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FAQ'S For Canadians

FAQ Answers:

Q. Is Financing Available for Canadians?

A. Yes, there are several banks that will lend to Canadians wanting to purchase a vacation home in Arizona. It is done all of the time. We work closely with several banks and can refer you to a mortgage professional. Generally, a 20-30% down payment is required and the interest rate is 6.5-7.5%. Many of our Canadian clients choose to finance in Canada and purchase their home in Arizona with cash. By financing in Canada, you protect yourself from currency fluctuations. You have locked in the exchange rate and your monthly payment. As the exchange rate changes your monthly payment does not change. If you took a US mortgage and was paying back your US mortgage with Canadian dollars, the monthly payment would effectively go up every month that the Canadian dollar went down. We can refer you to mortgage professionals in both Calgary and Edmonton. Please feel free to contact us for referrals. We would be pleased to discuss all options with you.

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Q. Who Will Take Care of My Home When I am Back in Canada?

A. There are several property caretaker services in Phoenix for Canadian property owners. These companies will take care of your home while you are out of town. Most of the services charge $25-40 per visit and will go to your home as often as you wish. Many people hire them to check their homes 1-2x per month. These services will do whatever you wish while they are at your home. They can check on the condition of the property, run the water, start the appliances, check to make sure the pool and landscaping maintenance companies are doing their jobs properly, verify the security system is functioning, etc. They can also meet contractors or maintenance crews, arrange cleaning or repairs, pick up packages and start vehicles. They are similar to a concierge service in many ways. We would be happy to refer you to our favorite property caretaker services. They are bonded, insured and extremely reliable.

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Q. Can I Rent Out the Home When I am Not Using It?

A. Yes, if you own a fully furnished condo or home in a good location, you can typically rent the home as a weekly or monthly rental, subject to the home owner association rules. The high season for rentals is November-April. You can generally rent a furnished home for $2-3/square foot during high season. So a 1200 square foot condo would rent for $2400-3600/month depending on many factors. Golf course or pool views make excellent rental units. It is also beneficial if the home is located in a good location or resort setting and is well furnished.

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Q. What Types of Investments Are Available?

A. Any real estate purchase can be considered an excellent investment in this market. Our prices have dropped drastically and definitely won't stay down for long. Many Canadians purchase vacation homes with an eye on future appreciation. Others want rental properties, lease backs or vacant land as investments.

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Q. What If I Want to Buy a Home as an Investment and Rent it Long Term?

A. We have several property management companies who we can refer you to. We are property investors, ourselves, so we fully understand the value of having excellent property management professionals take care of your rental home. The property management companies handle everything including finding tenants, employment and credit checks, lease contracts, collection of rent, and any maintenance issues. We have several Canadian clients who have purchased investment rental homes through us. By using a professional property manager, the investor simply cashes the rental checks.

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Q. Are Furnished Residences Available?

A. Yes, we can find you a beautiful turn-key, fully furnished condo or house. There are several furnished residences and former model homes available. Decorator furnishings are also available through our affiliated Interior Designer. Our Interior Designer can furnish your entire home for you. She will take care of everything right down to the sheets, towels and dishes if you like.

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Q. Should I Consider Buying a Foreclosure?

A. Yes, definitely! Many of the best deals in our current market are foreclosures. Many of our Canadian clients have purchased foreclosures. We are very experienced with foreclosures and negotiating with the banks for the absolute best price and terms. We receive emails from clients daily asking if the listing is "for real" because it seems to good to be true. That's the beauty of many foreclosures. They are priced so low at fire sale prices that they are almost too good to be true. That is exactly the reason many foreclosures are snapped up by "on the ball" buyers within a few days of being put on the mls. The best deals go fast and sell within days of being put on the mls. If you want to take advantage of a super foreclosure deal it is essential that you are able to act quickly. This means you need to have your financing or cash ready. You also need to be able to get down to Phoenix quickly if you see something that you want to make an offer on. Like they say, the early bird gets the worm!

