​Whether to rent or to buy is an age-old question and the answer is not simple. Put rent vs buy in any search engine and you will find a myriad of arguments for both sides. Although there are positive points on both side of the argument, what is not true is that one solution, to buy or to rent, is right for everyone.  This blog is not about arguing about renting vs buying, but rather a look at why I believe buying a home is the right choice for families with children who can afford to buy and for people who do not have a pension plan that will allow them to live at the same standard of living when they retire. I don’t claim to know all, but I do have experience helping many families move and an understanding of their needs.
Not everyone is in a position, nor can everyone afford to buy a home so buying is not always an option. Affordability is changing, but if you are fortunate enough to be able to purchase a home and you have children, home ownership can make a difference for your family. Most families want to know their children will be able to stay in the same school throughout their primary school years. Owning a home can provide that stability. Children get to know other children in the neighbourhood and establish lifelong friendships. According to CDC and their study on Essentials for Children, children thrive both physically and emotionally in a stable environment.
A renter with a growing family typically wants to live in a single-family home where they have a back yard and space for all family members. One of the down sides to renting a house is that the renter can get into a situation where they can be forced out of their rental property. It could be that their landlord decides to sell the home or it’s the end of a lease and they have a better tenant. There is a myriad of other reasons as the landlord is in control of who, how and why they rent a property. What ever the reason, a renter can be forced to move and if they want to remain in the same community, they need to find similar accommodations at a similar rental rate near by to keep their children in the same school.  This is rarely an easy feat.  If the renter is OK with the transiency that renting can cause and the children don’t care if they stay in the same school or neighbourhood, renting may be the right choice, but when children stay in the same school and live, play and establish longer friendships with ties to a community it creates a healthier emotional environment .
Whether someone chooses to rent or buy will also have a substantial affect on the big “R”… Retirement.  Yes, money can be saved through renting vs paying a mortgage in Calgary at this moment in time, but this may not be true in the future nor is it true in many other cities across Canada. If the difference between buying and renting is invested, it will create a larger nest egg to retire. This is often an argument on the pro side to renting.
So, what about retirement?  How will a renter finance monthly rental payments once they retire? Most home owners have their mortgage paid by retirement and many have it paid long before that. Retirees who are home owners with a fixed income can support themselves comfortably on a pension and or RIF funds. If you are renting when you retire, the rent money will have come from your pension or the interest earned on the funds you put away for your retirement. 
Let’s look at a likely scenario for the finances of a renter who wishes to retire. Instead of making a purchase, the renter takes the initial investment of $50,000.00 that would be used as the down payment on a home and adds a monthly investment of $1,000.00 saved by not carrying a mortgage and invests that at an annualized interest rate of 3% compounded monthly. According to Waki Saeed, mortgage specialist at BMO,  that investment will be worth $705,579.00 after 30 years.
Buy the time our subject has $50,000 in ready cash they would, most likely, be in their early thirties and have about 30 years of employment left until they wish to retire. Based on groupbenefits.ca pension plan calculations, if our subject has a $100,000 /yr income the annual pension benefit in an “excellent” retirement plan would be around $60,000.  Thus, the monthly retirement plan income would be $5000 and after tax it would be closer to $4000.
The total retirement income for our subject becomes the sum of investment income combined with pension funds. The investment will continue to earn 3% compounded monthly at an annual return of $21,460.86, or $1,788.40 per month before tax and @$1200 - $1300 after tax.  The combined income upon retirement will be @$5300. The question becomes, how much rent will this individual have to continue to pay after retirement.  Will the $1300 per month from the investment be enough to cover the rent so they would be on equal footing with a home owner in the same situation. According to CMHC, average rent increases vary from province to province, but a safe estimate on rental increases over time would be 1.5% annually.  If our subject renter was paying just $1000 in rent when they started saving, their rent would be at least $1500 per month in 30 years. Given that a home owner has other monthly expenses, a retired renter would, at best, be on equal footing with the retired home owner because they must continue paying rent throughout their lifetime, where the homeowner would not. The home owner would also have the benefit of their home appreciating in value over time, while the renter would have to use the earning from the investment to maintain the rent.
Is it better to be a renter or a property owner?  Can either be in a better situation at retirement by renting or buying?  Financially, I think the outcome in the two scenarios are similar, but the emotional benefits of ownership outweigh those of rental for most families with children and in the renter’s  retirement scenarios there must be consideration for how the rent will be paid. The real question comes down to quality of life in both of these situations.

