May 8, 2021

The Stress Test is being "TWEAKED" by the Feds

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Frustration and disappointment are often words that come to me when I hear the Office of the Superintendent of Financial Institutions (OSFI) making recommendations to the Federal Government about tightening the Canadian lending guidelines. The recommendation will be presented on May 24, 2021, to be put in place effective June 1, 2021. 

 

The new proposal for the qualifying rate for uninsured mortgages is the higher of the mortgage contract rate plus 2% or 5.25% as a minimum floor. Insured mortgages are already at a higher qualifying rate. What does this mean to you? If you have more than 20% down, your purchasing power is going to drop – likely between 30K and 60K. In addition, high ratio mortgages, which already have a qualifying rate buffer, may be affected because banks and finance companies will have a hard time programming their systems to differentiate between a high ratio mortgage and a conventional mortgage, at least for the first few months. 

 

If you have been preapproved, reach out to your bank or mortgage broker to find out what you will qualify for after the June 1st qualification changes. If you are currently in the middle of negotiations, get everything wrapped up before the end of May.

 

More information OSFI proposes new minimum qualifying rate for uninsured mortgages (osfi-bsif.gc.ca)

Posted in Market Updates
May 8, 2021

Waiting for the CRASH?

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"Ten years ago, The Economist magazine concluded Canadian real estate was grossly overvalued. Nine years ago, Merrill Lynch declared Canadian housing was afflicted by “overvaluation, speculation and oversupply.”

 

Seven years ago, the Organization for Economic Co-operation and Development and the International Monetary Fund began sounding sirens about the dysfunctional state of Canadian housing. And a year ago, the Canada Mortgage and Housing Corp. warned home prices could fall 18 per cent as a result of the COVID-19 pandemic.

 

What did this multi-year outburst of public shaming accomplish? Absolutely nothing. Canadian home prices marched relentlessly higher." Excerpt from "The trouble with ‘bubble’: Why Canada’s red-hot housing market is defying the burst" published in The Globe and Mail April 30, 2021 Click to see Full Article

 

The market is absolutely crazy right now, and I hear so many people talking about the coming crash. Are you waiting until after the crash to purchase a home? Let's consider the crash from a few different angles.

 

What economic driver would make a housing crash happen? A pandemic possibly? Nope – just went through that. A Tsunami – that didn’t work either. A Global Financial Crisis – temporarily slowed the market. Some people feel that prices "have to" drop. What would cause this is to happen? Loss of employment by millions of people – that didn’t do it. Government initiatives for affordable housing? Not that either. The one thing that could make housing prices fall would be a huge drop in construction costs and building fees by local governments. I don't see construction costs falling anytime soon, in fact, they are skyrocketing. 

 

There is a saying about when the best time to buy is, “Five years ago and if not five years ago, then today.” The fact is that even if prices fall, it will be temporary. In the long run you will be ahead if you buy, even in a crazy market like this one.

 

Let’s suppose for example that a house sold at $400,000 last December and is now worth $468,400 as prices have risen 17.1% in the first four months of 2021 (May 2021 Economic Housing Forecast BCREA Click to read the Full Report). There is an expected increase of another 5.4% for the remainder of the year which would put the house at $490,000 after just one year. If there were a 10% "crash" in housing prices over the next year the house would be worth $421,560. You are still ahead. 

 

Think interest rates are going to go up? In my opinion, it is unlikely that a rise in interest rates will have much of an effect on slowing the market, the cost to the consumer just isn't high enough. For every 1% increase in interest rates, your monthly mortgage payment will go up by about $50 per $100,000. So on a $500,000 mortgage, your payment will increase by $250 per month. The federal government has developed measures to protect Canadians from rising interest rates. When qualifying for a mortgage, you actually have to qualify at an inflated rate, generally 2.5% higher than the actual interest rate you will be paying. Mortgage finance regulations have built-in this buffer so that if interest rates increase you should still be able to afford the payments on your home.

