# Buying a first home...what's a good offer



## KanyEast (May 12, 2009)

Hey y'all. I'm so excited about getting my first home and i was wondering what i good offer is??? Does any of you well learned estate gurus know what a reasonable offer is?? I'm looking at a condo going for ~$200,000. I was thinking of make an offer of 180K for it. Does this seem reasonable?Is there some calculator i use ex. offer< or=90% of listed price etc.
Thanks!!!


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## iherald (Apr 18, 2009)

It's impossible to know. What are condos in that building and area selling for? If the average condo is selling for 200k, I don't think 180 is a bad first offer with the idea you'll likely go for 190-194. But, are you in an area with multiple bids? How long has it been on the market? if it's been there for 2 days and you want to go in at 180 the sellers may just reject it thinking they'll get a better offer. 

If it's been there for 2 months, then you might be good. 

I would recommend getting a buyers agent (you don't pay them, the seller does) who can not only look for condos for you, but can do the market analysis you need to get the property you want at a good price.


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## KanyEast (May 12, 2009)

Also is it okay to work with multiple realtors at once or is that an unethical thing to do??
Thanks!!


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## FeeOnly.ca (Jun 4, 2009)

Here is a process that works for many.

Find out actual & recent selling prices vs assessment values in your area. 

Your realtor knows this important ratio is derived from: 

Actual Selling Price/Assessed Value = *the Ratio*

This is a valuable and dynamic "current indicator" he can now follow the changes as they occur in his area. 

That ratio if you know it, gives you a tool for buying and selling in your area that everyone can understand. 

In a market when no one know what the real price is they use the assessment value as an anchor point and an unbiased point of reference. 

Your transaction $ should be in line with that ratio. 

Your offer slightly below, your actual transaction should be at or better than the ratio. 

I provided extensive input on 3 RE transactions in the last 4 months. Dissimilar & in very different markets the transactions were conducted promptly to everyones satisfaction. The ratio had a lot to do with it.

People have an innate desire to behave "consistently" and a strong urge to find common ground in negotiation. I believe parties with divergent interests can effectively come together on price anytime and feel comfortable doing it.

This approach simplifies but does not oversimplify a very complex problem. 
It is also very useful for focusing everyones attention and avoiding common errors. Very "doable" RE deals are notorious for going off-track unnecessarily. 

By turning the problem into a process, it's not a problem anymore.

Graham


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## Sampson (Apr 3, 2009)

FeeOnly's advice is good, but I believe there can be an inherent bias in the 'ratio'

In Calgary, City performed property assessments are actually BASED on sale prices of comparable units (comparable in terms of location, size, upgrades etc). So actual sale prices and assessment prices are linked.

A ratio we used when putting an offer in was actually the (sale price)/(listing price) of comparable units (location build quality etc). This gives you an idea of what the market has been doing over a set amount of time.

How we got this info was asked our realtor to pull all the sales in the community incl. MLS listing histories (i.e. have the listing prices changed up or down over the past few weeks/months) and the final sale price. Since we are in a duplex, and they are relatively rare in our community, I also asked our realtor to pull duplexes in neighboring communities for the same info.

This gave us an idea of how much variation between asking and final sale price - in our community at the time, sale prices were about 95-98% listing price. So our initial offer was about 90% and we settled at about 93-94%.

This is almost exactly the same as what FeeOnly describes, however you need to know if the assesment price is accurate. In our case it wasn't. The assessed value was nearly 20% higher than what the market value was.


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## FeeOnly.ca (Jun 4, 2009)

Sampson said:


> In our case it wasn't. The assessed value was nearly 20% higher than what the market value was.


That's is precisely what the common ratio of around 0.80 revealed. Actual selling prices where 0.8% of the assessed value (prior year). 

Taking the attitude that people are slow to lower expectations we approached buying at a 20% discount to asking, and selling at a 20% discount to last years assesd value.


