Frequently Asked Questions

Ken Scott | Broker of Record & Owner
Laima Scott | Sales Representative
519-651-6228 | kls@klsrealty.com

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The top eleven questions we hear the most from buyers:

Question 1

Q: Is location, location, location all that it is cracked up to be?

A: Location is the prime factor when it comes to Real Estate. When it is time for you to resale your home the value you receive is dependent on your location. Current and future amenities such as schools, groceries, highway accessibility etc play an important role.

Question 2

Q: What kind of home can I buy, afford for my budget?

A: There are two basic qualifications a mortgage lender wants to know when it comes to affordability. 1) GDS (Gross Debt Service Ratio) Lenders typically use a factor of 32%. This is 32% of your total gross annual income. If a couple buying a home has a combined gross income of $100,000, then $32,000 of it is what is used to pay your annual mortgage payment plus property taxes.(Principle, Interest and Property Taxes)(PIT). To look in terms monthly you divide $32,000 by 12. Therefore $2,667 is the qualification you have to buy a home to cover PIT. If we assume the property taxes are $450 per month and a 4% interest rate, then $2,667 – $450 = $2,217 per month which equates to an approximate mortgage allowance of $420,000.

Now, we still have to consider TDS. This is the same calculations as above except TDS means Total Debt Service Ratio. Here the financial institution will take into account all your other debts like monthly car payments, credit card obligations etc. The factor they use for this is 42%.

They compare the GDS to the TDS and use the lower of the two.

These amounts that we calculated is for what your mortgage allowance will be proving you have a fair size down payment. Without a 35% down payment then insurance premiums will be applicable on a sliding scale. See http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

The bottom line is the financial institution wants to have a high probability that you will be able to maintain your monthly financial obligations.

Also, it is important to know that what we discussed so far is to qualify the person(s) buying the home. The fact is the home has to qualify as well.

So, if you purchased a home for $465,000 and the lending institution only appraises the home for $450,000, then they will only give you financing based on that value of the home.

The best way to know what you qualify for is to consult a mortgage broker. They will go through all the aspects of mortgage financing and let you know based on your financial position, how much money you qualify for to buy a home

Question 3

Q: What are the other expenses associated with buying, purchasing a home?

A: Besides your down payment there is the land transfer tax typically around 1% of the purchase price up to around a purchase price of $300,000. The higher the purchase price the higher the land transfer tax will be on a sliding scale. (See the land transfer tax calculator under Buyer Info) Note that in Toronto they have a double land transfer tax fee. There is also your lawyer fee to close the transaction, typically $750 range, the cost for you to move, and the cost for hooking up your utilities.

Question 4

Q: Is the home I want to buy, purchase have good resale value?

A: The most important factor here is location as mentioned in question 1, but there are other factors to consider as well. Keeping the home well maintained and updated is also very important. When it comes time to resale your home cleanliness and removing any clutter will give you your best return. Also, when dealing with a professional realtor factors that may harm the resale value of your home will be disclosed. Tools such as a Seller Property Information Statement, Police Reports on Grow Ops, standard clauses that go into an offer relating to disclosures that could affect the present and future value of the home, will help you make an informed decision.

Question 5

Q: How do I get the best price I can when I want to buy, purchase a home

A: There is no substitute for having someone negotiate for you. The middleman takes all the heat, takes the emotion out of the equation. Most likely real estate is the most expensive asset you own and where family roots are formed. It is a professional realtor who understands the psychology of selling that will really become your most important asset. Every circumstance and situation will be different. Sometimes making a low offer makes sense, other times it be the worst thing you can do if you really want that home. A professional realtor, who researches the history of the home, who knows the location attributes or concerns, who communicates with the Seller representative to inquire about disclosures affecting the present and future value and who uses their experience in negotiating, will guide you in helping getting the best price you can for your new purchase.

Question 6

Q: What are the amenities in the area I want to buy, purchase in?

A: Research into the area you are buying is important. A local Real Estate Professional makes it their business to be informed about the area you want to buy in. There are also other sources you could research to feel comfortable about your new purchase location. The City Hall Planning Department is an excellent source. They have future development plans that would show you what new potential amenities are on file. You could also go to the local police department and find out if there area you are considering is perhaps less desirable than you may of thought. Neighbourhood grocery stores or small shop clerks may also be a good resource for you. The list goes on and on.

