Ten tips for getting a fair price on a home - The Globe and Mail

An article from The Globe and Mail on September 7, 2011, by Amy Fontinelle:

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Whether it's a buyer's market or a seller's market, all homebuyers have one thing in common: they don't want to get ripped off. But how do you know if you're getting a fair deal on the home you're prepared to place an offer on? Read on to find out how to evaluate the price of any home so you can make a sound investment decision.

Realtor standing with family in front of new house Getty Images/OJO Images

Research recently sold, comparable properties
A comparable property is one that is similar in size, condition, neighbourhood and amenities. One 1,200-square-foot, recently remodeled, one-story home with an attached garage should be listed at roughly the same price as a similar 1,200-square-foot home in the same neighbourhood. That said, you can also gain valuable information by looking at how the property you're interested in compares in price to different properties. Is it considerably less expensive than larger or nicer properties? Is it more expensive than smaller or less attractive properties? Your real estate agent is the best source of accurate, up-to-date information on comparable properties (also known as “comps”).

Check out comparable properties that are currently on the market
In this case, you can actually visit other homes and get a true sense of how their size, condition and amenities compare to the property you're considering buying. Then you can compare prices and see what seems fair. Reasonable sellers know that they must price their properties similarly to market comparables if they want to be competitive.
 
Look at comparables that were on the market recently but didn't sell
If the house you're considering buying is priced similarly to homes that were taken off the market because they didn't sell, the property you're considering may be overpriced. Also, if there are a lot of similar properties on the market, prices should be lower, especially if those properties are vacant. Check out the unsold inventory index for information about current supply and demand in the housing market. This index attempts to measure how long it will take for all the homes currently on the market to be sold given the rate at which homes are currently selling. (For further reading, see Selling Your Home In A Down Market.)
 
Consider market conditions and appreciation rates in the area
Have prices been going up recently or going down? In a seller's market, properties will probably be somewhat overpriced, and in a buyer's market, properties are apt to be underpriced. It all depends on where the market currently sits on the real estate boom-and-bust curve. Even in a seller's market, properties may not be overpriced if the market is on the upswing and not near its peak. Conversely, properties can be overpriced even in a buyer's market if prices have only recently begun to decline. Of course, it can be difficult to see the peaks and valleys until they're history. Also consider the impact of mortgage interest rates and the job market on the economy. (Knowing your mortgage choices is important. For more information, read Shopping For A Mortgage.)
 
Are you buying a for-sale-by-owner property?
A for-sale-by-owner (FSBO) property should be discounted to reflect the fact that there is no 6 per cent (on average) seller's agent commission, something that many sellers don't take into consideration when setting their prices. Another potential problem with FSBOs is that the seller may not have had an agent's guidance in setting a reasonable price in the first place, or may have been so unhappy with an agent's suggestion as to decide to go it alone. In any of these situations, the property may be overpriced.
 
What Is the expected appreciation for the area?
The future prospects for your chosen neighbourhood can have an impact on price. If positive development is planned, such as a major mall being built, the extension of light rail to the neighbourhood, or a large new company moving to the area, the prospects of future home appreciation look good. Even small developments like plans to add more roads or build a new school can be a good sign. On the other hand, if grocery stores and gas stations are closing down, the home price should be lower to reflect that, and you should probably reconsider moving to the area. The development of new housing can go either way - it can mean that the area is hot and is likely to be in high demand in the future, increasing your home's value, or it can result in a surplus of housing, which will lower the value of all the homes in the area.

Your home’s sale price is private information by Mark Weisleder

An article from the Toronto Star, October 14, 2011, by Mark Weislader.  

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Condos under construction between the Rogers Centre and the Air Canada Centre in downtown Toronto. (Apr. 8, 2009)

Steve Russell/Steve Russell

A few years ago, the federal Privacy Commissioner ruled a home’s sale price is personal information and cannot be advertised or disclosed without the permission of the buyer and the seller.

This is what privacy legislation is all about — protecting your personal information. The lesson is that if you do not want to see your home’s sale price advertised after closing, then don’t agree to it.
In another case decided in 2006, an insurance company arranged for photographs to be taken of an apartment unit, without the tenant’s permission. The purpose was to get examples of the state of repairs of the interior of the apartments to assist in figuring out the building’s value. However, the pictures included some of the apartment’s contents.
The Privacy Commissioner’s office found that while the purpose might have been to show the condition of the unit, it also revealed information about the tenant, including their standard of living, whether they could afford expensive media equipment, whether they loved music or art or cooking. This was found to be personal information and thus permission should have been requested.
What this means is that before a buyer or agent takes photographs of anything inside a seller’s home, even during an open house or home inspection, they should ask for permission.
In another case decided in 2008, a consumer asked their bank for a copy of the appraisal report the bank had done on their home. An appraisal contains information about other comparable property sales in your area that help the appraiser calculate the value of your property. The bank refused, claiming this was confidential commercial information and not personal information.
The Privacy Commissioner’s office decided that, while the consumer was entitled to the appraisal value of their own home, they were not entitled to the name or contact information of the appraiser, or anything related to comparable property sales, as this was the personal information of third parties.
The issue of privacy arises in the ongoing lawsuit between the Competition Bureau and the Toronto Real Estate Board, something I’ve written about in the past few months.
The Competition Commissioner wants Canadians to be able to go online and access the selling price of any home in Canada. The potential abuses are huge, starting with thieves who want to learn about potential victims and their lifestyle. Since buyers and sellers didn’t provide this permission, in my opinion, it violates privacy legislation.
It seems to me the Privacy Commissioner should be involved in these proceedings and I encourage all Canadians to complain to the Privacy Commissioner’s office in Ottawa and to federal Industry Minister Christian Paradis. To register a complaint to the Privacy Commissioner’s office, you can download a form from their website, www.priv.gc.ca, sign it and then send it in. You can email Paradis’ office at minister.industry@icigc.ca.

New Mortgage Rules

Changes to the rules for mortgage lending received a lot of press in the past week. However, these changes won't affect most borrowers significantly.
The March 18, 2011 changes are really phase three of a gradual return to what I would call normal mortgage lending rules. In the “old days” - like 10 years ago - home buyers needed a minimum 10% down payment, they needed to pay for CMHC mortgage insurance in order to protect their lender if they had a down payment smaller than 25%, and they had to pay off the mortgage within 25 years. Even after the most recent changes, a home can be purchased with 5% down and paid for over 30 years. No wise person would amortize over more than 30 years, but you can still do that if you have made more than 20% as a down payment. If you are refinancing an existing home, you can still borrow up to 85% of its value, although down from the previous 90%. The third change – effective April 18, 2011 - is going to make lenders more cautious, because it removes the government insurance protection on home equity-backed lines of credit. These have been a fabulous business building tool for banks and credit unions, as well as a convenience for homeowners. This change simply means that the bank or credit union will have to be more careful to make sure you can repay them, because CMHC is no longer guaranteeing it.


as reported in The Viewpoint of the Clearsight Investment Program