A “vendor mortgage” is sometimes referred to as a “vendor-back” or “vendor take-back” mortgage. Here, the vendor encourages the sale of the property by giving the purchaser a loan on the purchase of the property. For example, if the purchaser is able to get 75 per cent conventional financing but does not have sufficient funds for a down payment of 25 per cent, the vendor may be prepared to give a second mortgage for 15 per cent of the purchase price. That way, the purchaser would only need to come up with a 10 per cent down payment. The purchaser would then make mortgage payments to the vendor as if a normal commercial lender held the second mortgage.

If you are the purchaser, it is fairly common for the vendor not to make any credit check or any other financial assessment of you. On the other hand, if you are the vendor you should make sure that there is a provision outlined in the offer to purchase that allows you to do a thorough credit check of the purchaser before deciding on granting the second mortgage.

Sometimes the vendor makes arrangements through a mortgage broker for the second mortgage to be sold at a discount as soon as the transaction is completed. This way, the vendor gets cash immediately–minus, of course, the cost required to discount the mortgage and the broker’s fee. Generally the mortgage has to have a fixed–not variable–rate if it is to be sold, the terms should be at least a year to be attractive to a purchaser of the mortgage, and the mortgage is generally closed with a penalty for early payment and not assumable.

If the vendor intends to sell the vendor-back mortgage, there is normally a precondition in it that the purchaser will cooperate with any credit checks and will agree to the mortgage being assigned. In addition, that acceptance of the offer to purchase is based on a commitment from a mortgage broker that there is a purchaser for the second mortgage as soon as the sale is completed.

If you are considering providing a vendor mortgage, it is important to be cautious and obtain legal advice in advance. There is a risk that the purchaser will refuse to pay on the second mortgage if there appears to be any problem with the condition of the property after the sale.

Naturally, the vendor or the assignee of the vendor’s second mortgage could commence foreclosure or order for sale proceedings, but in practical terms it is possible that the purchaser could attempt to raise a defence. Discussion of these types of problems in detail is outside the scope of this article. They are raised merely to alert you of the need for competent legal advice in these unique situations.

At some point in your life, especially if you are investing in real estate, the odds are that either you will be suing someone or someone will be suing you. Litigation normally has a mystique to many people, and the process can be very frustrating, intimidating, stressful, uncertain and expensive.

However, by avoiding the classic mistakes that people make, you will be better able to deal with the litigation process from a position of perspective and insight. You could be suing someone for a debt owing, or breach of contract or negligence. No matter what catalyst is causing you to think of suing, the following pitfalls to avoid should be kept foremost in your mind.

Lawsuit based on emotion� You might feel that you have been wronged for whatever reason and you are naturally very upset. Your decision to sue though, should be based on hardnosed business realities. Maybe there is not much money involved but a matter of principle. In that case, give yourself some time, maybe several months, to see if your emotional intensity has subsided. The litigation process itself has enough negative emotion and energy associated with it.

Unrealistic expectations of outcome
Many people assume that they are in the right and that they will “win” at the end of the day. However, the interpretation of the facts can vary and very few issues in law are black and white. The litigation process is inherently unpredictable. In addition, when you factor in your legal fees from any judgment in your favour, maybe you are not ahead of the game at all. If you win, the court costs you are awarded only amount to about l0%-25% of your legal fees, so you still lose. And then you have the pleasure and challenge of attempting to collect on the judgment.

Not assessing the defendants assets
You could “win” at trial, but still be a big time loser. The reason is that the personal or corporate defendant could have no assets in their name or have all their assets levered up with debt.

Not weighing potential gains vs. losses
In this situation, you need to realistically assess the relative pros and cons of litigation. In other words, the costs in money and lost productivity. Can you afford the fight to the end? Have you obtained various quotes as to the cost of complete pre-trial and trial process? Is the cost to pursue the matter going to be a lot more than the amount you are claiming? What if you lose? In the latter case, you will be out not only legal fees, but court costs as well. What if the defendant counterclaims against you and wins? You get the idea.

Not considering a settlement
The pragmatic and practical reality is that settlements occur all the time. Only about 5-l0% of lawsuits ever end up at trial, with the exception of small claims court. Even small claims court has a settlement hearing process before trial, in many provinces. The purpose is to see if both sides could agree on striking a deal and getting on with life. Settlements save a lot of court time. You have heard of people settling the case on the court house steps. The reason is the uncertainty of the trial process outcome. Settling for 20, 30, 50 or 70% of the original claim is better than the risk of getting nothing and being out legal fees as well.

Suing too early� In this situation, you commence your action before you have all the facts. Ideally, you want to have all the facts in your favour determined and included in your claim. It will show your opponent that you have done your homework.

