Buying a Home in the South Okanagan?
HERE ARE SOME FAQS
Congratulations on buying South Okanagan real estate!
The Penticton, Naramata, Oliver, Osoyoos and Keremeos areas are booming so it makes sense to work with experienced real estate agents who have in depth knowledge of the market. While CRUSH enjoys selling homes for our clients, we love helping clients buy the perfect property in the South Okanagan.
We excel at helping home buyers because we really listen to get a sense of your needs. Maybe you’re a first time home buyer in Penticton, a retired couple looking for a waterfront property on Lake Okanagan, or moving from Vancouver or Calgary to raise your family in the South Okanagan. We make sure we completely understand your individual needs before showing you your options. We know that you are the one who will be living in the home and paying the mortgage, so making sure we pair you with the right real estate is our number one priority!
What Should I Offer for a Home in the South Okanagan?
Finding the house you want to make your dream home can be an incredibly exciting moment. Making an offer on that house however, can be a daunting and stressful task. The written offer is a step in the home buying process that requires the finesse, experience and negotiating skills of a REALTOR® professional.
Deciding How Much to Offer when Buying South Okanagan Real Estate
There are several factors to consider when deciding how much to offer for a property in the South Okanagan: the listing price of the home, the prices of comparable properties that have recently sold, and of course what you can afford.
- Listing Price: Also called the ‘asking price’, this is a rough estimate of what the seller would like to receive. It is important to consider how long the property has been on the market for and if there have been any price reductions. Other factors that should affect how seriously you consider the listing price include whether the property is a foreclosure or short sale, and if there are multiple offers being presented to the seller.
- Prices of Comparable Properties: CRUSH can provide you with a list of comparable properties, or ‘comps’ that have recently sold in the area near the property you are about to make an offer on. The most relative and supporting comparables should fall within these guidelines:
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- Sales that have occurred within the last three to six months in the South Okanagan real estate market – the more recent, the better.
- Sales of properties similar to the one you’re making an offer on, in terms of age, size, and bedrooms and bathrooms.
- Sales within a reasonable proximity (six to ten blocks in an urban area; please consult us in rural areas) of the property you are making an offer on. This radius may need to be reduced if a freeway or other dividing line splits the neighbourhood.
- What You Can Afford: You should come to the offer table pre-approved. When figuring the total cost of the property, be sure to include closing costs into your budget. Closing costs are typically 2%-5% of the final purchase price.
Once you have considered the factors at hand, it is time to decide on a number. In competitive areas or ‘hot markets’ like the South Okanagan, you may have to offer no less than the asking price. You should be mentally prepared for negotiations, and in some cases even bidding wars, which can erupt among aggressive buyers. In hot markets like the South Okanagan right now, properties can often sell for 10% to 30% above the asking price.
If you are making an offer in a hot market, you may need more than just a well-priced bid. Considering the seller’s needs is the best way to achieve an advantage in the competition. Your ability to close the deal quickly is often an advantage. For example: buying with all cash or having your loan pre-approved tells the seller that you are a serious buyer. Your flexibility and accommodation of seller time frames can also be beneficial. For example: extending the closing time frame for a party that cannot move for several months; or making your offer for the property ‘as is’, meaning you will pay for any needed repairs.
In less competitive areas, or ‘cold markets’, you will have more room to negotiate with the seller at a lower purchase price. REO, short sale and Bank Owned properties can often be obtained at great prices, but be prepared for a long and challenging closing process.
This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on selling your individual property.
How Much Would I Qualify for When buying South Okanagan Real Estate
When buying a home in Penticton or other parts of the South Okanagan, it is helpful to determine the type of home you’ll like and how much you can afford before beginning your search. Most lenders allocate approximately 28% of your GROSS MONTHLY INCOME to housing expense. Housing expense includes principal, interest, taxes and insurance (PITI). To get an idea of how much you can afford to pay each month for a home, multiply your gross monthly income by 28%.
