Fixed or Variable Rate Mortgage?

Some interesting posts raised in today’s Globe and Mail article. The gap between the two types of mortgages is smaller than it has been for quite some time causing many to consider opting for a fixed rate mortgage.

In a fixed rate mortgage, the interest rate, and hence periodic payment, remains fixed for the term of the loan. Therefore the payment is fixed and payments for principal and interest should not change over the life of the loan. With a variable rate mortgage, on the other hand, the interest rate ‘floats’ and this may result in a fluctuating monthly payment.

The considerations for home owners have not changed? How much risk can you tolerate? How long is your time frame for owning the property? Where do you see the prime rate going and when, etc?

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

Are Strata Fee Estimates for Strata Developments Reliable?

Ever wondered how developers set strata fees before a new strata building is even built? Good information on just that in a recent Vancouver Sun article. Developers are tasked with estimating monthly strata fees for their future development projects. It might be tempting for developers to make fees appear lower than they are actually likely to be in if gives them a leg up when courting potential buyers. Apparently this is not common practice and developers are subject to strong penalties as a disincentive to underestimating potential strata fees.

I have seen this happen on one occasion but I’m not sure if it was a case of poor accounting skills, outright deceit by the developer or a bit of both. The developer was required to make up the shortfall in the strata fees to cover the first year’s annual budget.

The best way to avoid this scenario as a buyer is to retain the services of a Realtor who can assist with the due diligence and fully investigate an offering for sale.

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

I just bought a new house, or did I?

Happy day! You’ve gone and had your offer accepted for your brand new dream condo or house. But wait! A few days have passed and you’ve got a bad case of buyer’s remorse. What to do now? Well, if you live in BC, you may simply rescind your offer in the first seven days after your offer was accepted or you received the developer’s Disclosure Statement – whichever was later. Rights of Rescission are part of the Real Estate Development Marketing Act (REDMA) and apply to most new development properties in BC. There are exemptions to this rule so check with your local knowledgeable REALTOR® for full details on how the laws work for a particular property. An excerpt from the Real Estate Development Marketing Act:

Under section 21 of the Real Estate Development Marketing Act, the purchaser or lessee of a development unit may rescind (cancel) the contract of purchase and sale or contract to lease by serving written notice on the developer or the developer’s brokerage, within 7 days after the later of the date the contract was entered into or the date the purchaser or lessee received a copy of this Disclosure Statement.

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

BC New Home Warranty – How protected are you?

Just like any warranty, a new home warranty policy should be closely scrutinized before finalizing a property purchase. Always bear in mind that warranty companies are not in business to payout large sums of money if they have any way of avoiding doing so. Also, do as much research on the builder (not just the developer as this is often a separate company) as possible and research previous projects they have built.

What is it and how does it protect me?
A new home warranty policy provides for deficiencies in construction. If problems are discovered and not addressed by the builder then a claim can be made with the warranty company to remedy the deficiencies.

What is covered and what is the minimum coverage term required by law in BC?
Coverage varies depending on whether or not the property is strata or a detached home. All builders in BC must be licensed by the Homeowner Protection Office (HPO) and must provide at least a 2-5-10 new home warranty. A typical 2-5-10 example:

2 Years – Materials and Labour Defects
5 Years – Building Envelope Defects (including water penetration)
10 Years – Structural Defects

Does the fact that a builder is registered and therefore able to offer me a new home warranty ensure a high build quality?
No. Do your own due diligence and check out the builder’s history. How long have they been building? Any problem projects they’ve been involved in? It will often be much easier to choose a high quality builder at the outset then to try to collect on a home warranty policy after the property is complete.

Are there any limits on claim amounts?
Yes, the limits are as follows:

Fee simple (primarily detached dwelling units):
• The lesser of the first owner’s purchase price or $200,000.

Strata homes:
• Strata unit: lesser of the first owner’s purchase price or $100,000.
• Common property: the lesser of $100,000 times the number of dwelling units in the building or $2.5 million per building.