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Jim Perks is a REALTOR in Calgary, Alberta, Canada. He uses his expertise in Internet marketing and real estate experience to service both his buyers and sellers throughout the city of Calgary. He can be reached at RE/MAX Real Estate (Mountain View) 403-247-5178 or by email at [email protected]. His website is www.calgaryrealestateagent.ca

First, lets define market value: "The likely price a property should bring in an open, competitive market under conditions favorable to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”
I could spend a lot of time breaking down that definition, but I will let you work through it for yourself. The purpose of this post is to help you understand the process I use to arrive at market value.

Here are the 5 steps I use to find market value:

1. Look at the history of the property, the city assessment, the location of the community and location of the property within the community and the lot orientation​. Consider the current market both city wide and within the subject’s community as, in the end, this will all influence the listing price
2. Find comparable properties that have sold, are for sale and have their listing expired. The market value of real estate is established by a real estate agent using what is commonly known as a comparative market analysis. This is a procedure that is exactly as its name describes. The agent compares other properties, listed,  sold and expired, to the subject property and arrives at a market value range.
3. Establish a range of pricing. Every community has a range of pricing and the comparables help to establish that range. I will often look at all properties that have sold in a neighbourhood, not necessarily to use as comparables, but they put a property in context.
4. Subtract and add value to the subject based on features, selling time, location and condition. The value of a home can be affected by many variables and the agent looks at all of those and compares to the subject property. For example, and this is an oversimplification to make the point, If a comparable property has a fire place and the subject does not, a fireplace may decrease the value of the subject by $4000. 
5. Compare the results of the analysis to the range of pricing and establish a value range for the property. The subject property will fit into this range based on the features, condition and location. If a house is substantially renovated or upgraded, it may have a market value at the top of or just above the top of the range.  If a house is in poor condition it may be priced at the lower end of the range. 
   
   

Armed with this information the seller and the agent can work together to decide on the listing price for the house. No agent can tell their client the absolute selling price of a home.  That is determined by the market. The purpose of the Comparative Market Analysis is to establish a range of pricing and advise the seller on what is a most likely outcome for the sale of their property. 

Would you like more information about pricing your home?

I often get requests from clients to help find distressed sale properties. I can set up a very specific type of auto search in the MLS that will email  foreclosure and judicial sales to subscribers as soon as they come on the market. The belief surrounding these types of purchases is that they are a great deal on a home or a good opportunity to find a house that can be  fixed up to resell for a profit. Both scenarios are possible when buying foreclosure properties, but it is also important to understand the risks.  Not all foreclosures are great deals.  Here are 3 concerns that should not be overlooked. This is, by no means, an exhaustive list, but these are 3 important concerns you need to note.  Do not let this discourage you, but it is important to be aware of the potential problems you may encounter when buying distressed property. Make an informed decision about what you are buying and what you willing to spend to secure a property.
 
1.       Maintenance and condition
The reasons properties are in distressed sales, like a foreclosure or judicial sales, can vary. Typically, in a foreclosure, the owner could not make their payments There is a very good chance the previous owner did not keep up the maintenance on the property nor did they have the funds to repair serious issues that may have come up, like a leaky roof, broken windows, furnace repair, leaky plumbing or problems with the exterior envelope of the house. There may also be a chance that the property has been cleaned out of appliances, plumbing fixtures and even kitchen cabinets by the previous owner. Often, foreclosure homes can sit vacant and can get infested with mice or other vermin. They can be full of junk left behind by the previous owner.  I have seen foreclosure sales where the basement is stacked to the ceiling with household garbage and junk left behind. Buying a home that is in serious need of repair or upgrade could be costly and this might mitigate any savings you may have realized on the purchase.

