Ever heard of Interest Rate Differentials, or IRDs?  If you haven’t, and your mortgage contract contains a clause referring to it, you could end up with much, much less from the sale of your home in Spruce Grove, Stony Plain, Parkland County or the Edmonton area than you had anticipated.

I just re-read an email from Frank DeAngelis, a Spruce Grove lawyer (contact information below) who often handles the legal side of home sales and purchases for my clients.  Although the email was written a year ago, its content and advice are just as relevant in today’s real estate market:

“In the last few months the Real Estate Department at Main Street Law Offices has dealt with some very surprised and upset Vendors relating to the amount of their mortgage pay-outs. 

“Most Vendors seem to be expecting a three month interest penalty if they pay their mortgage out early.  However, MOST mortgages call for a three month interest penalty or an interest rate differential (“IRD”), whichever is HIGHER.  This higher cost effectively reduces the equity that Vendors have in their existing properties, making their next purchase difficult to complete as they were expecting more equity from the sale of the old house. 

“IRDs can be substantial and are a current concern due to the large decreases in interest rates over the past year.  For example, take a $300,000.00 five year mortgage taken out in 2007 at 6.5%.  With current rates at 4% or less, the pay-out penalty today with three years remaining on the term is $300,000.00 X 2.5% X 3 = $22,500.00

“We strongly recommend that you insist on your clients getting an estimated pay-out statement from their banker, including the IRD pay-out, in any circumstances where reliance is being based on an estimate of equity in the sale property.  This will help avoid closing surprises and assist us greatly in achieving ON TIME ^TM closings for your referrals. 

“Sometimes the bankers can help resolve the issue by “porting” the mortgage.  Each lender has different policies, so each case has to be addressed on its own merits.  We suggest you involve the bankers early to see what they can do to make this issue less of an impact on closing.” 

Frank C. DeAngelis, Barrister & Solicitor

Whether you live in Spruce Grove, Stony Plain, Parkland County, the Edmonton region or elsewhere, you have probably heard the phrase “location, location, location” used in real estate and wondered why the need to state it three times.  It is repeated to emphasize its importance.  It is one of those things in real estate that just is, and when you ignore its importance you will likely regret it.

As a buyer myself, I ignored it twice in the last 30 years.  One of those times was when I remustered to a Structural Technician (changed trades) while serving in the Canadian Armed Forces.  My first posting was to Wainwright, Alberta where housing was pretty pricey, so we decided to purchase a major fixer upper in Czar, Alberta (200 people, 10,000 head of cattle), 50 km south of Wainwright.  My thinking was twofold:  we could buy a house a lot cheaper in Czar, and this would be good practical experience to experiment with my new construction trade.  We could add sweat equity to this house, making a really nice home and still be competitive with the Wainwright market.

My wife Paulette and I spent the next 3 ½ years gutting the house, including the interior walls, kitchen, basement, lighting, electrical…  In the end the house turned out beautiful.  But when we got posted to the north end of Vancouver Island, no one wanted to buy the house, because we could not compete with the buyers’ desire to live in Wainwright.  To make a long story short, we rented the house to the only person who applied, and that person trashed the house.  I took time off, came back to Czar, fixed the house up for sale and put it back on the market, selling it for what the market would bear. The lesson here:  Buyers will pay a premium to live where they want to live. 

“Location, location, location” usually means attractive neighbourhoods close to schools, hospitals, and facilities for entertainment, recreation and shopping.  It can mean proximity to a lake or backing onto a park, green space or golf course.  Homes in undesirable locations might be next to commercial/industrial buildings, beside railway lines, under flight paths, or in neighbourhoods with high crime rates.  Also included are economically depressed areas, where neighbours show zero pride of ownership in maintaining their homes and yards.

Although you will pay a premium to buy in a desirable location, the payback is well worth the extra cost.  Desirable locations sell quicker, usually appreciate at a greater rate, and are likely to sell before less desirable locations even when the market is slow.

From my past experiences, if budget is an issue (and when isn’t it?), I would settle for a smaller home located in a desirable location, later moving up to a larger home when I could afford it.

Looking for a great home in a great location?  Let me help!  Call me at 780-910-9669, email me at barry@barryt.ca, or contact me here.

If you are asking the question, then the answer should probably be, yes.  No one should ever advise you not to get a home inspected.   If you do decide to go ahead, make sure the home inspector has experience, training and a broad understanding of home construction and all the bits and pieces that make a house whole.   This advice holds true whether you are looking to buy a Spruce Grove or Stony Plain home, a Parkland County acreage, or property in the Edmonton region or elsewhere.

