If you're planning on finding your next dream home, then you're probably going to view several homes on the market that meet your criteria.

 

You will want to make the right purchasing decision for you and your family. So, it's wise to be savvy when viewing properties for sale. Here are some ideas on how to do that.

 

  • Bring a notepad. Take notes, not only of the home's characteristics, but also of how you feel. For example, can you imagine yourself happily cooking up a storm in the kitchen? Do you see yourself entertaining family on the back deck?

 

  • Bring a measuring tape. Will the furniture you plan to bring fit? Your dining room suite? Your home fitness equipment?

 

  • Ask about maintenance. Is the property in a good state of repair? Will anything need to be replaced soon, such as the windows?

 

  • Bring a camera. Take lots of pictures of the home's exterior features. Don't make the mistake of thinking you'll remember how everything looked.

 

  • Check out the area. Do other homeowners take good care of their properties? This shows pride of ownership. How is the noise level? Is there a playground, or another area feature nearby?

 

  • Make a list of compromises. For example, are there only two bathrooms instead of three and, if so, can you live with that?

 

  • Make a list of bonuses. What features does the home have that, are not a necessity, but would be nice to have? For example, an entertainment bar in the basement recreation room.

 

  • Remember your budget. Is the price within your range? Can you afford to buy this home?

 

The savvier you are when viewing properties on the market, the more likely you will be to find your next dream home.

 

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What are the differences between buying a brand new home or a re-sale one? There are alot of factors to take in consideration besides the age. Yes, it is very nice to own a property that no one has lived in before, but there are downsides to buying new as well. Here is a list of pros & cons associated with each. Be informed and make the best decidion!


Brand New - The Pros

 

1) Personalized Choices


When purchasing a brand new home, you may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures and have these installed for you prior to taking possession.

2) Latest Codes & Standards


With any new construction the latest building codes, electrical and energy-efficiency standards will be applied. You can feel safe knowing that you are getting a product with the most recent safety standards.

3) Low Maintenance Costs & Open Bylaws


Since the building is brand new, you will general find lower monthly maintenance costs in strata properties. The building will fall under the required warranty coverage so there is not a need to have a large contingency fund at this stage. You will also find the most open bylaws with new construction. As time goes on and problems arise restrictions on pets and rentals are usually imposed.

4) Builder Warranty


In British Columbia, builders must be licensed by the Homeowner Protection Office and arrange for third-party home warranty insurance. As a minimum, homes built by Licensed Residential Builders must have the
2-5-10 Year Home Warranty Insurance - the strongest construction defect insurance in Canada. Some new homes have warranty insurance coverage that exceeds the minimum requirement.

 

Brand New - The Cons

 

1) Price is Non-Negotiable

 

When you are buying directly from the Developer the asking price for strata properties is generally firm and there is no room for negotiation. The only negotiable items when buying brand new units are usually the extra items, such as storgae lockers and parking stalls, or the deposit structure, but even this is not guaranteed. The purchase price, for the most part, is set in stone.

 

2) Sales Tax Applicable

 

GST/PST sales tax applies to all brand new construction. This means that when you purchase a brand new home you must pay the 5% GST and 2% Transitional Tax or PST on top of the purchase price. There are some government rebates that a purchaser may be eligible for as a first time home buyer buying a property under $450,000, but the sales tax must still be paid upfront at closing and rebates (if eligible) will only be for a portion of the tax amount.

 

Some sales centres for new construction homes will include the NET sales tax within the purchase price. This means that they are including the tax amount payable AFTER eligible rebates. In return, you must assign your rebates to the developer at the time of purchase.

 

For more information about the GST New Housing Rebate program, visit the Canada Revenue Agency website at, http://www.cra-arc.gc.ca.

 

3) Extra Costs

 

Don't be fooled by the show suites - these units usually have all "extra upgades" that are not included in the purchase price, which can add up to be anywhere from an extra $20,000 on top of the purchase price! So if you want to add the shelving units, fancy appliances, and crown moulding you see in the show suite, you better be ready to pay for them!

