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5 common mistakes first-time American homebuyers make

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Photo: Dan Moyle/Flickr

Buying a home is typically the single largest financial transaction of a person’s lifetime, and often comes after years of highly detailed prep work.

Yet, despite the many hours spent browsing listings, attending open houses and scrimping to save for a downpayment, many first-time buyers still fall prey to several common pitfalls along the path to homeownership.

We recently sat down with Bridget Harvey, a licensed associate real estate broker with the Harvey Team at Douglas Elliman, and Zack Tolmie, a home lending officer with Citibank to discuss some of the common mistakes first-time homebuyers make and how to avoid them.

1. Not taking advantage local experts

Americans use apps to buy everything from car insurance to tacos, but that doesn’t mean they should only rely on their smartphones when it comes to purchasing a new home. It’s understandable — apps are convenient, usually free, and devoid of human contact. And that’s precisely why homebuyers should skip the apps and opt for actual facetime with a living, breathing broker and banker.

“Often people just call an 800-number or go with their family banker in Texas when they’re ready to buy, but you need someone who understands the local marketplace to help with the process,” says Harvey.







Photo: Bridget Harvey

Ideally, buyers should look for someone who is not only personable, but professional, and who can offer knowledge, experience and local insight beyond the limited scope of an app.

Plus, navigating the murky waters of the internet can be tricky — not to mention misleading.

“Sometimes when consumers are browsing listings online, they think they are contacting that seller’s agent directly and will save some money. But really they are just giving their information away for free to someone who has purchased that information and likely has nothing to do with the property,” says Tolmie.

Many buyers use apps to avoid hiring a mortgage banker, but in essence, all they’re doing by using an app is putting an interface between the banker and themselves.

Tolmie adds that using online calculators is like selling your information to a cold caller who may not have your best interest at heart.

“And something you end up losing by going with an app is a professional’s local expertise, like not being able to meet at the agent’s favorite coffee shop or talk about local hot-spots or landmarks worth checking out,” says Harvey.

Also, the person lurking behind the app never gets to know anything substantial about the potential buyer beyond debt-to-income ratios and bank statements.

“There’s enormous value to having that social interaction with someone who knows what your down payment means to you,” says Tolmie.

2. Not understanding the numbers

Most popular home listing websites include some sort of “how much home can you afford” calculator, where users can enter their income and guess their creditworthiness. The website then spits out a potential price-range and estimated monthly mortgage payment.

Homebuyers frequently misread the information and end up buying more home than they can actually afford.

“An online mortgage calculator may tell you that you can technically afford to buy a house valued at $300,000, but in reality, based on your larger financial picture, including debts and goals, you really shouldn’t be buying anything over $250,000,” says Tolmie.

First-time homebuyers are often not aware of the “hidden” monthly costs that come with buying a home and extend beyond the mortgage payment, like lawn or pool care, home and appliance maintenance, and labor costs. According to the listing site Zillow, these “hidden” costs can easily add up to almost $10,000 annually.

3. Money trails

National home prices and rents have risen by 73 percent and 61 percent, respectively, over the last 18 years. Yet wages have only grown by 31 percent over the same period. So, it’s not surprising that one in three Millennials reportedly anticipate that family members will cover 30 percent or more of their downpayment.

But while such gifts are nice — and not to mention extremely generous — buyers don’t always account for the money properly.

“Because of the Patriot Act, the bank looks at two months of statements and if there is a large deposit from overseas, it has to be sourced and that can delay the process if the country of origin doesn’t handle statements the way the US does,” says Harvey.

Aside from gifts, buyers often liquidate their stocks to raise funds. But much like buying a home, timing is everything.

“Liquidate as soon as possible, a year to sixteen months out, and get that money into your account. You never know what’s going to happen to the stock prices and currency rates and conversion rates. You might not be able to afford tomorrow the same home you can buy today,” says Tolmie.

Plus, major world events like Brexit can significantly lower your buying power overnight.

4. Inadequate financial planning

Homebuying is a lengthy process, from the time it takes to save for a downpayment to the months of waiting for the sale to close. One mistake first-time buyers make is jumpstarting the process before they’re really ready.