A good home inspector will spend between 2 to 4 hours (depending on the house size) inspecting the home.  He or she should have equipment such as a moisture detector, carbon monoxide detector, ladders, magnifying glasses, mirrors and other specialized equipment in order to check all areas of the home and in cracks and crannies when needed.  A thorough home inspection should give you a good overview of the general condition of the plumbing, electrical, roofing, insulation, windows, grading, drainage, the foundation where exposed, furnace, hot water tank, and general construction and condition of the home.  It is advised that you be there for most of the inspection or at least the latter half of the inspection.  That way you can see firsthand any deficiencies (minor or major) noted by the inspector.  You can also ask the inspector to look more closely at any areas that are of concern to you.

At the end of the inspection the home inspector should provide you with a report outlining his observations. He or she should also give you an overall view of the condition of the home (i.e. sub-standard, normal, above average), and recommend maintenance that should be done over time.

A house put under a magnifying glass like this will create a list of observations.  That list can sometimes seem overwhelming.  Don’t be surprised when your home inspector refers to a 25-year-old furnace as being “fully depreciated”. That doesn’t mean the furnace has to be replaced tomorrow.  If it is operating safely, it could last, with proper maintenance,   another 5 or more years.  But a 25-year-old furnace is only about 60% efficient (60% of the fuel used by the furnace is used to produce heat and the other 40% goes up the chimney). Most people nowadays replace furnaces in order to have a more efficient furnace.  The building code now requires that all new furnaces be high efficiency (90 plus percent). The home inspection needs to be put into perspective.  It should reflect, within reason, what you viewed and bargained for when you negotiated your purchase.

Although a home inspection can be used to try to re-negotiate the original purchase contract or to try to get the seller to do repairs or upgrading, this is usually the exception to the rule, reserved for bigger ticket items that a buyer would not have expected from the original viewing of the home.  Things that fall into this category could include safety issues (for example, a cracked heat exchanger on a furnace), a structural issue that you were not aware of, or such a very large list of minor deficiencies that it now represents a major expense, with the exception of a home that was known to require a lot of work, such as a “handyman special”.  There is no one answer that fits all situations, so it is always best to discuss any concerns you have with your REALTOR®.

See also “How to Pass Your Home Inspection” on BarryT.ca.

Comments or questions are always welcome!  Contact me here, phone me at 780-910-9669 or email me at barry@barryt.ca.

The single most valuable item most of us will ever own is our home, whether in Spruce Grove, Stony Plain, Parkland County, the Edmonton area, or elsewhere.  It makes sense – and money, when it comes time to sell our property – to keep it up to date and in good repair.

Every home repair and maintenance job could be hired out to a professional tradesman.  Most of us don’t have the expertise or tools to tackle a job like replacing eavestroughs or reshingling the roof or repairing the springs on an automatic garage door opener.

But the average homeowner doesn’t always have to go to the trouble and expense of locating and employing a professional.  A little instruction and practice make many home improvement and repair jobs fairly easy and even fun to do.  One word of caution however:  If you do decide to do the job yourself, the finished product must look as though it was done by a pro!

Where do you go to get the information and help you need so you can do it yourself?

• Check out your local public library.  The do it yourself marketplace has exploded in recent years with a huge array of books, magazines and videos devoted to home improvement.  The library is a good place to find the best and most recent of these, and all for the low price of a library card.
• Visit a large bookstore like Chapters for even more information.  Flip through current issues of magazines such as
  • Canadian Home Workshop
  • Canadian Homes and Cottages
  • Canadian House and Home
  • Canadian Woodworking and Home Improvement Magazine
  • The Family Handyman
  • Remodeling Magazine
  • Renovation Style Magazine (from Better Homes & Gardens)
  • and many others
• See what cable television has to offer on networks like
  • Home and Garden Television and HGTV Canada
  • DIY Canada
  • Arts and Entertainment (A&E)
  • The Learning Channel (TLC)
• Attend home shows like the Edmonton Home and Garden Show,  the Edmonton Renovation Show or the Home and Renovation Show where you can connect in person with home improvement experts, as well as local contractors and tradespeople.
• Stores like Home Depot (Home Improver Club) routinely offer workshops on topics such as installing bathroom faucets, planting a garden, replacing countertops and the like.
• And of course there’s the internet, with thousands of websites and forums devoted to every home improvement topic imaginable.  Here are a few we like:
  • Ask the Builder
  • Bob Vila
  • Canadian Tire How To
  • Do It Yourself
  • Fix It Club
  • Handyman Club
  • HIP: Home Improvement Projects
  • Home Improvement
  • Home Renovation Guide
  • Home Renovations at About.com
  • Home Repair at About.com
  • Home Thinking
  • Home Time.com
  • Home Tips
  • My Home Improvement
  • Old House Web
  • Shell Busey’s Home Improvement Library
  • Start Remodeling
  • This Old House

Did we miss anything?  Do you know of a source of good information or website that we should include in this article?

Comments or questions are always welcome!  Phone me at 780-910-9669, email me at barry@barryt.ca, or contact me here.