Nickels and Dimes

Written by Wade Graham | 11 October 2010

Sorry for the lack of articles lately. I have been running for town council here in Canmore. This has been an amazing process for me as I have had the opportunity to reach out and talk with many Canmore locals. They are a passionate bunch that care deeply about the future of our mountain town. For info on the campaign and the issues I am looking to address visit www.wadegraham.ca.

I have also had a couple of speaking engagements lately revolving around real estate. Audrey Duval asked me to speak a couple of weeks ago at her Canmore Real Estate Series regarding acquiring top notch tenants.  She is running a monthly series and I recommend getting out and checking it out.  The last one was a full house. The Real Estate Investment Network (REIN) has also asked me to speak at an upcoming event in Calgary regarding raising capital. I expect it to be another great event put on by Don R. Campbell and company and I humbled and honoured to have been invited. If you are interested in attending please let me know and I will be happy extend a huge speakers discount your way. With all of this going on let’s just say I haven’t got a tone of time on my hands these days

But back to the topic at hand. A friend of mine called up the other day asking for some advice on her first home purchase and I was happy to help her out as best I could. She has been saving for quite some time, has a reasonable down payment and is now looking to get into the market (great timing on her part I might add). The market here in Canmore is quite suppressed at the moment especially in the condo and starter home market which is where she is looking to purchase naturally.

My friend is a very analytical and calculated girl maybe to a fault sometimes but this purchase was a big one and naturally it was making her a little anxious. Her first question was about the price. Should she be aggressive with her offer and “low ball” the seller? She really didn’t feel comfortable with this tactic as she didn’t want to anger the seller (someone she had never met before and had no relationship with).

Her second question was about the mortgage she was getting approval for. I had sent her to my mortgage broker whom I have been using for years and have done many transactions with. I told her that he was a straight shooter and would give her the best rate the first time and that she wouldn’t have to ask twice for it. These are the types of people I like doing business with and I am happy to send them as much business as I can. But alas my friend wanted to know if she should ask for more of a discount.

If this was the first time I had heard this type of thing I may have been a little taken back but I think most homebuyers think this way. They don’t want to anger a seller they have never met and whom likely will make a decent dollar on their home but want to nickel and dime a bank that they will have a long standing relationship for possibly the next 25 years!

So let’s break down the math on this one a little (if you read my articles you know I love doing this J ) If you ask the mortgage broker for a 0.25% discount that equates to about $15 per $100,000 of debt or in my friends case about $45/month or $540/year or $2700 over a typical 5 year term. Now the bank is your best friend in real estate and life. They give you the credit to do the things you couldn’t otherwise accomplish. If you disagree I trust you will be paying cash for your next home, car and dinner. Without them my business would not t exist so I am happy create a great long lasting relationship here and not worry too much about $45.

Or you could ask your seller for a discount. It is a strong buyers market here in Canmore and in most markets right now. There are 4 times as many listing in Canmore than in a “normal” market. Condos...I hate to say it...are a dime a dozen. If your seller really wants to sell their home they better get aggressive or it will sit on the market. If this person has held their home for more than 5 years they more than likely have lots of room to negotiate and with realtors involved making a commission you will probably never even see the person you bought the home from....why wouldn’t you ask for a discount? Any break here will likely be more substantial than the $45 you asked the bank for a break on.

I am not known for being a hard negotiator but I also know when it is a seller’s market and a buyer’s market and on which side of that fence that I sit. If someone doesn’t want to sell me a home they don’t have to and vice versa....I don’t have to buy a home if it isn’t in my best interest. I always try to remember this when I am making an offer and negotiating....there is always another deal. This mentality truly puts you in a great position but it is difficult for most homebuyers as they get emotionally attached to the transaction. Try your best to remember this.

So on your next purchase instead of asking your banker for a break on the mortgage find yourself a motivated seller and ask them for a discount. It is probably more profitable in the short term and long term!