Buying a house - The Solid Foundation

Whether you are buying an investment property or buying a house for yourself, the foundation is the same. so this articles applies to all home buyers types.

To make sure I am not making any assumptions, your objective is to buy a house that you want at the lowest possible price.

To do that, first, stop DAYDREAMING. Stop listening to the scammers who claim you can buy for nothing and get the house for nothing! What kind of seller would be so stupid to sell you a house for nothing and how many of them will you actually run into. Even if you end up finding one, your Real Estate Agent would buy it before you do! In fact, with all these Real Estate Scams out there, if you bought a house at fair market value, then you have done very well.
 
This article is not about the secrets of buying a rental property for no money down and half the price of the market value of the house. I am not Tom Vu or Don Lapre and I am not in jail.

To clear the air, in Canada, the no money down home did use to exist, but not anymore. Some banks and lenders were willing to lend you the 5% down payment so that you don't have to pay a dime out of your own pockets to purchase a home. However, given the changes to the financial situation and the tighter lending restrictions, there are no bank or lenders who would do that in Canada or the United States.

The buying home for half price did use to exist as well. At one point, foreclosures (or called "Power of Sales", which is just a marketing gimmick) in Canada would allow foreclosed homes to be sold at rock bottom prices. The new law, which has been in placed for many years now require foreclosed properties be sold at the highest possible price or else the lenders will get sued. Cause of the naive belief of some buyers, sometimes foreclosed homes sell higher because Canadians have the misconception that foreclosed homes are a really good deal causing it to have a reverse affect.

Now, clearing out the quick money maker myths of buying homes, there are still many things you need to be aware of before starting.

If there exist ever an industry with more sneaky sales tactics and money motivated people, it has got to the Real Estate industry. As a buyer, you could be dishing out $350 000 and everyone wants a piece. The Real Estate Agents want a piece. The lenders want a piece. The lawyers want a piece and the sellers want piece. No wonder there are so many scams in this industry.

Your objective as a buyer is to get trustworthy people on your team. If you Real Estate Agent claims he knows everything and can get you houses at dirt cheap prices, then he is lying. If he could do that, why wouldn't he just buy it for himself. Don't bother looking for those who possess "Power of Sale" or sneaky ways of getting homes for half the market price. They don't exist in Canada! If a Real Estate Agent could do that for you, then the Real Estate wouldn't be a Real Estate Agent. He would become a buyer! Look for Real Estate agents whoe will work for less commission, not secret inside knowledge that God doesn't have.

And don't even listen to the Real Estate Agents who claim they are so rich that they are only working because they want to help new inexperience buyers. Just run when you hear that! If they really wanted to help, they can volunteer for other things and work for free.

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Where to find an honest Real Estate Agent

Word of mouth
As long as the source that you got real estate agent from is reliable, then there is a high chance the agent is reliable and a low chance the Real Estate Agent is a scammer.

Just attending open houses
Open houses are properties that are for sale and are available for viewing at certain times. Often times, during the summer, you may notice signs on the corner of the street posting an open house. This sign leads you to a house for sale where the agent is waiting for interested buyers. For the agent, it is not only an opportunity to sell the house, but also to sell himself or herself as your agent. Since this agent already has clients, these agents may be more reliable than just an unknown stranger off the street. You will certainly still have to go through an interview process with him or her and make sure this agent is reliable.

Newspaper ads and Real Estate Sessions
Real Estate Agents usually spend some time investing in advertisement. They could range from a Billboard sign to a classroom session where they may teach something. I prefer the classroom session. A billboard sign does not tell you much about the agent. Certainly not enough to make any decision.

The Internet
By surfing the Internet and just typing in Real Estate agent plus the city you are looking for, you will get a list of eager agents. If you see an agent on the top ranked of the search engine, that only implies these agents have done a good job in marketing themselves. That does not imply they make good Real Estate Agents. Often times, I see the top raked sites are the worse agents. These sites contain useless information that does not help you in any way, but only intended to help the site get a better ranking from the search engine. I ABSOLUTELY DO NOT recommend you pick the agents where their sites are ranked on top of the search engines.

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How to interview your Real Estate Agent

Your Real Estate is applying for a job you are offering. You need to interview your Real Estate Agent to see if he or she is a good fit into your team that will help your purchase a house. Your team consist of a Real Estate Lawyer, a lender, perhaps a home inspector and the Real Estate Agent.

There are two stages to interviewing your agent.

First, is the discussion stage to see if you can get along with your agent. My preference is to always talk to my agents in an informal manner. My agent may know every word he says, every action he makes could determine whether I would keep him or release. My first priority is make sure my agents is honest and fair. There is no need for my agent to suck up to me and no need for my agent to work extra hard. These additional wants often lead to agent pretending to be somebody else. I will ask my agent questions and advise, not because I don't know the answer, but because I want to know how my agent will answer.

Second, is the watching the agent in action where the agent takes you to tour the houses and see how your agent interacts with you. Often times, I would look at the agent's response before looking at the house. That's because it is more important to make sure you have good agent than to make sure the house you are looking at is worth buying. If the agent is acting like the house is a good buy even when it's not, then that's bad agent. If the agent is always complimenting every house, then I would wonder about his intentions. By observing the agent, you may notice what the agent's priorities are. Is the agent interested in offering me a house worth buying or is the agent interested in selling me any house so that he can quickly get the commission.

