Hidden Expenses

Buying a house is one of the biggest purchases you will make in your lifetime and a lot goes into the planning and finances of purchasing a home, especially if it is your first home. From a down-payment, to repairs & maintenance, to purchasing furniture and appliances, there are hidden expenses that one might not think of when in the home-buying process.

Below is a list of the top six expenses that buyers often forget about when purchasing a home.

Property/Land Transfer Tax

The Property Transfer Tax (PTT) or Land Transfer Tax (LTT) is one hefty expense that our RE/MAX Influencers agree is often unaccounted for in advance of the purchase. All provinces except for Alberta and Saskatchewan have this tax, which differs between provinces. Meanwhile in Toronto, home buyers must pay both a provincial and municipal LTT. BC, Ontario and Toronto, as well as Prince Edward Island, all offer rebates to first-time buyers to help offset the cost.

Property Tax

“At the time of purchase, the [property] tax owing by the seller has normally been accounted for with the clients, but not that it’s going to be due. If someone takes possession in October, they will pay the seller back for November and October, but then only have 6 months to save up 12 months worth of tax before it’s due. There is not enough discussion with buyers on this and given that they are normally ‘tapped out’ after the down payment and closing costs, it can be an unexpected bill if they haven’t owned a home before,” says Taylor Hack, RE/MAX River City, Edmonton, AB.

Insurance

While home, fire and content insurance is usually an expense that is considered right away during the home buying process, there are other types of insurance that can be overlooked. These can include things like title insurance, life insurance and mortgage insurance can come as surprise unexpected costs. When planning and going through the numbers associated with purchasing a home, make sure you take all types of insurance into account.

Home Inspection

One important thing that every homebuyer should have done is a home inspection on the property they are planning on purchasing. While some sellers may opt to have a pre-inspection done, it is always a good idea to have a home inspector look at the home to ensure that there are no issues with the land or structure of the home. The cost of a home inspection can often be overlooked, so it is important to remember to allocate a portion of your budget towards a home inspector when the time comes to purchase your home!

GST/HST

While sales tax is generally only applicable to newly constructed houses and condos, as well as services related to the real estate transaction (such as agents’ commissions and legal fees) this cost is often overlooked – especially by first-time homebuyers. If you are looking at purchasing a new construction property, make sure you ask about the sales tax payable, and take the time to calculate it so you can budget for this amount.

Legal Fees

Another expense that is often forgotten during the whirlwind process of purchasing a home is that of lawyer fees. The exact amount varies depending on the purchase price of the home and differs based on the lawyer/notary. The legal expenses also often include ordering a title search and registering title.

When estimating the cost of buying a home, don’t forget to include legal fees in the total list of main costs that need to be considered!

Source: remax.ca

FSBO

With technology always on hand and information literally at their fingertips, the hyper-connected Millennial generation has taken a do-it-yourself approach when it comes to consumables, including everything from products and services, to purchases of every kind – including real estate. Generation Y might as well be called Generation DIY. The appeal in DIY lies in the flexibility, customization and let’s face it, the cost-effectiveness. As a consumer, job one is educating yourself, weighing your options, and making an informed decision. When it comes to real estate, an FSBO could be the right decision for those who want to save the commission fee and take the reins when it comes to all aspects of their transaction. But buyer and seller beware – an FSBO has some drawbacks as well. Here are five things to know about FSBO.

What is an FSBO, anyway?

FSBO is an acronym for “For Sale By Owner,” meaning the seller hasn’t retained the services of a professional agent to assist with the sale of their home. By doing all the legwork in selling your property yourself, the seller will save on the commission fees he or she would be required to pay to both the selling agent and the buyer’s agent.

Selling a home is a full-time job.

Now, we’re not saying you can’t sell your home yourself, because you can. There are plenty of resources out there to help you DIY. We’re just saying that a professional, experienced real estate agent can do a better job of it, and get you more money too. While saving on the agent’s commission might be tempting, consider what you get as part of the price you pay, including (but not limited to!):

• Setting the right asking price
• Preparing your home for sale
• Marketing the listing
• Showing the home
• Reviewing and negotiating offers
• ALL THAT PAPERWORK!

All this takes know-how and time. And you likely already have a full-time job, right? And remember that for avid home hunters, listings get stale fast. If you home’s been on the market for an extended period, due to delays related to home staging, marketing and showing, prospective buyers will lose interest fast. Remember: you only have one chance to make a first impression.

Some hard stats:

While Canadian statistics on FSBOs are limited, the US-based National Association of Realtors has done some research on the subject:

• FSBOs represented 7% of home sales in 2017.

• The typical FSBO home sold for $200,000, versus to $265,500 for agent-assisted transactions.

• FSBO methods used to market a listing:
Yard sign: 22%
Friends, relatives, or neighbours: 18%
Online classified advertisements: 6%
Open house: 10%
FSBO websites: 5%
Social media: 12%
Multiple Listing Service (MLS) website: 4%
Print newspaper advertisement: 2%
Direct mail (flyers, postcards, etc.): 2%
Video: 1%
No advertising: 49%

• Most difficult tasks reported by FSBO sellers:
Getting the right price: 17%
Understanding and performing paperwork: 12%
Selling within the planned length of time: 5%
Preparing/fixing up the home for sale: 8%
Having enough time to devote to all aspects of the sale: 3%

Risks and rewards

For novices, the FSBO transaction can be tricky. As with all things, the more you do something, the better you’ll be at it. Experienced real estate agents can be worth their weight in gold. Again, we’re not saying you can’t sell your home yourself, and in fact, many people do. But there are risks that can be mitigated by working with someone who’s been there, done that. Potential pitfalls include:

• Pricing that could turn off prospective buyers.
• Misunderstood legal matters disclosed in writing.
• Safety concerns with showing your own home.
• Poor negotiation that leaves money on the table.
• Unrealistic promises as part of the deal.

Your agent is a Boy Scout: always prepared.

As a seller, how do you get the phone to ring? Generating interest from potential buyers is the key objective of listing agents. Especially in a buyer’s market, yard signs won’t cut it. If you’re not a real estate agent, or a marketing or advertising professional, you likely don’t know where to start – and who could blame you? Marketing through yard signs, brochures, and online and print advertising can help spread the word. How does a virtual tour sound? Do you plan to host an open house for buyers? What about an open house for agents and brokers? Beyond marketing, an FSBO means you get to juggle third parties such as a home stager, photographer, appraiser, the buyer’s agent (or if they’re DYI-ing it as well, the buyers), then throw in a pile of paperwork, just for fun – NOT.

Then there’s the legal stuff…

Once you have a buyer who is interested in purchasing your home, consider the legal side of things. The buyer will submit an offer, and when you’re confident that you have a good deal on the table (you are confident that it’s a good offer, right?), a contract will need to be signed by yourself and your buyer. Remember, if it’s not written in the contract and signed, then it doesn’t count. An Agreement of Purchase and Sale will include details about the buyer, the seller and the property. It will outline the purchase price, the deposit, fixtures and chattels, title searches, closing arrangements, conditions and clauses. A real estate lawyer can help with this step of the process. The benefit of working with an agent is that oftentimes, they already have a lawyer they regularly work with, to ensure all legal matters are handled correctly and in a timely manner.

Your home is likely your biggest asset. When you’re ready to sell the place, ensure you’re well-represented – whether you represent yourself, or are backed by a professional real estate agent. A “minor” mistake can mean the difference between a lucrative sale, or tens of thousands of dollars left on the table. As the consumer, do your due diligence and make an informed decision before you start the selling process.

Source: blog.remax.ca