Build Your Team
If you’re feeling somewhat intimidated by the complexity of home buying, join the club. It’s a lot to take in, and most of us have no sense for the steps involved until we find the home of our dreams and actually start the process.
The good news is there’s plenty of help out there for you to lean on as you go through the home-buying process. Let’s look at building a team that can help ease your load.
Ask around, do your research, and make sure you work with the best professionals you can find:
- Your real estate agent – it’s hard to imagine going it alone.
- Your mortgage broker – should not cost you anything and can save you thousands of $$
- Your real estate lawyer – one who has the patience and experience first time buyers need
A mortgage broker can educate you on the process and help negotiate a good deal on your behalf. They have access to dozens of lenders.
Mortgage agents can give advice on which mortgage fits your needs best, and often provide access to lower unpublished rates.
Bank vs Mortgage broker/agent differences from RateHub
“In the past, prospective home buyers turned exclusively to their banks for their mortgage needs, but you now have more options at your disposal with the growing presence of mortgage brokers.
Independent mortgage brokers and agents are licensed mortgage specialists who have access to multiple lenders and mortgage rates. They essentially negotiate the lowest rate for you, and because they acquire high quantities of mortgage products, mortgage brokers can pass volume discounts directly on to you.
Mortgage brokers will assist you in the application process, from pre-approval to home appraisal; however, it is important to note they are an origination service. A financial institution, not a mortgage broker, will provide and service your loan.
The bank or lender will collect payments and provide customer service after the closing; however you can also reach out to your mortgage broker/agent to help you throughout the life of your mortgage.
Although banks can offer some discounting for consolidating your services with them, there are many advantages to using a mortgage broker/agent that many Canadians are unaware of.
One of the main benefits of using mortgage brokers is they have access to, and knowledge of, the entire mortgage market. They can advise which lenders will consider your case and which will not, based on your individual circumstances.
This is particularly useful for people with poor credit ratings, (or perhaps hard to verify income). Mortgage brokers have access to lenders who specialize in servicing people with adverse credit, and can leverage relationships with mainstream banks.
Mortgage brokers can also access exclusive deals not available on the open market, or negotiate a better interest rate or lower application fees from the lender in some cases.”
You might deal directly with a mortgage broker/agent when:
- You are at risk of being turned down by your bank
- You want an extended amortization period (say 35 years)
- You want a fixed rate mortgage, but you are fearful of high prepayment penalties if you have to break your mortgage mid-term.
- Privacy reasons – you don’t want your bank to know everything about your finances
- You want to make sure the entire mortgage market is being scoured for the best terms for your unique needs and circumstances
In the last few years, online mortgage brokers and rate comparison sites have sprouted up to add transparency to the financing game. They are a growing force when it comes to comparing mortgage rates and providing quotes.
Typically the rates you will see are being offered by mortgage brokers who covet high volume, low margin business.
Mortgage brokers for first time buyers, by Robert McLister
More first-time buyers use brokers than any other mortgage channel, 55% of them to be exact. It’s hard to overstate the importance of that. It makes brokers extremely important conduits for lenders who want clients that represent long-term revenue—and what lender doesn’t?
That fact was established once again with the release of CMHC’s 2015 First-Time Homebuyers Survey. Here are some interesting stats from that report:
- 43%of first-time buyers arranging their mortgage directly with a lender dealt with someone who exclusively specialized in mortgages
- Providing advice on long-term mortgage strategies can increase a first-time buyers’ satisfaction with their mortgage professional by up to85%
Interaction with Mortgage Professionals
- 79%of those receiving a recommendation to use a specific broker ended up using a broker
- 72%of first-time buyers who switched financial institutions arranged their mortgage through a broker.
It’s your biggest financial obligation folks and good advice can pay for itself 10-fold. Choose a mortgage expert, not jack-of-all trades. If you want investing or insurance advice, get a separate referral.
Survey note: CMHC’s survey interviewed 788 first-time homebuyers from across Canada. Individuals polled had all undertaken a mortgage transaction in the past 12 months and all were one of the prime decision-makers within their household for matters relating to housing finance and mortgages.
Real estate lawyer
Your lawyer has a lot of responsibility and if you are buying without a real estate agent, she will be even more valuable to you. Choose wisely; she can save you a lot of headaches down the road.
Your lawyer will make sure the property you want to buy is in good legal standing and doesn’t have any liens, penalties, clean-up orders, or other complications. The most important thing your lawyer should do for you is review all contracts before you sign them and answer any questions you might have.
As a buyer, this is especially important when it comes to the offer. If that document is accepted by the seller, the process is done and nothing more must be added unless both parties agree.
Your lawyer will also explain and handle the actual transaction of money during the escrow period.
When choosing a lawyer, find one that specializes in real estate transactions.
Real estate agent
Your real estate agent smooths out all the technicalities involved in a real estate transaction. In the buyer’s case, they give advice on properties that best fit the buyer’s stated needs.
They prepare the offer to purchase, ensure the proper deficiency disclosures have been made, and will represent you in negotiations with the sellers and their agent.
The seller of the home is responsible for paying the real estate agents once the sale concludes. The sales commission is typically 2.5% to 3.0% of the purchase price.
It is my view you would be nuts to enter into a home purchase without a real estate professional navigating this treacherous minefield for you.
With all due respect to friends and family, most of us know someone personally who is a real estate agent. Don’t feel beholden to give them your business. You should be convinced they are the best available resources for the task at hand.
If you think real estate agents are overpaid and do very little to earn their commissions, you are misinformed. Oh sure sometimes a blue bird falls into their lap, but most of the time assisting buyers and listing properties successfully is very hard work, and a good agent is worth every penny.
8 reasons to use a real estate agent, by Mike Holman
1) Knowledge of the local market prices
They should have more knowledge than you regarding local market conditions. Unless you are willing to spend a ton of time learning the market yourself then it’s worth paying for someone else’s experience.
2) Knowledge of local landscape
If you don’t know all the areas in your city or if you are new to a city then hiring a local real estate agent can be quite helpful.
3 Access to house details and comparative sales
This is the big reason why MLS is so valuable. If you are buying a 3-bedroom semi in Leaside then you look at all the recent sale prices and get a better sense for the market. This info is available from other sources such as city hall but it is very difficult and inconvenient.
4) Easier access to houses
This is one of the biggest advantages of having an agent regardless of how experienced you are with buying houses. The fact is people selling a house are not going to let you in without an agent.
You can contact the selling agent to book an appointment but there is no guarantee they will play ball. Open houses are a good way to look at a house but they are quite limited.
Another problem is sometimes buyers without agents are considered “ignorant” and might not be taken seriously.
5) Transportation when looking at houses
For a house buyer who doesn’t own a car, this would come in pretty handy.
6) They are far more experienced at negotiating the deal than you are. This is especially true in hot markets where multiple offers are the norm. It’s like navigating a minefield.
7) Less stress to close the deal
One thing about an agent is they will do all the administration for documents, finances etc. They’ve done it many times, while this would be your first. Enough said.
8) Renovation ideas
Agents tend to have at least some knowledge of renovation and design ideas so for a client who has a problem with the layout/condition/color of a potential house; your agent might be able to lend some insight about how to change things.
On top of all this, there is no direct cost to you the buyer, so why would you not use the best real estate agent you can find?