In: Real Estate News13 Sep 2011
Real estate agents who represent buyers have it easy. The agent representing the buyer receives the commission listed in the MLS listings (typically 2.5%). Or, if they have a buyer agency agreement, they receive the commission listed in the agreement (typically 2.5%). All the agent has to do is show the buyer homes and put in offers. Some agents will offer 1% or even 2% back to buyers. Find one of these agents!! 1 − 2% back in commission equals $4000-$8,000 on a $400,000 home. That’s a lot of money. When a buyer’s agent offers 2% back, it means that they are working for .5%. .5% on a $400,000 home is $2,000. If the agent works for 10 hours, it means that they earn $200/hr. Still not a bad wage. However, if the agent spend 100 hours on finding the buyers a home, then their rate would be $20/hr. Not that good a wage.
Sell privately or sell privately on MLS with a flat fee listing. If you use an agent, try to avoid paying 2.5% to the listing agent. Some brokerages will list a home on MLS for $499.
If the home inspection shows deficiencies in the property, then request a drop in the agreed selling price. If the buyer was unaware of significant repairs when they negotiated the price, why would a buyer pay a that price when they learn of the deficiencies? Don’t be shy. Ask for a discount in the agreed price?
These days, when everyone wants to buy a home, it is often required for a 1st time home buyer to have a parent be a guarantor of the mortgage. This is perfectly acceptable and it happens all the time. However, just because a parent guarantee’s the mortgage, does not mean that they need to be on title. If they are put on title, and they want to be removed later, this will cost $1,000-$2,000 in legal fees and you might need to pay land transfer taxes, again, as well.
Toronto has 2 land transfer taxes. This results in an extra 2-3% going to the government. Buying a $500,000 home could result in a land transfer tax in excess of $10,000. If you have a choice, and you want to save $5,000, buy in another city. York Region, Mississauga, Pickering…
Remember that Legal fees and real estate fees are taxable. So in addition to paying $20,000 to an agent and lawyer, you will need to pay an extra $2,600 in HST (in Ontario). Whenever you can reduce legal fees or real estate fees, you will be additionally saving (13%) taxes on those fees.
It’s true that a good real estate lawyer is very important. If the deal get’s messy, they can do great work and save you lots of money. However, if it’s a standard residential real estate transaction, then you might consider trying to find a very good, low priced lawyer.
It’s funny how some home buyers and sellers will argue about a $2,000 fridge for days, but when it comes to their mortgage, they don’t give it 5 minutes of thought. Mortgage interest is a significant expense. Because of the amounts involved, a small change in interest rate, can save thousands over time. You should use a mortgage broker, but also do your own research. A good starting point on rates to beat are the online rates for online banks. PC financial and ING post low rates. Those are your starting rates. You mortgage broker should be able to beat those. If you’re paying more than PC financial or ING, then your wasting money.
One tip to avoid paying high condo fees is to choose a building that is 5-10 years old. Also, building with lots of units will have less fees because the fees are spread over many units. New condos tend to start with lower fees, but quickly increase them. Having a condo fee go from $300 a month to $500 a month is significant. $200 a month is $2,400 a year.
Builders tend to charge much higher prices for upgrades. Hardwood floors, granite counters, pot lights…when a builder quotes a price, don’t commit. Instead start asking for other quotes from other contractors. If you see a significant difference and the builders prices are much higher, then don’t have the builder add the extras. Instead get the base model from the builder and have another contractor put in the extras when you take title of the property. Sure, this is more inconvenient, but if you can save $20,000 by waiting another month to move it, then it might be worth it.
Money is money. You work hard for it. Don’t spend it where it doesn’t count. Saving $20,000 to $30,000 when you buy or sell a home means a smaller mortgage. When you save $30,000 when you buy a home, it means a $30,000 smaller mortgage. If you pay 4% on this amount over 25 years, it means you saved much more than $30,000. You actually saved$66,000. Money adds up.
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Real estate news in Canada including buy and sell information, local market updates, guides, tips for Canadians in the real estate market.