How smoking at home reduces property values

A recent survey of Ontario real estate agents in Ontario found that smoking in a home could lower the value of your property by up to 30 per cent. The survey was sponsored by Pfizer Canada and besides the obvious damage by staining walls and carpets, it can leave a smell that is very hard to eliminate.

It makes sense that a home with a smoky smell or strong odour will be harder to sell as it will deter most buyers. 

Landlords are permitted to include no smoking clauses in their leases. But they can only evict a tenant who smokes if they can prove the smoking has damaged the unit or is bothering the other tenants

The Non-Smoker’s Rights Association published their own study demonstrating that the average costs for a landlord to clean an apartment is two to three times greater when it was occupied by a heavy smoker. They also quote statistics from Canadian Fire Marshals demonstrating that cigarettes, lighters and matches remain one of the top causes of residential fires.

Similar statistics are found with resale cars where the prior owner was a heavy smoker and it is difficult to remove the smell from the upholstery.

Buyers, be suspicious if you notice the fans going or electric air fresheners whenever visiting a home for the first time.

Sellers, don’t try to cover up or hide odour issues that you know about. Get rid of any foul odour before putting your home for sale, to maximize your return.

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First Time Home Buyer Reality Check - Affordability

As I mentioned in my September Net Worth Udpate, I am planning to start my property hunt for the first time. So, first question comes into my mind is, "what can I afford"?

There are two types of costs in buying a home -- the initial down payment and the ongoing monthly mortgage payments. The largest one-time cost is the down payment.

When purchasing a home, there are also many one time costs and monthly expenses that I will need to budget for in addition to the expenses that I have while renting.

One-time Expenses:

Property inspection (optional), due at time of inspection
Legal fees, due at the time of closing
Legal disbursements, due at the time of closing
Property survey (sometimes provided by seller), due at the time of closing
Mortgage interest adjustment (if applicable), due at the time of closing
Home and property insurance, at closing and ongoing
Moving expenses, due on the date of move

Monthly Expenses:

Mortgage payments
Maintenance/Condominium fees
Property and content insurance
Property taxes
Utilities

The surprising truth about what's really in Canadians' wallets

Those who want to know how they financially stack up against others should check out MoneySense magazine's All-Canadian Wealth Test.

Despite a growing chorus of voices that say the recession is over, many Canadians are feeling downright poor these days. But MoneySense magazine's All-Canadian Wealth Test reveals that many of us are actually a lot better off than we think.

Available on newsstands across the country starting today, the Wealth Test lets Canadians determine how they stack up against other Canadians on all the key indicators of household prosperity. MoneySense research reveals whether we're earning more or less than our peers, if we're wealthier or poorer than others, and if our track record in the stock market is better or worse than most investors. Canadians can also visit MoneySense.ca where they can calculate their own net worth and compare it to people like themselves.

The good and bad news on how we stack up:

• The good news - yes, good news - is that the average household is better off today than it was nine years ago at the peak of the dot-com boom. In fact, we're 7 per cent richer in real terms in grim 2009 than we were in bubbly 2000.
  
• But there are warning signs. While the rich are getting richer, it's not clear that middle- and working-class Canadians are any wealthier.
  
• Another problem? The way we're getting rich. Rather than make moneyon the stock market or accumulate savings in the bank, a significant portion of our wealth is tied up in the rising value of our homes. Real estate now makes up an unprecedented share of our personal balance sheets. That may be fine now. But if house prices crash, look out below.
  

The All-Canadian Wealth Test also reveals that:

• The average unattached Canadian has an annual income of $37,800. The average family earns $91,500.
• The path to higher income starts with being a guy. Women make, on average, about two-thirds of what men do.
• The richest 20 per cent of Canadian households control about 69 per cent of the wealth in Canada. Meanwhile, the poorest 20 per cent controls no wealth at all. It's actually in debt.

Source: MoneySense

10 Ways to Cut Your Moving Costs

Moving can be a very chaotic and expensive task, one that needs to be accomplished very carefully. A move carried out in haste can bring about several unnecessary problems. Almost everyone looks for cheap movers. After all, most of us want to save on out of pocket expenses but there are several disadvantages of selecting cheap movers. There are professional moving companies, who offer competitive rates that are easily affordable by everyone. However, there are certain techniques or methods of preparation that can also help you minimize your expenses.

When planning your moving budget, it is very important to keep a check on the outflow of cash. This will make you better prepared to understand the unnecessary expenses. Create a budget template in Excel or Microsoft Word—this will make your calculations easier.

