SHORT VERSION:

Do not rely on your provincial assessment for a fair market value of your property.

The value printed on that document was arrived at during a time in the previous year, the market may have changed a bit since then, and not in the direction you might think.

Do not rely entirely on the buyer’s opinion or the seller’s opinion in an unlisted private transaction for a fair market value.

Do not rely entirely on your neighbours, friends, or family members opinions for a fair market value of a property.

Do consider ordering a marketing appraisal, but do not rely on it 100%… maybe 98% though.

Do consider an evaluation by an experienced, active, local Realtor or two. This in combination with a marketing appraisal is the best indicator of current fair market value.

Gather professional opinions from Realtor(s) and an Appraiser – these are the people with their feet on the ground and their heads in the game.

Thank you.

LONG VERSION:

Provincial Property Assessment notices have arrived in the mail for BC residents (and other provinces), giving some homeowners a big smile and a bit more spring in their step (increased property taxes aside), while others wilt and lament at a modest gain or decrease in assessed value.

Hold on a sec, neither this assessment document nor either parties’ emotions, are tied to a current true market value. In fact provincial property assessments can be significantly too high or too low. In BC, values are determined in July of the previous year, and properties are rarely visited in person by provincial appraisers.

For this reason provincial property assessments should never be solely relied upon as any sort of relevant indicator of true market value for the purposes of purchase, sale, or financing.

Think of the assessed value instead as something akin to a weather forecast, spanning far larger and more diverse areas than the unique ecosystem that is your neighbourhood, your specific street, or your specific property. A weather forecast made the previous July, not the previous week. As this is when assessed values are locked in, a full six months prior to the notices being mailed out.

The BC Assessment Authority does offer some useful tools for a high-level view of the market. Go to http://evaluebc.bcassessment.ca/ and start typing an address. You’ll get a drop-down window where you can click on the address you want. Here’s what you can find out:

DETAILS ON ONE ADDRESS

These come up on the first screen and include: current and last year’s assessed value; size and rooms; legal description; sales history, and further details if property is a manufactured home or multifamily building. There’s also an interactive map as well as links to information on neighbouring properties and sample comparative sold properties.

NEIGHBOURING PROPERTIES

Here you can compare the assessed value of houses in the immediate neighbourhood. Clicking on any property brings up further details.

SAMPLE SOLD PROPERTIES

Find comparable properties and see what they sold for and how their sold price compares to their assessed value. This is a great research tool for owners, sellers and buyers.

These tools can be a starting point, but if you’re looking to set a selling price on your own property, always enlist a professional. Valuing your own property is not a do-it-yourself project. In a buying/selling transaction your are best to order an appraisal, which is a much more accurate reflection of current market value. It is timely and reflects value for zoning, renovations and/or other features unique to the property. An appraiser is an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question.

WHAT’S MY HOME REALLY WORTH?

Usually, market value is determined by what a buyer is willing to pay for a home, and what the seller is willing to accept.

A quick survey of recent sales and their relation to assessed values will often demonstrate no clear relationship between sale price and assessed value. It’s often all over the map. Some properties selling well below assessment, and others well above.

You also want an experienced and local Realtor to help you determine the selling price of your home. A (busy &  local) Realtor will have a far better handle on what is happening in your area for prices than does a government document, and in many instances will save you from yourself.

In theory a comprehensive current market review completed by a Realtor should not differ radically from the value determined by a professional appraiser.

Professional appraisers spend all day every day appraising properties, and their reports are often seen as less biased. Imagine your reaction, as a buyer, to the following statements…

1. The seller says their house is worth $500,000.
2. The sellers’ Realtor says it’s worth $500,000.
3. This house is listed at $500,000 based on a professional (marketing) appraisal.

Most buyers would consider #3 the most reliable of the above statements. And most buyers requiring financing will have the benefit of the lender ordering their own independent appraisal to confirm fair market value. Sellers rarely order an appraisal in advance, which can create some interesting situations.

In practice, Realtors are relied upon for listing price estimates. Most buyers don’t care much about what anybody else thinks the house is worth. Buyers care what they think it is worth. This is why we say that market value is ultimately determined by what a buyer is willing to pay for the home, aligned with what is acceptable to the seller.

