First Time Buyer - Looking for advice & possibly representation

Hi folks,

Potential first time buyer here. Been lurking about these forums the past few months. Looking for some advice (and possibly representation) but not really sure where to begin. I've laid things out below and peppered my questions throughout.

VIVID at the YATES:
Got myself registered early for The Vivid at the Yates pre-sales (by Chard Development). To be eligible to purchase at The Vivid:
1. Household income must be < 150 000 (pref to those making < 125 000) and;
2. You must live here for the first 2 years after construction.

All units will be offered at 8% less than market value (BC Housing partnership). Parking is 35 000.


MORTGAGE:
RBC has also partnered with Chard to offer mortgage preapprovals for the Vivid that are good throughout the construction duration. I got myself pre-approved by RBC for an amount just under what I was looking for (~315000 and I was hoping for 345000). Thing is, my down payment is going to be more than 20% yet RBC stress tested me to a 4.99% interest rate. Now obviously this isn't the rate they are going to give me but it does shrink my max mortgage amount. Note that I have good credit (845 ish), no debts (24000 student loan payed off in december), large down payment saved (between 80000-100000 plus what I can save in the 3 years before construction completion), and 75000 ish gross annual income.

Q1: I thought stress testing of >20% buyers wasn't going to be happening until next year?

Q2: Should I go to a mortgage broker or places like ratehub.ca to rate shop? Will other places be able to offer the same pre-construction assurances and rate holds that RBC is offering as Chard's official partner?

Q3: Any other mortgage points that I can look into or mention to the RBC mortgage person?


PRECONSTRUCTION REALTOR:
Thus far, I signed up and have dealt with the sales team on my own. However, I've done enough reading to know that there may be things I DON'T know. I've seen lots of conflicting opinions online about whether a realtor is needed or not for a pre-con condo that the buyer has already picked out.

Q4: Since I signed up on the builders website on my own, is it even possible for me to get a realtor at this stage?

Q5: The developer pays for the buyer's realtor but they told me they won't discount the price if I DON'T get a realtor... so should I get a realtor? What services will they be able to provide me at this stage?

Q6: I have heard of some Realtors splitting the commission with the buyer on precon condos. Is this common?

Q7: Is a good pre-con lawyer (perhaps one familar /w the developer) to review the sales agreement (for assignment clauses, capping closing costs, etc.) all that is needed in my case? Where would be the best place to find such a lawyer in Victoria?


I'm just looking for any and all advice/opinions at this point. Perhaps some of you can even provide the very services I need :-)

Cheers for now Vibrant Victoria

Edited by RustyNail, 01 November 2017 - 12:47 AM.

First off, great on you for putting these questions out there. You're already a few steps ahead by doing so. Second of all, welcome to VV, I think you'll find you're in good hands here.

 

I'll take a crack at these questions, but granted I might not have the right answers here as the terms and conditions of some of the arrangements you speak of might be a little more complex than what we assume they are.

 

Q1: all buyers purchasing from an OSFI-governed institution come January 1st will require a stress test, even if you have over 20% down, even if you're buying a pre-purchase today.

 

Why are you stuck on RBC? Sounds like you have your pickings with a down payment that high and a relatively good-paying job. Pre-qualify with RBC if you'd like and use that as leverage elsewhere, but don't feel you're chained to that institution.

 

Realistically you won't be locking down a mortgage until early-to-mid-2020, so you've got a ton of time to figure out that aspect of the equation.

 

Q2: is RBC offering you a rate hold until mid-2020? And at what rate is the rate hold? Avoid Ratehub for anything more than their calculators and news. It's always to your advantage to shop around for a mortgage locally and stay off the Internet for something that important. What you might see there at a low rate could come with a litany of additional costs that, depending on how things go with your purchase, could come back to haunt you (things like selling your place prior to the mortgage renewal period, things like a missed payment, things like switching institutions at the time of renewal, etc.).

 

Q3: don't get sucked in by a single institution. Shop around. Check out the various mortgage brokers in town, too.

 

Q4: that would be a question someone like VV's "resident" Realtor Marko Juras can answer for you. I don't think signing up for updates precludes you from coming in with a Realtor, but if you've already engaged the sales staff on your own it could be too late?

 

Q5: everything is negotiable. If that $2,500 discount clinches the deal, a developer is more likely to approve the discount. And don't just take the word of sales staff, ask to speak directly to the developer or write him directly. He approves that ultimately and it's his decision and his alone.

 

Q6: no, but a realtor like Marko Juras does do that.

