enough that a home without one will not be looked at? • In what areas or neighbourhoods might the home be located? Where do you want to live? Where might you have to live for work commute or home price reasons? • What features would make it special? 22

• What can you afford and what is out of your budget? Budget usually constrains us most in selecting a home. While some things are necessary for any home (as mentioned, a good roof and working appliances), others will just stay on the list of desires for now (like the sauna).

MAKE A LIST; CHECK IT T ; CHECK IT TWICE

You may have an impression of what you want in your new home. Putting that to paper and having a complete checklist can prove useful. Before starting your hunt for a new home, it’s advisable to make a list of all your basic needs and desires, then prioritize the desires, figuring that all needs must be met in any house under consideration. This will make the search easier and help weed out the ones that don’t meet the basics. Realize, however, that it’s nearly impossible to find a home that meets all requirements. Compromises will be necessary. It’s a good idea to work from outside-the-house factors to inside- the-house. For example, location is perhaps the primary concern and both “needs” factors and “desires” factors might be involved. A “need” would be “must be within 25 kilometers of work.” A desire might be, “would like Lorne Park” (a favored neighbourhood), while a need might be “on the west side of the city” (because work, family, friends, and recreation activities are all located there). Location needs may include proximity to schools, frequently used recreation facilities, or mode of transportation (bus or suburban rail access). Whether an item is a need or a desire depends on circumstance. Closeness to family might be a need for a couple with young children or elderly parents to care for — or a desire if those 23

factors aren’t involved. It’s items like these that make a checklist most helpful. After location needs and desires are compiled, housing factors can be considered. Needs include having all essential house structures and systems in good working order. Accepting a house with need for a new roof because the owner is willing to knock $7,000 off the listing price — but it will cost $10,000 to replace the roof in two years — is not a sensible deal. Needs might include a minimum number of bedrooms and bathrooms, no steps, fenced yard, perhaps a first-floor laundry facility, and any feature the prospective buyers have decided they cannot accept a home without. Desires are features that make the home more attractive or enjoyable — an upgraded kitchen, walk- in closets, a master bedroom suite. Of course, one buyer’s need is another buyer’s desire. The point is to know your own needs and desires so you can easily assess potential properties and make the process smoother. Regardless, buying a house is not a simple process. Much of the planning should be done well before contacting a real estate broker or looking at homes. Work the costs as well as your budget. Choose a general location. Contact lenders well ahead of home shopping, so that your offers aren’t tied up in getting financial approval. Having the image of your dream home is reality married with imagination. In fact, you may find that some aspects of the house you intend to buy are different. It’s not the same as what your dreams told you. Different people have different requirements. It depends on your thought processes, as well as personality. We understand important things and potential compromises differently. Needs are basic requirements that just can’t be ignored or compromised. Desires, on the other hand, can be left

behind if the situation demands it. You need to make a clear distinction between what your needs are and which items you would classify as desires. No matter how many desires you have unfulfilled now, they can be worked on later. A pool can be added and paint colours can always be changed.

A NOTE ABOUT PETS

Consider your pets in your home shopping. Home buyers who are pet owners have specific requirements — they must provide for their pets. A third of millennial-aged respondents (ages 18 to 36) who purchased their first home (33%) say the desire to have a better space or yard for a dog influenced their decision to purchase the home, according to a survey conducted online by Harris Poll, on behalf of SunTrust Mortgage. Dogs ranked among the top three motivators for first-time home purchasers and were cited by more millennials than marriage/upcoming marriage, 25%, or the birth/expected birth of a child, 19%. It’s essential that the neighbourhood in which you’re going to buy a house has no restrictions on pets, if that’s something you desire. Do you raise American Staffordshire Terriers, also known as pit bulls? There are neighbourhoods that ban this breed. Include your animals in location planning. Some pet owners choose wood or other hard flooring, not wanting to risk pet damage or odors. An appropriate-sized fenced backyard is on the “needs” list for many pet-owning house buyers. Consider the arrangement of rooms and the structure of the house to ensure it’s suitable for your pets, too. Traffic in the area could be another checklist item.

Pet services, such as veterinary, grooming, and exercising, should

be conveniently nearby.

LOCATION, LOCATION, LOCATION!

You must make sure to limit your search to a neighbourhood that offers the closest possible match to the kind of lifestyle that you like and want to live. In addition, based on the 2021 NAR Generational Trends Report, 62% of homebuyers ages 22-95 years old prioritized the quality of the neighborhood as a reason for purchasing a house and primary reason for neighborhood choice. Location is so important that people are willing to give up “must- have” features to buy into their desired neighbourhood — 72% would forget about a pool, 55% would lose a finished basement, and 33% would accept less square footage. What matters is living in a safe place with good schools. According to Trulia, 69% would drive through the neighbourhood during different times of day to determine if the neighbourhood was the right fit. You can’t go shopping for a home without choosing a location where you’d like to live. Probably the most significant decision when buying a home is where it is. Location influences your everyday life. Your property does not exist in a bubble; it’s part of a bigger community. It’s important to find a neighbourhood or area that suits your needs. Do you want the peace of a secluded woods, or the energy of a bustling city center? Do research before starting your search. Drive through the area and see if all the stores, activities, and features you want are there. Eat at local restaurants and walk through a nearby park. As price is mainly based on location and condition of the property, when

someone starts looking for their house, it’s important to consider the location and how far it is from schools, shopping areas, and other facilities. Home means comfort, and comfort can’t come if the location isn’t suitable.

CHAPTER 4 Searching for the Rig or the Right Home ht Home

Buying a home is an exciting event, but the process of finding the right one can be daunting. It’s a major investment. It’s an emotional time of making lifestyle decisions. It isn’t like buying a pair of shoes from the department store that are a bit snug, because you can’t just return the house if you’re not satisfied. Once you buy, you’re in for the long haul. To avoid costly mistakes that could haunt you for years, you need to make sure you do your homework properly when house hunting.

VIEWING A HOME

For most people, the prospect of going to view homes they like is a thrilling experience. It’s tempting to think that this is the first step to buying a home, but it’s not. Assuming you have your down payment, mortgage preapproval, and other financial issues handled, the first thing you need to do before viewing any home is to determine what you’re looking for. • What is your criteria? • Do you need a certain number of bedrooms and bathrooms? • Do you want a yard? Is a separate garden area necessary to your lifestyle? • Do you want property only in particular neighbourhoods? • How much are you willing or able to spend?

Answering these questions will save you significant time and effort in running around to view homes that don’t suit you. Once you’ve decided upon your criteria, call your real estate broker. Let them know what you’re looking for and what your price range is. They will get to work on your behalf, shortlisting the properties that meet your criteria so you can start your viewing from there. Then comes the fun part: Finding that perfect home you’ve been dreaming of!

SCHEDULE ADEQUATE TIME

When going to view homes, make sure you’ve got plenty of time to really view the home from a critical perspective. Schedule enough time to do a proper inspection. Look into all closets and crawl spaces. It’s possible you will be living there for years to come, so five minutes strolling around is not going to be adequate to form an opinion. Thirty minutes to view your potential house is an appropriate calendar entry. Research suggests that when buyers spend a longer time viewing a home, they are more likely to pay below the asking price.

BE THOROUGH

Related to scheduling adequate time to view the home, be thorough when checking it out. Open drawers, cabinets, and cupboards. Look behind furniture, and even under it to find stains or signs of wear not readily evident. Lift up rugs, if necessary. While this may seem rude, it’s not. You’re about to make a substantial investment and you need to know exactly what you’re getting. An artfully positioned chair could be hiding something, so feel free to look where you need to.

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