Bathroom renos are almost over – tile is grouted!

We’re almost done the renovations to this bathroom, and after that, and some other small tweaks, I will be able to stage this home and get it on MLS for sale. But here’s the “before and after” so far – Alex has finished grouting the tile, so all that’s left to do is put up a shower curtain rod and paint the walls.

Here are the “before” shots of that leaky tub surround and the work Alex did to get it properly waterproofed before he tiled it.

And here’s the “after”: the grouted surround.

 

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We used Bone White grout, sanded, from Home Depot. (Sanded mean it’s smooth; you use narrower grout lines for a sanded grout.)

Re costs: the Gloss White subway tiles were about $ 300 at Home Depot and Alex’s labour cost for the tile alone was about $900.)But as you can see, everything was done properly and it’s beautiful.

This property will be listed soon: it’s a lovely 3 bedroom freehold townhouse in Hunt Club, close to everything. Keep an eye out if you’re in the market or contact me. I’ll put up staging photos as soon as they’re done; the homeowners are still busy getting things ready.

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The bathroom renos continue – tile is up!

So, here we are on what is essentially day 3 of this bathroom tub surround reno (day 1 was removing old tile, drywall & insulation; day 2 was installing new greenboard and waterproofing and day 3 was installing new tile)! Here is the before-and-after so far:

 

 

(We think that white spray on the drywall was primer. Might have been the painter checking his spray before he sprayed the ceiling.)

Anyway, here’s the new tile! I love stacking subway tile — it gives a clean, modern feel to a space. Alex is meticulous as well: lovely job!

We’ve decided to use Bone White grout from Home Depot so that the grout lines won’t be as noticeable as they are here – we don’t want the surround to clash with the paint and floor tiles. I’ll be staging this bathroom this weekend – stay tuned!

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Completing a reno to get ready for resale – work on the bathroom continues!

As you know, I am helping to get a clients’ townhouse ready for sale. I posted a couple of weeks ago about the bathroom tub surround in the ensuite that we had to redo because it hadn’t been installed properly.

Instead of tile going all the way to the top of the surround, the tradesman they used had installed a strip of wood. And since wood is porous, as soon as Alex Martinez, who was working at the time to install hardwood, pointed it out to me I agreed it was a problem, and so did the clients. He pulled off the tiles and this is what we found.

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The black parts of the fibreglass show the water damage; it was already leaking.

ayesha 13There were several other problems with this installation. First of all, drywall had been used  instead of a mold-resistant board, and drywall is porous, as is grout, so eventually, if you use it, you’ll have water damage.

Also, there shouldn’t be fibreglass insulation behind the tile/drywall. Fibreglass insulation absorbs water and isn’t normally used in an interior wall at all. In a bathroom, you might want to have insulation to muffle noise, in which case you wouldn’t use fibreglass but styrofoam or spray in insulation.

And finally, the jacuzzi tub hadn’t been secured properly either. It rocked from side to side, and eventually the plumbing attached to it would have leaked.

We had some delays while the homeowners got a quote on what it would cost to replace the tub altogether and install a new one, but they finally decided to keep it. With that decision made, Alex removed the insulation and I was happy to see that there was no water damage to the drywall behind it.

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He secured the tub properly (it was a bit tricky because of where the studs were), and then he put up greenboard, which is a mold-resistant board; waterproofed the corners and sprayfoamed the cracks. Tomorrow, he’ll get started on tiling! Here’s where things are at now:

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I picked out a 3″ x 16″ white subway tile that will be stacked instead of staggered. There it is, along with the new hardwood and tile we installed elsewhere. We have yet to make a decision as to what colour grout to use; I’m tempted to go with a light gray and show off the grout lines. But it’s going to be nice. Stay tuned for more pictures!

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How does the mortgage stress test affect first time buyers?

I am working with a first time buyer right now, and I admit, I was a little startled when she told me that if she proceeded with a condo offer on the modest condo we were looking at (600 sq ft), it would cost her $ 2300/month, including taxes and condo fees. And that was with a hefty deposit!

That was at a 3.09 per cent interest rate, but to get the mortgage at all, she had to qualify for 5.09 per cent under the mortgage stress test. (The new rules now apply to those with a 20% down payment as well, and  require that you establish you are able to pay your mortgage as if the interest rate was a full two per cent higher than whatever you can actually secure.)