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Q. How Does Buying a Foreclosure Differ From a Normal Resale?

A. When you purchase a home that was foreclosed you are dealing directly with the bank or lender. These homes are considered unwanted inventory to the bank. The banks are in the business of lending money, not holding real estate. They want to get rid of the homes as soon as possible. Most foreclosures are listed 10-15% below market price (which have already dropped 30-50%). Foreclosures can thus be an excellent investment. Most banks are extremely cooperative in negotiations and will respond to offers within 2-3 days (some even within hours!). Banks will not make any repairs or warranties about the house. They are always sold "as-is". The bank that owns the property will not do any repairs prior to close of escrow. As a prospective purchaser you still hire a home inspector to do a full inspection of the property. The inspector will give you an extensive report with photos of any potential problems. Once the inspection has been done you have the option within your inspection period (which is usually 10 days) to either continue with the transaction and purchase the property as-is, OR refuse the property due to the results of the inspections and get your deposit back. The inspection and 10 day walk period will give you peace of mind.

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Q. Are There Any Foreclosures in Great Shape?

A. The appearance and condition of foreclosures can be in both extreme ends of the spectrum. We have seen foreclosures that are in perfect clean move in condition. Others are filthy with broken windows, holes in the walls and have been stripped of all appliances, faucets, sinks, toilets, light fixtures, etc. The best foreclosures deals go quickly within days of being put on the market. If you are serious about purchasing a foreclosure you need to have your financing in place or cash ready and be wiling to act quickly.

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Q. Are Foreclosure Prices Negotiable?

A. Yes, it is possible to negotiate the price of a foreclosure similar to other resales. We are very experienced negotiating with banks for foreclosures. However, whether this will work is dependent on the interest from other buyers. We have seen many foreclosures with multiple bidders. Some of the best foreclosure deals are already priced so significantly below market value that multiple bidders may force the final price above list price. If there is very little interest in a property, we have successfully negotiated discounts of up to 15% off list price. Each situation is unique and depends on many factors.

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Q. What Is a Short Sale?

A. Many Canadian clients ask us about Short Sales. It is not a term commonly used in Canada. Short sales are pre-foreclosure situations where the homeowner is about to be foreclosed on and in a last minute attempt to keep the foreclosure off of their credit history they try to sell it. The home is worth less than what they owe on the home. The homeowner must get approval from the bank to sell for less than the mortgage amount and ask the bank forgive the balance of the mortgage. There are thus a minimum of 3 parties in a foreclosure: seller, buyer and bank. Usually there are a minimum of 4 as there is also a home equity line of credit on the home too. Sometimes there are property tax liens, mechanics liens, IRS liens in addition to the most common four. All liens must be cleared and/or approve the sale price. This is usually a very tricky situation. Most short sales do not sell. Up to 80% of short sales never close. We advise our buyers to not waste their time as short sales are extremely frustrating at the best of times.

Short sales are handled by a bank's loss mitigation department. As you can imagine with the US credit crisis, these departments are completely overwhelmed and understaffed. It can take up to 3 months to get a response from the bank for an offer. During this time you are just left hanging. Most times, after waiting for weeks or months to hear back from the bank about your offer, they simply say no. Banks are often unwilling to accept the below market price on the home and forgive the balance of the mortgage - are you surprised? This is often the fault of the listing realtor that puts the property on the mls for an unrealistically low price in an attempt to get an offer. Other times, during the process the homeowner just takes off and can't be found. The seller has to sign all the documents to complete the transaction and if he can't be found the deal can't close. Also if the homeowner declares personal bankruptcy, which often happens, that delays the transaction until the bankruptcy is resolved. Other times, there are second mortgages or other liens on the property which have to be negotiated to clean title. During that time period many homes simply go to foreclosure leaving the buyer empty handed. In our opinion, a buyer is better of buying a foreclosed property where all liens have been cleared up with just the bank owning the property, or to buy a normal resale.

