28 Dec

What’s the difference? Property Assessment Vs Market Value

Mortgage Tips

Posted by: Kiki Berg

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…

The seller says their house is worth $500,000.
The sellers’ Realtor says it’s worth $500,000.
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!

Dustin Woodhouse

23 Nov

Can’t qualify for a bank mortgage? How do private mortgage work?

Mortgage Tips

Posted by: Kiki Berg

There is almost ALWAYS a mortgage solution. New to Canada? Self Employed? Maybe a few credit glitches in your past? Not everyone can qualify for bank mortgages today. It’s doesn’t make you a bad person, it makes you a savvy person getting the best mortgage for your situation! With the mortgage rules constantly changing, private or alternative mortgages are becoming the only way many people can refinance or buy.

Did you know that according to the Globe and Mail report “self-employed now represent about 15.6 per cent of all working Canadians”

There is a misconception, that alternative or private mortgages are only for bad people. Some folks call it “subprime”. Don’t let the word “subprime” scare you as our lending practices here in Canada are very strict and all federally regulated.

What is Alternative or Private Mortgage Financing and who uses it? 

Private mortgage financing can be an excellent alternative for those that are either:

  1. Self Employed and declare little or no income

  2. Micro-condos that are less than 400sqft (banks generally won’t finance these)

  3. Foreign investors

  4. Non-residents of Canada

  5. Credit Challenged

  6. Owe CRA back taxes

  7. Property Taxes that are in arrears

  8. People going through a foreclosure

  9. Construction financing and commercials loans

  10. Equity takeouts for starting a business

  11. Short term financing that has is open and has no penalties

  12. Don’t want to refinance their 1st bank mortgage as the penalties are to high.

  13. Requiring funds up to $20 million dollars

Many Banks and mortgage brokers don’t specialize in private financing. It’s vital to ensure these types of mortgage files are are submitted and packaged different than a traditional bank type mortgage.

If it’s submitted without care and due diligence you may pay a higher rate and HEFTY fees!When you are applying for traditional mortgage (meaning your are a typical T4 employed client, good credit and saved down payment) the CLIENT is qualified based on the PERSON first, then the property.

When you apply for private financing, the PROPERTY is qualified for the mortgage first and then a few details about the client.The property and location, location, location is what the lender is lending on. A property in a marketable area such as Vancouver Westside, North Vancouver and West Vancouver are PRIME marketable properties that private lenders like. The risk is lower, so better rates they can offer. Certainly properties anywhere in Canada are all options for private financing, even in small communities as well. Mortgages are also available for remediated, non-remediated and legal grow op properties as well.
What about the Rates?
Valuable and marketable properties can get financing with 25% down, but you can expect to pay 2-3% higher rates than if you have less than 25% down, as their is more risk taken by the lender. The rates for a 1st mortgage today (2017) are as low as 5.75% for a strong mortgage file to 10% for a less desirable property. 2nd mortgages can range 12-15%. The bonus of course, it you can opt to only pay “interest only” and can be fully open so you don’t have to pay the penalty to break the mortgage.
I hear there are Fees?
There are almost always fees for private mortgages. This is how the broker is paid for working on your solution. Fees depend on your broker. I have seen as low as $500 to as high as 5% of the amount you’re borrowing; the average is 1% (for example: $400k mortgage would have a $4,000 fee), so good to ask this upfront and ask a few brokers that SPECIALIZE in private financing.
Having an EXIT strategy
If you get a short term (1-2 year) private financing, as your mortgage strategist, I want to ensure we have a “exit strategy” plan in place to have to moved to a traditional low rate mortgage soon. This is especially true if the reason for the private financing is credit, income or back taxes. We will work together to ensure this plan happens and is followed through.
22 Nov

Critical Documents Required for Mortgage Qualifying

Mortgage Tips

Posted by: Kiki Berg

Critical Documents Required for Mortgage Qualifying

Being fully pre-approved means that the lender has agreed to have you as a client (you have a pre-approval certificate) and the lender has reviewed, approved ALL your income and down payment documents (as listed below) prior to you going house hunting. Many bankers will say you're approved, you go out shopping and then they sorry you not approved due to some factor. Get a pre-approval in writing! It should have you amount, rate, term, payment and date it expires.

Excited! Of course you are, you are venturing into your 1st or possibly your next biggest loan application and investment of your life.​​

What documents are required to APPROVE your mortgage?

