Here is a question from one of my readers.

"Tibor, what would you advise someone buying a first home today about mortgages – lock in for five or 10 years, or go variable?" Most people are going fixed, though a lot are also using combination mortgages, according to info from RBC.

Although I knew the answer I consulted with one of my lenders and here is what he had to say...

A ten year mortgage has very reasonable prepayment penalties ONCE you get into the sixth year and beyond – then it’s just three months’ interest.

But IRD (Interest Rate differential) in years one to five of a ten year mortgage is serious Money – so as much as the rate protection is attractive, it is unlikely the ten year mortgage will fit a first time home buyers needs over such a long period of time. The ten year mortgage is a better fit for a clients who know that they won’t be moving anywhere in some time, like me. I have been in my house for 10 years and I don’t see myself living anywhere else.

(a) Fixed or Variable – no discussion necessary – go fixed.

(b) What term? - Yes five years is often the term of choice, but it
may not be the best if you are pretty sure you will move in three
years. You can do 2.99% for three years and 3.19% on very clean
applications for five years.

Feel free to comment or contact me with any questions/inquiries.

Kind Regards,

Tibor Bogdan

Here is an interesting survey done by BMO ( Bank of Montreal) as published in Vancouver Sun this week.

When it comes down to it, many British Columbia home buyers just aren’t willing to battle for their dream home, according to a BMO Home Buying Report released Thursday.

In the survey, 22 per cent of Canadians said they were willing to enter into a bidding war when making an offer on a home.

"Of those prepared to fight, half would pay up to 110 per cent of the asking price, while a quarter would be willing to bid up to 120 per cent," the report said.

Those surveyed in Manitoba/Saskatchewan ranked first in eagerness to enter into a mortgage bidding war (32 per cent). They were followed by respondents in: Ontario (28 per cent), Alberta (25 per cent), B.C. (23 per cent), Atlantic Canada (13 per cent) and Quebec (10 per cent).

The study also noted that 52 per cent of Canadians surveyed said they're willing to pay between 100 and 110 per cent of the asking price, with Quebec ranking first at 62 per cent. It was followed by: Alberta and B.C. (53 per cent), Ontario (51 per cent), Manitoba/Saskatchewan (48 per cent) and Atlantic Canada (44 per cent).

Meanwhile, 27 per cent of Canadians said they would pay between 100 to 120 per cent, with the highest in Atlantic Canada (33 per cent), then Ontario and B.C. (30 per cent), Quebec (25 per cent), Manitoba/Saskatchewan (22 per cent) and Alberta (17 per cent).

I find these numbers fascinating but I am always skeptical about these kind of survey since I don't know how they are selecting the groups. So I thought I would ask all my subscribers these two questions:

1. Would you be willing to enter into biding war situation?

2. Would you pay over market value price ?

Please comment and I will report the results in my next blog post.

Kind Regards,

Tibor Bogdan

Looking to be a Landlord?

Buying property in "college towns" typically translates into stable rental returns, no matter how the economy is faring.

Not only do colleges provide a steady source of jobs for the local economy, but enrollments have swelled as the unemployed go back to school seeking new job skills.

Along with increased demand, rents have risen, too, by about 5% over the past 24 months, and you can expect them to keep climbing in the upcoming years.

Would you like a list of properties in Chilliwack and Abbotsford that are near a college? Send me an email and I will send you a list.

Kind Regards,

Tibor Bogdan

Here is great article by Gerry Marr from Financial post that  every homeowner should read.

Bank offers you should refuse!

One of my favorites is the cash-back mortgage. It is offered to a varying degree by most of the major banks, so there is no point in picking on any one institution.

Here’s the offer: Take out a mortgage for more than five years and get 5% of the value of the mortgage up front to a maximum of $25,000. In other words, get a $500,000 loan and immediately get $25,000 back. “It’s great for first-time buyers,” we’re told.

Really? If the loan is at the posted rate of 5.44%, which it usually is for these types of mortgages, you could easily land into more debt trouble long term.

Another deal tries to lure me over to a new bank with an offer of 2% cash up front, or up to $4,000 on $200,000 if I switch to the financial institution. But what about the costs to break my existing mortgage, and is there really any point in switching products to get that cash right away if I’m going to end up with a higher rate and a less-flexible mortgage?

“Somebody is going to pay for it,” says Kelvin Mangaroo, president of RateSupermarket.ca, about the cost of the promises. “Sometimes there is more fine print than the actual offer.”

“Somebody is going to pay for it. Sometimes there is more fine print than the actual offer”

There are other deals out there. One mortgage will offer you travel points, another will let you take “payment holidays,” but the details are scarce on both as to whether they’ll cost you more and ultimately make it even harder to pay down your debt.