 

Some people believe that once everyone who deferred their mortgage has to start paying again, there will be a lot of foreclosures and forced sales which will cause the market to drop. With the top ten banks reporting their mortgage arrears to the Canadian Bankers Association, in BC at the end of February 2021 only 0.16% were over 90 days late in their payment (Canadian Bankers Association Arrears Statistics Click to See the Stats). With an active seller's market, if someone is getting into hot water with their lender, they are going to sell their home before the bank forecloses. 

 

If you are waiting for the crash you could be waiting a long time. What if you bought into the market today and then waited? I can assure you that you will be ahead ten years from now and thanking me for giving you a kick in the ass.

Posted in Market Updates
March 9, 2021

For Sale By Owner

Last week a neighbour asked me how much I thought her house was worth. I did a comparative market analysis and said I would list it at $550,000. Her jaw dropped as she had been offered $475,000 by an acquaintance. They settled on a price in the middle, but she does know that she left money on the table.

There are two main reasons that people try to sell property on their own.

1. To save the Real Estate commission fees and

2. Because there is something wrong with the house and they don’t want to disclose it. In a private sale, the owner does not have to say what is wrong with the property. On the other hand, by law, realtors must ask and must disclose defects. The Real Estate Board of British Columbia ensures that realtors have a high standard of disclosure. 

Recently I looked at five sales of "For Sale By Owner" (FSBO) properties. 

House 1 Starting price of $979,000 and 502 days on the market, eventually selling for $875,000. A real estate agent represented the buyer, therefore the owners paid a standard commission of 3.5% on the 1st 100K, and 1.5% on the remainder.  They saved $15,125. in real estate commissions. Or did they? What if the house had been originally listed at $899,000 and sold in 60 days? Less hassle than showing a house for 1.5 years. The listing agent also would have paid for the photos, floor plan and marketing.

House 2 A homeowner listed their house For Sale By Owner with a starting price $769,900. The house sold for $749,888 in 6 days. A real estate agent was representing the buyer, so the standard commission was paid to the buyer's agent.   I would have likely listed this house a bit higher and the sellers would have netted more money.

House 3 Starting price $949,000. Sold for $920,000 in 20 days. Buyers used a real estate agent, so commission was paid out to the real estate agent on the buyer's side. 

House 4 Starting price $449,000. Sold for $455,000 in 11 days.  This house could have easily been listed for $499,000 in my opinion. No one represented the buyer, so the seller did get to keep all the profits. House was from the ’50s so possible asbestos, perimeter drain issues, oil tank. As I am not privy to the details of the purchase it is unknown what due diligence was done by the buyer to find any defects before the purchase was done.

Condominium 5 Starting price $225,000. Sold in 1 day for $226,000 with the buyers using a real estate agent. Someone had a great buyer’s agent who was right on the ball and got that deal done.  Could the property have sold for more? Quite likely. 

As a buyer, your Realtor can work with FSBO properties. As you can see from above, most sellers pay the agent's commission. If the seller is not willing to pay a buyer's agent commission, you may pay a fee. The fee is worth it as you have a professional writing the contract of purchase and sale, ensuring due diligence is done and that you are purchasing an appropriate property. Personally, I love working with buyers purchasing a FSBO house as I get to bypass they gatekeeper (the seller's agent) and go directly to the source of the sale. 

As a seller, why would you sell a house on your own? You are likely going to have to pay the buyer’s Realtor a commission, you are paying for the marketing and if there is a non-disclosed material latent defect, you could be held liable into perpetuity. If you are selling a home in BC the website for the Real Estate Council of British Columbia is a good place to start to understand your legal obligations as a seller. 

Real estate agents know the local market. They know what is selling today, what type of marketing works, and what marketing doesn’t work. I understand that it appears shocking when you see that you are paying out between 4% – 5% in commission for the sale of your house, but that money gets split between the buying agent and the selling agent. As you see from above, 80% of the time there is going to be a buyers agent you will need to pay regardless. That 2 – 2.5% the Selling agent is paid goes to so much more than a post on the MLS.