Do not just interview one agent. By interviewing multiple agents and if your expectations of your agent is fair, you should be able to find a decent agent. Do not reveal what you are looking for. By revealing that, the agent can pretend to be that. Do not deceive your agent. Your agent is human also. Treat your agent with respect and aim to get the same. Just like you need to watch out for those terrible agent, your agent needs to watch out for those terrible clients.

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What you can and cannot expect from your agent

Agents are often in a tough situation. In order for them to make money, they need to please they're clients and at the same time still be honest. Sometimes there two factors don't agree with each other.

So the most imporant thing you can expect from your Real Estate Agent is a comparable analysis. This is a document that only Real Estate Agents has and tells you sold house prices. This statistical data helps you decide how much you should pay for, for a house with similar size, type and location.

Simply put, if your agent does not provide you that, fire him! Do not ask him to provide you that. The agent should initiate it. This is a good test to see if your agent is honest.

Aside from that, any other additional knowledge can be seen as a plus, but realize your agent could be wrong. Do not trust your agent with any other kinds of questions.

If you are wondering whether a house is a good investment, don't ask your agent. Your agent has to say yes in order o encourage you to buy.

If you wonder whether your house is legally liveable, ask your lawyer.

If you wonder whether you can afford the house, ask your mortgage broker.

As a home buyer, you are essentially establishing a team to help you buy the house of your choosing. Your team needs to work well together and at the same time, inform you when any one member of your team is not putting his/her weight and/or deceiving you. To do that, it may be best to get referrals, but not all from the same team members. That is, do not ask your Real Estate Agent to help you hire your lawyer, home inspector and all your other members. If your Real Estate Agent is a crook, then the other team members will also be.

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Etiquette when visiting a stranger's house

When you travel to visit these houses that you are interested in buying, you entering as a guest in someone else property. Treat it like you are a guest and respect the rules of the owners.

First, if the owner is around, do not critisize the house. Sometimes, people get too caught up in analyzing the house that they forget that this could be someone else's pride and joy. Some people take it personally and critisizing the house could be equivalent to critisizing the people living there. You can make your own remarks after you have left the house.

Second, do not use the washrooms. You are only there to view the house for purchasing. Unless if the owner is there and you have gotten to know the owner better, it is not a polite thing to do to strangers.

Third, don't mess the place up. Turn off lights when leaving and leave things the way they were before you step in. A home can be a private and personal concern. You should notice your agent making an effort to turn lights off and making sure your agent is polite. You should also notice your agent unlocks and locks the door after he or she leaves.

The best Real Estate agents

Ok, so we can all agree that a hard working, honest, good agent is the kind of agent you are looking for.

Now, the next question would be out of all the honest, ethical agents out there which ones will suit you best?

First, one would belief an experience agent is better than a new inexperience agent. That is a MYTH. What you will notice is that inexperience agents have its perks. Many inexperience agents work harder. They work harder because they are new at their job and they really have to establish themselves. They need to work harder. Secondly, inexperience agents are less likely to be dishonest. Once when agent knows the rules and ropes, they will try to pull strings and see if they can get away with it. An agent who is helping you find your home may also be trying to help himself get the commission fast. Perhaps, like a child, inexperience agents are much too naive and scared to break the law. Inexperience Real Estate agents may tell you things an experience one knows better not to.

So what are the benefits of having an experience agent? The most important difference between a skilled agent and unskilled agent is the point of negotiating the sale price of the house. Everything else is matter of following procedure and giving you all the information you need to decide on your own. Following procedure does involve some experience, but it is not important as gaining the skill to negotiate well.

So the question for you is, do you need the agent to have more control in negotiating the sale price of the home for you or do you need more control in the negotiations. One may argue that it is always best to have a skill negotiator on your side. Rightly so, that is true. However, you already have a lot to look for in an agent. If you prefer to have more control in negotiations, then you can concentrate your efforts in other characteristics of finding the close-to-perfect agent. One thing to note is that an agent with strong negotiating skills may also be smart and devious enough to trick you into buying a less then your desired home.

Now, to look for an agent with negotiating skills, simply observe their behavior. Do not ask them upfront whether they have strong negotiating skills. Almost every agent will say yes. Look for things such as providing you with innovative tricks to get the best deal or they show you past statistics where they have negotiate better than other agents.

Remember, it is not in an agent's best interest to get you the lowest price because they lower the price, the lower their commission. It is in the agent's best interest to get you the highest price that you are willing to buy for. Do not reveal to your agent your highest price. Your agent does not need to know.

What you can do after your Real Estate Agent has scammed you?

Although this is the last article in my series of understanding Real Estate Agents, it is generally the first one people read. People often get scammed before they realize Real Estate Agents can be deceptive. It is not made public in the same stature as car salesmen or repairmen where people just believe Real Estate Agents are telling the truth. Unfortunately, this is intentionally done. The Real Estate Regulators within each Province protects Real Estate Agents. It does not protect the buyer.

