Buying a Condo without a Realtor 101 – Owners Own Use

In light of the recent thread about buying without a buying agent, I thought I’d write up a quick 101 to help people that choose this path. This is just meant as a starting guide and not a comprehensive guide.Step 1: Make a PlanDetermine what you want in a condo. This may include things like size, number of bathrooms and bedrooms, amount of the condo fees, location, locker and parking, and price. The price you are prepared to pay for a condo depends largely what you can qualify for in a mortgage. So, once you’ve determined what you want, speak to a mortgage agent to determine whether you can afford what you want.If you can’t, re-evaluate what are needs vs wants from any potential condo. For example, you may want to trade in a better view for a second bathroom. Once what you want lines up with what you can afford, move onto step two.Also, have a lawyer lined up and waiting in the wings to prepare and submit your offer to the seller.Step 2: Look around for condosWe have reached a point where there are many websites that you can use to search for properties. HouseSigma is the one I would recommend. Using that site, you can narrow the properties using your search criteria. HouseSigma also provides you with sold and de-listed data. Using this data, you know what range your preferred unit is going for, you’ll know whether your preferred unit types are on the market for longer, and you will see whether the seller of the units have been dropping their prices. This data is important in making an informed decision about how much to offer.When you see some units that you like, arrange to go view them. Take a thorough look, visit the locker and parking spots, see amenities (if you can). Take the time you need. Once you find one you like, determine what you think is fair market value for the unit.Step 3: Determining a Fair PriceThe reason that this 101 is about condos is that condos are the easiest to price. In any given condo there will be multiple units with the exact same layout. You can use this as a comparable for what you think the unit you are bidding on is worth. For example, if you want unit 812, see whether there was other X12 units sold in the building recently. These units will typically have the exact same layout. Higher floor units draw more of a premium than lower floor units. When you hear realtors talking about comparables, this is what they mean. What are comparable units to the one you want going for?If you can’t find the same unit in the same building, then start looking around the neighborhood for similar units. Don’t price condos in Park Lawn based on prices around Square One. Location matters!But your bid does not have to be for fair market value. It is a buyer’s market for condos, so consider the following:Is the unit a former rental or is it owner occupied: A vacant rental unit may have a more motivated sellerHow many days has the unit been on the market: The longer a unit is on the market means the harder its been for the seller to sell. In today’s condo market most units have been on the market for a while and it’s not uncommon to see units on the market for more than 30 days;Have there been price drops and/or has the unit been de-listed and re-listed: Again this is a sign that there may be a motivated seller.Finishes: If a unit has better or worse finishes than a similar unit, this will affect price. A recently renovated unit will draw a higher price than the same unit with older finishes.This is not an exhaustive list for what to consider when determining price. Determining what is a fair price is an art and not a science.Step 4: The 2.5% Buyer’s Agent CommissionThe ONLY reason you should not be using an agent to buy your home is to get the benefit of the 2.5% buying agent’s commission.As a background to how commissions work, when a seller lists a property with an agent, the seller agrees to pay a portion of the purchase price to the agent’s brokerage. Typically, that commission is 5%, but it is not uncommon to see it range anywhere from 3-5%. For the purposes of this 101, I will work with the 5% commission. The listing agent then agrees to pay a buying agent half of that for bringing them a client. But what happens where there is no buying agent? Well, the seller’s brokerage gets the full 5%. But why should they get the benefit of that portion of the commission when you, as the buyer, did all the work. You found the property, you made arrangements to see it, you are determining what the fair price is, etc. If you’re doing the work, then you should get the benefit of the commission.There are essentially two ways to get the benefit of the commission: 1) Negotiate it into the purchase price or 2) get cashback on the close of the transaction equivalent to the 2.5%.Negotiating it into the purchase price is pretty self-explanatory. If you think the property is worth $100,000, make an offer of $97,500. This approach requires some extra work on the side of seller’s agent as they will need to change their listing agreement with the seller to reflect that they are only taking 2.5% commission instead of 5%. This approach is beneficial to the buyer as well because the sale price is lower, they will pay a lower commission and less HST. The con to this approach is that it may artificially deflates the price of the condo units.The second approach is to be paid out the commission at the end of the transaction. This is a little more complicated, so it’s important that you have an enforceable agreement with the listing brokerage and its agent. In such a commission agreement, your agreement is with the brokerage and not the seller so make sure you have a separate enforceable agreement for that.Step 5: Making Your OfferThis is a buyer’s market for condos. So, you will typically not have to rush on making offers, but you should already have a lawyer in place to submit your offer. The lawyer will prepare your offer with your determined purchase price. You will need to also determine when you want to close, the amount of the deposit and any other conditions you may want to put on the offer. Typical conditions you will see are review of a status certificate, obtaining financing, and an inspection of the unit. Depending on the particular unit, there are other factors that you will need to review with your lawyer.Step 6: Offer and Counter-OfferThe parties will then go back and forth changing aspects of the agreement (purchase price, closing date, and/or conditions) until both sides are satisfied. Once all parties agree, there is no backing out (with the exception of unsatisfied conditions) without serious legal consequences.I hope that this was informative for some people. Happy hunting! via /r/TorontoRealEstate https://ift.tt/2KRrWHv