When coupled with current outstanding loans, the total for your debt service should not exceed 36% of your gross monthly income. Some lenders may have slightly more liberal requirements or loan interest rates which may increase your purchasing power.
Mortgage interest, property taxes, loan fees or “points” are currently tax deductible (up to allowable limits). Points are generally deductible in the year paid. A point equals 1% of the mortgage amount. If you are in the 28% tax bracket, this is equivalent to receiving a 28% discount on your mortgage interest and property taxes. During the first years of the mortgage your tax savings are especially high because most of your monthly payment goes toward loan interest.
CRUSH works with a solid network of mortgage brokers in the South Okanagan and are happy to connect you with one! Contact Us to get introduced!
This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on selling your individual property.
What price for a home can I afford when buying South Okanagan real estate?
As a ‘rule of thumb’ you can afford to buy a home equal in price to twice your gross annual income. More precisely, the price you can afford to pay for a home will depend on six factors:
- Your income.
- The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.
- Your outstanding debts.
- Your credit history.
- The type of mortgage you select.
- Current interest rates.
Lenders will analyze your income in relation to your projected cost of the home and outstanding debts. This will determine the size loan you can borrow. Your housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your loan, property taxes and hazard insurance. The sum of these costs is referred to as ‘PITI.’
Monthly homeowner association dues, if you’re purchasing a condominium or townhouse, and private mortgage insurance are added to the PITI. Your housing income-to-expense ratio should fall in the 28 to 33 percent range. 28 percent of your gross monthly income is allotted toward PITI. 33 percent of you gross monthly income is allowed for PITI and all long term debt. Some lenders will go higher under certain circumstances. Your total income-to-debt ratio should not exceed 34 to 38 percent of your gross income.
This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on selling your individual property.
How do I find out about the condition of the home I’m considering in the South Okanagan?
First and foremost it is strongly recommended that you hire a professional person to inspect the home. Many home inspectors belong to the Canadian Society of Home Inspectors (CSHI). They attend seminars and stay abreast of the latest developments.
Secondly some Provinces require sellers to complete a disclosure form revealing everything known about their property. Home sellers are required to indicate any significant defects or malfunctions existing in the home’s major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachment of easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for settling, sliding or soil problems, flooding or drainage problems.
People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions, if the homeowners association has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on selling your individual property.
How Low Can I Consider Offering for Home for Sale in the South Okanagan
There are always some sellers who for some reason must sell quickly, however in general, a very low offer in a normal market might be rejected immediately. In a strong buyer’s market, the below-market offer will usually either be accepted or generate a counteroffer. If few offers are being made, an outright rejection of offers becomes unlikely. In a strong seller’s market, offers are often higher than full price. While it is true that offers at or above full price are more likely to be accepted by the seller, there are other considerations involved:
- Is the offer contingent upon anything, such as the sale of the buyer’s current house? If so, such an offer, even at full price, may not be as attractive as an offer without that condition.
- Is the offer made on the house ‘as is’, or does the buyer want the seller to make some repairs before the close of escrow or make a price concession instead?
- Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
- Are there any requests for seller concessions, such as asking the seller to contribute towards points and/or closing costs? If so, the offer is not really full price.
How and what do I negotiate?
Different sellers price houses very differently. Some deliberately overprice, others ask for pretty close to what they hope to get and a few (maybe the cleverest) underprice their houses in the hope that potential buyers will compete and overbid. A seller’s advertised price should be treated only as a rough estimate of what they would like to receive.
If possible try to learn about the seller’s motivation. For example, a lower price with a speedy escrow may be more acceptable to someone who must move quickly due to a job transfer. People going through a divorce or are eager to move into another home are frequently more receptive to lower offers.
Some buyers believe in making deliberate low-ball offers. While any offer can be presented to the seller, a low-ball offer often sours a prospective sale and discourages the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway.
Before making an offer, also investigate how much comparable homes have sold for in the area so that you can determine whether the home is priced right.
This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on selling your individual property.