Hard to believe I’m writing a blog post on NYE. This is more pathetic than even I imagined.
In any case, there are some Real Estate 101 rules I wanted to make sure you remember as we start into a new year, living in this mama of a housing gasbag that is clearly on borrowed time. Strikes me it’s never been so important to ensure you’re selling, and buying, in the right ways.
No BRA: It doesn’t matter how seductive the realtor ends up being, do not sign one of those Buyer Representation Agreements when you are shopping for property. The most pervasive argument is that all realtors work for the person paying the commission (which is the seller), so by signing a BRA you ensure the agent helping you buy is on your side. That’s crap, of course. If you sign you’re opening yourself up to potential legal action in the future, since you’re accepting responsibility for possibly paying the dude. So don’t.
No FSBO: It’s the refuge of the cheap and the greedy. For-sale-by-owner listings invariably attract sellers who don’t think professionally marketing their homes is worth paying for, and yet expect to pocket not only a fat price for the real estate, but also all the commission. It’s easy to see why people want to sell this way, but why on earth would you want to buy from from a DIYer? They probably home-school and change their own oil, too. Gross.
Negotiate. Everything. When you decide to list your home and avoid the real estate tsunami aimed at your town, remember that real estate commissions are totally negotiable. If you don’t ask, the listing agent will likely slap on the standard 5% (which ends up being split between agents and brokers on both sides of the deal). But it shouldn’t take much of a conversation to get it reduced to 4% – which is a sizable wad on a $700,000 house (plus HST in many provinces). Also make sure you ask for a marketing plan. And comparables to confirm the pricing. List too high in 2014, and you’ll still be for sale in 2015.
Stage it. Selling houses will get a lot more competitive as listings swell in many markets. Meanwhile most buyers are hormonal and emotional basket cases, ruled by first impressions who often decide to deal based on one 13-minute viewing (as opposed to spending four hours looking for great yoga pants). The best investment you can make is in staging – pimping the place to its maximum potential with lots of eye candy furniture and nice decorator touches giving the impression you’re actually erudite and cultured. If you’re a buyer, imagine the place naked.
Insure it. Most insurance products (and insurance salesguys) are designed to Hoover your money using guilt. It works astonishingly well, especially on new fathers. But while most insurance is questionable, title insurance is now a necessity. Never buy a house without spending a few hundred bucks to get a policy that will protect you against unpaid property taxes, liens or other things your lawyer was too balled or cheap to catch, such as an encroachment or wives of the former owner buried out back. This also makes a survey somewhat redundant, but you should still ask for one prior to closing.
Inspect it. Never close a deal without doing a home inspection. If you’re moronic enough to be in a bidding war, then have the inspection done prior to submitting the offer so the condition can be eliminated. Otherwise, it’s non-negotiable. A good report will give you some peace of mind. A bad report lets you walk away from the deal or go back and demand a lower price. And the inspector is obviously key. Choose very carefully, asking for referrals and credentials. On the day of inspection spend every second with the guy, getting a running commentary on the property as well as the final written report. And take your time. Typically a home inspection clause will give you a number of days during which your due diligence can happen. Go back with your buddy the electrician or your plumber brother, as well as the reno contractor. Make the sellers nervous. It’s fun.
Reconsider it. This is arguably the worst time in years to buy a house, unless you do it a place (like New Brunswick) where houses are priced below their replacement cost, plus the moose are free. In most urban centres sellers are still greedy, refusing to believe prices can ever fall, and the 2013 pop in values has just made them worse. If we’re not at the pinnacle, we’re close. Real estate is basically unaffordable in Toronto, Calgary or Vancouver, while household debt is ridiculous. Once markets fade, events happen quickly. If you can get by another year or two without your spouse vivisecting you, then wait.
Rent. Without consistent, relentless annual increases in real estate values, there is no financial argument for buying a house. Renting is always cheaper. In fact, landlords today heavily subsidize their tenants, usually without even understanding the folly of their actions. Renters don’t waste their money any more than homeowners piss it away cash on mortgage interest, property tax, insurance, maintenance, snowblowers, land transfer taxes or commissions. Renters can take the difference and invest it. Homeowners are often broke, with scant savings and fat debt. In the absence of inflation or income growth, a real estate buy is 100% emotional. Remember that rich people’s houses are a small percentage of their net worth. That’s not a coincidence.
Well, there are many more rules. Like never hire a lawn Asian. Or, only make an offer on a stat holiday. Or, buy the worst house on the best street. Or, never lowball. Or, replace your mortgage with a revolving LOC. Or, don’t leave the pit bull unattended during showings. Or your mom.
So, fear not. Any blog that stayed home on New Year ’s Eve and wrote about title insurance certainly won’t disappoint you. This is rock bottom.