 

Q7: I'd slide towards a lawyer/legal firm with real-estate development experience like Infinity Law, they know their real-estate, but there are many others.

 

Keep the questions coming!

Q5: everything is negotiable. If that $2,500 discount clinches the deal, a developer is more likely to approve the discount. And don't just take the word of sales staff, ask to speak directly to the developer or write him directly. He approves that ultimately, and it's his decision and his alone.

 

I concur.  Back when I sold condos (~1996) in a tougher market, I can tell you that at least weekly I sat down with the developer and went over every lead, every expression of interest in the suites.

Edited by VicHockeyFan, 01 November 2017 - 07:35 AM.

Q1  here is an article from globe and mail that basically says some banks are bringing in the stress test rules effective Oct 17th

 

https://beta.theglob...obeandmail.com

 

Q2/3  I would definitely shop around, it doesn't cost anything, but you will generally find most most banks monitor each others rates and offer identical rates.  Don't forget to check out the fine print like yearly pay downs and at what percentage, can you double your monthly payment, etc, etc as those do differ.  As for a mortgage broker some are free, some charge.  I have found the ones that charge usually find somewhat of a better deal

 

Q4/5 yes why not

 

Q6/7  you have to get a good lawyer to review the conditions of sale.  Why not bypass the realtor all together and have your lawyer act as your realtor which they are automatically licensed to do.  If you know a good lawyer, pay them 1-2 hours to make the offer on your behalf, they are entitled to 1/2 the commission which they should refund to you.  On a 300k condo with standard 7 plus 3 fees that should be $6500-$500 approx lawyer acting as realtor fee which is approx $6k back in your pocket.  They don't have to be familiar with the developer, but it could help as they already know many of their conditions already

Edited by tjv, 01 November 2017 - 08:43 AM.

7 plus 3 = a commission term, meaning your realtor is making 7% on the first $100k, then 3% on each $100k thereafter.

 

The standard is not typically 7 plus 3 though, it's more likely to be 6 plus 3, and that is split between the agents. But with a pre-sale the commission varies and is usually at or below half of the commission from a comparable "re-sale" unit.

 

tjv, why is a lawyer obligated to give their client back the commission?

 

And anyone applying the stress test before January 1st is lining themselves up to lose business. Who in their right mind would go for a lender that stress tested them when they didn't have to and did everything possible to lower their purchasing power? It doesn't make sense. I'm shopping for a mortgage right now and every single lender has been rushing to everything organized ahead of January 1st.

I'm pretty much in the same boat a the OP. First time home buyer going for the place at Vivid, great credit, no debt, same 80k - 100k+ down payment. I make a little under 1/3 less income.

 

Back in May I got a pre-approval (not with RBC)  just to find out where I stood since. At the time I was approved for $270,000. In September when I knew I wanted to pursue the Vivid project I was advised to check with my lender due to the new rules. Ended up getting a new approval that lowered it to $220,000 due to the stress test. 

 

Apparently the RBC deal is that it's a "firm" approval and that the rate you're approved for now will be the rate you get when you actually start the mortgage unless the rate in 2020 is lower and then you'd get the lower rate. But if you're being approved at a stress test rate, what's the point?

 

When I knew I was serious about buying a place I got a realtor right away because I know nothing about the procedures. My thought was that if I'm going to be shelling out hundreds of thousands of dollars, I should probably have someone who knows the real estate game and can guide me and keep me on the right track. 

 

My question is, when do you actually have to see a lawyer? My parents' lawyer apparently specializes in real estate so I figure that's a convenient connection. Do I need to discuss anything with him before a purchase other than saying "Hey, I might be buying a pre-construction condo. Can you be my lawyer and look at the contract?"

To be fair, very very very few people have lawyers look at contracts on pre-sale condos.  Especially with an experienced developer.  There will be nothing strange in there and quite frankly the developer is not going to change the disclosure statement (that is the same for all buyers) over a point your lawyer makes.  But if you do not understand the purchase contract or the disclosure statement, it does not hurt (except your pocketbook) to have a lawyer help explain it to you.    

Edited by VicHockeyFan, 01 November 2017 - 11:15 AM.

How can a mortgage approval be 'firm' for something that won't really kick in for 3 years? Your income will likely change. Your down-payment will likely change. Interest rates will certainly change. There may be a completely new federal government in place that changes things to be even tighter, or looser. 

To be fair, very very very few people have lawyers look at contracts on pre-sale condos.  Especially with an experienced developer.  There will be nothing strange in there and quite frankly the developer is not going to change the disclosure statement (that is the same for all buyers) over a point your lawyer makes.  But if you do not understand the purchase contract or the disclosure statement, it does not hurt (except your pocketbook) to have a lawyer help explain it to you.    