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## Retired at 31 (Apr 20, 2009)

Just remember that you can always go up in price, but going down if you offer too much to begin with isn't an option!

It obviously depends on prevailing market conditions and how much of an emotional attachment you have to the house in question. Best results come from putting both of those in your favour.

If using the ratio of sell price to list price, watch out for greasy realtors who will cancel a listing and redo it at a lower price, rather than amending the price. This will impact the ratio unless you catch the old listing with the true original price.

At the end of the day, a house is worth what you're willing to pay for it.


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## iherald (Apr 18, 2009)

KanyEast said:


> Also is it okay to work with multiple realtors at once or is that an unethical thing to do??
> Thanks!!


I wouldn't be against using different brokers. BUT, if you ever want to make an offer on a house they'll make you sign an exclusive agreement with them (it's how they get paid) which will mean you'll be stuck with one. So why not just use one who you trust and you can deal with.


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## lb71 (Apr 3, 2009)

iherald said:


> I wouldn't be against using different brokers. BUT, if you ever want to make an offer on a house they'll make you sign an exclusive agreement with them (it's how they get paid) which will mean you'll be stuck with one. So why not just use one who you trust and you can deal with.


And you will be stuck with them for a fixed period of time (something like 120 days). So if that offers falls through and you purchase a property (same property or any other property) with another agent and the first agent finds out, you'll be forced to pay the first agent commission. (Unless the first agent lets you out of your agreement.)


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## Sampson (Apr 3, 2009)

Also make sure to negotiate with your realtor. They understand competition is rough and many are willing to 'return' some of their commissions to you upon closing.


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## KanyEast (May 12, 2009)

Sampson said:


> Also make sure to negotiate with your realtor. They understand competition is rough and many are willing to 'return' some of their commissions to you upon closing.


I don't fully comprehend that;i thought the realtor will get the commission from the seller not the buyer(i that is)...so can you shine more light on this commission "return" you talking about???


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## Sampson (Apr 3, 2009)

You are correct that the seller must pay these fees.

Basically, some realtors are willing to give you some of their pay to earn your business. Instead of the standard 2.5%, they'll earn a lower commission and give that to you the buyer - only some do this, and only if you negotiate for it.


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## takingprofits (Apr 13, 2009)

If a Realtor can't negotiate well enough to maintain his/her full commission, why would you trust him/her to negotiate a lower price for your home purchase? 

Your Realtor should be able to show you comparable sales that will give you an idea of what to offer. If your Realtor will not do that you need a new Realtor.


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## takingprofits (Apr 13, 2009)

> Find out actual & recent selling prices vs assessment values in your area.
> 
> Your realtor knows this important ratio is derived from:
> 
> Actual Selling Price/Assessed Value = the Ratio


Assessed value does not tell you much about market value. Assessed value tends to be an average based on utility and does not take into account the biggest determining factor - property condition. There is no ratio that has any accuracy at all in estimating property values. The only way to determine property value with any sort of accuracy at all is by doing a comparative market analysis which compares the property to recent sales, current listings, and recent expired listings in the area. This is what appraisers do and that is what your Realtor should be willing to do for you if you are a loyal customer or client. 

A Realtor citing a "Ratio" would be one looking to avoid doing any real work or one that suspects you are not a serious buyer (if you are working with multiple Realtors for example).


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## iherald (Apr 18, 2009)

takingprofits said:


> Assessed value does not tell you much about market value. Assessed value tends to be an average based on utility and does not take into account the biggest determining factor - property condition. There is no ratio that has any accuracy at all in estimating property values. The only way to determine property value with any sort of accuracy at all is by doing a comparative market analysis which compares the property to recent sales, current listings, and recent expired listings in the area. This is what appraisers do and that is what your Realtor should be willing to do for you if you are a loyal customer or client.
> 
> A Realtor citing a "Ratio" would be one looking to avoid doing any real work or one that suspects you are not a serious buyer (if you are working with multiple Realtors for example).


