Blog.ByTheOwner.com

Here is the 7 step process to save $29,400 in 13 days.

1. Subscribe online at ByTheOwner.com and choose the premium plus package.

2. Have our ByTheOwner.com representative take amazing HDR photos.

3. Have Randall Weese, licensed real estate professional, provide you with a Comparative Market Analysis.

4. Receive offers and call the ByTheOwner.com sales coach with any questions.

5. Ignore the real estate agents that call to solicit your listing.

6. Accept a great offer and pay no commissions!

7. Save $29,400 in real estate commission and taxes.

Isn’t it great when everything works the way it’s supposed to? That was the case with this ByTheOwner.com customer and the customer now has almost 30 thousand dollars in his pocket.

There are a few ways that the above situation might not have happened.

- The customer could have listen to the agents that called, listed, and paid $30,000 in commissions.
- The customer could have posted on a lesser website, with poor photos no buyers.
- The customer could have not chosen a package with CMA and listed their property too high or too low.
- The customer could have not taken advantage of our sales coach and perhaps not have received answers to their questions.

..but that didn’t happen and the customer saved enough for a new car!

ByTheOwner.com provides all the tools and support for you to succeed in selling your home and saving thousands of dollars in real estate commissions. The real estate market is very hot right now. There is a very high demand and a low inventory of quality homes for sale. If you have a great home, now is the perfect time to sell privately.

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In order for a buyer to purchase a house, they first need to qualify for a mortgage. Also, in order for a seller to sell a house, they need a qualified buyer.

This blog post will examine what buyers will need so that they qualify to obtain a mortgage.

Down Payment

Buyers must have at least 5% of the purchase price of the home for the down payment. That means that for a $300,000 home, the buyer must have at least $15,000 in their bank account. For a $400,000 home, the buyers must have $20,000 in their bank account. This amount should be actual money. It can’t be from a line of credit, or from other sources which would require the money to be paid back.

Seller Tip: If you have a serious buyer for your home, you could ask them if they are putting 5% or 10% down. This will help you determine how much money they have in the bank.

Regular Income (Job)

In order to be qualified for a mortgage, buyers have to have regular income from their job. The banks will ask for proof (T4, pay statements) before they approve your mortgage. Their annual income will be a main factor in how much money buyers can borrow. A good rule of thumb is 3 times your income, but at today’s rates, a better rule of thumb is 4-5 times income. This means if the buyers’ combined family income is $100,000, they should be able to obtain a mortgage for $400,000.

Seller Tip: Ask the buyers what they do for a living. If they say “Teacher” and “Police Officer”, then you know that they should have no trouble obtaining a large mortgage and there is a great chance that any offer you accept will not have financing problems. However if they say “Fast Food Customer Service” and “Nortel”, then there is a possibility that the buyers might not be approved for the financing. Self employed individuals also have different requirements to qualify for a mortgage.

Credit Score

The buyer’s credit score will have a significant impact on their ability to obtain a mortgage. Buyers should already be aware of their credit score before they put in an offer on a home.

Seller Tip: Ask the buyers if they have obtained a credit check yet. If they have not, you should suggest that they call equifax or transunion. Suggest that they will need it anyways and if they let the banks check their credit, then it hurts their credit score (so they should get it themselves).

Low Debts

How much money the buyers can borrow is a function of how much money they make, but also how much debt they have. Banks will look at two numbers:

Gross Debt Serviced: This number examines how much money the buyers make and compares it to the monthly costs of the mortgage and the home (taxes, heating). The monthly housing costs can’t be more than 32% of your income.

Example:

Income: $100,000
GDS (32%) = $32,000 ($2,666 per month)
Using this measure, the mortgage, taxes and heating should not be more than $2,666 per month.

Total Debt Serviced: This number is similar to the GDS above, but it includes other debts (car payments, credit cards, line of credit…). If the buyer has lots of debts, then it will reduce the amount of mortgage that they will be approved for. The Total Debt Serviced (TDS) should not be more than 40% of your income.

Example:

If you have the following monthly debt payments:

Car = $800
Line of credit = $300
Credit cards = $150
Student Loan = $150

This would equal $1400 in monthly debt obligations. If you made $100,000 a year ($8,333 a month). That means your mortgage and housing costs could not be more than $1,933 a month ($8,333 x 40% - $1,400 = $1,933).

Summary: It becomes difficult (and a waste of time) for both buyers and sellers if buyers are not qualified to purchase a home. The best solution for a seller is to ask a lot of questions, and the best solution for a buyer is to do some research so that they know what they can (and can’t) afford.

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Taking out a mortgage is a big step. An average mortgage for a buyer is approximately $300,000. When you agree to take on that mortgage, you are agreeing to pay that money back to the bank for the next 25-35 years (plus interest) regardless if you are hurt, or deceased.