Part of the process for Vivid is after the contract is drawn up you have 72 hours to see a notary and then do some course. Figure instead of finding a notary, why not just get a lawyer involved now? It's going to cost a few bucks either way. 

How can a mortgage approval be 'firm' for something that won't really kick in for 3 years? Your income will likely change. Your down-payment will likely change. Interest rates will certainly change. There may be a completely new federal government in place that changes things to be even tighter, or looser. 

This is the flyer that was included in the Vivid promotion material. (I erased the mortgage people's names/contact info) https://imgur.com/a/ergND

What are the rates RBC wants to lock you guys in at? Honestly, with such a long time before you need to lock in a mortgage, I'm not sure what the point is to sign off on RBC unless the rate they promise you is at today's five year fixed-term and it covers a period of five years following possession. 

 

And you shouldn't need a lawyer for anything other than the closing period. Your realtor will explain.

 

These agreements are very straight forward. What you want to look at with a close eye is your "outs," and by that I mean what the developer expects in the event you wish to consign your unit (attempt to sell your pre-sale before building completion) and what happens in the event of default. That sort of stuff. You also want to look at things like completion dates and to confirm what you'll receive in terms of appliances, upgrades, etc.

 

But you can have your agreement altered. It's simply a matter of crossing out certain lines or appending certain lines. Developers do this all of the time. If you have a reasonable alteration or one that is pertinent to your purchase then they'll make the necessary alterations.

Q1/Q2/Q3 - Obtain what you need for the developer/BC Housing in terms of a pre-approval and worry about the actual mortgage three years from now.  Sure, maybe get a rate hold from RBC as insurance (in the unlikely event mortgage rates skyrocket) but most likely you will be able to find better deals closer to completion; therefore, no point of over-analysing the situation right now.

 

Q4 - Really you should have had a realtor from the get go, but doesn't hurt to ask the sales staff if they feel it is fair if you brought in your realtor at this stage in the game. Doesn't really seem to fair to parachute in a realtor as you are signing the contract, but it is a bit of a grey area.

 

Q5 - Disagree with the other comments on here. I can't see them discounting the prices here with BC Housing involved as then you'll have buyers telling other buyers they receive a discount, etc. If a condo is $325k this is the type of project most likely you'll have to pay 325k realtor or no realtor representation involved.

 

Q6 - Very rare, I offer it -> http://markojuras.co...ondo-cash-back/

 

However, at this point in my career not interested in picking up clients that have already stepped foot inside the showroom without presenting my name at first point of contact with sales staff. Makes it seems like I am trying to sneak in after the fact and I have more business than I need so not worth the headache. 

 

Q7 - Very good question. As another person pointed out if your lawyer finds an issue with the disclosure/contract the developer is not going to change it just for you. If buying from a smaller/newer developer would probably be more worth while.

 

The key in my opinion is to CLOSELY read the disclosure statement YOURSELF and take notes. If you don't understand something or have concerns go see a lawyer. For example, some developers will lease back the rooftop to themselves for 100 years so they can rent space for satellite/cell equipment, etc. If you are buying a penthouse this may be of concern to you, not sure if a lawyer would even point out something like that. 

 

The other thing that is more important than the actual disclosure statement, in my opinion, is reviewing the actual architectural/working drawings.  Here you can pick up on a lot of things such as bulkheads, proximity to elevator shafts, opening windows, etc., etc.  This is where an experienced realtor that can read drawings well is of great benefit.

 

There was an article Mike had published for me maybe 3 or 4 years ago and it was called "5 things to look for when buying a pre-sale in Victoria," or something like that but it was before Citified so I can't find it anymore.  Had some additional pointers. 

7 plus 3 = a commission term, meaning your realtor is making 7% on the first $100k, then 3% on each $100k thereafter.

 

The standard is not typically 7 plus 3 though, it's more likely to be 6 plus 3, and that is split between the agents. But with a pre-sale the commission varies and is usually at or below half of the commission from a comparable "re-sale" unit.

 

tjv, why is a lawyer obligated to give their client back the commission?

 

And anyone applying the stress test before January 1st is lining themselves up to lose business. Who in their right mind would go for a lender that stress tested them when they didn't have to and did everything possible to lower their purchasing power? It doesn't make sense. I'm shopping for a mortgage right now and every single lender has been rushing to everything organized ahead of January 1st.