I agree. A lot of assessed value is "three bedrooms, two bathrooms on this street therefore X" There is value to a renovated place, versus a non-renovated place. When I purchased my place I looked at sales in the area and was able to see that similar homes were going between 640 and 720. Based on those numbers and how many bids there were, I knew what I could afford and made the winning bid.


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## Sampson (Apr 3, 2009)

takingprofits said:


> Assessed value does not tell you much about market value. ..... The only way to determine property value with any sort of accuracy at all is by doing a comparative market analysis which compares the property to recent sales, current listings, and recent expired listings in the area...


With the exception of current listings, many Canadian cities actually use market analysis methods for valuation. One major problem is that they are only done once per year and use semi-historical data.

I do agree that up-to-date (read: recent) listings and sales are key in deciding how much to offer.

I have to disagree with you about a realtor who is willing to reduce their commissions is not a good negotiator. That would be like saying a mortgage banker who gives you an extra 0.2% (below the standard rebate) is a bad banker. Some of the realtors I know will make a judgement based on how much time and effort it takes to close a deal - then decide if they are willing to part with their hard (or easy) earned commission.


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## takingprofits (Apr 13, 2009)

Sampson said:


> Some of the realtors I know will make a judgement based on how much time and effort it takes to close a deal - then decide if they are willing to part with their hard (or easy) earned commission.


That may be true for a selling agent trying to close a bona-fide offer on an over priced listing or one close to expiring but there are few Realtors other than those new to the business who actually need more people to drive around in their cars. (Do you want a starving Realtor negotiating on your behalf?)

Buying prospects who try to negotiate commission cuts up front would be cut loose as low quality prospects by almost all *experienced* agents. That type of prospect can be had by the boatload and few Realtors will waste their time chasing such a prospect.


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## Sampson (Apr 3, 2009)

takingprofits said:


> there are few Realtors other than those new to the business who actually need more people to drive around in their cars. ....That type of prospect can be had by the boatload and few Realtors will waste their time chasing such a prospect.


I think this is one of those agree to disagree arguments. 

If the majority of realtors were able to control when how how big of a deal they close, then in theory, this should be one of the best paying occupations - which, while there are many wealthy realtors, they aren't all loaded.

Many of the realtors I've spoken with and dealt with are often doing in on the side, are new and aren't as overworked as to be able to choose their clients. The competition is fierce especially now so many people are listing homes themselves.


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## takingprofits (Apr 13, 2009)

Sampson said:


> Many of the realtors I've spoken with and dealt with are often doing in on the side, are new and aren't as overworked as to be able to choose their clients.


I guess experiences differ depending on location. In Winnipeg part timers are not allowed so Realtors are generally serious about their profession and are not just looking for a quick buck to supplement other income. 

Why on earth anyone would deal with an inexperienced part timer they can push around to save a few bucks on commission when so much money is involved in the deal itself is beyond me. Especially in multiple offer situations or tough negotiations when real expertise is required. People can lose tens of thousands trying to save a few thousand and many don't even know when it happens...


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## Sampson (Apr 3, 2009)

takingprofits said:


> I guess experiences differ depending on location...Why on earth anyone would deal with an inexperienced part timer they can push around to save a few bucks on commission when so much money is involved in the deal itself is beyond me.


You're first sentence probably sums it up.

Not all part timers are inexperienced, earning on the side. Realtors transitioning into retirement might have plenty of experience. Realtors at lower profile companies or working at independent firms may also be more flexible.

I just don't think that someone willing to reduce their own commissions are 'lesser' realtors. Negotiations on price happen in any transaction big or small - its up to you to convince the realtor why they should lower their commission. Are you suggesting that someone charging less money for the same good/service is of lesser caliber? 

Maybe it hasn't happened in Winnipeg, but certainly there have been huge boom-bust cycles in Calgary and realtors who were once turning away clients wanting to buy $1M homes are now struggling.