As a selling agent, in a recent marketing campaign, I had over 30,000 people view my advertising of a house with over 2500 clicks to receive further information.  More eyes on a property are equal to more competition. You may have the best house in the world but if only your neighbours know you are selling it there is no way you will get top dollar. Bottom line: Unless you are an online marketing professional, if you sell your own home you are leaving money on the table. 

March 8, 2021

Pitfalls of Subject Free Offers

It is a crazy market out there, possibly you are on your third or fourth offer and you are getting tired of losing out on an offer once again. You want to go subject free.  I get it and I understand. Buyer’s Fatigue is real.

Here are 5 standard conditions and where and when you may consider going subject free.

 

Financing: This is a big one. It is difficult to go subject free on financing if you have less than 35% down. Many people will say 20% down, but here is why it should be more than 20% down. What if the appraisal comes in short of the purchase price? Appraisers are often conservative in a hot market, especially if there have been very few comparable sales in the area. Let’s suppose a house is listed for $500,000 and you get it for $600,000. What if the appraisal comes in at $575,000? Is that going to be okay with your current down payment?

Another key factor is the lender must approve the house for financing. It is not just you that is being approved. At the end of the day, if you stop making your payment the bank will own that home. Mobile homes, condominiums, townhouses, and older homes may have challenges that the bank doesn’t like. Banks like newer, marketable homes that they could sell in a foreclosure situation. A bank will analyze if your home would sell within 60 – 90 days in a buyer's market.

 

Insurance: This can be bigger than financing as there are so many questions on an insurance policy. It may seem like waiving insurance is a no-brainer, but at the end of the day, if you can’t get insurance, you cannot complete on your mortgage. If you plan to waive this condition make sure you can answer all the questions your insurance company is going to ask and deal with this before you write the offer. Questions include the type of wiring, age of the furnace, age of hot water tank, age of baseboards heaters, are there fire detectors and a multitude of other questions. 

If you plan to waive the insurance, get the insurance set up before you write the offer. When viewing the house take photos of everything that an insurer may ask so you can refer to the photos when discussing your insurance needs. 

 

Inspection: A seller's market is a great market to flog off a challenging house that possibly could not sell in the past. Be aware of this and ensure you are making informed, rational decisions. Aluminum wiring, asbestos, oil tanks, bad roofs, cracked foundations, the list can go on and on.

The best way to waive this clause is to get the inspection done in advance before you make the offer. This does 2 things, it shows that you are serious and have invested in the property and secondly it lets you know if this is the right house for you. An appraisal is approximately $500 give or take, so you must be really keen on the property to make this sort of investment upfront.

 

Title: Title is a standard condition that can be reviewed before you make an offer. Titles are public records that can be pulled and gone through with your lawyer/notary if there are any strange clauses.

 

Property Disclosure Statement: The property disclosure statement should always be reviewed before writing an offer and any questions clarified upfront.

 

Strata Documents: Before COVID it was difficult to be able to waive this condition as technically not all strata documents should be provided before an accepted offer is in place. There has been some leniency to this during COVID and often all the strata documents, or at least most strata documents can be reviewed in advance. 

 

There is a definite risk/reward that only you can decide about what conditions you can waive. If you cannot waive financing, insurance and inspection, you can make the offer better in other ways. Work with the seller's preferred closing dates and make the timelines for conditions as short as possible.  

 

Waiving conditions may seem like the only way to win in a multiple offer situation, and that might be true. Before you go "subject free" carefully evaluate whether or not you can handle any potential consequences.

Feb. 5, 2021

Looking for Opportunities in a Seller's Market

 

A seller's market can be quite overwhelming for a buyer. With a positive mindset and some strategic planning, a buyer can do very well in a seller's market, especially right now. If I was considering purchasing a home in this market these are a few things I would consider. I would think like an investor, a mindset of profit over the short and long term.

 

The cost to build a house right now is extremely unpredictable and volatile. Companies are unable to give contractors 30-day price guarantees because the product pricing is increasing exponentially. Lumber, plumbing, electrical wire, concrete are only a few of the bits and pieces required to build a house from the ground up. When contractors to be unable to hedge against price increases to manage costs, it is an extremely challenging situation. At the moment this is pushing up the price of new houses.

