Lorenda Simms : Sutton Group - West Coast Realty : Archived blog posts for : 2024

Everything You Need to Know About Gifted Down Payments

Posted on January 20, 2024 by Lorenda Simms

Everything You Need to Know About Gifted Down Payments

As home prices and interest rates increased this year, some Canadian families are choosing to help their kids get a foothold in the real estate market. One of the ways they’re doing that is with gifted down payments.

A 2021 CIBC report said 30% of first-time buyers in Canada got a boost thanks to receiving money as a gift for a down payment on a home. James Harrison, Mortgage Broker at Mortgages.ca estimates that, in some markets, that number is a lot higher, with gifts ranging anywhere from $10,000 to more than $1 million. There is no limit to the amount that can be gifted.

“At least two-thirds of my clients are getting a gift of some amount,” he says. “Parents just want to help their kids buy, with the goal often being a 20% down payment.”

According to the CIBC report, in 2015, the average Canadian gift was $52,000. In 2021 it was $82,000. Gifts in Vancouver lead with the highest average in Canada, clocking in at $180,000, and Toronto a close second at $130,000.

What are gifted down payments?
A gifted down payment is exactly what it sounds like: a monetary gift from a parent, grandparent, sibling, or other close relative, towards the purchase of a home. It isn’t a loan; it’s non-repayable. The person doing the giving should have zero expectations of getting that money back, and will often be asked to sign an agreement to that effect.

How are gifted down payments different from co-signing?
When you give a gift, you don’t own any part of the property, but you also don’t assume any of the risk. If you co-sign, you are on the title—and 100% liable if the homeowners default on their mortgage. Co-signing can also impact your ability to borrow: whatever amount you have co-signed for will look like you borrowed it yourself.

Do gifted down payments have any impact on a mortgage approval?
No. Your income determines the max you qualify for, and the down payment is on top of that. Of course, the more of a down payment you have, the less you’ll need to borrow. So if you only qualify for a smaller loan, a gift can help you buy something bigger than you could otherwise afford.

“A gift can also get you from an insured purchase (less than 20% down) to a conventional one,” says Harrison. “Insured only gets you a max 25-year amortization, with strict debt ratios. But with 20% or more down, you could potentially qualify for a 30-year amortization with more give on the ratios. That can make a big difference in the total mortgage you qualify for.”

What are the rules around gifted down payments?
Everyone needs to sign a mortgage gift letter (each lender has their own template). Harrison says you must also provide proof that the gifted funds have been deposited into your account, and they should be there no later than 15 days before closing. For funds coming from outside Canada, lenders want to see those in your (Canadian) account 30 to 90 days before closing.

Depending on how gifted funds are used in the transaction, there may also be obligations to comply with Canada’s anti-money laundering laws, according to Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC). For example, if the gifted funds are provided directly to the REALTOR®, the REALTOR® would have an obligation to verify the identity of the individual providing the funds.

Can we use borrowed funds to gift money to our kids?
Yes, you can. However, it’s probably not as common as you think: only about 5.5% of gifting parents use debt to finance gifting. If you’re considering using your line of credit, just be careful about your debt load, especially if you’re looking to retire anytime soon.

Are there any tax implications to gifting a down payment?
In Canada, gifted down payments aren’t taxed. Immediate family members can provide the gift without either side being on the hook taxwise. Of course, it’s always prudent to check with a tax professional for info pertaining to your specific financial situation.

That being said, Harrison suggests to his clients they consider protecting the gift in the event the recipient splits from their partner. Otherise, half your gift could end up with the departing spouse/partner.

Getting into the real estate market can provide plenty of benefits, like housing stability, an investment opportunity for yourself, and numerous social benefits. Helping your immediate family members with a down payment, if you’re able to, can be a great way to get them into the market so they can begin their homeownership journey.

The information discussed in this article should not be taken as financial or legal advice. This article is for informational purposes only.

Source: https://www.realtor.ca/blog/everything-you-need-to-know-about-gifted-down-payments/34688/1363

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Maximizing Property Appeal: The Impact of Home Staging on Real Estate Transaction

Posted on January 8, 2024 by Lorenda Simms

Maximizing Property Appeal: The Impact of Home Staging on Real Estate Transaction

In the dynamic world of real estate, the presentation of a property stands as a critical factor in driving its sale.