It is important to note that there are two kinds of professional appraisals. There is the marketing appraisal, such as one ordered by a seller. And there is the financing appraisal, which is done so the bank is satisfied the house is worth what the buyer and seller have agreed it’s worth. The financing appraisal is a less in depth review and is essentially answering the question; is this property worth the agreed upon purchase/sale price.

A marketing appraisal goes deeper (and costs more) but a lender is not concerned with the actual market value over and above the purchase/sale price. A lender just wants the simple question answered. It is a rare day that the appraisal for financing has a value that differs significantly, if it all, from the sale price. Therefore one should not be surprised if, when buying a home, they find that the appraisal comes in bang on at the purchase price. As they do 99% of the time.

The 1% of the time that the value is off it is almost always a private transaction where the seller has had no professional guidance at all and has inadvertently set their price below market by relying on something as inaccurate as their BC Assessment document.

IN SUMMATION

Do not rely on your property assessment for a fair market value of your property.

The value printed on that document was arrived at during a point of time during the previous year, the market may have changed a bit since then, and not in the direction you might think.

Do not rely entirely on the buyer’s opinion or the seller’s opinion in an unlisted private transaction for a fair market value.

Do not rely entirely on your neighbours, friends, or family members opinions for a fair market value of a property.

Do consider ordering a marketing appraisal, but do not rely on it 100%… maybe 98% though.

Do consider an evaluation by an experienced, active, local Realtor or two. This in combination with a marketing appraisal is the best indicator of current fair market value.

Gather professional opinions from Realtor(s) and an Appraiser – these are the people with their feet on the ground and their heads in the game.

…and of course, when it comes time for your mortgage, visit a mortgage professional at Dominion Lending Centres!

 Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts

So 2016 was an exciting year in the mortgage world! The problem is that we mortgage professionals really hate it when things get exciting in our world. Between the economy and the federally mandated mortgage rule changes and their ensuing fallout, it is now more important than ever to get a solid pre-approval in place. I am not just speaking to first time home owners either! Before you list your current home or refinance your mortgage or consider buying a rental, you need to make sure that you qualify under the new mortgage rules.

The biggest change by far was the increase to the mortgage qualifying rate. Basically, no matter which term you are selecting you will have to qualify at the Bank of Canada posted rate which is currently 4.64%. The mortgage rate you are given will be considerably less than this and will be based on whichever term you choose. The rationale is that there is no way rates were going to stay at 2.39% and all of a sudden a lot of people could be hit with a significant mortgage payment increases which could mean increased foreclosures. When you remember that our federal government is actually financially backing those mortgages through the mortgage insurers, they had a vested interest in keeping the housing market secure.

So the things you need to know:

1. Rates have climbed since the rule changes were announced, so if a new home is in your future get a rate hold in place so you are protected against further increases. Most are good for 120 days.

2. Make sure they are checking your credit and not just seeing how much you are qualified for based on your income. Can you imagine selling your home only to be told that you do not qualify for the financing on the next because of something on your credit bureau? It has happened, I assure you.

3. Given the variety of ways in which we all get paid, you also need to make sure your pre-approval is solid given your situation. For example, the mortgage lenders require a 2 year history on all variable income. That means if your income is commission, bonuses, overtime or shift differential then you will need a 2 year history of it before it can be used for the mortgage qualification.

4. Porting is an area which is slightly misunderstood. You will have to qualify for the mortgage under the new rules even if you are just moving the mortgage from A to B. Please refer back to the previous horror story of the people who had sold and then could not buy a new home.

5. Ironically, the changes now mean that if you are refinancing your home, there is a possibility that you will have a higher mortgage rate than someone putting 5% down. This is because the 5% down mortgage is insured while yours with the significant amount of equity is not making it a higher risk for the bank. If you are considering a refi you may want to do it sooner rather than later given the rate increases.

6. Rental properties have been heavily hit by the changes. Our economy means that fewer lenders are willing to consider these mortgages to start with and those that still are have upped the ante. Some have increased the minimum down to 35% from 20%. Others require a very strong net worth in liquid assets. If you have multiple properties make sure they are reporting on your taxes.

