I’ve heard countless buyers say to me that they feel maintenance fees are a complete waste of money. While there are some condos in the city that are poorly managed and have very high maintenance fees as a result, I don’t believe maintenance fees are as bad as some people may think, especially when taking into account a longer term perspective.
Condo fees are one of the most misunderstood aspects of condo ownership. Some feel that it can turn an outright purchase into what feels like a rental, with monthly payments to budget for as long as you live there.
If you have never paid condo fees before, here is what they cover:
• The costs of keeping shared spaces, such as the elevators, outdoor gardens, parking garage, lobbies and hallways, in clean and good working order.
• The maintenance of the building amenities such as the gym, swimming pool, games room, party and theatre room - the facilities that initially attracted you to the condo.
• Snow removal, balcony, window and roof repair
* Building insurance
* Security and concierge services
How much should you pay in maintenance fees?
This is a difficult question to answer as amenities, the age of a building, location are all significant factors. In Toronto today, the average the rate per square foot is around 70 cents a square foot, or $560 a month on a 800-square foot condo.
The first step is you must consider the amenities offered at the condo and whether you will make use of them. For example, if you can cancel your gym membership and dine out less and use your condo’s rooftop patio, that can help justify a portion of the monthly cost.
When you think about the actual costs of maintaining the exterior of a single family home, including landscaping, paving, fertilizer, cutting grass, snow removal etc., most homeowners would spend more than $120 a month, on average. Also, if you factor in eventual larger maintenance items such as a roof ($8,000-$10,000) and furnace or air conditioning replacement ($5,000), and condo fees can be justified since it has the convenience of living a carefree lifestyle.
The term breaking your mortgage often has a negative meaning to it, but that’s not necessarily the case. The main reason why someone might decide to break their mortgage is to get a lower rate with their bank or another lending institution. When the Investor’s Group cut its three-year variable mortgage rate to 1.99% last month, many of my clients wondered if breaking their mortgages and switching would be a wise decision. The question is, do the long-term savings outweigh the initial interest penalties? It is possible, however let’s have a closer look at the various considerations.
The number one factor to consider before breaking your current mortgage is the interest penalty you will incur. The interest penalty depends on the type of mortgage you have (fixed or variable) and which bank or lender you’re with.
You can find mortgage penalty calculators online such as at Ratehub.ca - simply enter in your remaining mortgage balance, the type of mortgage, your mortgage rate and term and the calculator will provide you with an approximate calculation for your mortgage penalty amount. As an example if you are breaking a $200,000 mortgage with TD and have a fixed mortgage rate of 2.99 percent, you would have an interest penalty of approximately $9,800.
With a fixed rate mortgage, the interest penalty is calculated using what’s called “interest rate differential calculation.” The penalties are also different if you have a variable rate mortgage or a cash-back mortgage – check with your financial institution for details and be sure to read and understand the fine print. Some lower rate mortgages may have a provision that the mortgage cannot be broken unless you sell your home.
Once you've determined your penalty, it’s just a matter of working out if the interest savings will be greater than the penalty paid. In general, if the offered rate is greater than two per cent less than your current mortgage rate, it might be worth paying the penalty and switching.
Most people assume that working with an agent who lists a lot of houses (i.e. “to list”, is real estate lingo for the selling side of the transaction) would make for a great buyer agent. In some cases that might be true, but in my experience, agents who focus primarily on listings don’t always make for a great buyer agent.
So, why is that? In general, agents who list a lot of houses, focus just on that… listing houses. They might work with potential buyers that come from these listings, but make no mistake their focus is listings and to service their sellers. The main reason for this is that listings are a great way to promote their name and you guessed it… get more listings. Working with buyers, especially in today’s seller’s market, takes a lot more time, energy, and dedication than servicing a listing.
So where do you think this listing agent is going to be spending the majority of their time and efforts? That’s right, the sellers! To some busy listing agents, buyers often don’t get the attention they deserve. In today’s hot seller’s market, it’s now more important than ever to have an agent who’s dedicated and committed in helping you find your next home. So, when interviewing agents, ask them if they prefer working with sellers or buyers. Also, ask them what their “split” is (working with buyers to sellers). That will give you a good understanding as to what type of business they have and where their dedication lies. I don’t think you should necessarily work with a buyer-only agent, but an experienced agent who works with a healthy mix of both buyer and sellers might be your best approach.
I do believe there are some agents that are better suited to working with buyers than others. I think there are 3 main characteristics that make a great buyer agent. By evaluating these characteristics against agents you interview, it can provide some valuable insight as to what they will be like to work with.
A good buyer agent will be patient to work with and won’t try to sell you a home quickly and move on “to the next transaction”. I personally recommend looking at least 15 different properties in the same neighbourhood before even putting an offer. You really need to look at a lot of homes or condos to get a good idea of value, specific features you need in a home and the right location. Ask your agent how they work with buyers – that will give you a good indication of their patience level.