Move-in ready houses are a delight to purchase. In a seller's market nicely finished homes tend to go at a premium because it makes life easy for the buyer. One simply packs, move into the new house, and unpacks, life barely skips a beat. This is sometimes the only option depending on people's current life commitments. If I was selling a home, I would definitely want to try and make the house as move-in ready as possible.

 

Well worn homes have some opportunities as well, especially if there is the ability to add some sweat equity and do some easier renovations where costs can be managed. Adding a suite, new flooring, appliances or paint. Even upgrading wiring and plumbing can add a ton of value. If I was looking to purchase a home, and I wanted to make (or save) some money, a house that needed to be fixed up would be on my list. 

 

Recently a house in Courtenay was listed for $555,000. It is on a busier street but has a suite downstairs which rents for $1200/month. The upstairs needs some renovation. With a minimum down payment of $30,500, the mortgage would be close to $545,000 with the government-mandated default insurance added on. This makes a mortgage payment of close to $2300/month. With the rental of $1200/month, you are looking at a monthly cost of $1100/month plus property taxes and utilities.  The British Columbia Real Estate Board housing forecast predicts properties in the Comox Valley to appreciate 7.7% in 2021. Spend a year slowly improving the upstairs and with the expected property appreciation you could end up in a very positive position. Or move into the suite and rent the upstairs out for $1650, making your monthly mortgage cost even less. A house with a suite or suite potential is a sound purchase decision in a seller's market.

 

Another house was listed for $639,000. It is on a quiet street in Cumberland. The layout is perfect to add a suite as the downstairs was a full walkout basement. Zoning allows for a suite and it already had a bathroom in the basement. With a mortgage product called purchase plus improvements, you can add the funds to build the suite in the basement onto your mortgage. Let’s say you bought the house for $639,000 and added $25,000 to put a suite in the house for a total purchase price of $664,000.  The minimum down payment would be $41,400 making the mortgage amount close to $645,000 including government-mandated default insurance.  This makes a mortgage payment of $2723. If you could get $1400/month for the new basement suite, this would make your monthly portion $1323/month plus property taxes and utilities. Plus you immediately increased the value of the property by adding a suite.

 

In both the above scenarios, if you ended up paying $25,000 over the asking price in a multiple offer situation, this would increase your monthly payment by $105/month. Is it worth it?  YES!

 

 * Per British Columbia Real Estate Board Housing Forecast

 

Jan. 8, 2021

BIG CHANGES WITH THE HOME OWNER GRANT

Let’s start with the easy part. Everyone in BC now has access to their BC Property Assessment. Go to https://www.bcassessment.ca/ and input your address. My personal assessment went up 6% from last year. The assessed value is based on the market value of your home on July 1, 2020. An increase or a decrease in your property assessment is based on the market value of similar homes in your neighbourhood. In more rural areas sometimes the property assessment seems low to a listing price. This means that BC Assessment does not have enough data to provide accurate market value assessments. As long as your assessment is in line with equivalent homes in your area you will be okay. 

That being said, sometimes the assessment is unreasonable. If that is the case, you should contact BC Assessment Authority and discuss the property valuation amount with them. If you are still not satisfied with your assessed value you have until February 1, 2021 (because January 31 is a Sunday) to complete the online request for review/appeal form https://eforms.bcassessment.ca/online_appeal_form_PARP_2021.asp and have a hearing. At the panel hearing, your appeal will be heard and changes could be granted. This format is online and via phone for 2021.

Reasons an assessment may not be accurate could range from the assessment thinking you have more bedrooms and bathrooms than you do, over-stretching evaluation on renovations or something else with the actual property. Another reason could be that you purchased the house recently and paid over market value due to some other items included in the purchase (equipment, furniture, etc.). The system does not know those items were added on to the purchase price. 