The only thing you as the buyer can do is contact the Real Estate Regulator within your province and report the case. For example. in Ontario, http://www.orea.com/ would be the organization to contact. If you go on their web site, you'll see a bunch of friendly faces that appear to care about your Real Estate needs.

Once when you report it, they will request for more evidence relating to the incident. This is where you as a buyer will fail. It is highly unlikely that you have any strong or any evidence at all that your Real Estate Agent has scammed you. Your Real Estate Agent will then deny everything and because there is no evidence, the Real Estate Agents walks freely and continues to perform his profession onto other innocent victims.

To this day, I have never heard or seen any Real Estate Agents get expelled. One may wonder what these Regulators really do.

The bottom line, prevention is the best medicine. Let others be aware of the potential scams Real Estate Agents can pull.

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Condo or House - which one is a better investment

Simply put, the general case is a house. Done properly a larger house goes higher in value, can be rented for more and doesn't have condo fees associated. Although the condo mangement board is non-profit, they are still very expensive for what they offer.

Now, having said that, there are exceptions. It would be impossible to find a house in downtown Toronto. Yet, downtown Toronto will offer you the better rental investments for your money. Therefore, if you are going to buy a condo for investment purposes, your best bet is in downtown Toronto. If you really want to rent out your property, your best bet is also in downtown Toronto.

A condo also offers less worries because everything is taken care of. This lifestyle is actually catching on as more people are preferring this lifestyle. At least, the single, young adults do and given the trend, the percentage of singles are growing with each year.

I recenty purcahsed a house and the maintenance has become a nuisance.  Mowing the lawn, and shovelling the snow appears to be a lot easier than it really is. I made the mistake of buying a corner lot - double the sidewalk and bigger lawn!

My next house will definitely be a small lawn, small side walk house, but not a condo with those overpriced monthly condo fees.

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What extras to offer as part of your rental property

One may believe that more services attracts more renters. I use to believe that. To me, I thought it would be more cost effective if I manage the Internet and cable for my renters since I knew how to get the best deal. Then, I could increase the rent because I was providing Internet and Cable TV.

I was right in that I knew how to get the best deal, but I was wrong in that it was more cost effective.

Cable and Internet is not an expense that is tax deductible! The Ontario provincial government does not allow you to claim this expense because they do not believe a rental property needs Cable and Internet. Hence, although I pay taxes on the rent income, I was not able to claim the expense of the Internet and Cable that my renter was using.

So what is the strategy?

Now, if you are living with your tenant, you could offer free Internet because really, my renters seem to find Internet as a necessary part of life. (In fact, they claim immediately when the Internet is down. And I must fix it fast.) The other option is to split the Internet and Cable bill as part of different expense, which is not part of the rent.

I chose to just offer the Internet for free because it was just easier to maintain. However, when I moved out of the house, I did not provide them with the Internet or Cable service. They were on their own. Choosing to split the cable and Internet bill was just an additional maintenance that I didn't care to waste my time on.

Depending on how open you want your target client to be, offering free Internet and Cable would appeal to short term Tenants. Offering Cable and Internet does not appeal to long-term tenants because if they have intentions to stay there for a longer period, then they wouldn't mind making the effort to get the services that fit their needs.

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The real purpose of a rental contract

Many people believe the purpose of a rental contract is to ensure each party commits to their part of the deal and to find a way to sue each other if the other party fails.

That is NOT the purpose a rental contract. Although contracts are designed for this purpose, but not rental contracts. The law in Canada is designed such that petty cash lawsuits are discouraged. Often times, you will spend more on the lawsuit than getting the rewards from the lawsuit.

Ensuring each party commits to their part of the deal should have been done during the tenant screening. The landlord should be carefully screening the tenant to make sure the property is a good fit and that the tenant is reliable and responsible enough to pay for the rent. As well, the renter would have also screened the landlord and property to make sure the landlord is a decent person and the property suits the renter.

The true purpose of the rental contract is to clearly communicate to each other what is expected of each other. Only during times (and this is especially rare) that the tenant completely destroys the house, would the landlord sue the renter. And during those times, the renter wouldn't even be able to afford to pay the landlord back anyways!

What I mean by clear communication is that the renter will need to know when to move in, when to pay the rent, with what method of payment, what services are included and how long the lease agreement is. There are additional clauses the landlord may also throw in.

A rental contract is especially important when it comes to rental property that doesn't apply to provincial regulations. This is often the case in room for rent where the landlord shares the same kitchen or bathroom. Since the provincial regulations do not apply, then the rental contract will set the official standard as to what is appropriate and inappropriate behaviour within the rental premises.

At RentBin.ca, I provide you with a sample rental contract. Further RentBin.ca also allows you to automatically generate a rental contract when you post a rental ad.

The other thing you will want from the tenant, which is not in the rental contract is some form of identification such as driver's license and an emergency contact. To sue someone, you have to identify him or her and locate him or her.If you do want to chose the lawsuit path, you also have to make sure the person has valuable assets. In Canada, you simply can't sue someone who has no money.

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