I've personally only dealt with a few professionally, and they certainly haven't been looking after my best interests (trying to get me the house at the lowest possible price).


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## takingprofits (Apr 13, 2009)

Sampson said:


> Are you suggesting that someone charging less money for the same good/service is of lesser caliber?


I am suggesting that since they are hard up for work the market deems them to be of lesser calibre.


> I've personally only dealt with a few professionally, and they certainly haven't been looking after my best interests (trying to get me the house at the lowest possible price).


Which confirms the market's view that they are of lesser quality and confirms my previous statement that if a Realtor can't negotiate well enough to maintain his/her full commission, why would you trust him/her to negotiate a lower price for your home purchase? 

You rarely find quality in a bargain store.


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## Sampson (Apr 3, 2009)

takingprofits said:


> if a Realtor can't negotiate well enough to maintain his/her full commission, why would you trust him/her to negotiate a lower price for your home purchase?


I've personally never dealt with a realtor that was willing to reduce their commissions. I've also never dealt with a realtor that was clearly effective at negotiating a lower closing price either. My experiences have been that if your realtor has any inclination of the maximum price you are willing to pay, then that is the price they will get for you, even if they could have gotten it at a lower price. Buying your first home is such an emotional experience, and most realtors realize and capitalize on this.

My personal experience with this industry has been that your realtor really isn't your friend at all - and has very little interest in getting you the best deal.

Its up to you to determine what's a good offer, not your agent. My experience with high profile agents is even more mixed. Most don't care enough to give you the time of day. They treat you with a 'take it or leave it' attitude. They may have great 'negotiating' powers, but that doesn't make them a good agent. 'Bargains' can be had if the commodity is known. If a buyer has personally scouted everything out and simply needs someone to help with paperwork, why would they NOT want a rebate on commissions?


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## takingprofits (Apr 13, 2009)

From what you are saying, you are a do-it-yourselfer who wants to control whomever you work with and have no loyalty - working with multiple Realtors. No wonder your experiences turn out the way they do. You are using the phrase "your Realtor" but no Realtor with any experience would consider you "their client".

One thing you need to understand is that to a Realtor you would be a "C" or a "D" buyer - which is why high profile Realtors treat you the way you say they do. Realtors are very concious of the time they spend and the more successful Realtors will only devote their time to "A" or "B" buyers - which is why you are blown off. You may end up on a list and receive occasional contact and/or minimal interaction but that would be the extent of it. "C" or "D" buyers are only "seriously" worked with by the new or the desperate.

Your experiences with Realtors will not likely change. Others do enjoy more positive experiences.




Sampson said:


> I've personally never dealt with a realtor that was willing to reduce their commissions. I've also never dealt with a realtor that was clearly effective at negotiating a lower closing price either. My experiences have been that if your realtor has any inclination of the maximum price you are willing to pay, then that is the price they will get for you, even if they could have gotten it at a lower price. Buying your first home is such an emotional experience, and most realtors realize and capitalize on this.
> 
> My personal experience with this industry has been that your realtor really isn't your friend at all - and has very little interest in getting you the best deal.
> 
> Its up to you to determine what's a good offer, not your agent. My experience with high profile agents is even more mixed. Most don't care enough to give you the time of day. They treat you with a 'take it or leave it' attitude. They may have great 'negotiating' powers, but that doesn't make them a good agent. 'Bargains' can be had if the commodity is known. If a buyer has personally scouted everything out and simply needs someone to help with paperwork, why would they NOT want a rebate on commissions?


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## takingprofits (Apr 13, 2009)

Sampson said:


> If a buyer has personally scouted everything out and simply needs someone to help with paperwork, why would they NOT want a rebate on commissions?


On once hand you say that you just want someone to fill out the paperwork and on the other you complain that Realtors do little other than fill in the paperwork. It seems you are getting what you are looking for.

