UNDER CONSTRUCTION – PLEASE COME BACK SOON!

STAGES OF AN AMERICAN FORECLOSURE: A Canadian Perspective

 

1. Short sale/pre-foreclosure:

The owner is issued a warning, because they are late on payments. If the owner can sell the property-it is called “short sale” and their credit score is not affected.  Websites like www.realtytrac.com advertise short sale homes or you will see them in the local papers.  If you have the guts to approach an owner in this phase, take him out for a nice coffee, and tell him you are interested in buying his home and NOT kicking his family out, which he knows will happen anyhow if he can’t repay his default.  This way he can rent it (and you can do an inspection, unlike in the Bank Auction phase below).  Obviously approaching someone going into foreclosure is a feat for the brave, and if he doesn’t throw his coffee at you, you may be able to work out a deal. This will be something to consider if you want to go into an investment to rent the home anyhow…and remember, the bank still needs to approve the short sale, which can be months in the making.  Plus, tax on rent is 30% gross rent income, and 15% of your monthly rental income will automatically be withheld…so beware…your monthly CASHFLOW is affected!!

2. Bank Auction (approx. 30% savings from market value):

if it doesn’t sell in short sale time, it goes here: done at the county courthouse or outside the home itself.  Buyers pay cash or cashiers cheque from US Bank.

a)    There could be multiple mortgage/liens on the property (DO A TITLE SEARCH!!!)

b)    The bank sets a starting bid, which is considered the 1st bid.  This way if the home has no other bids thereafter, it is sold back to the bank and goes on to the next phase (REO).  For those who are savvy in foreclosure investments know this can be a lucrative investment, HOWEVER…bidding on a home in this phase has its down side. Not only can the home be in bad shape, but the laws surrounding who can renovate that home can complicate your plans.

**Remember…homes in this phase are “AS IS WHERE IS (get title insurance!!), and you are not allowed to do an inspection before you purchase so before you bid…think…think…think…then think again!

3. REO:  Once the home is here, the bank has 2 choices…

a)    Chances are the homes that are sitting in this phase are NOT going to be any lower priced than those on the local market…but there are exceptions. The nice thing here though, is the bank will clean up the title, maybe fix the home & put it on the MLS.

b)    Send it to an auction house (NOTE): this auction is different than a bank auction, because the house has a clean title & potential buyers are allowed to see inside the house, do an inspection (etc).  Often, you will notice there are open houses in this phase.

c)    Mortgage can be arranged, and Canadians should work with a Canadian Bank in the US or things can get really complicated.

TIPS:

*Study the laws of the state you are purchasing in!!! They are not all the same.  I advise people to hire a cross-border tax advisor.

* Have a plan.  Know the purpose of your investment.

-JUST A SECOND HOME: only property taxes to worry about. The catch is, when you sell, capital gains tax is hefty & maximum US tax rate (after 12 months ownership) is…yikes…15%!  There are rules around lowering this, but this is a whole other blog, so consult your accountant…

-RENTING IT OUT: US taxes are 30% on gross rent income. You need to hire a property manager if you are not American to renovate & manage the rental. So much as driving a nail into a wall can cause you considerable trouble so account for this before you purchase. In addition 15% of the monthly income will be withheld for year-end tax purposes, so your cash flow WILL BE AFFECTED!!!

*Get your title insurance policy & have your Canadian tax advisor review it. If you need a referral to local cross-border accountants, just holler!!

* GO SEE PROPERTIES IN PERSON!!!!!!!!!!!!!! The Internet picture is not the whole story.  If the entire street has been riddled in foreclosure homes & they are vacant, you have issues: (property value, condition of the home, squatters etc). No research in the world can compare to actually being able to see the property in person & touch brick & mortar with your own 2 hands.  Trust NO ONE except you! Be prepared to take a plane trip.  On the bright side…what Canadian doesn’t want to do THAT in mid-winter right?

PREPARING YOUR HOME

 

  • Staging – something to consider if it is in the budget. I am HUGE on home staging especially for vacant homes. The cost of home staging by a professional more often than not pays for itself in cutting the amount of time the home generally stays on the market.
  • PAINTING –patch wall gouges & nicks: then a fresh neutral coat of paint on walls/baseboards.
  • PROFESSIONAL RUG CLEANING – this will rid the house of most pet odour, as well as bring a sparkle to the carpet you long forgot it had.

