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Archive for April, 2012

Finding the right home, with or without Mr. Right

By Robert Hof

This article, gleaned from April 19th’s Globe and Mail, addresses possible problems for women buying their first homes solo.

By Andrea Self

The Globe and Mail

I have a single friend sitting on the fence between buying and renting. She’s financially ready to make the leap into homeownership, but hesitant about doing it solo in case she meets someone soon.

Waiting for Mr. Right can derail a number of women’s homeownership plans, according to Sandra Rinomato, a realtor and owner of a full service brokerage in Toronto.

“I can’t tell you how many times a client asks what she’ll do if Mr. Right comes along, and I always say if he does, then okay, you can keep the investment in your portfolio and rent it, he can move in, or you sell it and take the equity,” she says. She speaks from personal experience, having at one point purchased property on her own while in a serious relationship. She was ready to start climbing the property ladder and he wasn’t.

More and more single women are entering the market, making up roughly one in four new buyers, according to Ms. Rinomato, who is currently hosting the new HGTV series, Buy Herself, focused on helping singles navigate the world of real estate.

The first step for those interested in home ownership is to run the numbers and ask themselves if they are financially stable. Start with a snapshot of your personal finances, to review where you stand with your assets, liabilities, and credit score. Then, dig into mortgage rates and get preapproved.

“If you are not preapproved, forget about starting your search. There is no reason to even look online if you have no idea how much you can afford,” Ms. Rinomato says.

I see her point, but it’s so tempting to click through MLS, browsing the homes you could buy if you had a little, or a lot, more money to work with. You come back to reality pretty quickly though once you start touring places that are within your budget.

“If I could pull a rabbit out of a hat I would, but we work within the budget,” laughs Ms. Rinomato. Searching outside your financial scope can derail the process, or financially stretch you further than you should be if you fall in love with something a few rungs out of your reach on the property ladder.

Aside from down payment, monthly mortgage costs, and emergency funds for the unexpected, it’s your responsibility to have a grasp on the countless other costs associated with buying your first place, like inspection, legal, and appraisal fees.

Ms. Rinomato says it’s not unusual for solo buyers to have unrealistic requirements, so sitting down with your wish list and prioritizing your needs and wants in a place is the launch pad to starting the search within your financial parameters. A strong team in your corner is also essential for a first-time buyer, and an understanding of the steps of buying, and how to will help you make the right investment decision.

Ms. Rinomato hopes her new TV series inspires women to at least ask if this is the right time to buy and not to hold back because they’re scared, or don’t think it’s an option, or think Mr. Right is around the corner. More importantly, she hopes women have the courage to leap confidently into homeownership if the time and the investment is right.

Angela Self is one of the founders of the Smart Cookies money group. Read her weekly column on managing debt and saving money at the Globe’s personal finance site.

Very interesting piece on foreign buyers

By Robert Hof

Something to think about. And please comment if you wish.

Debate on banning foreign buyers resurfaces

Written by  Vernon Clement Jones

It’s a controversial suggestion that isn’t about to go away, with new calls for a ban on property buying by foreigners — increasingly faulted for outbidding local investors.

The Financial Post’s right-leaning columnist Diane Francis is the latest to float the idea of dramatically clawing back the buying privileges of foreign nationals, whether they reside in Canada temporarily or seek to plant their investment flag in a country they’ve never called home.

More specifically, Francis is asking any temporary resident — a person with a work permit — be restricted to one owner-occupied residence, which must be sold when he or she leaves the country. That temporary resident would also be banned from buying any investment property for the purpose of leasing it.

The ban is all but complete for non-resident foreigners wanting homes or investment properties.

“The only exception is if a foreign entity doing business … wants to buy housing for its Australian staff,” she writes, referencing Australian law introduced in 2010 and advocating it as a model for Canada.

The suggestion echoes some Canadian property investors concerned that they are being shut out of the Vancouver and GTA markets as deep-pocketed Asian buyers ratchet up buying prices.

Francis points to a Toronto house sold in March for $400,000 above its $759,000 asking price. The new owners are Chinese nationals, buying the property as a college residence for their child.

It’s a strategy more and more Canadian investors are adopting, although GTA selling prices have largely limited the viability of those plans. Americans, still grappling with tight credit and decimated home equities are also complaining about an influx of Canadian competitors now moving in to buy condos, townhouse and multi-family properties, often with cash in hand.

Still, in this country, foreign investors can’t be blamed for the spike in condo construction in either Toronto or Vancouver, counter critics of any Canadian move to follow several Asian and Western markets already restricting foreign ownership.

They blame the price surge in this country on a buying spree by Canadians, themselves, relying on low-interest rates and “liberal” default insurance guidelines.

Decision to stick with mortgage rules praised

By Robert Hof

This piece is reproduced from the Toronto Star, March 31st, 2012

Some brokers feared tighter leash on buyers.

Canada’s mortgage brokers are applauding Ottawa’s decision to hold its fire on further measures that would make it tougher for home-buyers to borrow.

Having tightened the rules governing mortgages three times in the last three years, the federal government has kept its powder dry in the 2012 budget.

Instead, Ottawa said it plans to tighten its oversight of Canada Mortgage and Housing Corp., the national mortgage insurance agency.

“For the consumer, there’s no immediate changes,” said Jim Murphy, president and chief executive officer for the Canadian Association of Mortgage Professionals.

Too much tightening too soon could have the unintended effect of dampening demand for housing along with many construction jobs the sector creates, Murphy cautioned.

During pre-budget consultations, some lenders had argued the federal government should increase the required down payment to qualify for a loan to 7.5 per cent of the property’s value, up from the current 5 per cent. Some lenders also wanted Ottawa to reduce the length of time a home-buyer has to fully repay their loan from 25 years, down from the current 30 years maximum amortization period.

Both moves would have made it tougher to buy a home.

Ottawa has already tightened mortgage borrowing rules three times since the recession of 2008 as record low interest rates drove household debt loads to record highs. Both federal Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have cautioned that over-indebted households could run into trouble when interest rates start to rise.

There are signs those previous measures, which raised minimum down payments and shortened amortization periods, are working, Murphy said.

Household debt loads eased in the latest three-month period and condo sales in the overheated GTA market slowed down, he noted.

The government appears to be looking at bringing Canada Mortgage and Housing Corp. more closely under the control of the finance department. CMHC is currently part of the human resources department due to its historic role in promoting social housing.

They do it differently down there…

By Robert Hof

I have recently heard about the goings-on in the Toronto real estate market. A friend of a friend listed their modest row home for $269,000. The agent held an open house which was mobbed, and buyers were told to submit offers which would be dealt with the following Tuesday. There were 14 offers, all higher than asking, and the home sold for $335,000! And this is not an unusual situation. An unimproved bungalow in a desirable area listed at $750,000 and sold for $1.1 million according to the Toronto Star. It is apparently common practice for agents in Toronto to under-list properties hugely and create a bidding war.

Does this sound like good practice? Not in my book, and I hope it never happens here. This extremely inflationary way of selling a property may make the Sellers very happy – until they are on the other end of a transaction as a Buyer!  And what will happen when interest rates go up and the crazy Toronto market cools? Just doesn’t bear thinking about.

Here in Ottawa we list a property pretty well at market value and buyers do not have to go to war to buy a new home. This is our way and we going to stick with it. I hope!