Is it transferable?
Yes. The warranty is tied to the property and will transfer to subsequent owners based on the initial policy commencement date.

I welcome any questions you may have about selling or buying.
Feel free to comment or contact me directly.

More Info:
New Home Warranty Brochure from the HPO

“I Have an Accepted Offer on a Property – Can I Skip the Home Inspection?”

Are you a gambler by nature? Making the choice to not have an inspection done on your next potential home purchase could end up being a very costly mistake. Even newer properties can benefit from a full inspection for peace of mind. There are several reasons why ordering a home inspection makes sense:

  1. The inspection cost (usually between $400-$600) represents only a very small percentage of the purchase price yet can save you thousands or even tens of thousands in future repair costs.
  2. Home inspectors are now regulated and must be licensed in BC and can advise you on the positives and negatives of a particular property.
  3. Home inspectors are a neutral party and can give you unbiased advice on the condition of your potential home purchase.
  4. All reputable home inspectors will generate a full report for your review after completing the inspection.
  5. In certain situations your REALTOR® may be able to negotiate price reductions on your behalf following an inspection.

The inspection itself will usually take between 2-4 hours. I recommend that the buyers meet the inspector at the property as he/she is finishing so that they can do the walk-through with the inspector as he/she points out deficiencies, etc.

I welcome any questions you may have about selling or buying.
Feel free to comment or contact me directly.

Further Information:
Canadian Association of Home & Property Inspectors (BC)
BC Institute of Property Inspectors (BCIPI)

Top 7 Home Inspection Red Flags for Buyers

A home inspection performed by a licensed home inspector (not your uncle’s brother-in law even though he may have worked as a plumber’s helper in Saskatoon in the summer of 1983) should be a part of the due diligence for every property purchase.  All sorts of interesting tidbits may come out of a thorough home inspection. Certain items can be more costly to remedy to others. A red flag list should include:

  • Health and safety concerns: mould, faulty construction, etc.
  • Roof replacement – one of the most costly home maintenance items
  • Heating/Cooling system problems – these systems, especially furnaces can be costly to repair/replace
  • Foundation issues – cracking, settlement, etc.
  • Moisture/drainage issues
  • Electrical/wiring issues
  • Plumbing problemshome-inspection-house

Other problems may show up on a home inspection report that should all be carefully considered when deciding whether or not to proceed with a purchase. Certain problems may necessitate further investigation by other specialists as home inspectors tend to be generalists.

A home inspection in the Lower Mainland usually starts from around $400.00. This cost is infinitesimal relative to property costs in our area and is money well spent.

I’d love to hear in the comments below if anyone has had particularly interesting home inspection results.

HST – How it Will Apply to Real Estate Purchases in BC

Result of the tax grab
The government's effect on your wallet.

The HST is coming to BC and it may end up costing you more on the purchase of a home in Vancouver and all of BC. Currently the GST (5%) minus any applicable New Housing Rebate applies to new and substantially renovated properties. The new HST (12%) replaces the GST and comes into existence on July 1, 2010. You may be eligible for a new housing rebate after this date.

Here’s a breakdown of how the new tax will work:

  • A rebate will apply to properties up to a maximum price of $525,000.
  • The rebate is equal to 71.43% of the provincial portion (7%) of the HST payable up to a maximum rebate of $26,250
  • Homes above $525,000 will receive a flat rebate of $26,250.
  • HST is only applicable to new or substantially renovated (more than 90%) properties – resale properties are exempt.
  • The new housing rebates will be administered by the Canada Revenue Agency.
  • New Rental Housing will be eligible for a rebate
  • Recreational Property not used as a primary residence will not be eligible for any rebate.

There is a vocal lobby challenging the legality of the new tax but it will likely take months or years for the courts to decide if the tax is here to stay in its initial implementation. Don’t hold your breath waiting for an end to the new tax.

Links to further government information:

Please leave any questions and/or comments below and I’ll get back to you with further information.

(information courtesy of the Real Estate Board of Greater Vancouver, Government of British Columbia and Canada Revenue Agency)