What's in a contract?

What’s in a contract?

 

January 2012 - In the business of real estate, those of us in the profession have a serious responsibility to our clients.  We need to protect our client’s current and future interests.  How do we do this?  A variety of ways but one that I believe to be very important comes from ensuring our clients understand and read the purchase contract prior to making an offer. After all this is where it starts, it is where it all hinges and ultimately where it will end.  

When you buy a property, the purchase contract contains clauses that you need to know about.  Small print if not understood can result in BIG problems. Here are a few highlights that I would like to mention.

·         The selling REALTOR® should always pull the Certificate of Title which will then list all encumbrances and encroachments on the property.  This document will also verify who the seller is.  You, the Buyer must understand that you are agreeing to assume any of these items on title.

·         Make sure the address, legal address and condo plan are correct. A wrong address can be quite a serious mistake. Make sure too that the parties to the contract are shown correctly.

·         A Real Property Report (RPR) with compliance must reach the Buyer’s lawyer 10 days before the possession date (Clause 4.4).  (Sellers make sure you have a current one with compliance before you sell!). RPR’s are not applicable to condominiums or to land without any structures on it. (Clause 4.11)

·         A condition, such as financing, condo documents, property inspection is something that must be satisfied before the contract is considered a ‘firm deal’.  (Clause 8.1)  A term of sale is something that must happen after the fact. (Clause 7.6)  Consider what this might mean to you and if you require a written term of sale.  

·         Under a purchase contract, the seller warrants that they are not aware of any defects in the property that is not visible and that renders the property dangerous or potentially dangerous or unfit for habitation.  If they sell without disclosing this, then they’ve made a false representation to the buyer.  (Clause 6.1 h) Note: the defect must be latent (not visible) as opposed to patent, which is why a property inspection is so important to a buyer.  (Caveat Emptor – buyer beware)

·         A purchase contract is intended to create legal obligations.  Make sure you read the contract and understand it.  If you wish, you can obtain legal advice prior to signing. (Clause 10.1)

·         If you are legally married and only one person is signing the contract, Dower consent may be required (Clause 10.7)

Last year in Calgary, a staggering $9.6 billion in residential real estate sales was transacted.  It is my hope that each and every Buyer that purchased one of those 47,627 properties understood what they were signing, that every REALTOR® representing their client completed the contract accurately.  You see, a contract binds the present with the future. It brings legality into an expectation of hope and promise.  It can go one of two ways.  Know your stuff, make sure your REALTOR® does too and no doubt you’ll have a positive experience.   That’s what is in a contract!

A Seller now has the option, if put in writing to decline documenting their conditional sale on MLS or attaching a ‘C/S’ sticker to their ‘For Sale’ sign. This new change allows for the Seller’s REALTOR® to continue to show and market the property until the sale becomes firm.  In the event the conditional sale does not go through, this new change would then allow a Seller to have a back up offer.  If an offer is strong and solid, it may be that a Seller will not want to market or have the property shown after it is conditionally sold and may wish it to be reported.   Buyers, this new change may affect you the most especially in the Calgary market which continues to heat up.

Jacqui Williamson, REALTOR
Century 21 Bamber Realty Ltd.
403.244.0773
www.jacquiwilliamson.com

 

 

Variable Rates Not As Enticing

January 2012 - The days of attractive discounts on variable rate or floating mortgages are now gone.    Statistically 37% of all consumers chose a variable rate over the last year.  With discounts at one time as high as prime less 0.9%, this allowed mortgage holders to enjoy floating interest rates between 1.1 - 2.1% over that last 3 years.    I have one major bank at prime -0.1% and one trust company at prime –0.2%.  The majority of the banks are now advertising variables at prime + 0.1%.

With the variable product high discount gone, clients are now gravitating to the attractive fixed rates now offered for 4 years at 2.99% (insured mortgages) and 5 years at 3.14%.  With fixed rates at these low levels virtually at prime, the stability they offer and solid signs of economic recovery, consumers have no real basis to complain.   With these current low fixed rates, consumers are now able to qualify for larger mortgages compared to the previous year.

Reviewing Personal Finances

Year end is always the natural time to review your personal finances.   No one should ever lose site of building equity or becoming mortgage free.   In January of 2011, the government made changes to mortgage regulations decreasing the amortization to 30 years and restricting refinances to an 85% loan to value due to concerns over increased debt levels in Canadian households.

Whenever I put together a mortgage, generally the first question a client asks is what their prepayment privilege would be?  Yet statistically less than 3% of mortgage holders ever use this option.   In today’s environment a good rate on a savings account would be 1.5%, so it makes sense to apply any extra cash against your mortgage debt at a higher interest rate.   I have one client who takes her year end bonus income and applies that to her mortgage.    She is now in the 7^th year of her mortgage and will be virtually mortgage free in 3 years.   Not every one has bonus income, but you can ear mark other funds such as tax refund for this purpose.

If your disposable income has increased over the last year, look at increasing your mortgage payment or going to an accelerated payment.    These strategies save thousands of dollars in interest and can easily shave 5 – 10 years off the life of your mortgage.

Consumers should take advantage of these low fixed rates.   There is always wisdom in transferring consumer debt to the low fixed rates secured by a mortgage.   Unsecured and secured lines should also be reviewed.  Rates on the lines vary by institution anywhere from prime plus 2% (5%) to prime plus 0.5% (3.5%).   Although secured lines offer the most flexible repayment privileges, the majority of consumers only pay off interest.   You should look at rolling these lines into a mortgage, enjoying a lower rate and making headway on the principle.   Prime has been low for a number of years; consumers have almost forgotten that it will increase with positive signs of economic recovery.

With these low rates and a healthy Calgary economy all is in place for a promising year in Real Estate…………

Greg Gullekson, Mortgage Broker
Dominion Lending Centres Westcor
403.244.9133
www.greggullekson.ca