Getting Sidelined on Your Offers???
Then Get Creative
On a regular day in our Personal Mortgage Group Office I will walk in and Steve, Boyce and Chris will be standing in the hall way chatting about the mortgages they are working on. I jump right in as this is the best part of being a Mortgage Broker. As an office we work as a team to find solutions that work for our clients. Four heads are much better than one. PMG with three seasoned professionals puts out the equivalent of most brokerages with over 70 agents.
What this means to you is you are dealing with pros that have experienced almost every twist and turn people go through. You have to do hundreds of mortgages before you qualify as a true Mortgage Expert.
As the Principal Broker of 26 years I am very proud of the PMG team.
That is why we have decided to write about the issue of getting an offer accepted in this heated market. The tough part on us, as brokers is trying to keep our clients calm and realistic when the market is driven by a lack of supply.
You want to get in but the prices are moving so fast you cannot keep up. It did not help that the Federal Government has pulled the rug out from under First Time Home Buyers buy reducing their purchasing power by roughly $100,000. So they take out 25% of the buyers and the prices still keep going up. Good news is the Boomers will be vacating their homes in the next 10+ years. So how can you, as purchasers get your foot in the door before it slams shut in your desired areas.
Here are some solutions:
1. Get into our our office and get a “Real” pre-approval. Whether you are only thinking of buying or think you are ready to go it is time to book an appointment. We are honest with our clients and will not activate a purchase if it is not in their best interest. PMG want our clients to experience a full and successful financial life.
1. We do fully documented pre-approvals, including credit reports. The reason for this is most offers will not be accepted with a condition of finance or even inspection. This means the deal is going to be firm. If the appraisal comes in short of the purchase price the client will have to bring in the extra cash from their own resources. We, as their advisors have to find out if our clients have a Plan B and this can be very tricky if they have only 5% – 10% down payment.
2. Whether you are First Time Home Buyers or Existing Home Owners selling and buying, you need to have professionals prepare you for making that winning offer without losing sight of reality.
Selling your property is not advised unless you have a firm purchase in place in this market. If you do it backwards and sell first you are putting yourself in a position of being homeless for quite some time or Panic Buying which is even worse.
We sit with our clients and provide them with working spread sheets so they can see how much they qualify for, keeping in mind their personal circumstances. IE Mat leaves, child care, post secondary education, divorce etc.
3. PMG reviews the complete purchasing process including establishing a realistic value. Best areas to be looking for their price range. How to prepare for an offer with no conditions and the repercussions if the financing was not achievable.
4. PMG’s Valuation system is a real bonus. We can research any address and give you all recent sales in that location and also the subject property’s last purchase price and market sales when it was last purchased. We know who the registered owner(s) is and the financing registered against it. In other words the more knowledge you have the better chances of coming off the winner in a bidding war.
Thinking You are Sidelined Already?
Something is better than nothing. Who wants to rent and pay for someone else’s mortgage for the rest of your life because you did not take off the blinders. *All figures are of course estimated to paint the picture for you.
1. Buy with a buddy. If your income is too low to buy in a good area, buy with a good business buddy. Whether it is a sister, brother or friend. It should be someone that is a good match in both income ability and credit worthiness. It is going to be a 4-5 yr plan with an exit strategy. It can be a single family or duplex. Buy it as Tenants in Common with 50/50 or 30/70 what ever share is appropriate with contributed down payment.
In five years, assuming the market slows a bit and you are at 10% growth year over year In 5 yrs. your $500K purchase is worth $250,000 more AND you have paid off $90,000 of your principal in the great mortgage we arranged for you. You sell or buy out your partner and each of you walk away with 145k – 170k in down payment for your next purchase and your income has increased substantially in 5 years so you qualify.
In 5 years you have turned your 5% shared down payment of $25,000.00 into a tax free profit of $120,000 to $145,000
2. Buy with your Parents. Yes, buy with Mom and Dad only make them partners. They are probably sitting on excellent money available in their Bank of Home Equity. So again your are buying a home at $500,000 and you only qualify for a home purchase of $400,000. Your parents take out a mortgage on their principal residence for $100,000 to make up the shortfall and you put them on title as Tenants in Common for 25% of the value of the property or just make an agreement.
You have agreed on an exit plan of 5 years when your incomes have increased and home value is up. You buy their 25% out when we refinance your property at maturity. The 8% to 10% annual return on their $100,000 has turned out to be $40,000 +. They have helped you and you have helped them.
3. Buying a legal duplex is an easy one, We can use 50% of the rents to increase your income to qualify. Down the road we refinance the duplex for the down payment on your single family home and you keep the duplex as an investment which is now paying for your new downpayment and supporting it’s own expenses. Or sell the duplex and cash out. The longer you hold real estate the more you seem to make.
Hope this helps to give you additional ideas to get your foot through the door in a product starved market.
If you know of anyone in this situation please tell them to give us a call to help them prepare to BUY a house. 905-546-0550