An agent needs to provide you with all the information you need to make an informed decision. In reality, a real estate agent’s opinion should not matter, rather they should give you the tools to make the decision yourself. Information such as:
sales history of the property,
why the sellers are selling,
when the sellers want to close,
how the sellers arrived at their list price,
what upgrades have been completed, and
the agent should provide recent comparable sales in the neighbourhood.
Does the agent genuinely care about your needs? This is often difficult to judge from the onset, but another question might be: do they display the qualities that are important to you in an agent? In other words, do they want to guide you through this process and make this a successful move for you? Ultimately, when you are buying a house or condo, it’s the agent’s responsibility to represent your interests and put together an offer with your terms, your conditions and your price. The agent may provide some guidance on these items, but ultimately it is your decision, not theirs.
If Buyers drive past a For Sale sign and say “Should I call the listing agent and find out what the price of the home is?” As innocent sounding as this question might be, this may not be in your best interest to do so.
Under agency law, the listing agent’s primary loyalty and duty is to the seller of the home. They have signed a contract and are hired by the seller to represent their interests and are being paid to do so.
So what does this actually mean for you as buyer who has contact with the seller’s agent with either questions or possibly even meeting them while viewing the home?
First of all you need to know what the seller’s agent can and cannot do for any buyer!
I know there may be buyers in today’s marketplace who prefer to act on their own and find the property themselves without the use of a buyer’s agent. When they do eventually find a home, these buyers may also decide to use the seller’s realtor to negotiate a transaction on their home.
One of the ways to calculate the value of a home is by doing what realtors call a comparative market analysis (CMA). Completing a CMA to find out what the home is really worth is the first step to understanding the market value. However the listing agent will prepare a CMA for the buyer only if they request it. They will not do it automatically! Furthermore… if they do prepare this CMA they cannot, by agency law, use that CMA to provide advice on what the purchaser should offer or what the property is really worth!
So why is the listing agent not allowed to do this? Well… it might give the buyer a negotiating edge and violate the listing agent’s duty to put the interest of the seller first!
As a buyer in this active real estate market you want to ensure you have a real estate agent working for you. To ensure they are advocating for your best interests and giving you all the information so you can make the most informed decision. Quite often buying a home is the single largest financial transaction most people complete and it’s imperative to have someone representing your best interests at all times.
During your home search, you’ve likely come across homes that are priced ridiculously high. I see it quite frequently, perhaps now more than ever. It continues to be a seller’s market and when my buyers come across one of these over-priced listings, they often assume that the sellers have become greedy and are trying to get a very high price for their home. I have a different theory altogether.
There are real estate agents that will tell sellers what they want to hear: their house is worth more than they think. They often do so with one purpose in mind - to put their For Sale sign on the front lawn. In real estate agent “speak” this is called “buying the listing”. A For Sale sign is great advertising for the real estate agent, and an effective way to promote their name. It also shows their clients that they are busy and active.
Ultimately having a For Sale sign on the front lawn for 3 or 4 months makes the agent look bad and brings negativity to the seller. I personally think this is a terrible way to do business. Stringing along a seller and giving them false hope is not a way to build a business in my opinion.
When I meet with prospective sellers, I always give them a range of what I think the house is worth based on current market conditions, not based on their needs or what they want to hear. While I am always sympathetic to everyone’s financial situation, I will give the sellers a realistic price for what the home will sell for, even if they don’t like what I am saying. I also find it equally important to give an honest assessment of what work needs to be completed to make the house more marketable to buyers. I might offer to show you other homes for sale that a potential buyer will look at in your price range to show you how your home should be priced.
Going back to the original question – why should you as a buyer try to avoid these sellers? Firstly, they have unrealistic expectations for the true value of their home and in fact these sellers may not truly be a seller and simply testing the market – which it makes it difficult for them accept an offer at the market value.
The real estate market in Toronto is still red hot and if you are looking to buy a home or condo I have some tips that will save you time and energy (and money!) and put you in a favourable position to buy in today’s market.
First and foremost - don’t get caught up with the newspaper headlines. You’ll still hear about the “house that got 36 offers” or on the flip side about how “the market is poised for a slowdown”. Ignore the “noise”, and with my help as your real estate agent and become a local market expert.
Here is what you can do to arm yourself in today’s market:
Be knowledgeable. Once you’ve narrowed down a neighbourhood to buy into, get to know the inventory. Study the sales history over the past several months and understand the trend in that particular neighbourhood. Keep track of the houses you view and understand their eventual sale price. The list price in today’s market can be deceiving and bidding wars are still very much prevalent. Understanding value of the product you’re buying into is key.
Be prepared. Get all of your ducks lined up and make sure you’re prepared with your mortgage financing. Meet with your mortgage broker ahead of time and understand your mortgage options. Also, make sure you have all of the documentation in place to get your mortgage approved. A good mortgage broker is vital in today’s market.
Be flexible. You may not get everything on your house hunting wish list, so make sure you’re realistic of what you can get in today’s market. After seeing the 10th home or condo, compare your wish list with the properties features you’ve seen thus far.