Being prepared with the RIGHT DOCUMENTS when you want to qualify your mortgage is HUGE; just like applying for a job or going for a job interview. Come prepared or don’t get hired (or in this case, declined).

I assist all my clients along the way to ensure any questions are asked and when you are my clients YOU are prepared UPFRONT and fully PRE-APPROVED before you go house hunting.

No stress, no running around, no surprises.

Why is this important?

You can have a leg up against the competition when buying your dream home as you can have very short timeline (ie: 1 day to confirm vs 5-7 days) for “financing subjects”.

Think?: you’re the seller and you know the buyer doesn’t have to run around finding financing and the deal may fall apart? This is the #1 reason deals DO fall apart. You will likely get the home over someone who isn’t fully approved and has to have financing subjects. Home is yours and no-ones time is wasted.

If you just walked into the bank, filled an application and gave little or no documents, and got a rate – you have a RATEHOLD. This is NOT a pre-approval. This guarantees nothing and you will be super stressed out when you put an offer in, have 5-7 days to remove financing subjects and you need to get any or all of the below documents. That’s not fun is it? Use a broker ALWAYS…me preferably. We don’t cost you anything!

When you get a full pre-approval, you as a person(s) are approved; ie: the bank done their work of reviewing (takes a few days) to call your employer, review your documents, etc. All we have to do is get the property approved, which takes a day or two. Much less stress, fastest approval…faster into you home!

Here is exactly the documents you need MUST have (there is NO negotiation on these) to get your mortgage approved with ease. Key word here is EASE. Banks/Lenders have to adhere to rules, audit files and if you don’t have any of these or haven’t been requested to supply them…a big FLAG that your mortgage approval might be in jeopardy and you will be running around like a crazy person 2 days before your financing subject removal.

Read carefully and note the details of each requirement to prevent you from pulling your hair out later.

Here is the list for the “average” T4 full-time working person with 5-15% as their down payment (there is more for self employed, and part-time noted below):

Are you a Full-time Employee?

  1. Letter of Employment from your employer, on company letterhead, that states: when you started, how much you make per hour or salary, how many guaranteed hours per week and if your new is there a probation. You can request this from your manager or HR department. This is very normal request that HR gets for mortgages.

  2. Last 2 paystubs: must show all tax deductions, name of company and have your name on it.

  3. Any other income? Child Support, Long Term Disability, EI, Foster Care, part-time income? Bring anything that supports it. NOTE: if you are divorced/separated and paying support, bring your finalized separation/divorce agreement. With some lenders, we can request a statutory declaration from lawyer.

  4. If you need a simple, cost effective, agreement drawn up to get this mortgage done, you can contact Kevin Moye, my good friend and divorce mediator at BC Mediation Services . Going to a lawyer isn’t usually necessary if you’re amicable with your ex-partner. Kevin: 604-818-5632. Using the cheap divorce kit from the library won’t work as it needs to be certified by independent legal representation.

  5. Notice of Assessment from Canada Revenue for the previous tax filed year. Can’t find it? you can request it from Rev Can to send it to you by mail (give 4-6 weeks for it though) or get it online from your CRA Account.

  6. T4’s for you previous year.

  7. 90 day history of bank statement showing the money you are using to put down on your purchase.
    Why 90 days? Unless you can prove you got the money either a sale of a house, car or other immediate forms of money (receipt required)…saved money takes time and the rules from the banks/government is 90 days. They just want to make sure you aren’t a drug dealer, borrowed the money and put it in your account or other fraud issues. OWN SOURCES = 90 days. BORROWED is fine, but must be disclosed. GIFT is when mom/dad give you money. Once you have an approval for “own sources” you can’t decide to change your mind and do gifted or borrowed. That’s a whole new approval.

Downpayments

Own Sources: For example for “own sources”: if you are a first time buyer and your money is in RRSP’s then, have your last quarterly statement for the RRSP money. If your money is in 3 different savings account, you need to print off 3 months history with the beginning balance and end balance as of current. The account statements MUST have your NAME ON IT or it could be anyone’s account. I see this all the time. If it doesn’t print out with your name, print the summary page of your accounts. This usually has your name on it, list of your accounts and balances. Just think, the bank needs to see YOU have X$ in your (not your mom’s or grandparents) account.

GIFT: If mom/dad/grandparents are giving you money…then the bank needs to know this as the mortgage is submitted differently (this is called a GIFT).

If you are PART-TIME employee?