Suing too late
If you wait too long, you could miss a statutory time limit to commence your action. In other words, you snooze, you lose. Different types of actions and different provinces have different time limits.

Lack of expert legal advice
You want to have a lawyer experienced in litigation matters review your case. Better still, have a minimum of three lawyers give you candid and objective feedback on your chances at trial, how long it will take and how much it will cost. If you contact the lawyer referral service in your province, most initial consultations are free or at a nominal fee. This will be time well spent.

Before you decide on any lawsuits, consider each of the above points and then sleep on it for a month. See if you have the same opinion at the end of that time. Remember the axiom, “act in haste, repent at leisure”.

Professional advisors are essential to protect your interests. They can provide knowledge, expertise and objective advice in areas in which you have little experience. It is important to recognize when it is necessary to call in an expert to assist you. Because of the costs associated with hiring a lawyer, accountant or financial planner, some people are inclined to try the do-it-yourself approach. This can be a shortsighted decision, not to mention detrimental to your financial interests.

For instance, if you decide to process your own income tax return rather than hiring a professional tax accountant, you may miss out on tax exemptions that could save much more than the cost of the accountant’s time. Or, a person who does their own will or power of attorney could end up having the document deemed invalid due to a technicality. Alternatively, lack of professional tax and estate planning could result in a lot more tax being paid during your lifetime and on your death, than was otherwise necessary.

Professional advisors include lawyers, accountants, financial planners, investment advisors and others. They serve different functions, and you have to be very selective in your screening process. The right selection will inspire confidence, enhance your peace of mind, reduce taxable income and protect your legal and financial health. The wrong selection will be costly in terms of time, money and stress.

There are many factors you should consider when selecting advisors. Here are the most common ones:

Qualifications
Before you entrust an advisor with your affairs, you need to know that he or she has the appropriate qualifications to do the job. This may include a lawyer’s or accountant’s professional degree, or in the case of a financial planner, professional training accreditation and experience relative to their professed area of expertise. Lawyers have to be accredited to practice law, but anyone can call themselves an accountant or financial planner.

When selecting a professional accountant, look for a Chartered Accountant (CA) or Certified General Accountant (CGA) designation. A financial planner should have a Certified Financial Planner (CFP) or Chartered Financial Consultant (CHFC) designation.

Experience
It is very important to take a look at the advisor’s experience in the area in which you need assistance. Factors such as the degree of expertise, the number of years of experience as an advisor, and the percentage of time spent practicing in that area are critically important.

Compatible personality
When selecting an advisor, make certain that you feel comfortable with the individual’s personality. If you are going to have an ongoing relationship, it is important that you feel comfortable with that relationship in terms of the degree of communication, the attitude, the approach, the candor and the commitment to meet your investment needs. A healthy respect and rapport will increase your comfort level when discussing your needs, and thereby enhance further understanding of the issues.

If you are not comfortable with the “chemistry” of the relationship, don’t hesitate to find another advisor. If you don’t like someone, it is only human nature to resist contacting them, and that could compromise your best interests.

Objectivity
This is an essential quality for a professional advisor. If advice is tainted in any way by bias or personal financial benefit, obviously it would be unreliable, and potentially self-serving. That is why you want to get a minimum of three opinions on your personal situation before deciding which professional to select.

Lawyers and professional accountants (i.e, CAs, CGAs) cannot obtain any direct or indirect collateral benefit from advising you, as it would be a conflict of interest. This could result in a professional negligence claim and/or professional disciplinary action including the loss of a practicing licence. However, when dealing with a financial planner, it is a different situation. Some offer fee-only services and receive no other benefit from their advice, and confirm this in writing. Others obtain a fee as well as commissions from the products they recommend or sell to you. This could potentially influence the nature of their advice. You need to clarify these issues in advance.

Trust
It is vital that you trust the advisor you select. Whether the person is a lawyer, an accountant, or a financial planner, if you don’t intuitively trust the advice as being in your best interests, never use them again. You cannot risk the chance that the advice is governed by the financial self-interest of the advisor, with your interests as a secondary consideration.

Fees
You need to feel comfortable with the fee being charged, and the payment terms. Is it fair, competitive and affordable? Does it match the person’s qualifications and experience? Most initial meetings with a lawyer, accountant or financial planner are free, or have only a nominal fee. This meeting provides an opportunity for both parties to see if the advisory relationship would be a good fit.

Comparison
It is a good rule of thumb to see a minimum of three advisors before deciding which one is right for you. You need that qualitative comparison to know which one–if any–of the three, you want to rely on. Seeing how they respond to your questions will be a good reference point. The more exacting you are in your selection criteria, the more likely it will be that a good match is made, and the more beneficial that advisor will be for you. Write down your questions before your meeting so you don’t forget, and prioritize them in case you run out of time. If you have a partner, friend or business associate who attends with you, you will have the opportunity to objectively debrief afterwards in terms of your impressions and assessments.