So that’s about that. A solid pre-approval from a qualified mortgage professional is a very good peace of mind strategy for both the new home buyer and those veteran buyers. When you’re ready to talk of if you need more information, the mortgage professionals at Dominion Lending Centres are here!

Courtesy of Pam Pikkert, AMP – DLC Regional Mortgage Group 

Over the last few years, we have seen many retired Canadians outliving their retirement savings and requiring a financial solution to help them live the rest of their retirement. In the media alone, there is a constant outpouring of articles relating to retirement planning, preparing enough savings for retirement, as well as numerous articles around when to tap into your CPP. For many retirees and those approaching their retirement, these articles are a reminder of how to prepare and what to anticipate. However, Canadians continue to struggle with their finances in their retirement years.

Many Canadians are entering their retirement years with debt and underestimating the amount they need to save for retirement. In a recent national survey of Canadian homeowners, 40+, that we commissioned, we found there is a large gap between the lifestyle expectations of those Canadians studied and the reality. In fact, a startling 69% of Canadians researched expressed confidence that they have sufficient funds to retire, however 43% of retirees studied have debt including a whopping 35% of Canadians 75+. While 78% claim to have savings and investments, a full 40% have less saved than $100,000. That means, the majority (53%) of Canadian homeowners 40+ have either no or less than $100,000 in savings to carry them through retirement!

The study further goes on to show that a significant portion (82%) of those studied, reported that having the ability to stay in their homes during retirement is very important and 69% value their home equity as an important asset in their retirement plans.

This study also enabled us to question the familiarity of the reverse mortgage product. More than half of the respondents claimed that they were familiar with reverse mortgages, and among those who would consider a reverse mortgage, 50% of them said that the main reason for considering a reverse mortgage is to supplement their income.

Many respondents wanted reassurance that they would continue to own their own home without ownership being transferred to a third party. (yes-customers continue to own their own home!) The respondents also felt more at ease knowing that banks and other secure financial institutions offered the CHIP Reverse Mortgage (they do!) and if the solution was recommended by financial professionals (it is!).

This study is a reminder of how important it is to continue to raise awareness to the reverse mortgage product. Canadians prefer to age in place, are carrying debt and have inadequate savings, but many are directed to solutions that don’t give them the opportunity to live in their homes without the need for monthly mortgage payments. Reverse mortgages are a smart and comprehensible solution for Canadians planning their retirement. To learn more, contact your local Dominion Lending Centres mortgage professional.

Courtesy of Yvonne Ziomecki, HomEquity Bank – Senior Vice Presiden, Marketing and Sales

Avoid these 5 common mistakes, and you will have no problem getting your mortgage faster, more efficiently, and with a clear understanding of the process:

1. Thinking banks are the first and best place to go for a mortgage

Mortgage brokers can often beat the bank rates by using different lending institutions. The bank is limited to one lender, but if you use a mortgage broker, they have the option to shop for you with multiple lenders to find you the best product.

2. Not knowing your credit score

Your credit score is a HUGE factor in your mortgage application. The first thing lenders look at is your history and your score—then from there they build your file.

You should know where you stand because so much of your lending availability is tied to your credit score. In mere minutes, a mortgage broker can help you obtain a copy of your credit report, and go through it to ensure the information is correct.

3. Shopping with too many lenders

When you shop from institution to institution you will have your credit score pulled multiple times. Lenders typically frown upon this and it may interfere with your mortgage application. If you go to a mortgage broker though, your score is pulled ONE time only.

4. Not keeping your taxes up-to-date

Plain and simple: If you are self employed or the mortgage application is requiring a 2 year income average to qualify (utilizing overtime wages and/or bonuses) and you haven’t filed your taxes and kept them up to date, you cannot get a mortgage. Lenders will ask for your notice of assessment if your tax filings are not up to date, and you will not get your mortgage until they are filed properly and a Notice of Adjustment from the latest year it is received.

5. Not understanding that the real estate market you qualify in TODAY will adjust in the future.

Rates may be at an all time low right now, but new rules, government regulation, and changes when you are up for renewal can change the circumstances. You must be able to carry your mortgage payment at a higher rate or with new laws imposed.

