Archive for May, 2012

Many of us pour our money into rental apartments or homes month after month because we don’t feel we could ever afford to buy in today’s real estate market.  Our hard-earned money is going to line somebody else’s pockets.

I’m asking you to take another look.  What are you paying for rent?

This very simple table will give you an idea of what a mortgage would cost you, making monthly payments, amortized over 25 years, at an interest rate of 3 per cent.

            $200,000                    $   946.49

            $250,000                    $1,183.11

            $300,000                    $1,419.74

            $350,000                    $1,656.36

            $400,000                    $1,891.98

 Even a small down payment will make a difference to these monthly payments.

You must not forget, however, that there are still property taxes and utilities to be paid and interest rates are bound to go up one of these days.

Keeping these things in mind, don’t you think it might be worth at least exploring the purchase option???

Call me

Kris

If you are a Buyer and need to sell your home before you can purchase a new one, here are a few things to consider when preparing your offer.

For the Buyer, a first refusal offer is the safe way to go.  The Buyer has found a home that they love and by adding the First Refusal Clause, the Seller is giving the Buyer the time they need to sell their home so that the Buyer will not own 2 homes or be homeless!

The first refusal buyer must remove all of their other conditions in order for the seller to grant the first refusal. The realtor® will insert a clause requiring the First Refusal to list their home on MLS® within 24 hours of acceptance of the offer.

The first refusal buyer must remove all of their other basic conditions (i.e. Financing, Home Inspection, etc.) in order for the seller to grant the first refusal. The realtor® will likely insert a clause requiring the First Refusal Buyer to list their home on MLS® within 24 hours of acceptance of the offer.  And today, with so many options available,  the Seller may even go as far as to state that the listing must offer the Buyer Agent a selling commission of 2.5%.  The reasoning behind this request is that if the seller is willing to give the Buyer the time to sell their home, then the Seller wants assurance that the Buyer is being as aggressive as possible in getting the home sold. And selling through an agent gives that advantage.

If the Buyer doesn’t not want to be tied to MLS®, then the Buyer has two options. 

Option A

Ask the Seller for a longer closing date.  In this case the Seller will be happier, because the sale of their home will not be tied to the sale of the Buyer’s home.  But the Buyer will need to get aggressive and sell their home in the time frame provided, otherwise the buyer may end up owning 2 homes.  This is the less risky decision for the Buyer if they want to maintain control of selling their home.  Once the Buyers’ home is sold, you can always discuss a new closing date and with mutual agreement of both the seller and the buyer, the date can be changed.

Option B

Check with your Financial Institution or Mortgage Broker during the pre-approval stage and ask about bridge Financing.  If the buyer is faced with owning 2 homes, it would be best to know this up front, BEFORE, putting an offer in on a home.  Each Buyer’s Financial situation if different as is each buyers aversion to RISK.  This is definitely the most risky option, but it might be the only option in a multiple offer situation.

Everyone’s situation if different and everyone’s tolerance to risk is different.  So discuss your options with your Real Estate Agent to get the right clauses into your Purchase and Sale Agreement!

Kris

If you are a Seller and you receive an offer containing a “First Refusal Clause”, here is what you need to know: 

For the Seller, a first refusal offer  is a bit nerve racking when you’re selling a home. You may receive an offer that you really like from a buyer, but you don’t  fully understand what the First Refusal Clause means to you..

The first refusal buyer must remove all of their other basic conditions (i.e. Financing, Home Inspection, etc.) in order for the seller to grant the first refusal. The realtor® will likely insert a clause requiring the First Refusal Buyer to list their home on MLS® within 24 hours of acceptance of the offer.  And today, with so many options available,  the Seller may even go as far as to state that the listing must offer the Buyer Agent a selling commission of 2.5%.  The reasoning behind this request is that if the seller is willing to give the Buyer the time to sell their home, then the Seller wants assurance that the Buyer is being as aggressive as possible in getting the home sold.

The First Refusal Clause will have a timeframe for the Buyer to sell their home, typically 3-5 weeks and will also have the number of hours that the Buyer will  have to remove all of their conditions should you receive a satisfactory second offer. Again, typically 24-48 hours.  Usually, if the buyer does not have an offer on their home, they cannot firm up and the home is now sold to the second Buyer. 

If the Sellers receive a second offer, it does not have to match the first offer price; it is a new negotiation and those buyers will not know what was previously agreed.

In the same sense, if the second offer is better than the first, the First Buyer does not need to match the second offer.

PROS of the First Refusal Clause for the Seller:

1. It shows the market that someone else loves your home.
2. The building and septic inspections would be completed and paid for by the buyer, so you would be aware of any shortcomings with the property.
3. A first refusal usually commands a selling price that’s closer to list price.
4. Your realtor® works hard to have the other property sold. (Your realtor® would first evaluate the likelihood of the back-up selling based on current market conditions and pricing, and advice you of the risks involved.)
5. A second offer forces the First Refusal firm up their offer or walk away, but this is after the second buyers have waived all conditions. So as the Seller, the second offer Guarantees that your house is sold!
6. During the time that the Buyer has to sell their home, MLS still shows the Sellers property as Active so the public will still have interest.

CONS of First Refusal:

1. The Seller cannot secure bridge financing with a First Refusal as the bank considers it a conditional offer.
2. Some realtors® shy away from showing first refusals as they are afraid their buyers will fall in love with the property and then not be able to have it if the First Refusal  Buyer firms up their offer.
3. You have to continue to show the home and market it.
4. The back-up property may not sell.
5. Some buyers will not want to make an offer, pay for a septic and for a building inspection at a cost of approx. $1,000 and then lose the property. For this reason, sometimes the Seller offers to pay for the second buyer’s inspections should they not be the successful buyers.
6. The realtor® sees the first refusal comments on MLS and will advise their buyer accordingly.

If you are faced with a decision regarding a First Refusal Clause, take some time to fully understand the offer and ask questions of your realtor®.