And let’s not forget the home-equity line of credit. You finally pay off your mortgage and there’s the bank ready to offer you more debt. “You tap into your home equity,” reads a headline from one bank about solving some issues like a home renovation or your child’s education. It sounds so simple.

For Immediate Release: Apr. 3, 2012

Fraser Valley house hunters looking for good buys; keeping prices resilient

SURREY, BC – The Fraser Valley Real Estate Board (FVREB) processed 1,412 sales on its Multiple Listing Service® (MLS®)

in March, a decrease of 22 per cent compared to March of last year, however only 13 per cent less than the 10‐year
average of 1,626 sales for same month.

Scott Olson, president of FVREB, says, “It was quieter than usual for March, but still steady with an increase in demand for more affordable properties, in particular detached homes for less than $500,000 and townhomes.

“Compared to last March, every community in Fraser Valley experienced a decrease in the sales of single family
detached homes especially those priced at the higher‐end; however Abbotsford, Langley and North Surrey all saw
increases in the sale of townhomes.”

Olson adds, “Last year, single family homes represented 63 per cent of our residential market. This March, it dropped to 56 per cent, so we’re seeing demand for more affordable options. This is in contrast to last year when we saw elevated sales of higher‐end homes in areas such as North Delta, South Surrey and White Rock.”

In March 2012 in Fraser Valley, the sale of detached homes with a value greater than half a million dollars decreased by 33 per cent compared to last year, explaining why average prices, which can be skewed by the dollar volume of high or low end sales*, are showing decreases year‐over‐year, while benchmark prices – homes with typical characteristics for the neighbourhood – are showing increases compared to 2011.

The MLS® Home Price Index (MLS® HPI) benchmark price of a detached home in March was $572,700, an increase of 6.8 per cent compared to $536,200 last year. The benchmark price of Fraser Valley townhouses increased by 1.5 per cent in one year, going from $310,300 in March 2011 to $315,000 in March 2012, while the benchmark price of apartments also increased by 1.5 per cent going from $210,600 in March of last year to $204,700 in March 2012.

The number of Fraser Valley properties on the market in March finished at 9,643, an increase of 5 per cent compared to the same month last year although the number of new listings received – 3,066 – represents a 9 per cent decrease compared to March 2011.

The average number of days to sell a detached home was 46 in March 2012, one day faster than last year. It took 49 days on average to sell a townhouse and under two months or 58 days to sell an apartment.
The Fraser Valley Real Estate Board is an association of 2,903 real estate professionals who live and work in the BC communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission. The FVREB marked its 90‐year anniversary in 2011.

To view the most recent statistics report with graphs, click here.

Whenever I am faced with a question like this, my answer is usually another question...which is, “To whom?"

In my experience your house has a different value to you than to the buyer or a lender or an appraiser and even to the local government, who needs to assess the value of the house for its tax collections. My job is to keep my finger on the pulse of the market and use my experience to make sense of the information that is available to me.

Here is an example that illustrates this issue.
Earlier this year I listed a property on the West side of Abbotsford. My suggested price did not go well with the sellers and they decided to list it much higher than I was advising. We did agree that if there was no offer on the property within 3 weeks, they would reduce and go with my suggested price. Due to a unique location we were able to attract many viewings and 10 days later we got an offer that was accepted by the sellers. It contained few subjects and one of them was, "Subject to the buyer being approved and obtaining a first mortgage." I was surprised by this offer since I knew that the buyers were paying more than the market value. 
My sellers just kept smiling and reminding me that my numbers were wrong. That smile on their face did last for 5 days until we received the news that the Bank will not release the funds on the property since the purchase price is not supported by the market value.
We were forced to re-list the property at the market value and sold it a few weeks later.
So here you have it! It doesn’t mater what you think your house is worth. You have to find a balance between what you want to get and what the buyers are willing to pay and don’t forget about lenders and appraisers.

Have a real conversation with your Realtor about the price and the real values.

Tibor

How Value is Determined Through The Eyes Of.....
Not very long ago, I wrote an article about how sometimes we have difficulties determining the market value for a property that would satisfy the current owners - since the owners always think that their house is worth more. However, We the Realtors need to be able to balance the owners needs, the salability of the house and recognize that the mortgage lenders need to assess the house before the mortgage is issued.

Here is how it works...

The sellers view their house like this:


The buyers always think that there's better homes than yours out there or they think that your house needs a lot of repairs and updates so they view your house like this:


The mortgage lenders have their own fears of lending too much money on the property that is not worth as much as you think and they view your house like this:


The lenders usually hire an appraiser and they see your house like this:


Then we have a view of the Tax assessors and they choose to view your house this way for their own reasons. By now you may understand their reasons.