When going through the process of selecting an advisor, you can get prospective names from friends who have a trusted advisor, the Internet, the Yellow Pages, or from professional associations in your province (i.e., the law society, chartered accountants association, certified general accountants association or financial planners association). The initial consultation is usually free, but make sure you confirm this before you go to the appointment. Refer to the Useful Links section of the www.homebuyer.ca site for websites of professional associations.

When saving for your next home purchase, your down payment is not the only cost you’ll need to consider. Additional closing costs, such as those outlined below, add up and may leave you in a financial bind if you don’t adequately prepare for them.

Contribution to property tax account
Some lenders require that you pay one-twelfth of the projected annual taxes each month. This payment would be built into your monthly mortgage obligations, and the lender would set up a separate tax account and remit the funds directly to the municipality at the appropriate time each year. Normally, taxes are payable in June or July of every year, although they are calculated based on the calendar year (January 1st to December 31st). Some municipalities require an advance part-payment in February of each year, and the balance in July of that same year.

If the lender makes the automatic monthly property tax payment a condition of mortgage approval, make sure that you inquire as to whether interest is going to be paid on your tax account to your credit, and if so, ask about the interest rate. The interest paid is normally lower than that paid on deposit accounts. The reason that some lenders require monthly payments is to minimize the risk of you not having sufficient funds to pay the taxes every year. If this happened, the property could conceivably be put up for tax sale after several years in arrears, and compromise the lender’s security.

In most cases, lenders will give you the option of being responsible for paying your own taxes directly after a year. Try to negotiate this option, at worst. At best, attempt to have the property tax contribution requirement waived entirely. Alternatively, maybe in your situation you consider it to be a worthwhile “forced savings” plan. If you are paying a portion of the projected property tax every month, you will have to build that expense into the costs related to your mortgage.

New home warranty program fee
This fee is either built into the price of your home or added separately. It is normally related to the cost of your home, and there is a maximum fee. If it is added separately, you will need to budget for this expense.

Provincial mortgage filing tax
A fee is charged for filing a mortgage in the land registry, and for transferring the title of the property. These filing fees usually range from $50 to $100, but can cost even more.

Legal fees and disbursements
You are responsible for paying the lawyer for legal fees as well as out-of-pocket disbursements that he or she incurs relating to the preparation and filing of the mortgage documentation. Disbursements would cover such things as property searches, photocopy expenses, couriers, and other costs associated with the preparation and registration of the mortgage. The disbursement costs would also normally include the provincial mortgage filing tax–the fee referred to above. It is normal practice for lawyers to deduct the legal fees and disbursements directly from the money to be advanced under the mortgage. In addition, you would obviously have to pay your lawyer to do the transfer of the property.

Sometimes, lenders give you a choice of one of several law firms, or they may specify one particular firm they want you to use. Other times, the lender will permit you to use a lawyer of your choice. In all cases you are responsible for the legal fees and disbursements. If you are permitted to use the same lawyer to do both the mortgage and transfer, there can be savings on fees and disbursements, as there is some duplication of expenses, and efficiency of scale.

Other government taxes
You will have to pay the federal Goods and Services Tax (GST) of seven per cent on any services relating to your residential real estate purchase. In some cases, you will have to pay provincial sales tax as well. If you are buying a new home, you would have to pay GST, but receive a partial rebate of the GST if the purchase price is under $400,000. The effective GST rate would therefore be about 4.5 per cent of the purchase price in most situations.� There are exceptions to this rule, so check in advance what formula applies in your situation.

Mortgage pre-payment penalty
If you are moving from an existing home and have to pre-pay a closed mortgage, you have to budget for the penalty. This could be three months interest, or the interest rate differential–generally the greater amount of the two. The amount could be nominal, but you need to budget for it.

Due to the competitive marketplace, some lenders will help you pay the penalty in order to get you to make a contribution to this cost to get you to transfer your business.

Moving expenses
Don’t forget to budget for moving costs. Make sure you get estimates and information packages from at least three to five companies. Consider the middle estimate–selecting a low-ball price is not necessarily the best decision. Since professional movers can be expensive, attempt to negotiate a lower price if you are moving at the slow time of the month. Find out how long the mover has been in business and obtain references. Check the amount of insurance for loss or damage you are covered for, and consider obtaining additional insurance. Check for complaints that have been registered with the Better Business Bureau. In the end, you may wish to rent a truck and move the goods yourself, if that option is feasible.

When selling your home or buying a new home, you need to budget for moving costs. Make sure you get three to five written estimates from moving companies, as well as complete information packages. Consider the middle estimate–selecting a low-ball price is not necessarily the best decision. Since professional movers can be expensive, attempt to negotiate a lower price if you are moving at the slow time of the month or consolidating the shipment with other peoples’ goods.