 

4) Buying from a Floor-Plan

 

When you are purchasing a pre-sale, you are making the decision to buy a unit largely based upon the building model and floor-plan. You do not actually SEE the home that you are buying. Athough you may be using the show suite as a guideline, the end result may come out quite differently than you were anticipating. In addition, the contract of purchase and sale prepared by the Developer usually contains a variance clause, allowing the final unit to vary by a specified degree from the original floorplan. This means that in the end there could be a wall where there was none before, or that the square footage may be slightly different than the original plan. Unless you can see the actual unit, you do not really know exacly what you are buying.

 

5) Things can Change


Issues can arise during construction and dates can be post-poned, or even moved earlier! The contract of purchase and sale prepared by the Developer usually contains a clause allowing the Developer to push or pull the dates a certain number of times upon giving notice to all purchasers. So when you think the Completion Date will be next May, it may end up being next winter and there is nothing you can do about it.

 

6) Developer's Contract of Purchase & Sale


Pre-sales do not use the same standard contracts that are used when purchasing re-sale homes. Rather, pre-sales have a contract of purchase and sale that has been drafted specifically for the Developer. This means that there are extra clauses inserted that allow the Developer to extend dates, etc. These contracts are much more lengthy than standard contracts and they must be read in full so that you know exactly what you are getting into. In addition, the sales representatives at the presentation center, like the contract, are working for the Developer. If you do plan to buy a pre-sale unit, bring in an outside Realtor to examine the contract and best represent you.


Re Sales - The Pros


1) Price is Negotiable


Unlike pre-sale units, the final purchase price for re-sale properties is almost always less than what the Seller is initially asking (unless a hot market with multiple offer situations). With the guidance of a Realtor, you can negotiatie the purchase price by any amount, depending on the current market situation and the motivation of the Seller, and you have the potential to get the property for anywhere from $2,000 to $100,000 less than asking!


2) No Sales Tax


Unlike brand new homes, you don't have to pay GST or PST on re-sales, as this sales tax is only paid once when a property is purchased for the very first time.


3) What You See is What You Get


You are not buying a property based upon a floorplan or building model and there is no "variance clause" allowing the final product to come out differently. What you see is what you get! 


4) Your Contract of Purchase & Sale


Re-sales use a standard contract of purchase & sale that is drafted, with the guidance of your Realtor, to fully represent you. You can ask for anything you want in this contract and anything can be negotiaited with the Seller. You are not using a contract of purchase & sales that has been specifically drafted to represent the Developer's interests.


5) Established Neighbourhoods & Amenities


Newly developed areas may take years to establish the proposed schdools, shopping malls and services, but these will all be in existence in previously developed areas.

 

Re Sales - The Cons

 

1) Warranty Coverage

 

The older a building gets, the less warranty coverage it has. After 10 years you fall out of the builder's 2-5-10 warranty coverage and it becomes increasingly important to have a healthy contingency reserve fund for strata properties. Detached homes will also fall out of this coverage after 10 years, at that point any major repairs will be at the cost of the owner.

 

2) May need Updating or Repairs

 

Before purchasing a re-sale home it is very important to examine whether any major repairs are needed, as these can ultimately cost you money. Make your offer subject to a professional inspection in order to fully evaluate whether the previous owner has kept the home well maintained, or whether you will need to make major repairs. If big repairs are needed, this should ultimatley be reflected in the negotiated purchase price.

 

3) Higher Maintenance Fees


As strata properties age, maintenance fees go up in anticipation, or need, of upcoming repairs. A well-prepared strata will have a repair plan and budget that keeps on top of all maintenance so that strata fees are kept in moderation while building repairs are carried out. This is why it is important to write an offer subject to review all strata documents in order to determine the competency of the strata council.