Question 7

Q: What does the Seller have to disclose to me?

A:Bottom line here is nothing. There is a term out there called Caveat Emptor meaning “Let the Buyer Beware”. A Professional Realtor who you have hired as a Buyer’s Representative has responsibilities to you to get the answers you need to know. Having the seller sign a Seller Property Information Statement is a great start to get your questions answered and even answer questions you never even thought of asking. There are two basic kinds of defects a property may have.

Latent Defect – A flaw or other imperfection in any article which is discovered after delivery; usually, latent defects are inherent weaknesses which normally are not detected by examination or routine tests, but which are present at time of manufacture and are aggravated by use. The seller most likely does not know about it.

Obvious Defect – The seller knows about it and so does everyone looking at the home.

Today most people buying a home are hiring a Professional Property Inspector. The cost range is between $300 -$500 dollars. The report they provide to you is very thorough and it usually takes between 2 -4 hours for an inspector to go through your home. It is best if you are there with them the day of inspection to learn about the home you want to buy. Sometimes after property inspections a buyer may not want to buy the home. Better to spend $500 then buy a multi thousand dollar problem. In most cases a compromise is made about the defects revealed in the home inspection report and the seller and buyer are happy.


Question 8

Q: What is Buyer’s Remorse?

A: Buyer’s Remorse is when you bought something and changed your mind about it. There is always nervousness when making a large purchase leaving you financially obligated. Not just from making sure you could afford the home by having a financing condition, or perhaps having to sell your existing home to be able to buy the one you want etc, but I’m talking about that gut wrenching feeling about questioning yourself if you made the right choice.

Signing a contract is serious business. Do not take lightly what you are signing. There have been many times where a seller has let the buyer walk away from the transaction by signing a mutual release because of a buyer’s personal circumstance, but just because it happened to a friend of yours, does not mean it could happen to you. Being informed, ready, willing and able is the best time to proceed.


Question 9

Q: What are risks in buying a home privately?

A: This is the largest, most sought after investment a person will make in their lifetime.
If you bought a TV and felt you made a mistake, you’ll kick yourself. What about a home?
Enough said.

Question 10

Q: What is a Buyer’s Contract and why should I sign one?

A: A Buyer’s Contract is just like a Listing Contract but instead of listing the property for sale, you are signing up a Buyer to work with you exclusively for a specified period of time to find a home.

It is not just that you are obligated to the realtor; the realtor is also obligated to you. There are many benefits a buyer will receive when choosing a realtor to represent them. The realtor’s job now is to find you the home you are looking for. Keep in mind that a Professional Realtor who is active in the market and communicating with other realtors sometimes knows what is coming up for sale before anyone else will. In this case the realtor’s obligation is to tell you. When it comes down to making an offer, the realtor’s obligation is get you the best price for the home that they can.

Knowing you have someone you can rely on when it comes to finding, investigating, researching and knowing pertinent information about the home you want to purchase, exclusively for you, cannot be more valuable.


Question 11

Q: Should I build myself a home, buy new home or buy a resale home?

A:There are pros and cons to each opportunity. Building a home can be very frustrating and rewarding at the same time. Trades people are going to favour the builders because that is their bread and butter. They will work for you but you will have to pay more money and frustration because you are not giving them volume business and the builders come first to them. Also, the builder will get volume discounts from suppliers as well.

Buying new, especially at the beginning of a subdivision usually gets you a good return on your investment. You also have a seven year Tarion Warranty and builders usually have a two year warranty from their suppliers and a one year warranty for construction issues around the home that need repair. Many times the home you purchased goes up in price before you move in. Keep in mind that closing dates are set far out and the builder’s have provisions for extending the closing dates if unforeseen events occur. The other factor to consider is the expense of finishing the home. Driveway, deck, landscaping, appliances, window coverings, finishing the basement, etc, all add up.

Buying resale has been so attractive to buyers because a lot of the items are completed. Also, the character of the neighbourhood has been established and you can feel and touch what you are buying. Resale however, does not come with warranties. After the property closes, what goes wrong is your problem. That is why it is important to get a property inspection, which will reveal any potential problems and outlines approximate cost for repairs. It’s all about making an informed decision.
It really depends on what adventure you are ready for in the stage of life you are at. Everyone is different and from a realtor’s point of view, you should try all three.

KLS Realty