There are numerous possible problems and pitfalls with short sales. We recommend to our Canadian buyers that if they want a quick, easy super deal they should try to stick to true foreclosures, instead of wading into the murky waters of pre-foreclosures.

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Q. Should I Consider Buying a Home at Auction?

A. There are many potential problems with buying a home at an auction.

  1. Most people attending home auctions are inexperienced with the auction process and can easily get carried away with all of "the excitement".
  2. Many homes at auction are sold for current market value - rarely are you getting a spectacular deal.
  3. If you purchase a home at auction you are responsible for also paying the Auctioneers Fee which is usually 5% of the price of the home.
  4. The prices listed in advertisements as the opening bid ($50,000 etc) are not what the homes sell for. Most homes have a minimum reserve price that must be met in order to sell. Even if it is an absolute auction without a minimum reserve, many sellers just pull the plug on the auction if market value is not reached - this is legal in Arizona.
  5. Often you are not even able to look inside the home. It is extremely rare to be able to have an inspection done on the home. You have no way to know if the air conditioning, furnace or appliance work, if there is termites or mold, etc.
  6. If your bid is accepted at auction you are legally bound to buy the home. No inspection period and no refunds of your deposit.
  7. Arizona has no regulations on home auctions! Tactics to manipulate bidders are legal in Arizona. Sellers can legally manipulate bidders with Ghost Bidding (where the auctioneer pretends to accept bids) and Shill Bidding (where an agent of the seller poses as a bidder to drive up the price and foster competition among legitimate bidders). This is difficult to believe but true!! Here is a link to an excellent article on home auctions in the Arizona Republic.

If you are considering buying a home at an auction, give us an opportunity to work with you first. We can usually find better deals on foreclosures than what you would get at an auction.

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Q. How Can I Get the Best Exchange Rate?

A. Since the Canadian Dollar has dipped in comparison to the US Dollar, it is more important than ever to get the very best exchange rate possible. Many Canadian buyers simply let their local bank exchange the funds for their Phoenix home purchase. This is such a large purchase that a difference of a few pennies on the exchange rate can equal $2000-6000 or more in savings. That's enough to start furnishing your new home. Don't throw that kind of money away. Proper planning for the exchange of Canadian to US funds is imperative. Foreign exchange companies offer many advantages to your local bank. They watch the markets continually as the exchange rate fluctuates throughout the day. They can choose the best exact moment of the day to make the exchange. The local bank will not do that. They make all of their trades at the same time every day. With a foreign exchange company you can also set a limit order and instruct them to only exchange the funds once the exchange rate reaches a certain price. This is similar to buying a stock at a limit order, rather than market order. You name the price at which you are willing to purchase your US dollars. It places you in control of the situation.
Many of our Canadian clients have used Globex Foreign Exchange in Edmonton, Alberta. We would be happy to refer you to the private client representative that we routinely work with. Please feel free to call or email us for her contact information. We are here to help you get the best deal, in all aspects of the transaction. If you want another referral to another FX company, we are glad to provide that too.

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Q. Is Arizona "Tax Friendly" to Canadians?

A. Yes, Arizona is extremely tax friendly to Canadians in many ways. Arizona has a state constitutional ban of real estate transfer taxes in the future. Thirty five other states have real estate transfer taxes that range from 0.1 to 2.2% of the sale price which goes directly to the state. Arizona also does NOT have a state FIRPTA tax. California has a state FRPTA tax on the sale of real estate that is ONLY for foreign residents (how nice is that?). Property taxes also vary widely from state to state. Florida, California and Texas have enormous property taxes compared to Arizona. In Arizona, we have NO real estate transfer tax, NO state FIRPTA tax and LOW property taxes. Please consult your chartered accountant in Canada or CPA in the US for specific tax questions.

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Q. What Fees Can I Expect When Buying a Property in Arizona?