All of the above, except you will need to bring 3 years of Notice of Assessments. You need to be working for 2 years in the same job to use part-time income. You can have your Full-time job and have another part-time gig…you can use that income too (as long as it’s been 2 years).

If you are Self Employed?

  1. 2 years of your T1 Generals with Statement of Business Activities

  2. Statement of Business Activities.

  3. 3 years of CRA Notice of Assessments

  4. if incorporated: your incorporation license, articles of incorporation

  5. 90 day history of bank statement showing the money you are using to put down on your purchase

Now let’s get started! Give me a call 778-808-7756 to start your mortgage plan, find out what you want from your mortgage, and get you moving along, having fun and being excited! There are so many options for you.

Going to the bank direct is such a big dis-service to you. That is like walking into Ford and asking for a Mercedes or Toyota. As a broker: I am FREE! I work with ALL the banks, know ALL the rules, get the bank you choose pays me to give you great service and a fantastic product. There are over 300 of them…so don’t sell yourself short.

Kiki

21 Nov

I’ve never heard of that lender before?

Mortgage Tips

Posted by: Kiki Berg

I’VE NEVER HEARD OF THAT LENDER BEFORE

One of the benefits of working with an independent mortgage professional; compared to getting your mortgage through a single institution, is choice. And as there are even more mortgage rules coming into place January 1st 2018, now more than ever, having access to a wide variety of mortgage products is going to ensure you get the mortgage that best suits your needs.

Working with an independent mortgage professional will give you access to varying products from many different lenders, some of these lender you may have never even heard of, but that’s okay. Sure, RBC, BMO, and CIBC, are more household names compared to say, MCAP, RMG, or Merix Financial, but as each lender has a different appetite for risk (there is always a risk when lending money) how do you know which lender is going to have the products that are going to be the best fit for you?

Typically the conversation develops into something like this: “I’ve never heard of this lender before, are they safe, I mean… I have no idea who they are”? And although that is a valid question, there is a simple answer. Yes. Yes they are safe. All the lenders we work with are reputable and governed by the same regulator as the big banks. Ultimately, you have their money, they don’t have yours!
But let’s answer a few of the common questions often asked about these lenders accessed only through an independent mortgage professional.

Why haven’t I heard of any of these lenders?
Instead of spending all their money on huge marketing campaigns (like the Canadian big banks) which drives up the cost of their product, broker channel lenders rely on competitive products and independent mortgage professionals to secure new clients.

What happens if my lender gets purchased by another lender?
This actually happens quite a bit, however, it’s business as usual for you. Even if your mortgage contract gets sold, the terms of your mortgage stay intact and nothing changes for you.

What happens if my lender goes bankrupt or is no longer lending at the end of my term?
This would be the same as if the lender was purchased by another lender. The only difference is, at the end of your term, we would have to find another lender to place your next term. And as this is already good practice, it’s business as usual. Again, you have their money, they don’t have yours. The contract would stay in force.

Why don’t these lenders have physical locations?
Much like why you haven’t heard of these lenders, they save the money on advertising and infrastructure, and instead focus on creating unique products to give their clients more choice. These lenders rely on independent mortgage professionals for awareness and compete on product not public awareness.

Do they really have better products?
Yes. Well, I guess we have to define what is meant by better products. If by better products you mean a variety of products that suit different individuals differently, then yes. Across the board, each lender has a different appetite for a different kind of risk. For example, while one lender might not include child tax income as part of your regular income, another might. While one lender might look favourably on a certain condo development, another might not. Each lender sees things a little differently. Knowing the products and preferences at each lender is what we do!

When it comes to mortgage qualification, some broker channel lenders are more flexible than others (or the banks) and offer different programs that cater to self-employed, people who are retired, own multiple properties, or rely on disability income. While as it relates to the features of the mortgage, different lenders offer many different features.

Some mortgages can be paid off at an accelerated pace with little to no penalty, some accommodate different payment structure, some products are set at lower rate, but sacrifice flexibility.

At the end of the day, the goal should be to qualify for a mortgage that has the features that suit your individual needs. Regardless of which lender that is. If you would like to talk about your financial situation, and see which lender best suits your needs, please don’t hesitate to contact a Dominion Lending Centres mortgage specialist.

 

 

Author:

Michael Hallett

MICHAEL HALLETT

Dominion Lending Centres – Accredited Mortgage Professional
Michael is part of DLC Producers West Financial based in Coquitlam, BC