Homebuyers should start working with a financial planner as soon as they’ve begun thinking about buying a home. The earlier, the better — especially if a buyer’s finances need a little help.

“Self-employed homebuyers especially should be having a conversation with their Certified Public Accountant (CPA) every year, and saying I’m not looking to buy right away but I may want to buy in the next couple of years and I want to make sure that my tax returns reflect adequate income to afford the kind of home I want,” says Tolmie.







Photo: Zack Tolmie

Looking at all the available options in terms of deductions with a CPA or mortgage banker is one of the most crucial and beneficial preparatory stage steps a buyer can take.

“Lockdown your finances and decide with your CPA what deductions to take and what to pass on if you plan on buying a home in the next few years. It’s a crucial step for anyone who is self-employed, but also worried about how much home they can afford based on their returns,” says Harvey.

Harvey suggests reverse engineering your taxes with a professional to ensure that it reflects adequate income to the bank for the home of your choice and you should be vigilant not to deduct more than that.

“It’s reflective of today’s economy. More of us are self-employed or commission-based, so you have to figure out how to navigate that kind of income and make it tell the story you need it to tell to buy your perfect home,” says Harvey.

5. Open houses

Many homebuyers only start attending open houses once they’ve begun the process. But, open houses can be a treasure trove of information and a great opportunity to connect with a local professional you may want to work with when you are ready to buy.

“Open houses are free to attend and buyers should attend a lot of them. They give a real-world view of what they can get for their money, and also help buyers nail down what they really want and don’t want in their ideal home,” says Harvey.

Open houses provide the perfect spot to network with local brokers and often bankers. Buyers can test the waters and ‘try out’ different professionals until they find their perfect fit. “It’s so important to like the people you are working with. You can end up having daily interactions with these people over the course of the two to three months it takes just to close on a home,” says Tolmie.

“It’s both finances and feels. You have to trust this person to know intimate details, not only about your finances but about your life, and to trust that they will use that knowledge to best serve your needs and wants,” adds Harvey.

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CFL: Argonauts counting on quarterback Arbuckle to see them past Ticats in feisty rematch

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The Toronto Argonauts went back to winning ways after suffering a defeat in Winnipeg by claiming victory over the Blue Bombers in their Toronto home opener.

This was off the back of a defeat by the Hamilton Tiger-Cats on Labor Day and with a rematch in view, the Argonauts are looking for an equally impressive repeat performance during their Friday rematch.

Ryan Dinwiddie, head coach of the Toronto Argonauts and his coaching staff did a tremendous job in making all the necessary adjustments in their tactics following the team’s defeat in the Peg. The task facing the Argonauts this week is quite similar.

With the CFL back in action, just like playing at online slots Canada, punters can ride their luck by betting on the Argos to come out victorious during this rematch.

However, just like how Winnipeg dominated on its home turf, the Ticats were also the better team at Tim Hortons Field. But when the Argos got ready for the Bombers at BMO, Dinwiddie made the vital switch at quarterback by starting Nick Arbuckle, who threw for 300 yards, one touchdown and dashed towards a major in his debut at quarterback.

Dinwiddie eventually replaced Arbuckle with McLeod Bethel-Thompson in the Hammer, but only when the Argos winning the game was no longer in doubt.

In Friday’s rematch, the Argonauts will field Arbuckle in the starting line up under centre and hoping for a repeat performance, said Dinwiddie in an interview. He noted that his team don’t intend to make Arbuckle the scapegoat during the game.

The front seven of the Hamilton Tiger-Cats dominated the game against the Argos and even when they had just five players in the box, it was extremely difficult for the Argos to take control of the line of scrimmage.

They stand a chance of redeeming themselves during their rematch, the Toronto Argonauts must take control of the line or at the very least not allow the Ticats to dominate them on the field of play.

The Argos completed touchdowns in all three phases during their Monday game, but they would need to be a lot better offensively against the Ticats.

“We weren’t very good up front,” said Dinwiddie. “I don’t care who was back there (at QB). We didn’t have a chance to win that football game based on our production.”

When up against a very organized Bombers defence—which lost six points to Hamilton in their season opener and then seven points to the Argos in game 2—the Argos were very impressive in their transitions, running and throwing the ball well and eventually being able to dictate the tempo of the game by controlling the time of possession.