What happens if you pass away? Your estate, or family, is still required to make those mortgage payments. One solution for your family, if you pass away, might be to sell the home and pay off the mortgage, however, this solution might not be ideal. This is why people have mortgage insurance or life insurance. Your insurance will cover the costs of the mortgage if anything happens. If you are looking to protect your family if anything happens to you, there are two different types of insurance that you can have: Term Life Insurance and Mortgage Life Insurance. Let’s examine the difference:

Mortgage Life Insurance:

If you have Mortgage Life Insurance and you pass away, then the bank will pay off your entire mortgage. You will not receive any money, you will simply no longer have a mortgage. Mortgage life insurance is usually offered to you by your bank when you take out your mortgage. Many people choose this option because it is very convenient to have your Mortgage Life Insurance through the same bank that holds your mortgage. The payments are taken out at the same time and they show up on your mortgage statement. However, your might be paying EXTRA for that convenience.

Some of the disadvantages of using Mortgage Life Insurance is that the coverage will only insure the cost of your mortgage. So if the main income earner passes away, Mortgage Life Insurance will pay off the mortgage, but it will not cover other debts or obligations such as credit card debt or car payments.

Term Life Insurance

Term Life Insurance will cover a person for a certain amount of money if they pass away. You will receive a large sum of money and the insurance money can be used by the beneficiary however they choose. This type of insurance might be better than Mortgage Life Insurance for several reasons:

1. You can use the payout as you please. If you have a $300,000 Term Life Insurance Policy, you can use that money to pay off some of the mortgage or car debt, or credit card debt. This allows the beneficary more options.

2. Term Life Insurance is sometimes less expensive. According to Kanetix, if would be less expensive to obtain a $250,000 Term Life Insurance policy compared to a $250,000 Mortgage Life Insurance Policy. The month savings could add up to more than $5,000 to $10,000 over the length of your mortgage.

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For the 1st time in our history, ByTheOwner.com has passed 7,000 homes sold in one year. We achieved this new milestone last week, proving that ByTheOwner.com is the most successful Private Sale company in Canada. 2009 has been an exceptional year for our customers and we look forward to passing more than 10,000 homes sold in 2010.

Our Customers Deserve The Credit

ByTheOwner.com provides the same high level of service for all our customers. We take the best real estate photos available in order to make sure our customer’s homes look their best. The ByTheOwner.com network is the most visited in Canada so our customers receive the maximum exposure. However, it is through the effort of our customers that we are able to help more and more people sell privately and save money.

Our customers are motivated to save money. They know that they will save up to 5% of their home’s value by selling with ByTheOwner.com. This equals more than $15,000 on a $300,000 home. Our customers are doing the research, having open houses, contacting their lawyer, and withstanding all the real estate agents who contact them to list their home. This effort is resulting in great savings for our customers, and fantastic testimonials for ByTheOwner.com.

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The weather in Ontario has been so beautiful this November that it’s hard to even imagine that snow will come….but it will. That’s why now is a great time to put your home up for sale. The real estate market is hot and so is the weather. This week’s forecast in Southern Ontario will range from 9 degrees to 1 degree. The sun will be shining and your grass will still be green. A perfect time for photos.

Here is an front photo from a home taken over the weekend:

Here is a photo of another home taken last winter:

In Toronto, here is the monthly snowfall from November 2008 to January 2009.

Nov: 13.1 cm
Dec: 64.8 cm
Jan: 45.2 cm

December’s total is more than 2 feet of snow!

To help our customers fully prepare for the winter, ByTheOwner.com is now offering 8 photos and 8 months on our website for all new listings. The offer is available until Jan 1st. So if you act now, you will receive even more HDR photos in order to show off your home (with no snow!).

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1. Predict Your Future

The type of mortgage you receive should compliment your life and your lifestyle. For example, if you are 28 years old, just married, and planning on buying a “starter condo” with your wife, you should be able to predict your future. Chances are that you will be having a child in 2-3 years and you will need to move. If this is the case, you need to have a mortgage that you can transfer or break when you sell. If you are in this situation and you received a 10-year fixed mortgage, you might have to pay thousands of dollars in fees when you sell your condo.

Other considerations include the stability of your job, and whether you like to save or spend your money. For example, if you are a saver, your mortgage should allow for an increase in payments or frequent “lump-sum” mortgage payments opportunities.

2. Shop around

According to RateSupermarket.ca, The Canadian Association of Accredited Mortgage Professionals (CAAMP) the national association for mortgage brokers, did a study and found that “when obtaining their mortgages, Canadians received an average of 1.94 mortgage quotes. Only 3% received more than 4 quotes”. This shows that buyers are not doing enough “shopping around”. A $300,000 mortgage amortized at 25 years could end up costing the buyer more than $200,000 in interest over the life of the mortgage. Even getting a 1% reduction in your mortgage rate can save you thousands of dollars (enough for a new car!). So make sure to shop around and get the lowest rate!