Besides the fact that I will urge a deep clean & de-clutter of the home to set your home up for a successful sale, here are a few extra tips to consider. I will be giving you a thorough list of recommendations on staging, cleaning & de-cluttering when we meet firsthand.

Wash baseboards with soap & water. If white, use bleach (if you did not repaint them)

Wash under baseboards with a skinny envelope opener & wet soapy cloth

Windex® the windows (in & out), between window panes & sliders

Windex® light fixtures/chandeliers

Wash down kitchen & bathroom cabinets. If your cabinets are white, use a small amount of bleach.

Artificial Plants (wash off leaves with soapy water) hose them down if you can

Family pictures OFF the walls & out of sight.

Small appliances (kitchen toaster/blenders/coffee maker’s) put away in cupboards, replace with one central focal point (plant/flowers). Nothing on the counters!!

Wash off the top of the fridge

Take all magnets & papers off the fridge & put away. Wash exterior of the fridge.

Clean out closets. Now would be a good time to purge the clothes you haven’t worn in years. Nice decorative boxes to line the top shelves, and put all extra odds & ends that are lying around from other rooms.

Litter & other pet paraphernalia: put away in garage or basement, if possible!!

**a cleaning service to help out might be something to consider**

THE DOWER ACT

I will be asking you questions similar to the ones below to determine whether or not Dower issues apply.

Where the Dower Act in Alberta becomes an issue in the sale of property or land is being sold and the following criteria are in effect:

  • Are you are legally married?
  • Is there only one spouse registered on title?
  • AND, have either of you have resided on the land at any time during your marriage?

If yes to all of these, then the Dower Act applies and we need to have the seller’s spouse agree to & sign the Dower Consent Form as well as a Certificate of Acknowledgement of free consent from a notary public /officer of the court before we proceed with listing the property.

**revenue properties do not apply in which neither have resided at any time**

AGENCY RELATIONSHIPS

 

Agency relationships are crucial for both buyers & sellers. It is created in 2 ways; implied (created by the actions of parties) & express created by giving consent (either written OR oral). The Real Estate Act requires me, your Realtor® to explain the relationships & obligations I have to you. Once you decide to hire me, we will formalize the relationship through a written service agreement. The first thing we do together is expressly create this agency relationship by means of the SELLER BROKER AGREEMENT.

This is an agreement that sets forth what you can expect out of me, and what I expect of you. Here, you grant the brokerage the authority to sell your property on the terms & conditions in the contract. You need to understand this contract and I encourage you to use the link to print off a copy. We will be discussing in detail the agency relationships that are created or may be created throughout the course of doing business together.

AGENCY RELATIONSHIPS GUIDE:

We will be speaking in detail about “Agency” and the Agency Relationships guide will be given to you and you will be asked to sign that you agree to our relationship.

Sole Agency:

Most relationships begin in sole agency, which is established in the Seller Broker Agreement. Our relationship changes from sole to dual agency, usually because a buyer under my representation is interested in your home. This obviously poses a conflict of interest, and the Real Estate Act requires me to inform you of this. It is innately impossible to protect 2 opposing parties’ best interests; agency must change from sole to “dual” agency, where I become a facilitator to the transaction so both parties can come to a mutually agreeable contract.

Dual Agency

A situation of dual agency is when the brokerage or its industry member represents both the buyer & the seller in the same trade {Real Estate Act}. A conflict of interest arises when trying to properly represent the best interests of two opposing positions (that of seller & buyer). And so, we then enter into what we call transactional brokerage. Some key points to understand under this circumstance are:

  • You understand my role as now a facilitator of the purchase/sale. I become a neutral entity and help both parties come to a mutually acceptable binding contractual agreement.
  • You need to understand that under transactional brokerage, I am obligated to share non-confidential information you have given me to the buyer.
  • Under sole agency, I was obligated to disclose everything I know to you. Now, to facilitate the contract under dual agency, if the buyer asks me to keep something confidential, I must abide.
  • As dual agent, I cannot try to get you the best deal to the detriment of the buyer.
  • Under dual agency, if you ask me for advice, the buyer will be informed.

If a buyer shows interest in your home, and they are also being represented by me or the brokerage I work for, you have 2 choices:

 1. Enter into transactional brokerage (Transaction Brokerage Agreement) and proceed under dual agency to facilitate the sale of your home.