The final scoreline of 30-22 score heavily flattered the Bombers, who got a defensive score following a sack and strip. Dinwiddie has taken full responsibility for his team’s apparent lack of composure during the first loss and is counting on his team to turn things around and be more composed.

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Canadian Leylah Fernandez through to the semi-finals of the U.S. Open after another major victory

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Canadian tennis player Leylah Fernandez has stunned the world of tennis again after recording an impressive win over fifth-ranked superstar Elina Svitolina on Tuesday, to progress to the semifinal of the U.S. Open.

Fernadez who only just turned 19 on the 6th of September, is now one of the youngest female tennis players to reach the U.S. Open semifinal since 2005 when Maria Sharapova achieved the feat at the age of 18. Emma Raducanu, the 18-year-old British tennis player also reached the semifinals on Wednesday.

Since eliminating third-ranked Naomi Osaka in the previous game, Fernandez, who is of Latino descent—with an Ecuadorian father and a Filipina-Canadian mother—has greatly captured the heart of the audience in New York.  

Also, her latest victory has earned the title of being the youngest player ever to eliminate two WTA Top-5 players at a major tournament, since 1999 when 17-year-old Serena Williams achieved this at the U.S. Open. Also, Montreal’s Félix Auger-Aliassime equally progressed to the U.S. Open semifinals on Tuesday.

When quizzed about the incredible success of Canadian players during this year’s tournament, Fernandez attributed it to the “maple syrup”.

Still hoping to hit jackpot by claiming her first major, Fernandez’s journey so far has not only been a thing of pride for Canadians but all members of the Ecuadorian and Filipino diaspora community across the country.

“This is particularly a golden moment,” said Romeo Candido, a filmmaker, writer and musician in a report. “To have someone who is repping both the Filipino and Canadian identity, it’s giving us a whole new level of feeling: Through association it makes us feel victorious ourselves.”

Ranked 73rd in the world, the current U.S. Open is only just the seventh major tournament of Fernandez’s career. Midway through the first set, she broke Svitolina and went on to win four out of 10 breakpoints in a game that lasted for two hours and 24-minutes.

“I was only thinking of trusting myself, trusting my game. After every point, win or lose, I would always tell myself, ‘Trust my game. Go for my shots. Just see where the ball goes,’” said Fernandez.

“I obviously have no idea what I’m feeling right now,” she continued. “I was so nervous. I was trying to do what my coach told me to do.”

Fernandez’s father doubles as her coach but was unable to be in New York, however, he stayed back at home and offered her daily tips during their frequent phone conversations. Her father’s coaching, alongside the roar of support she received from the crowd in the Arthur Ashe Stadium, who clapped and cheered wildly every time Fernandez claimed a point was quite instrumental to her victory.

“Thanks to you, I was able to push through today,” she told the supportive crowd after her victory.

In the next round, she would need another impressive performance to swing past No. 2 seed Aryna Sabalenka of Belarus, a Wimbledon semifinalist in July and who defeated Barbora Krejcikova, the French Open champion in two straight sets, 6-1, 6-4.

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What Is A Housing Bubble? And Are We In One?

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What is a housing bubble? You’ve undoubtedly heard the term, but what does it actually mean, and is Canada experiencing one? Whether you already own a home, are considering buying one in the near future, or you’re waiting for the right time to sell, here we answer what is a housing bubble, what causes it, and how it may affect you.

What is a Housing Bubble?

A housing bubble happens when the price of homes rises quickly, at an unsustainable rate. Typically, a price-growth rate that’s in the high single-digits is considered to be healthy and sustainable. Under healthy conditions, homeowners continue to earn equity over time, sellers can make a profit on resale, and buyers can still afford to get into the market. This type of price growth can usually be explained by economic factors, such as an employment boom and favourable interest rates.

On the other hand, a housing bubble can happen as a result of non-organic growth. For example, if speculators were flooding the market, buying up homes to take advantage of rapid price growth, with the intention of selling in the near term for a hefty profit. When prices are deemed to have hit a high point, speculators list their properties for sale. This massive influx of listings, coupled with stagnating demand, causes prices to plummet and results in a “housing market crash.”

