Home buyers should buy with you Part 2

Another instance of where home prices have not declined much in recent years is areas where large amounts of property development was simply not possible.  This can be true for either the US or Canada.  Many areas (especially affluent or wealthy ones) in Toronto were built up mostly to capacity many years ago.  So when supply stays the same, prices aren’t going to be affected much unless demand goes way up or way down.  Neither has happened in Canada.

Overbuilding happened to an absurd degree in many US markets, especially in places like Florida.  In one instance a 32-story condo building in Fort Myers, Florida had all but one buyer actually move into the building when it was completed.  All the other buyers had their financing fall through or they switched to the building next door owned by the same developer.  The lonely couple’s unit only has lights on in their floor, the pool isn’t heated, and there’s aren’t enough residents or condo fees to warrant having a concierge. Worse, birds have built nests in the lighting fixtures on the open walkways on each floor.

Here are a few other points you can highlight to buyers to move them closer toward buying:

Down Payments: most renters don’t buy because they never save up enough for a down payment or don’t know how to get it from others.  Nowadays, banks have made it easier for making a down payment.  Many lenders now allow you to borrow funds for a down payment or receive it as a ‘gift’ from family or friends.  Others who don’t allow this now offer cash back options your buyers can use for a down payment.

Some financiers offer “free down payment” or “flex down” options.  The buyer pays about a 1% higher interest rate than normal, but the upside is the buyer gets a home sooner, starts gaining equity and (most importantly) they benefit from their property’s appreciation.  Appreciation can be a huge motivating factor to buy now.  The only catch is the buyer must stay with the original lender for the full initial 5 year term or else they must pay the down payment back.

Incentives For First Time Buyers: in 2009 a $5000 increase was made for the RRSP Home Buyers’ Plan in Canada.  This means first-time home buyers can now withdraw upto $25,000 from the RRSP savings for a down payment.  The best thing is they can do this tax and interest free.  If it’s a couple buying the home then each of them can withdraw $25,000 from their RRSP savings.