Decide if you will hire a professional moving company or you will do it yourself. If you are hiring a mover, collect quotes from at least three different professional moving companies and include the highest quote in your budget.

Check all the items that you are moving. This will help you evaluate if you need more insurance because the default insurance offered by movers might not be sufficient for you. Along with added insurance, find out if you require extra services.

Because of rising fuel costs and a shortage of drivers, the cost of a full service mover has risen in the past few years. Anything you can do yourself—even if seemingly small—will help cut your moving bill and give you extra money to spend on other relocation costs (like the pizza and beer for after your move).


1. Reduce your load. Get rid of household items that you no longer need. Hold a garage sale and leave books with friends, the local library or sell them to a used bookstore. Anything you can't sell, give to a local charity. Weight equals money. The less weight, the less money. It's that simple.

2. Pack it yourself. Packing services performed by the mover are expensive and could amount to 25% of the moving cost. Even if you don't want to pack it all yourself, you can always do a partial pack, and have the movers handle the rest. For example, items that are nonbreakable such as linens and bedding can be packed easily without the risk of damage. Every box you pack yourself is money in your pocket.

3. Save on packing. Luggage and carrying bags are perfect for packing sheets, towels and clothing. Also, the bottoms of wardrobe boxes are great for bulky, lightweight items. Be wary of packing tips that might save you money initially but won't protect your stuff, for example, using newspaper instead of bubble wrap. Sure, it might save a few bucks, but in the end, is breaking something worth it?

4. Drive your own moving truck
Using a full service moving company is extremely expensive. You can rent your own truck and hire movers to help load up and unload.

5. Recruit help from friends or family
If you have friends or family in the area, getting them to help you load up and/or unload is a blessing, because it saves time and money. If you’re going to recruit help, make it a fun event. Order some food, and make it a moving party.

6. Avoid the busy season. If you are using a full service moving company, avoid June, July, and August as these are the most expensive months to move because of demand for moving services. Also, try to plan your move during the middle of the month—rates are higher at the beginning and the end because of the large number of apartment leases with month-end dates. If you can be flexible with your move-in times, you can also save money because the moving company can combine shipments.

7. Get organized. Time is Money. Color-code boxes according to the room they belong in so they all end up in the same place, saving time for both you and your mover.

8. Avoid storage costs by moving into your new property immediately and make sure that you have payment ready for when the truck arrives. Any delay could result in storage-in-transit fees if your things have to be stored until they can be unloaded and after the move is paid in full.

9. Make sure you are insured. Your existing homeowner’s insurance policy might cover your move so you don't have to buy additional moving protection.

10. Your move may be tax-deductible. Keep all receipts and visit the Canada Revenue Agency's website for specific details about which moving expenses you can claim, or consult a professional accountant to maximize your tax return.

Six Things You Should Avoid Before Buying a Home

Buying a home is not an impulse buy. In most cases you will have a few months notice before you actually go through with the sale. Planning ahead is crucial particularly if you don't have extensive financial resources. Since mortgage lenders will be sizing up your finances carefully, don't give them any reason to reject your application.

You never know what effect today’s actions will have on your mortgage application in three or even six months. Even something as simple as transferring money from your savings to your chequing account can negatively impact the mortgage process. So here are some suggestions of things you should avoid before buying a home:

1. Do not make any major purchases
Don't invest in any major purchases. Cars, weddings, jewellery, furniture and electronics can all wait until you're settled in your new home. When you make a major purchase, you limit the amount of money available for your down payment, and decrease the amount of liquid capital in your name.

If you do have to make a major purchase before buying a home, you might want to put it on a low-interest credit card until after your mortgage application is approved. Sometimes you can't control what life throws your way, but think carefully about your options before making a decision.

2. Don’t move money around
When a lender reviews your loan application for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. To do so, they will request statements from all of your accounts that contain liquid assets.

Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document and measure your finances. So leave your money where it is until after closing.

3. Do not make large investments
It is also not recommended to make investments just before buying a home; again, you're decreasing the liquidity of your assets. If you've come across a new stock in which you'd like to invest or if it's a great time to buy bonds, wait until after you've settled the finances on your home.

Furthermore, you'll have to disclose all of your finances before buying a new home, which means accounting for every withdrawal and deposit in all of your accounts. This can get quite tedious, especially if you're trying to dig up cancelled cheques for the new home theatre or HDTV you just had to have three months ago.