2. Refuse the Transaction Brokerage Agreement & continue being represented under sole agency. The buyer will then be directed to another industry member or another brokerage.

As your realtor®, my job is to sell your home to the best of my ability. However, never should this come before your best interests. Your comfort & satisfaction during every phase of our business relationship is a priority uphold strictly, so please ask questions if you do not understand agency.

MARKETING YOUR HOME

 

Like all successful ventures, the decision to sell your home needs a Realtor® that has a business plan to do that. Not only is the time involved to keep the home clean stressful, it is taxing on the family as a whole (especially for a family with children). Each home I list will be given an aggressive plan of action to move it off the market as quickly as possible, for top-dollar. Simply listing on the MLS®, in my opinion, is old-school & isn’t proactive enough. I am not disputing the power of the MLS®; obviously it is, to date, the cornerstone of real estate marketing. However, when you hire a realtor®, you should be demanding the best of advertising techniques, social media & open house days, should they be necessary, as a lure for those in the market.

TWITTER: The first two weeks of your home being on the market is crucial; having your home priced properly will engage the most serious of buyers to your home. Twitter is an essential tool during this period & will be used aggressively. Feeds about your home, accompanying pictures, as well as links to the blog, website & MLS® are the necessary techniques I use to market your property to local home buyers. These feeds are also followed by a large host of local realtors ®, decorators, & businesses. Social media is a resource that, when used often, professionally and aggressively, have the potential to drive traffic to wherever you need it. In my case, I use it to link to my website, my company blog, my decorating blog, the MLS®, Facebook, LinkedIn and everything in between (newspaper & online ad resources). Social media is powerful: Do not underestimate it.

WEBSITEwww.fancyshacks.ca is my name, brand & reputation. Your home is placed on the website as well as the MLS®. I am a firm believer in the power of social media because it is “live”, and more current than the MLS®. Social media is the medium I use to draw traffic to my website which will have all the details, pictures &unique features of your home.

BLOG FEATURES:  I own and write on two blogs: http://www.fancyshacks.ca/category/my-blog/ which is my main real estate blog, where your home will be featured.  The other blog is secondary, however, another route & angle that can be used.  www.graceyourwalls.com is a decorating blog, which has an international following of interior designers, decorators, trades people & many other professionals from all sorts of backgrounds.  If we stage your home, it will be featured on this blog, with your permission, or if your home has exceptional workmanship/décor this will be added as another marketing vehicle. The links from Twitter direct traffic to BOTH sites.

LinkedIn: My professional LinkedIn account has links back to my home front website & blog. 

FACEBOOK®: Obviously most people are aware of the immense pull of Facebook. Again, Twitter links, blog updates & website updates are all fed to & from Facebook.

PRINT MEDIA: Advertising in the local paper still is a necessary advertising medium the public still utilizes for real estate purposes. We will discuss the paper that will best drive results.

THE SOCIAL MEDIA CHAIN REACTION:  Of course, all of the above techniques are dependent on your approval. Trust the magic of the digital world because it is rapidly changing real estate & how we do our business. Real time apps such as Twitter make it possible to lure homebuyers to the blog & website, and from there back to the MLS like one massive vortex of advertising magic. Twitter is simply amazing and I call it my “fishing rod”, as it is the way to bridge the gap from buyer to seller and back around again.

Commission Rates

*IN THE PROVINCE OF ALBERTA, REAL ESTATE COMMISSIONS ARE 100% NEGOTIABLE.  YOU SHOULD NEVER BE PRESSURED INTO HIGHER REAL ESTATE FEES TO WORK WITH SPECIFIC REALTORS®. *

AN ETHICAL REALTOR® WILL WORK WITH YOU IN ANY SITUATION OR LIFE CIRCUMSTANCE WITHOUT PRESSURING YOU TO PAY HIGHER COMMISSIONS FOR THEIR SERVICES.

ECO CHECKUP

WEBSITE: www.ecocheckup.ca

(403) 874-6084

Daryl Mikalson, CMH, CMI                                          daryl@livingaware.ca

McArthur Fine Furniture & Interior Design

(403) 246-6266 (Main Calgary)

(403) 960-1030 (Airdrie)

GRACE YOUR WALLS DECORATIVE FINISHES

venetian plaster, faux finishing & interior design consultation

(403) 919-3394