You need a discount or flat fee Realtor - not a full service Realtor. A full service Realtor is not interested in working with you as per my previous post.


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## Sampson (Apr 3, 2009)

takingprofits said:


> One thing you need to understand is that to a Realtor you would be a "C" or a "D" buyer - which is why high profile Realtors treat you the way you say they do. Realtors are very concious of the time they spend and the more successful Realtors will only devote their time to "A" or "B" buyers -
> 
> Your experiences with Realtors will not likely change. Others do enjoy more positive experiences.


I'm not sure I've actually given enough of my experience for anyone to determine what level of client I was. In fact, realtors I've dealt with have certainly earned their full commissions, bringing us to dozens upon dozens (over the course of months) of potential properties, establishing what we wanted, and even suggesting properties we did not find ourselves, which we ultimately purchased. Are you trying to suggest that my lack of loyalty to a single realtor for *different* deals should be viewed as a lack of loyalty on my part? I would never suggest using multiple realtor at the same time, but as you mention, not all realtors are equal. Someone specializing in DT condos for use as rental properties is not going to have the same expertise as someone I'd use to buy a house in the suburbs.

I didn't enter this discussion to discuss my personal workings with realtors - I only try to draw on my experiences where they may be relevant (I know we did not get the best price - although we did get great prices). It might be very fruitful for you to describe your dealings with realtors so we can judge how you came to your opinions. Claiming that my future experiences with realtors will always be negative seems like a bit of a directed, personal swipe.

I simply wanted to mention that some agents are willing to negotiate on their commissions. Its up to the individual to determine if they want to deal with these agents.


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## Sampson (Apr 3, 2009)

takingprofits said:


> One thing you need to understand is that to a Realtor you would be a "C" or a "D" buyer - which is why high profile Realtors treat you the way you say they do. Realtors are very concious of the time they spend and the more successful Realtors will only devote their time to "A" or "B" buyers - which is why you are blown off. You may end up on a list and receive occasional contact and/or minimal interaction but that would be the extent of it. "C" or "D" buyers are only "seriously" worked with by the new or the desperate.


As you mentioned, the top realtors are selective. I'm guessing not everyone visiting this forum will have the opportunity to work with these people. Do you know many realtors who do multi-million dollar deals who are also willing to work with someone buying a $100k mobile home? Probably not too many. For people whom a few thousand dollars is significant, negotiating not only the price of sale, but also commissions can be a useful strategy?

Or do you believe that everyone buying a car should also pay full list price? and not try to negotiate?

I understand and appreciate people in this industry put food on the tables doing this, but if and when I start a new job - I negotiate salary and the employer is willing to do this, so are you suggesting the real estate industry should be immune from this practice?

Do you feel like every industry should have standardized rates of pay? It sounds like you think that *ONLY* top-paid realtors are credible and good. So in the financial planning industry, that's akin to saying that only the highest cost advisors are worth their own weight. Someone willing to do a similar job for less money is a reality of competition. Doesn't mean they are any less worthy.


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## dotnet_nerd (Jul 1, 2009)

KanyEast said:


> Also is it okay to work with multiple realtors at once or is that an unethical thing to do??
> Thanks!!


I wouldn't use a realtor as a buying agent. The new MLS website is so powerful and easy to use for DIY searches.

Find the property you want, then approach the listing agent directly. Both you and the seller will benefit because only one brokerage is involved (a "double-ender"). You'll save because less total commission is carved out of the pie.

You'll likely be asked to sign an exclusivity agreement, but simply refuse. If the purchase doesn't work out just walk away.

That's worked for me, I've been able to bid low and get close to my price.


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## Berubeland (Sep 6, 2009)

I am a property manager and have been for over 10 years now. Before I chose to become a property manager I was an assistant to a real estate agent. I did and passed my first course as a Real estate agent. Currently I rent property for landlords.