4. Do not change your bank
Changing banks is always a hectic ordeal, so don't do it before buying a home. You'll have to provide information about previous accounts that are now closed, and therefore inaccessible. And if you diversify your money too much in money market accounts, savings accounts, chequing accounts and other places, you'll have a harder time with the disclosure process.

If you're frustrated with your bank and want to change, tough it out a little longer and switch after your mortgage is approved and you've set up shop in your new home. This will save you hours of headaches and frustration.

5. Do not apply for a new credit card or line of credit
Even though the inquiry won’t hurt your credit too badly if you already have a good credit score, the additional credit card will cause the lender to question your financial stability for buying a home.

6. Do not change your job unless absolutely necessary
Try not to change jobs. Your employment is a key factor in the mortgage approval process, and if you can't show steady employment, you might be denied. Of course, you can't help matters if you've just been laid off or an opportunity presents itself that you can't pass up.

This could become more difficult if you become self employed. In most cases, lenders want to see at least two years of self-employment before they will approve you for a loan. So if you can, wait until after buying a home to become self-employed. For part-time workers, changing jobs creates unpredictability in the number of hours you will work so the lender cannot determine your gross income to qualify you for a loan.

If you're going to change jobs before buying a home, wait another six months before going ahead with the real estate transaction. This gives you an opportunity to establish employment and to show a steady income from a single employer. This looks much better on a loan application than a long list of recent employers.

As mentioned above, there will be times when you can't avoid all of these things before buying a home, but know that it's in your best interests to wait until the dust settles. The goal should be to move into your new house with as few obstacles as possible.

How to Avoid Defaulting on Your Mortgage Payments

The market conditions have changed quite dramatically over the past twelve months. As a result, some homeowners may stumble upon financial hardships that make it difficult for them to pay their mortgage payments. Once your mortgage loan defaults, the chance of foreclosure increases.

If you or your spouse has lost employment and no longer make as much money, and you see meeting your mortgage payment obligations is going to be problematic, the first step is to take a deep breath. There are literally millions of people that face the same problem. You are not a bad person, so leave any feelings of guilt at the door. You do not have time for them. Instead, you need to focus on your options.

Fortunately, there are ways to avoid default and keep your home, so read on for more information on how to avoid a mortgage default.

1- Get moving on a solution
Your first option is to find a way to make up the back payments and continue fighting to make your payment on time every month. Although not an attractive options, it is an option.

Explore options to decrease expenses and increase income, such as an additional job, selling possessions, and look to community resources for help. You may have to temporarily cut back on things like dining out, internet and cable.

If you have a basement or spare room you may consider renting it out. The extra income could be up to 50% of your mortgage payment. True, there is some inconvenience, but it is a small price to pay for the extra income. If you are uncertain about taking in an extra lodger, remember, you are able to choose who lives with you. Make sure you meet them before they enter. If a spare room is not immediately available; be creative, see whether there is another room you could cheaply convert.

2- Work with your lender
Contact your mortgage lender. Banks do not want to foreclosure on properties. The process is long and costly, and in the end, mortgage lenders lose money. Instead, they would rather work alongside borrowers that are slightly behind on payments, and come up with a practical solution.

Consider extending your mortgage term to reduce your monthly payments. The downside is that you will end up paying more in the long term. However, if it means you are able to continue meeting the minimum mortgage payments, it is worth doing.

Set up a repayment plan. If you are unable to pay your mortgage payment for one or more months, the lender may agree to a repayment plan. The mortgage lender adds additional money to each subsequent mortgage payment until the loan is up-to-date.

Your lender may also suggest an Interest Only Mortgage. This will also reduce your monthly mortgage payments, often quite substantially. However, again the disadvantage is that, in the long term, you will need to find an alternative investment plan to pay off your mortgage capital—might be good short term option.

3. Refinance your mortgage
This is perhaps the easiest and most effective method. If you happen to be on your bank’s existing standard rate, the chances are you will be able to find a much better deal.

4. Talk to a Financial Advisor
If the situation is becoming overwhelming and you are really in danger of defaulting, you may need to consider speaking to a financial consultant or accountant. This will arm you with expertise and resources with which to approach planning your financial future and make the most of your current circumstances.

5. Resell - Downsize
This option is probably the most drastic and only to be undertaken when the others have failed. If you are able to sell your house, you can temporarily rent somewhere cheaper or buy a cheaper house in a different location. The money saved can be used to pay off your mortgage. This option is not easy, due to the costs involved in moving, but it might be worth doing in the long term.