A. All purchasers, whether Canadian or American, will pay "closing costs" which include a home inspection, termite inspection, appraisal (if financed in the US), title insurance, county recording fees, pre-paid taxes and pre-paid property insurance. Generally closing costs for people who use financing will be up to 2-3% of purchase price. Cash purchasers pay up to 1/3 less (only 1/2-2% of purchase price) because if you pay cash you do not have to pay for lenders title insurance or pre-pay your property insurance. The high end involves some banks when purchasing foreclosures where the buyer is asked to pay some of the sellers costs due to their loss position. There are no legal fees to pay because, unlike Canada, lawyers are generally not involved in a residential real estate purchase. The Title Company acts as the impartial third party to coordinate the transaction and ensure that you get clean title. All Title Company fees are included within the closing costs estimated above.

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Q. What Does It Cost to Use You As Our Realtor to Buy a Home?

A. Nothing! Our commission is paid by the seller, similar to back home in Canada. It doesn't cost a buyer anything to have us search for the perfect property, show you all potential properties, negotiate on your behalf and handle the entire escrow transaction smoothly and efficiently.

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Q. How Do You Help Canadian Clients Better Than Other Realtors?

A. We have invested in the latest technology including zipforms and the Docu-Sign E-Signature. With this technology you can complete and sign all the paperwork online for the purchase of your new home from anywhere on the globe. This allows us to serve our Canadian clients most effectively. No need to return to Arizona to complete the transaction or fax dozens of pages. You can sign all documents online and wire the funds to the title company, we can supervise all inspections on your behalf, email you photos and inspection reports, attend the closing, pick up your keys and even have your home re-keyed. You can sit back in Canada and relax, knowing everything is being taken care of for you. Your keys will arrive in the mail, if you wish, or we can hold onto them until your next visit. Our goal is to make the transaction easy and quick, even from Canada! Our experience with Canadian buyers will shine through.

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Q. What is Escrow?

A. Escrow is a term to describe the process of the title company facilitating the transaction. Escrow is opened after the Buyer and Seller give the contract, written instructions, documents and funds to the title company. In Arizona, the Buyer does not pay the Seller directly for the property. The Buyer gives the funds to a title company who acts as a neutral third party. The title company verifies that title to the property is clear and that all written instructions in the contract have been met. The title company then transfers the ownership of the property to the Buyer through recordation at the County Recorder.

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Q. How Is Escrow Opened?

A. Once you have completed the contract and the Seller has accepted the offer, the earnest money deposit and the contract are given to the title company which opens escrow.

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Q. What Do Title Companies Do?

A. Once a contract has been reached between Buyer and Seller the title company will:

  • Open escrow and deposit your "good faith" funds in a separate escrow account.
  • Conduct a historical title search to determine ownership and status of the property.
  • Issue a title commitment and begin the process to delete or record items to provide clear title to the property
  • Meet all deadlines as specified in the contract
  • Request payoff information for the Seller's loans, other liens, homeowners association fees, etc.
  • Prorate fees, such as property taxes, per the contract, and prepare a settlement statement
  • Set separate appointments for the Seller and Buyer to sign documents (you can sign your documents in Canada if you prefer)
  • Deposit final funds from the Buyer
  • Review documents ensuring all conditions and legal requirements are fulfilled
  • When all funds are deposited, record documents at the County Recorder to transfer the subject property to you
  • After recordation is confirmed, close escrow and disburse funds, including Seller's proceeds, loan payoffs, Realtor commissions, related fees for recording etc.
  • Prepare and send final documents

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Q. What is Title Insurance?

A. Title insurance assures the new Buyers that they are acquiring marketable title from the Seller. It is designed to eliminate risk or loss caused by defects in title from the past. It protects the Buyer for as long as they or their heirs have any interest in the property.

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Q. How are Title Companies Regulated?

A. The State of Arizona licenses and regulates all title companies. The Insurance Commissioner and the State Banking Department can inspect a company's records at any time, providing further oversight of the company's management and position as an impartial third party to the transaction.

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