Just because your property value increased or decreased, does not necessarily mean that your property taxes are going to increase or decrease by that exact percentage amount. In late winter, early spring, your local tax authority sets out its property tax rates and applies those rates to your assessed value. Then you will be mailed your property tax amount which is due July 2, 2021. You will remit what is due, less any grants or exemptions. Property tax may indeed go up, but the increase is more likely due to budget issues at the municipal/city level versus a change in your assessed value.

This is where the BIG CHANGE is.

In the past, you would claim your Home Owner Grant of $570 and any additional exemptions through your local tax authority. This is claimed every year as the government does not make assumptions of your current residential circumstances of each property you own.

This year the grant is going to need to be claimed online through a Provincial Online System.

The system is not available yet and is expected to be out before taxes are due July 2, 2021.

 

Dec. 8, 2020

So You are Seriously Thinking of Buying

Buying a house is a huge emotional commitment and there are right ways and wrong ways to go about the process, especially in a very active real estate market like we are seeing on Vancouver Island. Anyone reading this is at some stage of looking for a home. Whether the plan is for immediately or sometime down the road, different strategies can help you secure the best home for you. 

Firstly, let’s have a phone call because there are a few ways to set up your home search.

We can set up the search for daily and weekly notification, or if you are actively searching for a home, you can be placed on immediate notification. This set up is important because if you are on the daily notification and actively looking, the house may already be sold before you even saw it.  Included in that search we can hone down more precisely what you are looking for as well. Additionally, for clients who are actively looking we scour the market manually to ensure that nothing is missed due to incorrect data entry, private sales, exclusive listings and out of board listings. This is an important first step to get ready for the spring market.

Secondly, you need to ensure your preapproval is current and accurate.

A six-month preapproval, or someone telling you to find a house first and then get a preapproval is like going trick or treating without a pillowcase for your candy. Plus with COVID19 showing restrictions, it is expected that all viewings by potential buyers are properly vetted and have the resources to purchase the home.

Three great local mortgage specialists are:

Spin Mortgage

Mackenzie Gartside & Associates

Victor Anasimiv

If you already have a relationship with a mortgage broker, please feel free to use them. I know most of the mortgage brokers in British Columbia and work extremely close with your mortgage professional.

Thirdly, we need to have a strategy.

We need to see a few properties together so that you and I can get a feel for what you really want, what is realistic for your budget and what are the needs versus wants of the property. You need to see what a purchase agreement looks like and understand it before we make the offer. We need to cover the costs and timelines involved when purchasing a house on Vancouver Island. We need to ensure we can work together and can trust each other. I want to really hear you and what you need so that we are on the same page.

Finding you a home takes work on both of our sides. My goal is to have a relationship with you based on trust, joy and fun. To listen to what you need, to create an amazing purchasing experience and find you a home you want to live in for the long term.

Oct. 13, 2020

Listing in the Fall and Winter

Putting your house on the market in the fall and winter comes with some unique challenges.

The daylight hours are limited, and people may need to view your house when it is dark out.  It is also the wet coast, so showings may be very cold and rainy.  Yards do not look as pretty because they are missing their beautiful spring and summer flowers and lush gardens.  With these factors in mind, here are some helpful hints to put your homes best foot forward for selling in these darker seasons.

When you are getting your house ready to sell, you must put on a buyer’s mindset. Pretend you are a buyer and drive up to your house. What is the first impression? What do you think someone would like and dislike? When you pull in the driveway, what attracts your attention? If your garage door is old and dated, consider replacing it. This is one of the top renovations someone can do when selling a home that will pay for itself. 

Does your house need a power wash? Do the windows and gutters need cleaning? Check the perimeter drains for leaves and other blockages and ensure drain spouts from the gutters are pushing water away from your house. Make your walkway to the front door as open and pleasant as possible. Often when a house is being viewed by a buyer there are at least 3 people in attendance, the realtor and two buyers. Is there room for everyone to stand while the door is being unlocked?  

What does your front door look like? How is the lighting all around your house? When it is dark out, lighting inside and out is extremely important.  You want your house to look warm and inviting.