A housing bubble is a temporary event and prices eventually return to normal levels, when demand rises again and home-buying activity resumes.

What Happens When a Housing Bubble Bursts?

During a housing bubble, homes become overvalued. When the bubble bursts, prices fall. Homeowners who have no intention of selling are unlikely to feel the direct impacts of the bursting bubble. However, these market conditions often indirectly impact other aspects of the economy, so to call homeowners who aren’t selling “free and clear” would be misleading. The ripple effects of a bursting housing bubble would likely touch most of us, in one way or another.

Homebuyers who purchased a home during a housing bubble likely paid considerably more than it is worth. Properties bought by end-users as a residence, with no intention of being sold in the short-term, will eventually rebound closer to “normal” values and at some point, return to positive growth.

A housing bubble poses the biggest risk to home sellers. Those who purchased in the bubble, but now find themselves forced to sell their home, will come up short on resale. They bought the home at a price that exceeds what they can recoup, putting them in the red with no asset to show for it.

For example, someone purchased at peak market prices, but due to circumstances such as a job loss or the inability to carry the costs for any reason, now has no choice but to sell in a down market. The seller still owes money to their mortgage lender on a home that they no longer own.

Are We in a Housing Bubble?

The Canadian housing market took a surprising upward turn during the COVID-19 pandemic, after coming to a grinding halt in mid-March. The slow-down was short-lived, and what followed through the remainder of 2020 was a a spike in demand for homes met by a shortage of supply. With 2021 well underway, there appears to be no end in sight.

There are a number of factors that indicate we’re not experiencing a bubble caused my market speculators, contrary to some media reports.

A recent online survey of RE/MAX brokers and agents in Western Canada, Ontario and Atlantic Canada found that speculators are not a factor in the Canadian real estate market at this time. In fact, more than 96% of RE/MAX brokers and agents supported this finding, confirming that the majority of homebuyers are end-users. Speculators tend to wait out hot markets, buying when prices are down and selling when they’re up again. The short-term investment opportunities they’re generally looking for are hard to find under current market conditions. Bully offers and bidding wars are commonplace, and we continue to see demand outpacing supply with the release of the monthly housing market data. These factors are generally inhospitable to speculators and investors.

For a housing bubble to burst, there needs to be a steep incline in inventory and new listings, and a decline in demand – neither of which is likely to happen any time soon.

Housing Crash 2021? It’s Highly Unlikely.

The Canadian housing market is still feeling the impacts of the pent-up demand from 2017, when the government introduced the foreign buyer tax and the mortgage stress test as a means to cool the overheating market. These policies prompted many homebuyers to move to the sidelines, opting to wait and save, with plans to re-engage in the housing market in a few years.

Now fast-forward a few years to 2020. COVID-19 had a similar impact on the market, whereby many homebuyers delayed their purchase plans due to pandemic-related uncertainties. That pre-existing pent-up demand for homes continued to swell. With Canadians subject to stay-at-home orders with nowhere to go and spend their hard-earned money, they collectively saved historically high sums, which was injected back into the housing market once consumer confidence returned. The spending came in the form of record-high home sales and for those who were unwilling to face the competitive resale market conditions, renovations to existing dwellings. In fact, Canadian real estate was said to be the driving force behind the Canadian economy in 2020.

Savings, low interest rates and low inventory continue to put pressure on the housing market.

Now, consider the housing needs of the 1.2 million people who are expected to immigrate to Canada through 2023, per the government’s 2021-2023 Immigration Levels Plan.

Given all this, it’s highly unlikely that we’ll experience the influx of real estate listings needed for a housing market crash – and if we did see those listings suddenly come on stream, there should be plenty of buyers to absorb them.

Homebuyers and Sellers, Do Your Due Diligence

Challenging market conditions and a still-present global pandemic have added some personal risk on the part of homebuyers and sellers. It’s important to remember that conditions vary across Canada, and can be dramatically different between provinces, cities, and even from one neighbourhood to the next. Now more than ever, it’s important to work with a trusted, experienced professional Realtor who can guide you though the buying and selling process.

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