What turned me off the business completely was when she ripped off an old lady for $60,000 on her house by getting someone she knew to buy it. 

I also became aware while i worked around the office the she was not the only ethically compromised individual there and that this kind of stuff was pretty common there. 

Nothing I have seen since in ten years has changed my mind in fact I have just added more and more horror stories. 

Realistically an offer of purchase and sale is a very simple document and certainly not worth 6% of the purchase price of an average house in Toronto. Then.......this fill in the blank form gets sent to not one but two lawyers who look it over.

For $22000 in commission i'll take a cab and fill in my own form thanks. 

Also there is nothing wrong with asking for a deal on a commission. All I repeat all of the owners I have worked for negotiated significant deals on commission. Some sold 50 properties, one guy I work for is selling a property worth $2.5 million. These are savvy smart rich people not some kind of bums. There is no crime in asking for significant concessions from your listing agent. They do a very similar job to viewit.ca and view it charges $50 a month for their listing. A lockbox costs $40.

I don't deny they deserve to be paid but IMHO they are overpaid for the actual duties they perform. 

Another pet peeve I have with real estate agents is overquoting the house to get the listing then coming back a week later and trying to drop it $20000 in one week. 

Oh and or underquoting to get a fast sale.... 

I do know a few decent ones in all fairness


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## DrStan (Apr 5, 2009)

Agents do negotiate their commissions. When purchasing my house, I had done all the research and selected the one property I wanted. Sadly, the sellers had listed with an agent so I hired my own agent. However, I was very clear with him that the deal involved almost no work on his part, since I had selected the property and decided on the offer price. He put about 5 hours of work in the deal, essentially faxing the offer to the selling agent and talking to her a couple times on the phone, and I wasn't about to let him walk away with $7000 for a day's work. We agreed on an acceptable split.

I think the argument that "if an agent isn't a skilled enough negotiator to keep full commissions, he must be a bad negotiator on your behalf" is weak and borderline dumb. This agent made about $500 an hour net once all was said and done, which I (and he, I'm sure) would consider a good payday. He seemed happy. If I was dealing with an agent on a regular basis (ie., flipping houses or the like), I would expect the same type of arrangement.


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## Elbyron (Apr 3, 2009)

When I was shopping for a new house, I did like dotnet_nerd suggested and looked at home by making appointments with the selling realtor. I would then ask the realtor if they would give me part of the buyer realtor's commission if I used them as a "double-ender". Most were agreeable to this, though the amount of commission they would give me varied. In the end I found a private sale (through Kijiji of all places) and made an verbal offer. Once we had a verbal agreement, we went to a real estate lawyer who gave us a "fill-in-the-blanks" offer to purchase and some advice on how to complete it. It was very easy to do, and there was certainly nothing a realtor could have helped with that the lawyer was unable to do. It's true that lawyers aren't cheap, but can be found for less than $500 an hour. And you're going to pay one anyway so why do you need a realtor to help you close the deal? Seems to me the only thing the buyer realtor is really useful for is to obtain more info from MLS (like finding sale prices of similar houses), and to do some of the "search" work for you. The other stuff, like making offers and closing the deal are just basic tasks that your lawyer can help you with. If the buyer can get a 1 - 2% discount by NOT using a realtor, then they really are paying for the services. Consider what services the realtor offers and how many thousands of dollars you're willing to pay for those serivces.


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## Serviss (Jul 15, 2009)

*ROB your Bank - How to "rate" negociate with your bank*

Hey guys and gals I came across an interesting Facebook Fan Page yesterday. A guy by the name of Scott Peckford has creating a system for educating normal people like you and I on how to negociate with your bank to get the best possible Rate. He has a book - ROB your bank.

There is more information on - http://www.facebook.com/pages/Kelowna-BC/Rob-Your-Bank/280943794625?ref=mf

I think he even is holding a contest if you join his fan page... Hope everyone has a safe weekend.

Kelowna Financial Advisor


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