Find out how long the mover has been in business, obtain references, and check for complaints that have been registered with the Better Business Bureau. Check the amount of insurance coverage you have for loss or damage, and consider obtaining additional insurance. You may wish to rent a truck and move the goods yourself, if that option is feasible.

You need to plan ahead as far as possible–ideally at least 10 weeks–so that you are not making your selection process under time pressure. Otherwise, you could end up paying a premium if few movers are available at the last minute.

Here is a checklist of suggested steps to take before the move:

Eight weeks before:

• Decide which items are to be moved.
• Select a mover to make arrangements for moving day.
• Start to use up items that are not easy to move, such as frozen foods.
• Contact the visitors’ or tourism bureaus in your new community for information.

Six weeks before:

Record an inventory, and evaluate your possessions.
• Compile a list of everyone you need to notify about your move, such as friends, creditors, professionals, insurance, clubs or organizations, financial institutions, subscriptions and motor vehicle and other licences or registrations.
• Make arrangements, if required, to put items into storage.
• Contact schools, dentists, doctors, lawyers and accountants and obtain copies of personal records. Ask for referrals where possible.

Four weeks before:

Notify the post office of your new address.
• Fill out change-of-address cards.
• Arrange special transportation for your plants and pets.
• Arrange to disconnect utilities at your old home.
• Arrange to connect utilities at your new home.
• Confirm loading and delivery dates with the mover.
• Arrange a new phone connection with your telephone company.
• Purchase packing boxes from your local mover if you are packing some of the items yourself.
• Make your personal and family travel plans.
• Arrange to close accounts in your local bank and open accounts in your new location.
• List all your questions as they come up. Ask them as soon as possible.

Two weeks before:

• Collect clothing and items to clean and repair.
• Send out rugs and draperies for cleaning and have them delivered to your new address.
• Collect items you loaned to others, and return things you borrowed.
• Have a garage sale or give away unwanted items to eliminate articles you don’t want to move.
• Draw up a floor plan of your new home, and indicate the location of all furniture. Give a copy to the moving company.
• Arrange for babysitting, if necessary, for moving day.
• Arrange any necessary insurance for transit or storage, as well as insurance for your new home.

One week before:

• Set aside items that can be packed in the car, in cartons labeled “Do not move”.
• Take down the curtains, rods, shelves, etc., if mover is not doing so.

One day before moving:

• Clean the stove.
• Empty the freezer and refrigerator.
• Finish packing personal items.
• Set aside personal and other items you will be moving yourself.
• Get a good night’s sleep.

Moving day:

• Be at the old home or have someone else there to answer questions.
• Make a final check of appliances to be sure they are working, and heating elements are off.
• Record all utility meter readings.
• Review and sign and save copies of bills of lading. Be sure the delivery address and the place you can be reached are accurate.
• Tell the driver exactly how to get to new address, and provide him with a map if necessary.
• Strip the beds, but leave fitted bottom sheets on the mattresses.
• Have your vacuum ready to clean hard-to-move items.
• Before leaving the house, check each room and closet for forgotten items. Make sure the windows are closed, doors are locked, lights are out and water shut off. If there is going to be a time period before the new owner comes in, consider shutting off the electricity.
• Call and inform your insurance agent that you are leaving.
• Notify the landlord, realtor and/or lawyer that the home is vacant.

Delivery day:

• Arrange to make sure that you or a relative or friend is at the new home.
• Review the floor plans with moving company foreman.
• Examine all goods as they are unloaded, and check off the inventory numbers as a protection against loss.
• Arrange to have appliances installed, if applicable.
• Arrange to have the movers re-assemble any furnishings that were dismantled.
• Re-check all items to make sure there is no damage before signing the final moving documents.

Whether you are the buyer or the seller of real estate, it is important that you obtain a lawyer to represent your interests. There are many potential legal pitfalls for the unwary when buying real estate. The agreements for purchase and sale and other related documents are complex. To most people the purchase of a home is the largest investment of their life, and the agreement for purchase and sale is the most important legal contract they will ever sign, next to a will of course!

There are a number of ways to select the right lawyer for your needs:

??? ?Ask friends who have purchased real estate which lawyer they hired, whether they were satisfied, and why or why not.
??? ?Contact the lawyer referral service in your community. Look in the White Pages of the phone book or check online. You can have an initial consultation with a lawyer for free, or for a nominal fee. You will generally be given the names of three lawyers in your community. Make sure you emphasize that you want a lawyer who specializes in real estate.
??? ?Look on the Internet using a Google search, or in the Yellow Pages under “Lawyers” and check the box ads, which outline the areas of expertise. When you call, ask the receptionist which lawyer specializes in real estate. Again, in many cases, initial consultations are free, but be sure to clarify that point before your appointment.