It got me thinking about how the mortgage stress test impacts new buyers. Here’s my hypothetical:

Let’s assume a first time buyer has saved $ 16,500 as a down payment. They want to buy a modest home: in Ottawa, a one bedroom  downtown condo or a three bedroom townhouse in say, Hunt Club, runs about $ 350,000, so they have the 5% minimum down payment they need. We’ll assume that our hypothetical buyer has no student debt and that they don’t have a car.

You can find a 3.09% interest rate right now if you have a good mortgage broker for a five year term with monthly payments. As mentioned, the stress test requires that you qualify at 5.09 per cent, or two per cent over your actual rate. When I plug those numbers into a mortgage calculator, I get this:

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Now add condo fees (anything under $ 350/month and I’m concerned that the building doesn’t have enough money in its reserve fund) and taxes, let’s say around $ 300/month, and my hypothetical buyer has to have an after-tax income of $2,439/month. Add utilities (some of which may be included in a condo but not a freehold), and we’re up to around $ 2700/month. If they have a car payment or student debt, they will be well over $ 3,000/month. That doesn’t include credit card payments, clothing, food, phone or internet.  Not too many first time buyers that I know are earning that kind of money after taxes. And that’s without setting anything aside for contingencies.

So what’s the impact of the  stress test? Well, it’s probably going to take longer for higher priced homes to move because those same considerations apply to all buyers who apply for financing.  It’s a whole lot harder to get a mortgage than it was a year or two ago. (I’ve read in other analyses that a buyer with a 20% down payment who qualified for  a $ 720K purchase last year  qualifies for $ 570K this year, under these new rules. That’s a huge drop in buying capacity!)

As long as our housing inventory stays low –we’re down around 27 per cent, year over year in terms of the number of overall listings– I think we’ll still see a pretty brisk market. Right now, we have so few properties to sell that anything decent is selling quickly, often with multiple offers. Ottawa is also seeing an increasing number of foreign buyers and buyers from other provinces, because it’s so affordable by comparison to places like Toronto and Vancouver.  Many of them are cash buyers, so the new mortgage rules don’t apply to them at all.

But for first time buyers, it’s getting a whole lot tougher to purchase, and every time the interest rates go up, it gets even  harder. Which means  the rental market is likely to tighten, so I expect rents to go up. We may see more purpose-built rentals as developers realize that they can rent more easily than they can sell to this demographic but that takes time so it’s probably going to get harder to find nice places to rent as well.

Those small condos and townhouses priced at $ 350K are going to get snapped up quickly, which will drive the prices up, making them even less affordable for first time buyers.

The federal government announced a policy last year of wanting to make housing more affordable for first time buyers. As I’ve shown, the new mortgage stress test has the opposite effect in the very price range that first time buyers need access to. It’s that old law of unintended consequences. The stress test assumes that interest rates will go up (I agree). But it ignores the fact that after five years, most first time buyers will have see their income increase and their monthly mortgage payments decline, as they pay off principal. And surely someone with 20% down has enough equity to protect lenders — there is absolutely no reason that I can see for the new stress test to apply to them too.)

With the spectre of higher interest rates ahead, and prices still relatively low, I do think this is the time to buy, but man, I feel for those first time buyers who really want to get into the market and just can’t get there.

 

 

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Aluminum wiring – what should I know?

Sometimes you’ll see a reference in a listing to a property being “pigtailed.” Or you’ll be doing a home inspection and the home inspector will point out aluminum wiring. What does that mean?

A lot of homes built in the 1960s and 1970s have aluminum wiring. Copper was expensive at the time, and aluminum is a good conductor. The problem is that it can oxidize. It is incompatible with devices intended for copper wiring. It’s very malleable and can come loose at the terminal screws. It can overheat. And so it’s considered a fire hazard. Some warning signs to look out for include sparks from light switches when you turn them on or off; warping of cover plates, weird smells around cover plates, flickering lights.

It would be very expensive to have to pull all the wiring in a house out and replace it, and so the solution that is most commonly used is pigtailing. This involves inserting a copper wire — the”pigtail”– between the aluminum wire and the device connection screw. It’s not that expensive (I had clients who paid around $ 1000 to have all the switches and plugs in their homes pigtailed a few years ago) but some insurance companies are still nervous about the fact that there is aluminum wiring in the home at all and won’t insure.

