"Cheapest Price" Commissions

We were in a hurry yesterday with duplicating keys for an estate sale. At the closest hardware store I was directed to an irritated "minimum Wage" employee that reminded me that their price was the lowest.

"Cheapest Prices for Cut Keys" he chimed

The second key, they didn't carry that particular blank, but that "More Expensive" fellow up the mall did. At the second store I was greeted by the proprietor who looked at the key to be duplicated and warned about the price of the blank; "I need it". Back to the house to try the key... Expensive one works great, cheap one is stiff and resistant. Doesn't fully close. It was very difficult to turn.

Back to the shops. I don't have time for this. Did I return to the lowest price that complained? No, I went to the fellow who did his job properly and took my money. I asked about the error with the "first cut" He looked at it carefully and said; "You see here" showing me the key, "Someone rushed, It's a little off."

I returned again to the estate home and tested the second re cut key. Perfect. Yes it cost a dollar more but could have saved me 45 minutes had I gone there first.

There is a lesson here for all of us. Too often we are attracted by the lowest price, only to have other expenses undisclosed or a repurchase do over is required that just plainly waits time. There seems to be a race to the bottom for prices on everything lately. Then there is the cost expense and waste of the re do.

Have things like this happened to you?

Flat Fee Commissions Now $1 to Selling Broker

Is this the way that you would like to see homes sold in west Toronto?

While many are rubbing their hands with glee about the impending "savings" that will be available as soon as the Competition Bureau invokes the freedom for Providers of Listing Services to list your home on the MLS for a flat fee the lawyers are already hard at work.

You listed your property with a limited service brokerage; who for the sum of IE $199 , $399 or $799 uploaded your listing to the MLS system. They are responsible for nothing else.

You, in the course of your listing agreement were recommended to pay a selling brokerage commission, but hey, why bother, what do you need an agent for?

The Lawyers have been busy also.

Form 202 – Seller Commission Agreement with Co-operating Brokerage for a Listed Property

October 26, 2010 -- Please be advised that Standard Forms has developed a new form to assist Co-operating Brokerages where the Listing Brokerage has indicated in the Remarks to Brokerage field that you can contact the Seller directly for showings and to negotiate payment of commission.

If the listing so indicates, then the Co-operating Brokerage is at liberty to deal with the Seller directly and this form can be used before the showing to establish a commission payment from the Seller.

This form is now available in the REALTOR® STORE. It is also accessible through TorontoMLS and will be available on WEBForms™ as of the first week of November.

Here is a link to the form.

Now, Prior to showing your home, You and I, will need to have a face to face with each prospect that shows up at your door to show the house. My clients respect me enough to sign a buyers agency. They are paying for a service that is paid with funds funds they borrow as a mortgage to pay you and pay via the lawyers from the proceeds of the sale in the course of concluding a real estate transaction. The service that I provide is counsel; we discuss at length is this is the deal for them.

While the sellers are trying to save the commission; the Buyers are calling and asking if they can have the same commission rebated to them!

Its a wonderful house market in Toronto!

The Fixed Rate vs Variable Rate Conundrum

At Astrum we have noticed an increase in the number of questions being asked about the future direction of interest rates. Clients want to know how to decipher the relevant information in order to understand their choices and what risks are associated with a variable rate mortgage compared to a fixed rate mortgage. This article looks at how short term interest rates impact variable rate mortgages and, at the other end of the scale, how long term interest rates impact fixed rate mortgages.

With the move in the bank’s prime interest rate upward for 2 months in a row, mortgage consumers are looking at whether they should choose a fixed rate mortgage or a variable rate mortgage.

Fixed rates, which are tied to the interest rate paid on the Government of Canada 5 year bond, have softened resulting in some minor downward changes in 5 year term fixed interest rates for closed mortgages. In fact, we are seeing small declines in the 5 year fixed interest rates with current offerings at 3.79% for both purchases and re-financing. A couple of months ago we had only one lender at 3.79% with the majority above 4%.

Variable interest rates are directly tied to the bank’s prime interest rate, currently at 2.75%. The one consistent prediction by both economists and forecasters is the bank’s prime interest rate is rising and, in the long term, will continue to do so. Bank of Montreal is forecasting an additional 0.25% increase before the end of 2010, plus another 1.5% increase for 2011 taking the bank’s prime interest rate to 4.5%. The Bank of Montreal then forecasts the rise in interest rates to continue with the bank’s prime interest rate reaching 6% in 2015. Therefore using Astrum’s prime minus 0.9% 3 year variable interest rate mortgage as an example, the borrowing cost would be 5.1% in 2015.

What does this mean to a borrower? Well, today you can obtain a 3 year term variable interest rate closed mortgage at prime minus 0.9% or 1.85%. For example, using a $250,000 mortgage with a 25 year amortization period the monthly payments equal $1,040.62. In 2015 assuming the same mortgage is available, with a forecasted bank prime interest rate of 6.0% minus 0.9% equaling 5.1%, the monthly payments are $1,468.28. This is an increase of $427.66 per month or an increase of 41% in the monthly payment.

You might ask, won’t the 5 year term fixed interest rate move up as well? Yes, the 5 year term interest rate will move up, but not by the same incremental amount as the bank’s prime interest rate. In July of this year, the major Canadian banks issued independent forecasts which showed an average increase in the Bank of Canada overnight rate to 2.57% which correlates to the bank’s prime interest rate increasing from today’s current rate of 2.75% to the 4.5% - 4.75% range by the end of 2011. During the same time period, the same banks forecast the interest paid on the 5 year Government of Canada bond to rise 1.06% to 3.59% which equates to a 5 year term mortgage rate of 4.75% - 5.00% compared to a 5 year term fixed mortgage rate of 3.79% - 4.09% today. The key point here is the bank’s prime interest rate is forecast to increase nearly 2% by the end of 2011 while, during the same time frame the 5 year term mortgage rate is forecast to increase 1.25%. If you accept the general concept put forward by this forecast, the interest rate difference between the variable rate mortgage and the fixed rate mortgage is becoming less and less.

As stated by some economists and financial analysts, the variable rate mortgage is an excellent product during a declining interest rate cycle, but during an increasing interest rate cycle the fixed mortgage interest rate may offer some advantageous benefits. At Astrum we have the expertise and resources to respond to your questions which will assist you make the decision that will allow you to sleep at night.

David Pylyp You can click here for the lowest rates I have seen recently from a virtual lender. The clients that purchase or sell with me ( available to the Purchaser's of my listings) has a huge competitive difference if you are buying a property and can save an additional $500 per month on interest costs alone.

This is limited to my clients only. Would you like to become my client? Give me call at 647 218 2414 or email David@davidpylyp.com