If you can see that things are going to get bad in relation to meeting your mortgage payment obligations, take a deep breath then face up to the problem. Take action now, procrastination will not help you.

10 Most Important Economic Indicators

10 most important economic indicators that every investor should pay attention to for the big piture is listed in reverse order, and this post also explains how each of them has an impact on the stock market. As investors, we should all know about CPI, PPI, ECI, and GDP.

10. Durable Goods Orders
This is a government index that measures the dollar volume of orders, shipments, and unfilled orders of durable goods. Durable goods are new or used items generally with a normal life expectancy of three years or more.

This report gives us information on the strength of demand for US manufactured durable goods, from both domestic and foreign sources. When the index is decreasing (fell by -1% in December, 2008), it suggests demand is weakening, which will probably result in decresing production and employment.

9. Personal Income and Consumption
Also known as Personal Income and Outlays. Personal Income represents the income that households receive from all sources, including employment, self employment, investments, and transfer payments.

Income is the major determinant of spending (US consumers spend approximately 95 cents of each new dollar) and consumer spending accounts for two-thirds of economy. Greater spending spurs corporate profits and benefits. If more spending will help the economy recover, the US consumers have less than 5 cents of each new dollar more to help the economy to recover. Not too much room ahead compared to China and Japan which has 30% saving rate!

8. Employment Cost Index (ECI)
The ECI is designed to measure the change in the cost of labor, including wages and salaries as well as benefits.

It is useful in evaluating wage trends and the risk of wage inflation/deflation. If wage deflation threatens, it's likely that interest rate will go down, then bond and stock prices will rise. With Fed's rate at 0 - 0.25%, how much room do you think the Fed still has to help the stock market?

7. Producer Price Index (PPI)
The PPI measures the average price of a fixed basket of capital and consumer goods at the wholesale level. There are three primary publication structures for the PPI: industry, commodity, and stage-of-processing.

It's important to monitor the PPI excluding food and energy prices for its monthly stability. This is referred as the core PPI and gives a clearer picture of the underlying inflation trend. Inflationary Pressure is generated when the core PPI posts larger-than-expected gains. It's considered a precursor of consumer price inflation.

6. Consumer Price Index (CPI)
The CPI measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education. It's also known as the cost-of-living index.

The rate of change of the core CPI (CPI excluding food and energy prices) is one of the key measures of inflation/deflation for the economy. Same as PPI, deflationary pressure is generated when the core CPI posts larger-than-expected losses. Deflationary pressure is not generally good thing for the stock market.

5. Consumer Confidence Index
A survey of 5000 consumers about their attitudes concerning the present situation and expectations regarding economic conditions conducted.

This report can be helpful in predicting sudden shifts in consumption patterns. Since consumer spending accounts for two-thirds of the economy, it gives us insights about the direction of the economy. However, only index changes of at least five points should be considered significant. According to the latest Consumer Confidence Index report, it's near a record low.

4. Existing Home Sales
In normal circumstances, this indicator will not make it to the 4th spot, but due to the housing market crash caused this economy crisis, I think it's more important to take a closer look at this indicator.

This report measures the selling rate of pre-owned houses. It's considered a more important indicator of activity in the housing sector than the new home sales, as it accounts for around 84% of all houses sold and is released earlier in the month.

This provides a gauge of not only the demand for housing, but the economy momentum. People have to be financially confident in order to buy a house.

3. Retail Sales
This index measures the total sales of goods by all retail establishments in the US. These figures are in current dollar, that is, they are not adjusted for inflation. However, the data are adjusted for seasonal, holiday and trading-day differences between the months of the year.

This is the most timely indicator of broad consumer spending patterns. It gives you a sense of the trends among different types of retailers. These trends can help you spot specific investment opportunities.

2. Beige Book
Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from bank and branch directors and interviews with key businessmen, economists, market experts, and other sources. It summarizes this information by District and sector.

The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings. If the Beige Book portrays deflationary pressure, the Fed may decrease interest rates. But, where can the interest rates go anymore?


1. Gross Domestic Products (GDP)
GDP measures the dollar value of all goods and services produced within the borders of the United States, regardless of who owns the assets or the nationality of the labor used in producing that output. Investor should monitor the real growth rates because they are adjusted to inflation.

This is the most comprehensive measure of the performance of the economy. Healthy GDP growth for US is between 2.0% - 2.5% when the unemployment rate is between 5.5% - 6.0%. As the unemployment rate might reach 12% by end of the year as indicated by some economists, GDP growth will take a while to get to the positive territory.