If you are obtaining a mortgage, speak to the lawyer who is preparing the mortgage documents on behalf of the lender. Some lenders permit you to select the lawyer of your choice, while others give you a list of lawyers who are familiar with their mortgage documents and procedures. If the lawyer you choose to transfer the title of your property prepares the mortgage documents, you could save on some duplicated disbursement costs and negotiate a package price.

You want to make certain that the lawyer provides you with a full explanation of the mortgage terms and conditions that might affect your interests. Keep in mind that the mortgage is being prepared on behalf of the lender, but at your expense. If you have any concerns in this area, obtain a separate lawyer to do the non-mortgage legal work, that is, the transfer of title, and explain the contents of the mortgage to you before you sign it. Some lenders will not permit the lawyers they recommend to prepare the mortgage documents to also represent you for the transfer of title.

Prior to a meeting with the lawyer, have all your questions and concerns prepared in writing so that you don’t forget them. Prioritize them in case you run out of time. If you wish to make an offer to purchase, bring your offer-to-purchase document with you, and the details about the new, resale or revenue project you are considering. Ask for a quote of anticipated fee and disbursement costs.

If you are submitting an offer on a weekend and it is not practical to see a lawyer beforehand, you can put a condition in your agreement offer that it is “subject to the review by the purchaser’s lawyer within three business days of acceptance of the offer, with the review being satisfactory to the purchaser”. That is just one example of a clause–your lawyer could suggest different wording. Although the recommendation to have a lawyer review your offer before you have committed yourself is ideal, the reality is that most people ignore it. Attempt to select a lawyer before you have made an offer.

When selecting a lawyer, you should look for various criteria such as qualifications, experience, expertise, compatible personality, confidence and competence in the area concerned. The other issue is the matter of fees, which will be discussed shortly. Having a comparison of at least three lawyers, either through interviews or telephone conversations, is the ideal approach before you make your selection. You need this type of qualitative comparison to enhance your decision-making and increase your knowledge.

Some people just want a lawyer for buying a home to live in, while others want a lawyer on an ongoing basis because they are building a new house, buying various revenue properties, or dealing with a multi-unit dwelling for investment. Still others want a lawyer for litigation purposes. That is, they want to sue someone, or possibly they are being sued. Ideally you want a lawyer who practices at least 50 per cent real estate law. The percentage reflects the amount of interest and commitment the lawyer has to the area of real estate, and the degree of intuitive “street smarts” acquired over time. The quality of legal advice tends to be closely correlated to the duration and percentage of time spent practicing real estate law.

On the issue of fees for legal services, there are various options in the marketplace:

Variable Fee
The amount of the legal fee for your property transfer is based on a sliding scale, increasing as the property purchase price goes up. The same formula applies for the legal services for your mortgage. If a lawyer is providing both of these services, there could be a discount of up to 50 per cent of the mortgage fee, due to efficiency of scale.

Flat Fee
Several lending institutions have arranged a flat-fee legal package with various law firms as an incentive to attract your business. In other words, you would pay a flat fee regardless of the amount of your home purchase or mortgage. Some law firms provide a flat fee as a matter of competitive practice.

Hourly Fee
Depending on the nature of the service provided, you would pay an hourly fee. Based on various factors including the lawyer’s expertise, this could range between $150 and $250 per hour. In addition, most lawyers will give you a quote for a simple property transfer and/or mortgage on the clear understanding that if it turns out to be complex because of unforeseen events or problems, the fee would have to be renegotiated to reflect that additional time reality.

You pay seven per cent GST on the legal fees. Disbursements or out-of-pocket expenses incurred on your behalf are extra, of course, and also include GST. These costs tend to be fairly consistent regardless of who you use. It is only the fee that is negotiable. When you are comparison shopping for legal services, you will see that the marketplace is highly competitive in terms of fees.

Remember the key benefits of using the services of a lawyer for your real estate needs. Only a lawyer can give you legal advice in advance of your purchase to protect your interests, and advise you on your rights, as well as remedies and options if subsequent legal problems occur with the purchase. The professional expertise will provide you with the peace of mind you want and need.

There are numerous direct and indirect expenses related to obtaining a mortgage. Not all the following expenses will be applicable in your case, but it is helpful to be aware of them. There are also additional expenses that do not relate directly to the mortgage itself, including legal fees and disbursements, provincial land-transfer filing fees and property purchase taxes. Other potential expenses include new home warranty fees, mortgage life insurance premiums, condominium maintenance fee adjustments, utility connection charges, repairs that may be required prior to occupancy, and moving expenses.