This is where home staging comes into play, serving as a powerful tool to enhance a property’s appeal. By thoughtfully curating a property’s aesthetics to appeal to prospective buyers, home staging can significantly elevate a property’s perceived value. This strategic enhancement not only captivates potential buyers but also often translates into swifter sales and potentially higher transaction values, thereby underlining the profound impact of home staging on real estate transactions.

What is Home Staging

Home staging is the art of preparing a residential property for sale by enhancing its aesthetic appeal to captivate potential buyers.

Originating in the 1970s in the United States, this practice has evolved into an essential marketing tool within the real estate industry. It involves more than just tidying up; it includes decluttering, rearranging furniture, optimizing space, and sometimes making minor repairs.

Modern staging techniques have expanded to include professional photography, which captures the essence of the property in its best light, and virtual staging, an innovative approach where digital furnishings and decor are added to pictures of empty rooms, making them more appealing and relatable to buyers.

Psychological Aspects of Home Staging

The effectiveness of home staging lies in its ability to influence buyer perception. By strategically styling a property, staging allows potential buyers to envision themselves living in the space, thus creating an emotional connection.

This emotional appeal is a powerful tool in real estate sales. A well-staged home not only creates a warm and inviting image but also helps buyers overlook minor flaws, focusing instead on the potential lifestyle the home offers. It also sets the stage for buyers to imagine future memories and experiences in the home, which can be a decisive factor in their decision-making process.

Essentials of Successful Home Staging

Effective home staging is much more than just cleaning and decorating; it’s about creating a mood. Key elements include decluttering to create a sense of space, and depersonalization to help buyers imagine their own lives in the home. Strategic lighting is used to highlight the property’s best features, while décor is selected to create a welcoming, universal appeal.

The property’s exterior, or curb appeal, is equally vital in making a memorable first impression. Landscaping, a fresh coat of paint, and minor repairs can significantly boost a property’s exterior allure. In staging, every detail counts, from the color of the towels in the bathroom to the placement of furniture, each element works together to create an environment that buyers can aspire to.

Cost-Benefit Analysis of Home Staging

While there are upfront costs involved in home staging, these are often outweighed by the benefits.

The investment can vary from a simple consultation and minor adjustments to a full-scale staging involving rental furniture and major landscaping work. However, the return on investment can be substantial. Staged homes not only tend to sell at higher prices but also often sell faster, which can be a significant advantage in markets where properties might otherwise linger. This quicker sale process can result in reduced carrying costs like mortgage payments, property taxes, and utilities, further emphasizing the financial benefits of home staging.

DIY vs. Professional Home Staging

For those on a budget, DIY staging can be a viable option.

Key DIY tasks include deep cleaning, rearranging existing furniture, and making minor repairs. However, for properties in competitive markets or at the higher end of the price spectrum, the expertise of a professional stager can be invaluable. These professionals bring an objective eye and an understanding of what appeals to today’s buyers. They can also access rental furniture and décor to enhance the look of the home, something that might be beyond the scope of most homeowners.

Regional Trends and Future Directions

The approach to home staging varies by region, reflecting local tastes and lifestyles.

In urban centers, there’s a trend towards sleek, minimalist designs that appeal to a modern aesthetic, while rural and suburban properties may benefit from a more traditional, cozy feel. Looking ahead, digital advancements are making a mark on home staging. Virtual staging, where furniture and decor are digitally inserted into photographs of an empty room, is gaining popularity for its cost-effectiveness and convenience. Additionally, 3D virtual tours are increasingly being used, allowing potential buyers to explore a staged home online, which is particularly appealing in the current era of remote buying and selling. These technological trends indicate a future where home staging can be both more versatile and accessible.

Conclusion

Home staging emerges as a key strategy in real estate, offering a powerful means to elevate a property’s aesthetic appeal and marketability. By thoughtfully preparing a home for the market, sellers can effectively showcase their property’s full potential, often leading to quicker sales and higher returns.

Given its proven impact, incorporating home staging into the selling process is not just recommended but can be considered an essential step for those looking to maximize their property’s value. Sellers are advised to carefully assess their staging needs, considering both DIY approaches and the expertise of professional stagers, to ensure their home is presented in the best possible light to potential buyers.

Source: https://canadianrealestatemagazine.ca/news/the-impact-of-home-staging-on-real-estate-transactions/

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