Summary:
Almost all the economic inidicators currently reflect deflationary pressure, which means a decrease of interest rates becomes imminent. However, with the Fed's rate at 0 - 0.25%, Where is the room to cut the rate anymore? Where is the non-convensional method to help the economy right now? I just don't see it coming anytime soon.

8 Steps to Purchase a Home

Step #1 – Meet with a financial institution for 3 reasons

1. Learn about the lending institution and negotiate an interest rate. A difference of even half a percentage point can mean a huge saving over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8 percent vs. 7.5 percent is about $35 per month. Over 30 years, that's $12,600.
2. Ask about all their fees (application fees, processing fees, etc.)
3. Get a Pre-Approved Mortgage Commitment (in writing). Even before the house hunting begins, homebuyers need to determine how much they can afford. Mortgage companies or other lending institutions provide pre-qualified loan commitments. Sellers often don't take an offer seriously unless the prospective first-time buyer has some assurance of creditworthiness from a mortgage company.

Step #2 - Do Your "Home-work"
Be sure to check for listings, neighborhood information, and current mortgage information and home ownership services. The right amount of research will help you to better understand the marketplace and homes available in your price range when you're ready to work with a real estate professional.

Step #3 - Make a List of your Needs, Wants, and Dreams
To help make the home buying process a little easier, homebuyers should create a Home Search Checklist of the important features they want in a home. Location and the number of bedrooms and bathrooms are usually important. Other important questions to answer: Are there shopping centers, parks, and schools located near the home? Please refer and print off our Home Viewing Checklist that has been provided for your convenience.

Step #4 – Decide on How to search for a property
There are two basic ways to search for a home, either you search privately or hire a ‘buyer’s agent’. A buyer's broker or agent represents the buyer's interests and helps identify homes that are for sale and in the right price range. The broker also can help with such tasks as writing contracts, negotiating the asking price, and closing the purchase. There is normally no cost to the buyer for this service. Both Buyer Brokers and Sellers Brokers are paid from the seller’s proceeds. Make sure you know who is paying the Buyers Broker, you or the seller.
Step #5 - Make an Offer
Once you find the right house, make an offer. Make sure that your offer is conditional on at least two items:

1. You're able to obtain adequate financing (if you haven't done so already), and
2. You can cancel (at no cost) if the property doesn't pass the home inspection and the owner can't come to terms about how to fix the problem. Make a good faith deposit (to be held in trust), which is a check that you'll give your realtor or lawyer to indicate that you're serious about buying the house. The check will apply toward the sales price if the deal goes through; if not, you get it back. The focus of an offer mostly centers around price although there are other important factors to consider, sometimes more important that the price. These are things you should either decide on your own or consult with your lawyer or realtor. Here are some things to consider:

• Irrevocable date: This is the time period you allow the seller to consider your offer.
• Items included and excluded from the sale. Be specific and don’t assume.
• Closing date (this is usually also the move in date)
• Who pays for the survey if there isn’t one available. If there is a survey, take it to the bank and confirm with them that they will accept it)
• Who pays the closing costs: Buyer or Seller (it is all negotiable)
• The final walk through date: Usually the morning of closing.

Step #6 - Hire A Home Inspector
Making an offer contingent on an inspection by a registered home inspector can save thousands of dollars by avoiding unseen problems. Inspectors will check the house for any structural damage. In the contract with the seller, it should state any necessary repairs that must be made before closing on the house. Prior to closing, walk through the house and check that such repairs have been completed.

Step #7 - Buy Homeowners Insurance
Lenders require homeowners insurance to protect the new homebuyer's interests as well as their own. Shop around for the best rates.

Step #8 – The Final Walk-Through, Closing, and Move
Prior to going to closing, you and your agent may visit your future house. The ‘walkthrough’ provides a valuable opportunity to ensure that the property has been left in the condition that you agreed to and that the items have been left and that they are in good working condition. It is too late to deal with any problems after closing so make sure all parties have lived up to their obligation. Instruct your lawyer or title company to close once you are satisfied with the final walk through. The closing is where the seller and buyer sign settlement-closing papers to transfer the ownership of the home and all transactions are finalized. Your lawyer and/or realtor should discuss the closing documents with you so you completely understand the statements and the exact amount of money you need at closing.

As the real estate market is deep trouble right now, if buying a home is necessary, then you can take huge advantage of this buyer's market at present.