Now, enter your home. Is there space for people to stand while taking off their shoes and jackets? In the split level “BC Box” this can be a challenge. Make sure that you have all your items removed to make as much space as possible for when the buyers enter the house. When you look around upon entering your home, what do you notice first? There can be no clutter when selling a house!

Declutter, declutter, declutter. If your house looks like Enola Sherlock’s family house, you have too much stuff! You may have lived in the house for many years acquiring things. Get a storage locker and move almost everything into the locker. You can have a garage sale in the spring when the weather is better. 

Clean, clean, clean. Hire cleaners for a day or two and have the carpets professionally cleaned. Let the cleaners know you are putting your house on the market and need it cleaned so you can sell the house. They will go to work washing baseboards and getting into the nitty-gritty of your home. Clean your light fixtures and fans, the fridge and stove. Make sure every light bulb works and throws off great light. When your house is being shown, you will leave the lights on to make the house look bright and airy.

If your house is older, look for ways you can make it feel a little less dated? Paint the bathroom walls light grey versus pink or green, spray paint with heat resistant black paint your gold fireplace frame, change the light switches to a more modern style, finish all trim and baseboards, patch and paint any damaged areas. 

A quick way to make a house look great is to purchase new throw pillows, bedding, towels and linens. The nice thing about this is that you can take all the new items with you to your new home. If your shower curtain is old, replace it. Fix all closet doors so they can open as smoothly as possible. As well, don’t forget the garage. Ensure the garage is tidy.

Check your crawl space and attic for dampness, rodent activity and uncovered electrical junction boxes. Having a home inspection prior to putting your house on the market is prudent as it allows you to correct any issues before buyers come through your home. A home inspectors job is to look for problems with the house, and THEY WILL FIND SOME. You may not be able to fix everything, but even fixing a bunch of small, unknown issues can decrease the negative impact of a home inspection.

On the day of showing make sure that you take out the garbage and compost and the house smells great. Winter dampness with wet dog, wet clothes and less air circulation can put a buyer off. Do your best to eliminate all smells. Do not cover the smells up with fragrances and scents. As neutral smelling as possible is your goal. 

There is a theory that selling your house in the winter can work to your benefit as there is less inventory and the people who are house hunting are serious and need to find a home.  The above tips will help sell your home faster and for top dollar.

Sept. 11, 2020

Going Into Multiple Offers

In today’s Comox Valley Real Estate environment there are currently more multiple offer scenarios than in the past few years. Not every property listed for sale goes into multiple offers, but recently many have. 

 

As a buyer, you might wonder “if there are no offers yet what is wrong with the house, am I over-paying?” and on the other side of the coin “Argh, multiple offers, now I have to compete and overpay to get the house!” 

 

As a seller, you might wonder “Did I not ask enough for the house?”

 

Recently, I showed a house that had been on the market for 2 years. We put in an offer and BOOM, multiple offers. You have no idea what everyone else’s timelines are, you only know yours.

Lately, there have been properties with more than five competing offers. If that’s the case, you have to be serious, sharpen your pencil and decide, is this the house you want?

There are a few things to remember when you are having those thoughts.

  1. Everyone is in a different stage of their house-hunting journey. Some are just starting, some have been looking for a while, some have been looking for a long time. 
  2. Everyone is looking for something that suits their needs. This may not be the same thing you are looking for, or what you are selling.
  3. The market will ultimately dictate the price of a house.
  4. Use your gut. If it feels wrong, it probably is not right for you. It might be perfect for the next person so don’t feel you are “missing out”.
  5. If you are going to need a mortgage, make sure you are pre-approved. If you can get a pre-approval letter, even better.
  6. A letter about yourselves can go a long way. There is still very much a personal touch to Real Estate and people like to know who they are selling their home to.
  7. Stick to your game while keeping in mind this: If you love the house, go in at your best offer. Would you prefer to lose the property by being $5000, 10,000, 25,000 to low, or get the property by paying 5000, 10,000, 25,000 to much? You know your budget, play within it and live with the outcome.

My biggest piece of advice on this is that you don’t want to regret losing the house because you decided not to put your best foot forward. 