If you believe that there is aluminum wiring in a house you are interested in making an offer on, don’t just include a home inspection condition in your offer, but include a condition to deal with insurance as well. The offer should be contingent on your being able to find an insurance company that will insure you on terms that are acceptable to you in your sole and absolute discretion. Otherwise, if the home inspection reveals that there is aluminum wiring in the house, you may discover you can’t find insurance that you are comfortable with, at a premium that you can afford.

If the home owner or listing agent tells you or your agent the property has been pigtailed, have your realtor ask the seller to provide ESA certification that it’s been done: your insurance company will require proof that the repair has been done properly.

ESA means Electrical Safety Authority: only one of their approved electricians should be contracted for this kind of work. You’re not changing a light fixture, you’re trying to prevent a fire.This is not a DYI exercise, it should be left to the professionals.

I had this question from a client this week:

In general, if a house has aluminum wiring, and insurance company doesn’t cover, what’s the standard protocol? Do we include a condition that seller covers the cost of replace/pigtail in our offer?

This was my answer:

Some insurers won’t cover homes with aluminum wiring even if it is pigtailed. It is prohibitively expensive to pull out all the wiring in a home to replace it, so it means finding an insurer who will insure pigtailed wiring.

If there is no pigtailing done, we either try to get the seller to get it done before closing, and/or the insurance company will usually give the buyer 30-45 days after closing to provide proof it’s been done.

Since pigtailing isn’t that expensive to do, it depends on the purchase price (and whether you are in a multiple offer situation) as to whether you try to get the seller to do it at seller’s expense. Better usually to negotiate a lower price and do it yourself so that you know it’s done properly and have the ESA certificate that your insurance company will want to prove it’s been done properly.

Here’s a link to an ESA Bulletin that explains everything you need to know about aluminum wiring.  This is one of those things that really has to be dealt with, and can often only be determined on a home inspection, so don’t ever waive a home inspection on an older home — it could put your whole purchase at risk.

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What if no-one wants to pay the realtor?

I had a question on this blog recently from someone who asked: What happens if the buyer signs a Buyer Customer Service Agreement because they don’t want to pay a commission and then the seller in a For Sale by Owner (FSBO) refuses to pay the  commission – who pays the brokerage commission?

Well, first of all, I have to explain what these documents are and when they’re used.

A realtor usually gets a buyer to sign a Buyer Customer Service Agreement when the realtor is already acting for the seller, i.e. when they are double-ending a deal. The realtor must act in the seller’s best interest. Usually, the seller usually wants the highest price possible and the buyer wants to pay as little as possible. Given this inherent conflict of interest, the realtor can’t represent both parties.  The terms of the Buyer Customer Service agreement make it clear that the realtor does not represent the buyer, and also that the buyer is not expected to pay the realtor any compensation. Since the realtor already has a listing agreement with the seller, who has contractually agreed to pay the listing brokerage’s commission, this makes perfect sense.

Remember, in this situation, the realtor is in what would otherwise be a conflict of interest: the Buyer Customer Service Agreement is a way of getting around that, by explicitly recognizing that the realtor’s primary duties are to the seller:

In a FSBO (For Sale by Owner) situation, however, there is no listing agent, no double-ender, and no conflict of interest. In those circumstances, the buyer who wishes to make an offer signs a Buyer’s Representation Agreement (BRA). Among other things, the BRA sets out  that if the seller refuses to pay the brokerage’s commission, the buyer will pay it:

To avoid a situation where a buyer ends up on the hook for commission, before we present an offer in a FSBO situation, we ask the seller to first sign two documents that acknowledge that we are acting for the buyer, not them, and also that the seller will pay our commission. One is Form 202, specifying the amount of commission the seller will pay.

The other is a Confirmation of Co-operation and Representation that specifies that we are acting in the buyer’s interests, not the seller’s. On p. 2 , you’ll see that commission is again referred to. (I’ve completed this one to show you what it would usually look like: the amount will vary depending on what the seller agrees to pay.) This is a document, by the way,  that our Board requires be submitted as part of every offer. 

If the proper paperwork is prepared and signed, there shouldn’t be any issue about who is going to pay a brokerage’s commission in any given transaction.

The question, however, was what happens in the hypothetical situation where the buyer signs a Buyer Customer Service Agreement because they don’t  want to pay a commission and the FSBO seller then also refuses to pay the brokerage’s commission.