Remember, securing a mortgage isn’t always about getting the best deal. It’s about getting a home you want and establishing yourself as a homeowner. That means not overextending yourself and taking your qualifying amount to the maximum. Leave some breathing room because no one knows what the future may hold!

But one thing’s for sure – you should contact a mortgage professional at Dominion Lending Centres!

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group 

Are you on the hunt for a new home but can’t find exactly what you are looking for? You’re not alone. House hunters experience this scenario every day. With real estate prices increasing you may not be able to buy your dream home the first go-round.

Think about buying a fixer-upper. There are many potential properties that you can put your own personal stamp on. Why not renovate something?

There is a mortgage product called Purchase Plus Improvements (PPI). With the PPI the lender is able to provide additional financing to improve the subject property. This type of mortgage is available to assist buyers with making simple upgrades, not conduct a major renovation where structural modifications are made. Simple renovations include paint, flooring, windows, hot-water tank, new furnace, kitchen updates, bathroom updates, new roof,  basement finishing, and more.

There are parameters to the PPI mortgage program:

• Apply for up to a maximum of 10% of the as-improved market value
• Utilize as little as 5% towards the down payment
• At the time the application is submitted for approval the lender requires a construction quote to verify the work that is planned for the subject property
• Renovation to be completed within 120 days
• A third party (appraiser) must verify completion
• One advance of the funds once the project is complete
• Once the renovation is complete the lawyer would release the funds

PPI Scenario

Listed or Purchase Price: $450,000

Value of the Renovation: $45,000

As-Improved Value: $495,000 (new Purchase Price)

Maximum Borrow: $49,500 (10%)

Purchase Price: $495,000

Down Payment: $24,750 (5%)

Mortgage Amount: $470,250

Mortgage Insurance: $16,929

Total Loan: $487,179

Monthly Mortgage Payment: $2,146.17

For many, it is a daunting task to seek a mortgage plus a second type of financing to complete renovations, so why not opt for the PPI option?

If you are considering another form of financing for the renovation, some borrowers look for a line of credit, but is it really saving money and time? An interest-only payment on $49,500 is another $309.38 (based on 7.50%) which saves you $114.28 overall.

With all the different types of mortgages out there, be sure to contact your local Dominion Lending Centres mortgage professional so we can explain how “we’ve got a mortgage for that”!

Courtesy of Michael Hallett, AMP – DLC Producers West Financial 

Your Credit Score that the lenders use, not to be mistaken by the Credit Risk Score you see when you check your own credit, is one aspect of determining your borrowing power. The better your score, the length of established credit and your payment history the better when it comes to mortgage financing.

Let’s assume that all parts of an application are equal (available down payment, income, monthly liability payments etc.) except for the Credit Score. Established credit in this case would be any credit report that has at least 2 accounts reporting with a limit of $2,000 for 2 Years.

Comparing the credit profiles of Jane and John both who make a gross annual income of $50,000 the following would apply:

First Gross Debt Service Ratio (GDS) is the combined shelter expenses (heat, property tax, half of condo fees & mortgage payment) in relation to the borrowers gross income. And Total Debt Service Ratio (TDS) is the GDS plus all other monthly debt liabilities in relation to the borrowers gross income.

Jane has a Credit Score over 680

• GDS allowed is 39%
• TDS allowed is 44%

John has a Credit Score between 600-679

• GDS allowed is 35%
• TDS allowed is 42%

Each year Jane may allocate $19,500 towards GDS and $22,000 towards TDS.

And each year John may allocate $17,500 towards GDS and $21,000 towards TDS.

Lets assume heat and property tax combined are $300/month. This means that Jane with her excellent credit can allocate $1,325 towards her mortgage payment and John can allocate $1,158 toward his mortgage payment.

Using the current Benchmark Qualifying Rate of 4.64% to qualify Jane may qualify for a mortgage of $236,066 and John may qualify for a mortgage of $206,313, a difference of$29,735.

As you can see there is quite the difference in mortgage amounts allowed under each credit rating. If you’re thinking of buying it’s best to consult a Dominion Lending Centres mortgage broker who will check your credit, help you determine your maximum mortgage amounts and if necessary help you make credit decisions that may improve your credit score and buying power.

Courtesy of Kathleen Dediluke, AMP – DLC Integrity Mortgage