My experience with realtors is it is always 7 plus 3, I have never seen 6 plus 3.  yes, it is split between agents.  as far as I understand, a realtor can't act for both the buyer and seller on the same transaction

 

Frankly, the sales agents are the one saying they don't discount the price if you don't have a realtor.  They are really peons in the process and have no final say so I would talk to the developer directly

 

My lawyer was the one who told me all about automatically being realtors and that they are entitled to half the commission which he said he would refund to me, just pay his hourly rate for any time required.  I had to hire him anyway to close so it was a no brainer.  Is he obligated to refund the commission, not sure, but who is going to have their lawyer act as a realtor if its not saving them money.  There are also a lot of lawyers in BC and some are hungry for business.  Its very basic law so even a lawyer with 1 or 2 years experience could do it

 

I was referring to the globe and mail article that says some banks are bringing in the stress test early.  No idea which ones are, I was just passing the info along

Interesting, that’s good to know.

My experience with realtors is it is always 7 plus 3, I have never seen 6 plus 3.  yes, it is split between agents.  as far as I understand, a realtor can't act for both the buyer and seller on the same transaction

 

Frankly, the sales agents are the one saying they don't discount the price if you don't have a realtor.  They are really peons in the process and have no final say so I would talk to the developer directly

 

My lawyer was the one who told me all about automatically being realtors and that they are entitled to half the commission which he said he would refund to me, just pay his hourly rate for any time required.  I had to hire him anyway to close so it was a no brainer.  Is he obligated to refund the commission, not sure, but who is going to have their lawyer act as a realtor if its not saving them money.  There are also a lot of lawyers in BC and some are hungry for business.  Its very basic law so even a lawyer with 1 or 2 years experience could do it

 

I was referring to the globe and mail article that says some banks are bringing in the stress test early.  No idea which ones are, I was just passing the info along

 

7 plus 3 is rarely seen in the Victoria marketplace; 6 plus 3 is seen in the vast majority of the thousands of transactions. ***Note, commissions may vary***

 

True, lawyers can try to make a claim on the commission but I've actually never seen it in practice. I've represented at least 15+ lawyers over the years.  Lot of practical problems as they don't have access to our system, lockboxes, don't have expertise in real estate law, etc.

 

As for pre-sales problem is if you don't end up securing the unit or your rescind (happens often) you are stuck with a lawyer bill. A lot of developments also have a clause that in order for them to pay the commission the realtor has to be present so I am thinking you would rack up lawyer time quite quickly.

The 6%/7% means a difference of $1000, that is usually a pretty small portion of the sale prices in Victoria. I would like it to be 7% on the first 100k period. No 3% on the rest of it. The 7/3 made sense when houses were selling for $150k, but not anymore.

Thanks to all for your responses and discussion thus far.

Regarding the RBC mortgage:

As Magmazing said, the rate they offer now is the stress test rate (4.99) and it is good until the mortgage starts. Perhaps, as Chard's partner in this development, it is BC Housing requiring the Stress Test on eligible purchasers despite it not being jan 2018 yet? Anyway, 120 days before closing, they will revisit rates again and if they are lower, you will get the lower rate.

At first glance I didn't think much of this but upon second glance maybe it's better than it sounds. When 2020 rolls around, if standard rates have risen to 5% or even just 4% and im still shopping around for mortgages, won't these other institutions have to stress test me at 6 or 7% interest? That would obviously lower the max mortgage amount I am eligible for, to the point that I might not be able to afford the Vivid purchase. And if the rates haven't gone up much then I get the lower rate anyway. Seems reasonable doesn't it?

Obviously there are other things to consider in a good mortgage besides just the interest rates, as some of you have already brought to my attention (renewals, missed payments, yearly paydowns etc). I don't think I'm beholden to RBC so there should be nothing preventing me from shopping around.

Regarding Realtors and Lawyers:

It was a coincidence when I came across the Vivid at the Yates. I figured I would register and see what it's about. After my meeting with the sales guy where I picked out the floor plans that I liked, I thought to myself: I should probably get the advice of a professional at some point. As Marko said though, since I've already visited the showroom it's a bit of a gray area as to whether I can/should still get a realtor. I reached out to the sales guy to ask him how they would feel about this. Will hear back from him tomorrow. Could they refuse to offer the commission to any realtor I bring into the process at this point? I wonder if it would be worth it to bring one on anyway and pay him myself?