I don’t agree with someone insisting on signing a Buyer Customer Service Agreement because they don’t want to pay a commission, and then wanting me to take them to see a For Sale By Owner where the seller doesn’t want to pay a commission either. It’s one thing to have a buyer want to see a property I’ve listed. But if they want me to show them a FSBO, and then put in an offer, that is more than customer service: I am definitely representing them. In that case, they need to sign a BRA. They can’t have it both ways.

But if a realtor agrees, for some strange reason, to let the buyer sign a Buyer Customer Service Agreement, instead of a BRA, and the FSBO seller won’t sign a Form 202 and/or the Confirmation of Cooperation and Representation, the realtor should not present the offer, plain and simple. Someone has to pay our commission. Realtors don’t work for free. If they do so, and this is important, they will have accepted an agency role with all its liabilities, without any payment.

Sometimes, in a sale by owner (and this  happened to me once), the buyer signs a BRA, obliging them to pay the brokerage commission if the seller refuses to, and the FSBO seller accepts their offer but refuses to sign the Form 202. What happens then?

In my situation, the seller had agreed verbally and via email/text to pay an agreed upon commission, but said they wanted to go over the paperwork with their lawyer before they signed anything. Based on their assurances, I gave them the paperwork, although reluctantly, because we really should have that Form 202 signed first, precisely to avoid this kind of situation.

To my horror, they then  signed and accepted the offer, thereby contractually binding my clients to the sale, but refused to sign the Form 202, and told my buyers they’d have to pay the entire commission.

That changed the overall price of the home and made it impossible for my buyers to proceed so they backed out over financing.  I found them another house they love, so it all worked out in the end, but I had quite a few sleepless nights thinking about what would have happened if they hadn’t.

In that case, because of the Buyer’s Representation Agreement, my brokerage was protected. If the buyers had chosen to proceed, they would have had to pay the commission or we would have had to work something else out, or maybe sued the sellers for bad faith. But if I had relied on a Buyer’s Customer Service Agreement instead of a BRA,and if I had presented the offer to the seller without that protection and if the seller had pulled the same stunt, my brokerage would have been entitled to nothing.

So, that was a great question – I hope this helps to answer it!

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Bathroom leaks! Another reno …

In the house we are getting ready for sale, my clients had paid a tradesman to redo their master bedroom ensuite not that long ago. I noticed when I first saw it that the tiles were a little crooked and that the tub didn’t seem to be level. However, it wasn’t until the tradesman I use, Alex Martinez, poked his head in during the other renos, that we saw a bigger problem: the tradesman had installed a wood trim at the top of the tile surround, instead of extending the tiles all the way to the ceiling.

The problem, of course, with installing wood in a shower is that it’s not waterproof. I brought it to the attention of my clients and they agreed it was a problem and that the surround needed to come down. Alex came back and removed the tiles and this is what we found:

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That black staining shows that water had already got in behind the tiles and into the insulation: it’s black mould. Ugh.

It turns out that there was no waterproofing behind the tile surround – no Schluter membrane, no greenboard– which is a kind of  drywall that is mold-resistant– just regular drywall. And for some peculiar  reason the tradesman (or someone before him, we don’t know who did it) had insulated the interior walls with fibreglass insulation. (If you’re going to insulate interior walls to reduce noise, you should use spray foam or rigid insulation: it can take a very long time for fibreglass insulation to dry out if it gets damp.)

Anyway, you can see where the leaks had occurred;  I’m surprised, frankly, that there wasn’t drywall damage on the other side of this wall.

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If you look to your left in the above photo, in behind the copper plumbing, you can see another potential problem. There is drywall there  too (which is the party wall between the two properties) that has a big gap between the two boards, meaning that wall was wide open to leaks as well.

We then discovered yet another issue. The tub had not been secured — if you sat on the edge of it, it rocked. The only thing holding in place was the bottom row of tiles. This can be a real problem, because if the tub moves like that, eventually, the pipes or drain connected to it will come loose and cause a major flood. (I had this happen to clients: it was over $ 10K to repair the damage.)

So my poor homeowners  agreed to redo all the work they’d already done and paid for. This whole fiasco really points out the need to use trades who know what they are doing and who are properly insured, and when it comes to anything to do with plumbing, use a licensed plumber.

They’re getting a new tub, and Alex is going to install greenboard and a waterproof membrane and get rid of that yucky insulation. I’ve picked out the tub  for them as well as the new tiles for the surround – they will be using 3″ x 16″ white subway ceramic tiles, which will be installed in a stacked pattern. Stay tuned for more pictures!

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