Costs will vary considerably from one lender to another, and the type of financing that you obtain will be a factor. The following discussion covers some of the most common expenses that you should consider budgeting for.

Appraisal fee
The lender will obtain its own appraiser to determine the value of the security for mortgage purposes. The necessary fee is either paid by the borrower to the lender in advance at the time of application or is taken from the mortgage proceeds by the lender. In any event, the borrower pays the cost of the appraisal. Generally lenders will not give you a copy of the appraisal, although you should attempt to get it by requesting it in advance. Appraisal fees can range from $150 to $300.

Property inspection
There are many benefits of having a professional inspection to ensure that you are getting the home in the condition that you were expecting. The fees normally range from $200 to $400, but could be even more.

Survey fee
You will generally be required to obtain a property survey prior to mortgage funds being paid out if you are buying a house. The survey would be done by a qualified professional surveyor, and the purpose is to make sure that the lender knows the exact dimensions of the property that it is using as security. The lender may also want to be satisfied that the building meets the requirements for setbacks as required by the municipal by-laws, or that any additions to the building have complied with the by-laws.

The cost of the survey would be deducted from the mortgage funds that have been advanced to you, or you would pay for it directly. Your lawyer normally arranges this survey for you. It is primarily older houses that lenders are concerned about, due to additions, etc. If you are buying a new or relatively new house, you can ask the lender if they will waive the survey requirement. Survey fees range from $150 to $300.

Mortgage insurance fees
If you are obtaining a high-ratio mortgage or the lender requires you to obtain mortgage insurance for other reasons, then you will be paying a mortgage insurance fee to Genworth Financial Canada or Canada Mortgage and Housing Corporation (CMHC). The fee is between approximately 0.5 to three per cent of the amount of the mortgage that is being insured (generally the first mortgage) and is either added onto the mortgage total or paid by you in a lump sum at the time of closing the mortgage transaction.

Fire and liability insurance premium
Primary lenders require that any borrower of a mortgage carry sufficient fire insurance to cover the amount of the mortgage, and that they be paid off first. The second mortgage lenders would want the same type of coverage and have it shown that they are paid off second, and so on. It is necessary for the borrower to purchase sufficient replacement insurance. The borrower is responsible for making insurance arrangements and paying the costs of the insurance policy, showing that the lender is on the policy as being paid first or second, as the case may be. This has to be provided to the lender’s lawyer before any mortgage funds are advanced.

Renovation, repair and redecorating costs
Make sure you include these costs in your purchase budget. Depending on the condition of the home, your needs and budget, the costs could be low or high, necessary or discretionary. For example, if you have an older home, you will probably have to repair or replace various items. If you had a professional home inspector provide you with a report and possible estimates for repair prior to purchase, you probably have a fairly clear idea of the “might do”, “should do”, and “must do” costs. You may have successfully negotiated a purchase price reduction to cover all or part of these costs. If you are covered by a “New Home Warranty Plan”, any major structural repairs should be covered. Check it out.

If you are buying your first home, you could have additional expenses such as new appliances, furniture, yard maintenance equipment, tools and supplies.

Due to the age of the house or your needs or style preferences, you may wish to redecorate all or a part of the house. This could include drapes, curtains, wallpaper, paint, flooring, carpeting, light fixtures, etc. You may wish to add on or renovate rooms for in-laws, renters, a growing family or a home office. Finally, if you are buying a new home, there could be landscaping costs to consider.

Statistics show that one out of four Canadian households have a part-time or full-time home-based business, and that number is growing.

If you are operating a part or full-time business out of your home, you have already made a conscious decision to reduce the financial risk of having your own business, in terms of low start-up capital and low overhead. But a home-based business is vulnerable to liability risks. Keep in mind that almost all basic homeowner policies specifically exclude any claims for losses incurred in your home or around your property as a consequence of home business activity. Here are a few examples and the types of insurance that would protect you:

• You have an electrical power surge which damages your home office computer equipment and destroys all your clients’ records. (Business property/business replacement cost insurance added to your home insurance.)
• You operate a computer tutoring business and someone who comes to your house slips on the stairs, injures her back and is off work for six months. You are sued. (General liability home insurance with additional coverage for business.)
• You have a short-circuit in your computer equipment, resulting in the house burning down and loss of business revenue. (Home fire insurance coverage with additional business use coverage/business interruption insurance.)
• You have expensive desktop publishing hardware and software in your basement office. Your home is broken into and all your equipment is stolen. (Business property/business replacement cost insurance, added as a supplement to home insurance.)

Now that you are aware of the potential risks relating to having the home office, the next step is to select the right protection.

