Featuring top producing Broker Alessio Varano
Youthana Radisson-Khuy, expert licensed Real Estate Broker and founder of Groupe Youthana Agency, sits down for a discussion with fellow Broker Alessio Varano. Alessio is one of their top producers in the Montreal and Laval areas, and was asked to share some of the top mistakes buyers make when purchasing a property in today’s market.
YOUTHANA: “Alessio, can you share with us some of the top mistakes buyers make right now?”
ALESSIO: “Of course. There are a few mistakes that buyers in today’s market make. I would say the principal mistake that buyers make is that they don’t get pre-approved. So what are the advantages of mortgage pre-approval? The first thing about getting pre-approved is that it really sets you up and tells you ‘Ok, this is how much you can afford’. So you won’t be wasting your time running around looking for houses for $700,000 if you can only afford a house of $500,000.
“The second thing that being pre-approved is really really good for is actually negotiating an offer. Often times in today’s market, we’re in multiple-offer situations. So when you’re pre-approved, and you come in with an offer at $500,000 and somebody else comes in with the same exact offer, but you’re approved and he’s not… well guess who they’re going to choose?”
YOUTHANA: “Well, the one that has the paperwork.”
ALESSIO: “The one that’s pre-approved, exactly. Because a lot of times, the files don’t go through because of financing. It’s a lot more difficult to get financing nowadays. So always get pre-approved!”
YOUTHANA: “Perfect. So are there other top mistakes buyers make that you see? Myself, what I see in this market —working more in real estate investments— when people are looking for a property, they say they’re looking ‘per door’. Like $100,000 per door. But they didn’t go see the potential of the property. What we can convert, like the gas heating into electrical, if we can increase the revenue, if we can add another apartment, if we can split a 6-plex into a 3-plex. So some people are sticking to the traditional calculations, of the cap-rate, of 12 or 13 times the revenue. So they don’t see the value of the increases we can make, by doing some of the renovations. That’s what I’m seeing in the plexes.”
ALESSIO: “Yes, I think that our job is really to educate our clients. Often times, they just don’t know what’s the return on investment on their home. So if we teach them that they can get between 10 to 20% on their investment by buying a multi-unit, then they’ll see the value in doing so.
The second big mistake that buyers make is not knowing their purchase cost (aka start-up costs). A lot of people come to me and say ‘Alessio, I have $50,000 to go towards my cash down’. It’s fantastic that they have that amount. Then I ask them ‘Well, have you considered all the other fees?’, and they answer ‘What other fees?’ And I tell them the whole list.”
“So small things that people forget about are the Notary fees. Often times a Notary is going to cost about $1200. The fee on the CMHC Mortgage Loan Insurance is also something besides your mortgage. Moving fees can be $1000 to 2000. The Welcome Tax, municipal and school taxes. Any adjustments, any reimbursements that need to be made (at the Notary as well) for the adjustments on taxes, on condo fees, on gas. Sometimes you have gas left in the propane tank. Well, you have to reimburse that amount. If it’s $100, or whatever the amount may be. House insurance… and the list goes on. There are others, but those are the main things.”
YOUTHANA: “Exactly. Thank you. Are there other top mistakes buyers make that you see?”
ALESSIO: “There are 2 other main things. Number 3 would be buying overpriced. A lot of buyers go into purchasing a property, and they see it, and the seller is asking (for example) $500,000. And they’ll offer whatever they think is a fair offer, and they’ll settle on a price together, right?
So the buyer didn’t really do an evaluation on the property. They don’t know what the real value is. So even though the owner is asking for $500,000, and you settled at $470,000, you might think that you’re getting a really good deal, but the fair market value of the property may actually be $450,000. So, as you know, Youthana… when do we make money in Real Estate?”
YOUTHANA: “For sure, when you’re buying and it’s very interesting (rate)”
ALESSIO: “Exactly. So when you buy, is when you make money. If you buy at an interesting price, well right away, you’re ahead of the game. So that’s when you make money: is when you buy, and not when you sell.”
“And the last thing that I strongly suggest to any buyer, and one of the most important things if you want to be sure to do everything right, and get a really good deal, is… well, guess what it is? It’s hire a Real Estate Agent. Hiring a real estate agent is very important. Someone who is going to represent you, and negotiate for your best interest.
What a lot of people don’t know, is that when they hire a Real Estate Agent to represent them for the purchase of their property, it’s actually free.”
YOUTHANA: “You don’t have to write a cheque.”
ALESSIO: “It’s always the seller that pays our commission when we’re representing a buyer. If you don’t hire a Real Estate Agent, you’re not being represented, and nobody’s fighting for your best interest.”
YOUTHANA: “Exactly, and when you hire a Real Estate Broker, you have access to all the data. Like, how long the property has been on the market, whether the property has been listed multiple times, what is the price per square foot in this area. What’s the negotiation rate? So we have access to a lot of information, where we can educate the client to let them know that they’re buying at the right price, and not overpriced.”
ALESSIO: “Exactly. A good Real Estate Agent is going to evaluate a property before making an offer.”
YOUTHANA: “Thank you very much, Alessio. Is there anything else that you want to share with the people watching us right now?”
ALESSIO: “Well, the only other thing I can say is that this year is a really good market, as you know. A very good time to buy. Interest rates are still very low, so if you’re looking to buy a property, call us.”
(The original recorded interview can be seen on Groupe Youthana’s Facebook Page)