What happens in a multiple offer situation?

When 2 or more offers come in, the Seller’s Real Estate agent must let the Buyer’s Real Estate agent know they are in a multiple offer situation and ask if they would like to revise the offer. At that point, you decide what you want to do. Do you want to stay where you are, revise your offer or drop out and walk away? The Seller will review the offers and they have a few options. 

1. Take the offer they like the best 

2. Take one of the offers and go back and negotiate with that offer. 

You may wonder why someone would do that. Here is an example. Suppose there are 2 offers. One has no conditions, but the price is a bit lower and the dates don’t line up perfectly for the Sellers needs. The other offer has lots of conditions, but the price is higher and the dates line up. The Seller may go back to one or the other offer and ask for changes (higher price, different dates, less conditions). 

Selling a house and receiving multiple offers sounds great, but is it really? In most instances, yes, it is great for the seller. You can force the buyers’ hands so that there is less back and forth, cleaner conditions, faster closings. Sometimes, though, when a buyer hears about multiple offers they can pull out and advise they do not want to participate. If there are more than 2 offers there is a lower risk of losing all offers. 

As a Seller, if you receive a great offer and you hear there are other offers coming in you can advise your agent, in writing, that you do not wish to receive any other offers.  Stick to the first one you received and be done with it. This is a decision you can make with your Selling Agent. They will advise you of the best option for you, ultimately you decide.   

The Buying and Selling of a home is stressful, exciting, nerve-wracking and in the end, exhilarating. Sometimes multiple offers happen, sometimes they do not. Being prepared in advance is the best course of action.

 

Sept. 11, 2020

First Time Home Buyers

 

You are doing a lot of online research, getting prepared to be a well-informed buyer, saving for your down payment and yet, it appears that there is conflicting information on what is a First Time Home Buyer.  

 

Guess what? You are not crazy. The federal and provincial governments have different definitions of a First Time Home Buyer. And to confuse you even more, Canada Mortgage and Housing (CMHC) and other companies that insure mortgages in Canada have a separate definition as well.

 

In British Columbia, a “First Time Home Buyer” is just that. A person who has never owned a home before, anywhere in the world. The house you are buying must be located in BC, as your principal residence. The size of the lot must be 1.24 acres or less and its value must be under $500,000 to take advantage of the first time home buyers property transfer tax exemption. 

There are partial exemptions between $500,000 and $550,000, but the main savings is for homes worth less than $500,000.

 

In Canada at the federal level, a “First Time Home Buyer “is defined as if you, or your spouse, have not owned a home for 4 full calendar years. The federal First Time Home Buyer's Program allows you to borrow money from your RRSPs to use as a down payment.

 

The insurers, Canada Mortgage and Housing, Genworth and Canada Guaranty, define a “First Time Home Buyer” as someone who hasn’t purchased a home before OR hasn’t owned a home in 4 full calendar years OR someone who recently experienced a breakdown in a marital or common-law partnership.

 

Here are some examples:

 

Example 1

You have recently split up with your partner, found a $600,000 property and have a $31,000 down payment. You can participate in the CMHC First Time Home Buyer program but must have the cash savings or a gifted down payment. It cannot be from RRSPs.

 

Example 2

You have not owned a home for 5 years, found a $600,000 property. You can withdraw up to 35,000 in RRSPs for your down payment, use savings or a gift. You can also take advantage of the CMHC First Time Home Buyers program.

 

Example 3

You have never owned a home before, found a $600,000 property. You can withdraw up to $35,000 in RRSP for your down payment, use savings or a gift. You can also take advantage of the CMHC First Time Home Buyers program. There is no savings of Property Transfer Tax as the property is greater than $500,000.

 

To take advantage of every program you would need to purchase a property for under $500,000 and NEVER owned a house ever. So even if you have never owned a home you might not qualify for First Time Home Buyers programs. However, home ownership is still a tried and true way to gain wealth in Canada so regardless of whether you fit the box of First Time Home Buyer, it is still worth jumping in.