Your goal is to ensure you are fully covered at all times. This can be achieved by periodically reviewing your risk and keeping your insurance representative promptly informed of any changes in your business that could affect your coverage. Such changes include buying more equipment, building an extension on your home, or using your personal car for business. If you are using your car for business and personal purposes, have your insurance company cover the car for business use. Otherwise, your policy coverage could be void if you have a claim. It’s not worth the risk, and besides, the extra premium is nominal.

You may need to increase your liability limits. Or, a change in circumstances may mean that you no longer need a certain type of insurance or level of coverage. Periodic reviews will save you from being over-insured and help avoid overlaps and gaps in coverage, thereby keeping your risks and premiums lower. This is especially important if your business is growing.

To help plan your insurance program, assess your business and identify the likely risk-exposure areas. Decide which type of protection will work the best for you–absorbing the risk, minimizing the risk or insuring against the risk.

To reduce the cost of insurance, shop around for competitive rates and negotiate for lower premiums if your loss experience is low. If you need a high level of expensive protection, increasing the deductibles should lower the cost of the premium. Look on the Internet, or in the Yellow Pages under “Insurance Brokers”, and contact at least three of them for quotes.

For example, most home insurance companies will provide additional protection, which is referred to in the industry as a “rider” or “endorsement” to your existing home insurance policy. This would cover business equipment losses, or increase the third-party liability coverage to include injury to people on your property for business-related reasons.

These riders generally exclude business-interruption losses, product liability, off-premises loss or disability income coverage. You may therefore want to check out group insurance coverage for other aspects of your home business. Certain organizations have excellent insurance programs for their members. Contact your local Chamber of Commerce, the Better Business Bureau, or the Retail Merchants Association for more information.

Studies show that only one-quarter of home business owners are covered for theft, damage or other loss of business equipment. More than two-thirds have no business interruption insurance. Nine out of 10 have no disability insurance, and most do not insure the business use of their cars. The majority do not have extra homeowner insurance coverage for their home business, and in addition, many homes are underinsured or lack adequate replacement value coverage.

To protect your assets, adequate insurance is a must for the home-based business owner. If you don’t have the proper additional insurance coverage, your claim will very likely be rejected. The premium cost for any additional coverage for business purposes is a 100 per cent tax-deductible expense against your business income.

Many Canadian seniors prefer to remain in their own homes as long as possible for a variety of reasons, including a comfortable feeling of security, familiarity, happy memories and an emotional connection to the neighborhood and community. In addition, many seniors prefer to remain in their home due to the support network built up over the years, through neighbors, friends, church or other regular social activities.

Unfortunately, this desire to stay at home is not always possible in terms of the seniors’ capacity to pay for it. It is not uncommon for seniors to be house-rich and cash-poor.

For many seniors, their home is their only major asset. It cannot be readily converted into income–in the perception of many–unless the home is sold and the senior moves out. Naturally, this can be a very stressful scenario. On the other hand, there are seniors who, by circumstance or choice, elect to sell the home and buy a condominium in a retirement area, and have a considerable amount of cash left over for their financial and lifestyle needs.

There are options for seniors who want to stay in their own homes but need or wish to supplement their income. One option is to rent out a self-contained basement suite to a student. Another option is to rent out spare rooms in the house–in other words, have boarders who share common kitchen facilities and washrooms. In many cases the income is not taxable, either because the income can be offset by a per cent of the house expenses, or because of the low amount of income involved.

The above options are attractive to some seniors, as they may provide additional benefits in the form of companionship and the feeling of security. This latter benefit could be particularly attractive, especially if the owner is often away on trips. On the other hand, these options may not be attractive because of the loss of privacy. There could also be municipal by-law regulations that technically restrict having tenants. In many cases these regulations are flexible, depending on various factors such as current municipal policy regarding enforcement, and the extenuating circumstances of the owner.

There are options, such as the “reverse mortgage”, which are designed to help senior homeowners unlock the equity in their homes and convert it into income. There are pros and cons of reverse mortgages, and they are not for everyone. You need to obtain independent legal advice before you commit to any reverse mortgage. In other cases, debt could be deferred so that existing income is not diluted. In this example, some provinces have established a property tax deferment program for seniors. In addition, loans obtained by a homeowner from the Canada Mortgage and Housing Corporation (CMHC) for rehabilitation or improvement of the home could be waived or deferred.

Equity is the net value of a home after all debts against the home have been deducted (an outstanding mortgage, for example). If this equity can be converted into cash or income, without the owner having to sell the house and/or relinquish possession (using a reverse mortgage, for example), many seniors would be able to afford to stay in their homes. In this situation, a lump-sum and/or regular income stream is obtained, and no payments are made until the home is sold.

Although this improvement in cash flow provides a higher standard of living and meets other personal or financial needs, it may also reduce the amount available to be left to the seniors’ estates. This may or may not be an issue of concern to the seniors or the beneficiaries. A more detailed discussion of reverse mortgages is covered in a separate article.

