Looking Out For Your Financial Freedom?

How soon do you plan on retiring?

I don't care if you have your investments with a bank, an insurance company or an independent financial planner. Fact is, if your financial adviser is not discussing your choices of how to sell your home they are not working in your best interest.

Think about it. If you were to live in 4 houses in your life how much money could you waste on a real estate agent. Let's do the math, shall we.

Year 1 (Age 30) First Home - Modest townhouse selling for $225,000
Agent Commission 5% - $11,250
GST on Commission - $562.50
Total amount not invested - $11,812.50

Year 5 (Age 35) Second Home - Single detached selling for $300,000
Agent Commission 5% - $15,000
HST on Commission - $1,950
Total amount not invested - $16,950

Year 20 (Age 50) Third Home - Large family home selling for $450,000
Agent Commission 5% - $22,500
HST on Commission - $2,925
Total amount not invested - $25,425

Year 30 (Age 60) Fourth Home - Bungalow selling for $300,000
Agent Commission 5% - $15,000
HST on Commission - $1,950
Total amount not invested - $16,950

At 60 I hope that we are all ready to retire (if not before). All ready to buy a cottage on a lake in Northern Ontario and a condo in Palm Springs. So let's look at our investment profile....or more importantly what didn't end up in it. The total amount of commissions (including taxes) paid to real estate agents through your life was $71,137.50. That sure is a big number! But let's add in the aspect of lost interest into that figure over the 30 years and see what it is.

Using the Bank of Canada investment calculator over the 30 years at 6% interest the $11,812.50 from our townhouse would have been $67,844.99. The $16,950 from our second home would be $72,747.21 over 25 years. The $25,425 from our 3rd home would be $45,532.30 over the 10 years. Of course our $16,950 doesn't get invested because we just sold that place. So the total money not in our financial portfolio due to needlessly spending it on real estate agents is $203,074.50.

You always have other options...


M

What To Do With All This BS?

Author’s Note: Due to a complaint about the legitimacy of information in this post I have double checked my sources and found the data to be accurate and made some notes below. I have also made some edits to help protect the home buyers/sellers involved as well some of the language has been edited due to individual interpretation of the specific words used.

I think I need a skid of these to deal with it all!

I hear all sorts of stories in this business. I recognize that they all start with a kernel of truth and through the art of story telling they get altered slightly. We all remember playing broken telephone as children, right?

I was out putting up the first of two sold signs in Cambridge last Friday when I came across a flyer blowing aimlessly on our client's door step. I am sure it fell out of the door jam or mailbox but there it was carefully avoiding my feet as it tried to get my attention.

I picked it up to see the same drab excuse of a flyer we expect from a (replaced Joe Schmoe with) ordinary agent. What popped for me was the PropertyGuys.com sign in the photo. (Using other people's trade marks in your advertising is not allowed and was a big motivator to this post. I have scanned and presented the flyer as it was found and included another company logo only to show the flyer in it's entirety.) When I read it in detail I knew it was a stretch of the truth at best. It is the exact opposite of everything we see in the market...so I did some digging.

Nothing is the truth except the truth, and here it is.

Address deleted
Listed with PropertyGuys.com on July 14 2008 at $267,900
Cancellation date deleted
Listed with Robert Wollziefer on Sept 30 2008 at $269,900 MLS® #0894383
Relisted with Robert Wollziefer on Dec 1st 2008 at $259,900 MLS® #0895294
Sold Date Jan 29 2009 for $255,000 (There was some question to privacy laws in publicizing the sold value of the property. This is already public information available through the Municipal Property Assessment Corporation aka MPAC)
Total days on MLS 121
Estimated commission paid at 3.5% $8,925 plus $446.25 in GST
Net amount client sold for deleted

Here are some points that Robert fails to point out in his marketing piece:
Details of the price drop of $8,000 in listing price and $12,900 to the actual SOLD price
(Deleted a comment regarding bottom line price client received after commissions payed).
Property was relisted after 60 days on the market

Here is (in my opinion) the absolute (replaced false with) misleading statement made:
"One day they received 3 offers and can now move forward"

As you can see from the truth above, they were listed for a total of 121 days with Robert (deleted “and not the 1 day he states”. It was brought to my attention that the client did in fact receive 3 offers in one day, the ad fails to mention that it took 120 days prior to that happening). The truth is they were listed twice as long with Robert than with PropertyGuys.com and needed to drop their price because it was price that was the issue not their choice of marketing. (Deleted language specific to the client and replaced with) One of the true benefits of selling privately is the fact that you are able to lower the cost of the transaction. Those costs can either be kept by the seller or used as a tool to lower their price, making them more attractive in the market place and sell faster.

Way to help them "Move Forward" Mr. Wollziefer, (grammatical error replaced your) you’re a gem!

Do you have a similar story? Leave a comment! Your story may help someone else avoid the "Rubber Lips"...


M

Freindly (and Functional) Real Estate

It is hard to be friendly when you have to go through a 3rd party.

Christine Durocher of Guelph recently sold her house. She had been trying for some time. She listed her house in time for the big "SPRING MARKET". She had called upon an agent she knew quite well to list it and it hit the MLS on Mar 26 2009 at $264,000.

After being on the market for a few months and not getting the results she needed (a SOLD sign on her front lawn) she called Tonya Brubacher in our office. Because Christine didn't have to pay the $13,860 (including GST) in commissions she was able to better price her home. She listed on June 4th for $258,000 with PropertyGuys.com and was able to sell her house within 2 weeks for 97.7% of the asking price. This decision allowed Christine to pay herself $13,230 (including GST) in commissions.