After reading through all the responses here, I'm still a bit confused where, at each stage of the process, I should be using a lawyer vs a realtor vs neither. The process for Vivid at the Yates is supposed to go like this:
1. Figure out if you qualify (see my original post)
2. Acknowledge you must commit to live here for 2 years
3. Make sure you will be able to put 10% down
4. Provide T4s and mortgage preapprovals (for BC Housing)
5. Sign a purchase agreement
6. Read the covenant, meet with a notary & 3rd party admin, and attend the mandatory education session (this step to be completed within 72 hours of purchase agreement according to magmazing?)
7. ?Closing?

I'm between step 4 and 5 right now.
-Who would be best to review the purchase agreement with me? A realtor?
-Isn't there supposed to be a 7 day cooling off period after signing the purchase agreement?
-‎where does the "closing" step fit into all of this? Not till 2020, upon move in? Is this where the lawyer comes into play?

I don't know if I'm being a bit overly paranoid at this point. Im thinking the fact that Chard is partnered with BC Housing probably makes this all a bit safer than usual for buyers.

Thanks guys. So far in your discussions you've answered a lot of my unasked questions in addition to those I did ask.

7 plus 3 is rarely seen in the Victoria marketplace; 6 plus 3 is seen in the vast majority of the thousands of transactions. ***Note, commissions may vary***

 

True, lawyers can try to make a claim on the commission but I've actually never seen it in practice. I've represented at least 15+ lawyers over the years.  Lot of practical problems as they don't have access to our system, lockboxes, don't have expertise in real estate law, etc.

 

As for pre-sales problem is if you don't end up securing the unit or your rescind (happens often) you are stuck with a lawyer bill. A lot of developments also have a clause that in order for them to pay the commission the realtor has to be present so I am thinking you would rack up lawyer time quite quickly.

I've seen 7 plus 3 a lot, but if 6 plus 3 is more the norm so be it, as someone else pointed out, its a difference of $1000

 

Lawyers need access to the system and lockboxes?  Why? as the buyer you do all the research, look for the house/condo, view it, figure everything out.  Then when you are serious go to your lawyer say this is the house/condo, this is my offer, these are the subject to's, etc, etc and here is my deposit cheque.  Lawyer makes the offer, a few consults back and forth with client and you are done.  total commission say $500

 

other way on a $1 million dollar house =  commissions (lets do 6 plus 3) 6k on first 100k plus 27k on the rest = 33k/2 realtors  $16,500 for each agent

 

my way save $16,000

 

more and more people should know about this, its why I posted it

 

Lawyers "don't have expertise in real estate LAW"!!!!!!!!!!!!!!   that is the funniest thing I have heard.  They have a 7 year degree and realtors took a multiple choice exam.  Damn I need a good laugh this morning

 

The 6%/7% means a difference of $1000, that is usually a pretty small portion of the sale prices in Victoria. I would like it to be 7% on the first 100k period. No 3% on the rest of it. The 7/3 made sense when houses were selling for $150k, but not anymore.

Couldn't agree more.  As per above example $33k to sell a house, ya right!

Edited by tjv, 02 November 2017 - 07:28 AM.

The 6%/7% means a difference of $1000, that is usually a pretty small portion of the sale prices in Victoria. I would like it to be 7% on the first 100k period. No 3% on the rest of it. The 7/3 made sense when houses were selling for $150k, but not anymore.

 

That's a tough one. From a realtor's perspective, a $7000 flat fee would not be enough for many houses. In the market of the past few years, it would be enough - except for realtors who don't get much business. In a slow market, it wouldn't be near enough. In a luxury market, where a realtor may only sell a handful of multimillion dollar houses, it isn't enough.

 

Perhaps if the realtor could also charge for costs for marketing?

I've seen 7 plus 3 a lot, but if 6 plus 3 is more the norm so be it, as someone else pointed out, its a difference of $1000

 

Lawyers need access to the system and lockboxes?  Why? as the buyer you do all the research, look for the house/condo, view it, figure everything out.  Then when you are serious go to your lawyer say this is the house/condo, this is my offer, these are the subject to's, etc, etc and here is my deposit cheque.  Lawyer makes the offer, a few consults back and forth with client and you are done.  total commission say $500

 

other way on a $1 million dollar house =  commissions (lets do 6 plus 3) 6k on first 100k plus 27k on the rest = 33k/2 realtors  $16,500 for each agent

 

my way save $16,000

 

I think you're forgetting we're trying to assist someone with their first home purchase.

 

We get it, you know your way around the maze. But advising someone who's obviously green in this whole process to "do all the research, look for the house/condo, view it, figure everything out.  Then when you are serious go to your lawyer say this is the house/condo, this is my offer, these are the subject to's, etc" , lol, is not helpful!

 

C'mon tjv, let's help this guy (or gal) out!