Recently I was helping a client determine the market value of her home and she asked, “But Tibor why do you say that my house is only worth $548,000 if my tax assessment that I just got in the mail says that my house is worth $573,000?”

The difference between my price and your tax assessors is that the assessor does not have to deliver on his promise and he does not need to help you to accomplish your dreams of selling your home.

I do!

Tibor Bogdan
Your Realtor For Life

So you want to buy a new house but you have to sell your house first?
You have few options and here they are...

Option 1: Put an offer on the new home with a subject to the sale of your old house.
Pros: Safe, no risk.
Cons: You will have a tough time negotiating good terms for your new house since this subject is too complex.
The builder will still market the house you want and if the better offer comes in you will get bumped.

Option 2: You can trade your house if the builder is in financial position to do so. (Just like trading in your car.)
Pro: Clean, no hassle selling your old house, quick move-in.
Con: The builder won’t pay you the market value since he will have to sell your old house and there are some costs attached with that, and they do not like losing $$$.

Option 3: Compromise between option 1 and option 2
Negotiate with the builder to give you a guaranteed trade in price but you would reserve the right to try to sell it yourself in the next 60 days or so.
Pro: No risk. You are moving regardless of what will happen.
You can start packing. There is a chance that you will get more $$$ for your house than the builder would pay you.
Con: I can’t think of any.

I hope this will help you.

Tibor

Lets put your perception to the test! Have a look at the picture below.

What do you see? Is it a young woman 20 -25 years old with a petite nose that is well dressed, maybe going to a party?
Or do you see an old woman 75 to 85 years old
with a larger nose and a dominant chin?

The first time I was introduced to this picture I remember thinking that either I am crazy or everyone around me is. I saw an old woman with a big nose 80 plus years old. The others saw a beautiful young woman with a petite nose, well dressed in a fur coat.

I thought my friends have either gone mad or they are pulling my leg. After discussing it for few minutes we started to see each others point of view and as it turned out we were all right. We just saw the picture from different perspectives or as you may say "with different eyes".

If you can't see both women scroll down for couple of hints...

This exercise brings up more questions than the answers about what do we see and how. However the most important question is this;
Do we see with our eyes, or do we see through our eyes?
What I mean by that is this - are we pre-programmed to see our world in a certain way?
In the other words, do we see things as we believe they should be by our own beliefs, rather than as they are in reality?

One of the lessons from this exercise should be that we shouldn't jump to conclusions about other peoples views too quickly.

“I know what I know and I see what I see” attitude should be replaced by,“Tell me what you see and why" attitude.

In my view, it is indisputable that there is a good chance that both parties may enrich their knowledge and view by exploring the other party's perspective.

But the first step in this shift of perception is that we must be able to accept the fact that we could be wrong and that our eyes are not able to detect what we don’t believe to be true.

P.S. If you still don’t see the old woman here is the hint.
The necklace of the young woman is the mouth of the old one and the cheek of the young woman is the nose of the older woman. Do you see it now?

Have a great day,

Tibor Bogdan

Matt~
Hi Tibor! We need your help. Our family and income situation changed a bit and we are thinking of selling our house in February and we would like to buy one of the gorgeous homes up on Eagle Mtn. If you remember, our house is 30 years old and it will need some renovations. My question is, "What should or shouldn’t we do before we list it for sale?"

Tibor~
Hi Matt good to hear from you.
Some of the best things that you can do to improve the appearance of your house are;
1. Clean up your front landscaping.  Landscaping is supposed to compliment the house but often is so overgrown that it has a life of its own and hides the house instead of showcasing it.
2. The next step is to DE-CLUTTER. Start in the garage and take out everything that you have not used in the past 12 months and put it in storage. Then go through the house room by room remove everything that would take away from the appearance of the room or the space. This includes, de-personalizing (taking down picture frames and knick-knacks)
3. Painting. Update the walls by choosing light and neutral colors. If you're not experienced at painting, hire a professional! There's nothing worse than paint drips and messy baseboards.
4. Change the light bulbs, and if your light fixtures are outdated - get a new one.
5. Clean your blinds and drapes.
6. Hire a duct cleaning company to clean the ducts and the furnace and change the filter. There is usually dust and pet hair that can cause your house to have unwanted odor.
7. Pay attention to your front door. There is a saying, "You don’t get a second chance to make a first impression." Make sure the hardware is functional and that the door is clean. Replace the front door Matt.

These are just few ideas how to get maximum price for your house.
When we are ready to list it, I will send Dianne (my professional Home Stager) to help you with the details.

Looking forward hearing from you,

Tibor