Here are Christine's comments on the the sale of her home.

"PropertyGuys.com is definitely the way to go. We are very pleased with the outcome and it didn't take very long to sell our home. Thank you to Tonya and PropertyGuys.com"

I guess the only thing worse than having someone stuck in the middle would be to have THIS guy stuck in the middle...


M

Cudos Mr. Turner

Garth Turner has had a tumultuous run to say the least.

He has worn many hats in his days. From author to lecturer to syndicated newspaper columnist to TV personality to entrepreneur to 2 time MP. He may just be best known in Canada for standing up to Stephen Harper and getting the boot from the conservative caucus.

In his book "Greater Fool" he looks at where we are heading in the world of real estate. He does not see a rosy future.

Garth continues his thoughts from his book on his blog by the same name. A recent post includes a letter from a local RIM employee that recently sold his home privately in Waterloo.

"Mr. RIM" has $95,000 in equity saved up in his $244,900 house. The one thing that Garth does not expand on is the fact that had this RIM employee used a Realtor they would have used up 13.53% of their equity.

$244,900 x 5% = $12,245
$12,245 + 5% GST = $12,857.25
$12,857.25 / $95,000 = 13.53%

When we are considering whether to use an agent we make choices on a cost of 5% of our home. Unfortunately most of us don't own our home, the banks do. In the case above "Mr. RIM" only owned 38.79% of his home yet he is expected to pay the entire selling fee charged.

When you are looking at the future of your financial life you should look at the big picture not simply what is in front of you. Watch for what lies beneath the water, not just the majesty of what protrudes above the surface. That is a mistake made by so many in the past. Are we not supposed to learn from their mistakes?


M

Nothing Like A Good Chicken Leg!

Now all you need is a BBQ to cook them on...

Do you remember my post about the client that was sick of annoying agents calling and knocking on his door? He had asked for some ammunition to help fend these pests off.

Glad to announce in under 3 months Peter and Nancy were able to sell their house and pay themselves the commission. They sold for 98.5% of their asking price and saved $17,325 including GST. They spent some money to market their home, in total $1,028.70, giving them a net total of $16,296.30 more than if they had of used an agent. I am not sure what they will use their extra cash for but I know one thing, they won't be wasting it on something they can do themselves!

Today I am going to share with you a few of the many things you can spend your money on instead of some Joe Schmoe agent.

1. Put it towards your mortgage - This is by far the best use of these funds (IMHO). Putting this money down on a $200,000 mortgage (based on a 25 year amortization and 4% interest rate) would save you an additional $9,418.52. That means you would end up saving over $25,000 by selling privately!
2. Pay for upgrades in a "new home" - If you are buying a new home you know that it never comes "fully equipped". Did you want hardwood floors? What about upgraded cabinets or a finished basement?
3. Make some changes in the home "new to you" - When you buy a resale home it is generally not perfect. Maybe you need a new water softener ($1,000 and up), high efficiency furnace ($3,500-$6,000), new A/C ($2,000 - $3,000), new roof ($2.50-$8.00/sq.ft.). Here is a great list of expected costs.
4. You sold the your place with appliances and now need to replace - Fridge ($2,500), Stove ($1,800), Washer & Dryer ($1,850)
5. Upgrade the backyard - New deck, Landscaping, Gas Grill for the chicken legs!
   
6. Your new place has a space for a kick butt man cave - TV ($3,000), Surround Sound ($3,500)
7. You decide that you want a spa in your basement - Hot tub ($4,700), Sauna ($3,400), Massage table ($500)
8. Send your child to University (1st year tuition and books)- Optometry ($16,100), Computer Science ($12,000), Architecture ($10,900)
9. Deposit on a new convertable or a new Harley Davidson.

I could go on and on. The point here is that you have the ability to make a choice how you want to spend your money. Whatever floats your boat. Don't let anyone tell you how you should spend it. If you want to use it for a real estate agent, by all means, it's your money.

One year ago today Joe Lima used some of his new found money to give back to his community. That's always a good idea.


M

GST Has Risen Again

This trooper has a new name...Harmonized Sales Tax.

The Ontario Budget released last week announced the plan for a harmonized sales tax like our friends in Atlantic Canada. For those of you buying homes after June 1st 2010 this new tax will not be charged on resale homes. There are some increases on tax charged on new homes, dependent on the value.

Where this tax increase will hit the everyday consumers is when purchasing a service related items. Service oriented businesses like lawyers, hair dressers, car repairs, accountants, real estate agents. That's right real estate commissions are subject to GST today and as of June 2010 taxes will increase to 13% on all commissions charged by a real estate agent.

Here is how deep this will effect you, the home seller.

Today: $300,000 x 5% commission = $15,000 + 5% GST = $15,750

June 2010: $300,000 x 5% commission = $15,000 + 13% HST = $16,950

Of course there is a way to avoid this HUGE increase of $1,200 in costs to you. As a matter of fact you can REDUCE it by thousands. Sell your home privately and you only have to pay HST on the fee of your marketing. Let's look at the same example, but as a private sale.

Today: $300,000 x 0% commission = $0 + $1,500* + 5% GST = $1,575 ($14,175 Savings)

June 2010: $300,000 x 0% commission = $0 + $1,500* + 13% HST = $1,695 ($15,255 Savings)
*PropertyGuys.com Elite Package

So as it turns out this new HST thing gives you even MORE savings selling privately. What a Trooper.


M