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June 2013

 
 

June 2013 Monthly Report

First, a mea culpa: last month, we speculated that it was likely that we would now have an NDP government. Like everyone else, we were wrong. With the Liberals' reelection, it's likely that there will not be any big surprises that will impact the housing market. Expect the status quo.

 

One sector that will likely benefit from having a Liberal over an NDP government is the commercial real estate market. After a strong run in the residential real estate market over the past several years, more and more people have begun asking questions about commercial real estate and its viability as an investment product. The answer to this question is that commercial real estate has proven to be a strong, stable investment, especially when compared to the recent volatility in the stock market or the infinitesimal interest rate returns being paid out by banks.

 

BC, in particular, has seen a disproportionate number of fortunes being made in commercial real estate (http://www.vancouversun.com/health/Cancer+donation+sets+record/6676983/story.html). In fact, 4 of the 8 BC-based billionaires made their fortunes through commercial real estate investments (http://en.wikipedia.org/wiki/List_of_Canadians_by_net_worth).

 

So what are the similarities and differences between residential and commercial real estate?

 

Residential and Commercial real estate share some commonalities and the licence to trade either asset is the same. That being said, because there are several key differences, real estate agents typically focus on one category or the other. There are exceptions, of course, and in smaller markets, agents often need to sell all manner of real estate. Macdonald Realty's sister company, Macdonald Commercial (http://www.macdonaldcommercial.com) offers professional commercial real estate services in all seven (7) main commercial real estate asset classes:

 

  • 1) Land
  • 2) Office
  • 3) Retail (Stores, Malls, Shopping Centres, etc.)
  • 4) Industrial (Warehouses, Distribution Centres, Industrial Manufacturing, etc.)
  • 5) Multifamily (Apartments)
  • 6) Leisure (Hotels, Sport Facilities, etc.)
  • 7) Healthcare (Medical Centres, Nursing Homes, etc.)

 

Pros of Buying Residential Real Estate:

 

  • It's the only investment product that you can also live in.
  • The Principal Residence Exemption (http://www.taxtips.ca/filing/principalresidence.htm) is the single biggest tax loophole that the typical Canadian can take advantage of.
  • The Realtor MLS system makes the residential market more liquid and transparent.

 

Because of this, buying a principal residence is one of the best investments you can make. That said, if you're considering buying real estate as a pure investment, you may also want to consider commercial.

Pros of Buying Commercial Real Estate:

 

  • Most commercial tenancies (except multifamily) are triple net, meaning the tenant(s) is responsible for paying (1) property tax, (2) insurance, and (3) common area maintenance of the leased property IN ADDITION to their negotiated lease rate. In residential, the landlord is primarily responsible for these three items and must pay it out of the rent he collects.
  • Commercial leases are generally considered to have been negotiated between two equal parties, meaning that both sides need to adhere to the stipulations of the lease. In residential, the Residential Tenancy Act is heavily tilted in favour of the tenant, meaning that it is much more difficult to get rid of bad tenants in residential real estate.
  • The commercial real estate market is generally more stable than residential real estate market because it is more likely to be based on 5- to 10-year prevailing lease rates rather than psychology or speculation. This means it generally has a more objective economic rationale underpinning the price than the residential real estate market.

The reason that many people shy away from commercial real estate is one of familiarity. Everyone has had the experience of living in a residential property and therefore has at least a rudimentary knowledge of what it is. In commercial, there are so many different asset categories that even seasoned commercial agents tend to focus on a few of them. After all, a nursing home, a parking lot, and a hotel all require different management skill sets. Fortunately, professional property management companies, like Macdonald Commercial (http://www.macdonaldpm.com/), can help you manage a wide range of assets.

 

If you're interested in learning more about investing in real estate, either commercial or residential, feel free to contact me at the address above.

 

 
   
  (Click chart to see larger image)  
 
 
*This communication is not intended to cause or induce breach of an existing agency agreement.

*Although this information has been received from sources deemed reliable, we assume no responsibility for its accuracy, and without offering advice, make this submission to prior sale or lease, change in price or terms, and withdrawal without notice.
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