3. Use a Mortgage Broker

Why not? Mortgage brokers do not cost buyers any money. Mortgage brokers only make money off the mortgage that they get you. If you want to see the true value in using a mortgage broker, then try this: First you can go find the best mortgage that you can receive, and before you sign, call a mortgage broker and see if they can find a better rate. You have nothing to lose and only money to save. You could also ask your mortgage broker to explain the fine print…

4. Read The Fine Print

Some of the key points that are hidden in the fine print would include: extra fees for lump-sum payments, extra fees for breaking the mortgage early (ie if you sell), fees if you want to transfer your mortgage to your next home or not (if you move). Take the time to read your mortgage document and take the time to ask questions or negotiate. If you try to negotiate with your bank, they will most likely tell you “that’s the way it is” and if you don’t know better, then you might accept it. But if you had a mortgage broker, they might know that “you can get them to remove that” (that’s another reason why a mortgage broker is a good idea).

5. Know All The Costs

The average mortgage will earn the bank more than $200,000 in interest and a few thousand dollars more in fees. Before you accept that mortgage, you should take the time to outline all the costs to make sure you understand all the costs. You should be know :

- CMHC costs (plus interest)
- Interest costs
- Set up fees
- Amortization costs (compare the interest costs on 25, 30, 35 year mortgages)

Most people are ecstatic that they can even receive a mortgage. They are so happy to be moving into their new home, that they could care less about the costs. It’s usually after you move in and you look at all the costs of your mortgage that you begin to have “mortgage remorse”. That “remorse” gets even worse when you talk to your friends and find out they received a mortgage with better terms and at a lower rate than you. A new car costs $25,000 and most people spend a few days researching their new car. If this is the case, then how much time should you spend researching your new mortgage, which cost you $200,000?

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We recently received some feedback from buyers who talked about the joys of visiting private sale open houses.

The buyers described their experience as “relaxed”, “no pressure”, and “it was refreshing to deal directly with the seller. They were able to give us great information about the home and the area”.

When you visit a private sale open house you will not be asked for your information by an agent (who is looking for a new client). You will be able to talk with the owner and ask them why they liked the home, why they are moving, There are many differences between private sales and agent sales when it comes to open houses:

Why do private sellers have open houses

Private sellers have open houses in order to boost their exposure and also to make it easier to manage their sale.

Having an open house is a terrific way for a private seller to manage their sale. Private sellers can allow all the buyers to look at their online listing during the week and then scheduling all view appointments for the weekend during set hours when they are having an open house. This limits the amount of time it takes to manage the private sale.

Sellers can also put open house signs up in their nieghbourhood during open house hours, which will increase their exposure in the neighbourhood. If an agent is doing an open house around the corner and the private seller has their open house signs out, then the private seller will attract the same buyers as the agent’s property (and pay 5% less commission!).

Thanks for our buyers for providing feedback. You can see all the ByTheOwner.com open houses here: OPEN HOUSES

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Our elected officials are currently debating the new HST tax in Ottawa. Apparently the discussions are quite animated as the debate turns “nasty“.

The new HST tax is scheduled to be introduced on July 1st, 2010. The tax will combine the GST and PST (In Ontario and BC) into one tax at 13%. This will have a large impact on real estate service such as commssions, legal fees and “new home” taxes when you buy a new home from a builder. Currently only 5% tax is paid on these services. This will increase by 8% next June.

An article today mentions that the new home sales in the GTA are experiencing “robust numbers”. In Toronto, the average price for a new home in October was $451,455. Lets look at how the HST will affect an average new home purchase.

Currently a buyer would pay 5% GST on a new home. This would equal:

$451,455 x 5% = $22,572.75 in taxes.

That’s a lot of tax!

However the proposed 13% HST tax would cost the buyer:

$451,455 x 13% = $58,689.15

Wow! That’s even more tax! That’s actually $36,116.40 more tax.

Currently being debated is the threshold for the new HST tax. An original threshold of $400,000 was established (Ie. homes under that price would be exempt from the new tax). However, recently it has been discussed that a higher threshold might be needed.

Imagine if you purchase a new home for $451,455 and also pay $58,689 in tax (plus approximately $5,000 in land transfer tax). You would need to sell the home privately for $515,144 in order to make your money back. If you used a real estate agent at 5%, you would need to sell the home for approximately $542,256 to make your money back. The home would need to appreciate by 20% in order for you to breakeven.

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Here are some great blog posts written by a personal finance blogger about real estate agents and for sale by owners:

BLOG: For Sale By Owner The Wrong Way
The author talks about how some for sale by owners do not invest in professional signs when selling their home.

BLOG: Why you can’t trust real estate agents when selling a house
The author talks about an agent’s motivation when trying to sell their client’s home. He also talks about the gap between the seller’s unrealistic asking price and the agent’s price.

BLOG: Why you can’t trust real estate agents when buying a house
The author talks about negotiation and why buyers should be educating themselves and not relying on the agent’s advice (The agent gets paid if you buy the home!)

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ByTheOwner.com had more than 700 sold homes in October. Ontario’s sold homes increased by 35% and Quebec’s sold homes increased by 62%.

The increase in sold homes is the largest increase that ByTheOwner.com has ever experienced. The increase is a combined result of

- Improved ByTheOwner.com services
- A hot real estate market compared to October 2008 (during the financial crisis)
- More people buying and selling privately

The approximate commission on a $300,000 home is $15,000 + $750 (GST). With more than 700 sales in October, ByTheOwner.com’s customers saved a combined total of $11 million dollars in one month!

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