Be aggressive. In a seller’s market you sometimes need to use your elbows to get to the front of the line. Consider your options with me and I will evaluate the various strategies with you. Consider submitting a pre-emptive offer (before the offer review date) to beat out other offers. Also think about doing a home inspection prior to submitting an offer to understand the home’s deficiencies ahead of any offer.
Be patient. You may make several offers before securing your “perfect” house or condo but using the above strategies will help you tremendously and have you better prepared.
If you have any friends or family that are thinking of buying a home or condo in today’s market please feel free to forward them these helpful tips. I would welcome the opportunity to speak with them.
Over the last couple of months I have seen a substantial increase in “bully bids”. A bully bid is otherwise known as a preemptive offer on a home accepting offers on a specified date. Holding back offers or specifying a particular offer date has been common practice in Toronto for the past decade or so.
Now, more buyers are using the preemptive offer as a strategy to gain leverage in a seller’s market. It doesn’t always work, but it’s something that both buyers and sellers need to be aware when they’re “in the market”.
As an agent, I have been on both sides of bully bids (representing buyers who wish to aggressively go after a property as well as representing the sellers end of the transaction when would be buyers are trying to “bully” their way to the front of the line).
When you are selling your home, you need to be aware that you may get an offer before the offer acceptance date. You do need to have a conversation with your real estate agent to make sure you discuss this scenario and how to re-act to such an offer. Your agent should also give you an expected sale price (usually a range betweeen 1-2%) and an approximate number of offers that you might expect. Having myself represented sellers countless times on offer nights, it’s more of an art than a science in predicting the number of offers, but having a sense of what to expect is good if you’re presented with a bully offer.
My advice to sellers is that’s it’s always better to wait until the offer date than to accept a preemptive offer. The only exception to that rule is of course if the offer is “too good to be true” and significantly better than the “market” value.
On the flip side, if you’re a buyer you need to be aware of the bully bid for two reasons. Firstly, if you a home is newly listed on MLS and is holding back offers until the following week, don’t wait to see the home. Why? It might by sold the time the weekend rolls around. The chances are slim, but definitely possible. You don’t want regret about not seeing that great house that sold before you even got a chance to see it. New house listings typically come out on Tuesdays, Wednesdays or Thursdays and I always recommend to clients to see the home within the first day or two of being on the market.
The second reason - if you do find that “perfect home” you should at the very least consider a pre-emptive offer. I am not suggesting you should bully bid, but at the very least you should consider the option. In this case you would have to prepare a very strong offer and give the sellers only a few hours to consider the offer. It does throw the listing agent off their game and they’ll scramble to try to drum up competing offers. This strategy doesn’t always work and there are definitely risks involved in doing this, but as buyer should be aware this as a possible option.
This real estate market is still very much a seller’s market and you need to be aware of the different options available to you when competing with other buyers and sellers.
Every now and again, the real estate market does funny things. Sometimes when you expect the real estate market to throw you a fastball - it throws you a curveball – when you least expect it.
At this time of year, many prospective home buyers have decided to hibernate over the winter months and check back in the springtime. With fewer buyers on hand, it can create some interesting scenarios for active shoppers. A perfect example of this that occurred this past week.
Two similar homes were on the market in North Toronto, both listed at $839,000. Both were accepting offers the same week. House A on Monday night, and House B on Tuesday night. I showed these two homes to my clients looking in this nice midtown Toronto neighbourhood. House A was the nicer of the two homes (with a new open concept kitchen and a larger than typical renovated bathroom). House B was nice, but the kitchen and bathrooms were updated about 25 years ago and didn’t compare to House A. What House B had was a better “finished” basement than House A. Both homes were on equally desirable streets only a few blocks away from each other.
After visiting both House A and House B we all agreed that House A would sell for more than House B given all of the recent renovations. Given the lack of supply of homes in this neighbourhood, bidding wars are still very much the norm. The question was how much more House A would sell over House B on offer night?
Fast forward to offer night, my clients decided to pass on both homes since both backyards could not accommodate a swimming pool. Having said that, we were interested in following what happened to both properties. Having been in touch with both real estate agents on both properties (and connecting a few dots in between), here is what happened:
House A (the better house) shockingly got no offers on Monday night.
House B had 2 offers on Tuesday night and sold more than $40k over the list price.
Then the losing party on House B bought House A three days later for $15k below the list price. How can House A sell for $57,000 less than House B when it had a brand new kitchen and bathroom? Mind boggling isn’t it?
My answer to this question is very simple. The real estate market isn’t like the stock market where millions of shares trade hands every single business day. In a given month and in any Toronto neighbourhood, you might get 12 condo sales and 41 freehold sales a month – sometimes less. (Each neighbourhood will have a different condo/freehold split, but you get the idea). And with that type of volume trading hands you’re never going to get an exact price – which is why I always give my clients a 2-3% range of what a house or condo’s value. On top of that you get you get other motivating factors like closing dates, terms of the offer or even uniqueness of the property and emotional attachment to the home - which can sometimes be difficult to quantify in dollar terms, but may also affect purchase price if you get the right buyer.