2.       Competition with offers
When you make an offer, it is possible that a date will be set for offers to be presented to the bank or to the court.  Not all sales are managed this way, but it is in the bank’s and court’s best interest to encourage multiple offers leading up to a specified date.   The seller’s expectation is to get the highest price possible for their property. You could have the highest price right up to the last minute before the deadline to close offers and someone swoops in with a higher offer to get the property for a slightly higher price. Normally, there is competition for good quality, good condition, distressed sale properties so anticipate that your offer will be outbid and make your best educated offer based on your knowledge of the property and what you are willing to spend to secure the property based on the condition.

3.       Finding Financing
Many banks will not lend on distressed property and you may be looking at higher interest rates and mortgages that are less flexible than those available from the major banks. Again, the extra you are paying to finance such a purchase is going to mitigate some of the savings from the lower purchase price. The lender will only consider the appraised value when lending, so if the property is not in good condition, the money available to purchase may be limited.
As previously mentioned, this is not an exhaustive list, but these are some of the more important considerations when buying distressed sale homes. If you would like advice relating to a specific property, please do not hesitate to contact me directly and request a free evaluation.

Get a free copy of the "Foreclosure Update" have a weekly or daily update of foreclosure properties coming on the market in Calgary emailed directly to you. There are great opportunities in foreclosures, but you must keep in touch with the market so you don't miss out.

When you are selling your house, you have two very important decisions to make:

1. Selecting your agent
2. Establishing your price

Many people make the mistake of establishing their selling price first, without any market knowledge, then finding an agent who agrees to sell at that price. That often leads to listing with the highest bidding agent instead of the most skilled and competent agent. An agent who lists a house at a significantly higher than market value price from the start will simply require a series of price reductions in order to get the property sold. By the time the house is listed at market value, it has been exposed to the market for a very long time and buyers are wondering what's wrong with it. Then the seller is dealing with bargain hunters and low ball offers. 
Choosing an agent who tells the truth will have a better outcome than choosing the agent who agrees to list at an inflated price. Great agents believe it is better to loose a listing by telling the truth than to waste everyone’s time by overpricing.  
You want your doctor, financial adviser and lawyer to give you good honest advice and you should expect the same from your real estate agent. Having good, professional advice is the only way to make sound decisions and realistic plans for the future. Real estate professionals do not create the market, they simply report on it.  Choose your agent wisely. The agents role is to sell your home, not to price it. Ideally, you should select your agent first. Your agent should provide you with current market data and then together, you determine how to price your home. Pricing should be done by the seller, based on the information and advice of the agent.

How should you select your agent?
Before discussing the value of your home, your agent needs to understand your situation, motivation and timing.  These three critical factors will determine your pricing strategy. The agent you are interviewing needs to understand these factors before he/she can make an educated proposal. Then during the listing presentation evaluate your agents ability to manage these elements. 
Here are 6 Things they must do well to get your house sold for the best price in the shortest period of time.

1.  Managing the marketing of your home
2. Getting the maximum exposure to buyers
3. Securing and managing buyer leads
4. Communicating during the listing period
5. Negotiating the final agreement
6. Closing the transaction

The agent who is most competent in these areas will help you get the highest price for your house.

Jim Perks is a REALTOR in Calgary, Alberta, Canada. He uses his expertise in Internet marketing and real estate experience to service both his buyers and sellers throughout the city of Calgary. He can be reached at RE/MAX Real Estate (Mountain View) 403-247-5178 or by email at [email protected]. His website is www.calgaryrealestateagent.ca