Keep in mind that CMHC and provincial programs vary from province to province and are constantly changing, so it is important to obtain a current update.

There are distinct advantages to having a realtor acting for you in buying or selling a property. With careful selection, you can benefit greatly from the skills of a knowledgeable and sincere realtor. There are a number of approaches to finding a good real estate agent. For example, friends, neighbors, and relatives may have the names of agents that they have dealt with and would recommend. Open houses also provide an opportunity to meet realtors. Newspaper ads list the names and phone numbers of agents who are active in your area. “For Sale” signs provide an agent’s name and phone number. And real estate firms in your area can be located through the Yellow Pages. Any of course, the Internet is one of the most popular methods of research of realtors and properties.

Before you meet several realtors who could potentially meet your needs, make sure you have clearly defined what these needs are. Prepare a written outline of your specific criteria in order to assist in shortlisting prospective homes. If you are going to be living with another person, each of you should prepare a written list of needs and wants, compare them, and then come up with a consensus list. For example, determine how much financing you are able to get, the maximum purchase price you are prepared to pay and the type, age, features and location of the home you are seeking. Here are some guidelines to assist you with your selection. Look for an agent who is:

• a good listener. You want a realtor who will pay attention when you speak, and ask questions which indicate sincere concern about your needs and wishes. This will help in the selection process and save time;
• familiar with the neighborhood you are interested in. Such an agent will be aware of the available listings, will know comparable market prices, and can target the types of property that meet your needs as you have explained them;
• familiar with the buying and selling of residential real estate;
• experienced and knowledgeable in the real estate industry;
• prepared to pre-screen properties so that you are informed only of those that conform to your guidelines for viewing purposes;
• familiar with the various conventional and creative methods of financing, including the effective use of mortgage brokers;
• thorough about the details of homes you are keen on, such as length of time on the market, reason for sale, and price comparisons among similar properties. A realtor who is familiar with the Multiple Listing Service (MLS) system can find out a great amount of information in a short period of time, assuming the property is listed on the MLS;
• candid with you in suggesting a real estate offer price, willing to explain the reasons for the recommendation, and honest with you in terms of advising you whether it is a good time to buy in a particular geographic area you are interested in;
• an effective negotiator, to ensure that your wishes are presented as clearly and persuasively as possible;
• more interested in a long-term relationship than a short-term one. In other words, it is more important to have a satisfied client rather than a quick sale;
• working on a full-time basis, not dabbling in real estate part-time;
• upgrading professional skills and expertise through professional development programs and training;
• good with numbers and familiar with financial calculations

If you are using a realtor for selling your property, you want to know in writing what the marketing plan will be for your property.

Because of the time commitment involved, once you select a realtor you should give him or her your exclusive business. Keep the agent informed of any open houses in which you are interested, and advise other agents that you already have one working for you. If for any reason you are dissatisfied with the realtor who is assisting you, find another realtor.

There are obvious benefits to using a realtor, as outlined in the previous points. One of the key benefits is that the realtor you select (referred to as the “selling” realtor) can act as an intermediary between you and the listing broker. This “arm’s length” negotiating position is an important strategic tactic that can benefit you. As you probably know, the seller pays the sales commission, not the buyer.

Another advantage to the buyer is the opportunity for the realtor to access an MLS computer, which can provide instant, thorough and accurate information on properties that might interest you. Without a realtor searching on your behalf, you seriously minimize your range of selection and the prospect of concluding the deal at a price that is attractive to you. A realtor can find out research data from the MLS system more extensively than what is available to the public through access to the www.mls.ca site.

There are extensive benefits to listing your property with a realtor rather than attempting to sell it on your own. Realtors can:

• list your property on the MLS, which provides extensive exposure throughout and beyond your market area;
• attempt to qualify and screen potential home buyers in order that only serious buyers who have the interest and financial resources present an offer;
• provide information to the purchaser on matters such as financing and other assistance programs that could facilitate the sale of your property;
• suggest methods of improving the appearance of your property in order to maximize the positive impression and subsequently increase the potential buyer’s interest and sale price;
• explain the real estate market in your area, and do so in a graphic fashion by providing you with MLS computer printouts of comparable listings or sales patterns in your area, and keep you on an email immediate notification of listings that fit your needs. They can also supply other facts and figures to assist you in realistically establishing a market price;
• free up your time, by using their contacts and marketing techniques in order to facilitate the sale of your property;
• negotiate an agreement on your behalf and according to your instructions, while you remain at arm’s length from the one-on-one negotiating. This improves your negotiating position.

Whether using a realtor to purchase or sell, remember to compare at least three realtors before deciding which one to use. You are looking for the five Cs–chemistry, confidence, competence, credibility, and commitment.