Six Renovations That Don't Add Value To Your Home

The Globe and Mail

 

Excerpted from The Globe And Mail

 

18 Toronto

Swimming pool by a house.
Photos.com

Six renovations that don’t add value to your home

Published Monday, Aug. 05, 2013 06:00AM EDT
Last updated Friday, Aug. 02, 2013 05:39PM EDT
 

Every homeowner must pay for routine home maintenance, such as replacing worn-out plumbing components or staining the deck, but some choose to make improvements with the intention of increasing the home's value. Certain projects, such as adding a well thought-out family room - or other functional space - can be a wise investment, as they do add to the value of the home. Other projects, however, allow little opportunity to recover the costs when it's time to sell.

Even though the current homeowner may greatly appreciate the improvement, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. Homeowners, therefore, need to be careful with how they choose to spend their money if they are expecting the investment to pay off. Here are six things you think add value to your home, but really don't.

1. Swimming PoolsSwimming pools are one of those things that may be nice to enjoy at your friend's or neighbor's house, but that can be a hassle to have at your own home. Many potential home buyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen. Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer's offer may be contingent on the home seller dismantling an above-ground pool or filling in an in-ground pool.

An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That's a significant amount of money that might never be recouped if and when the house is sold.

2. Overbuilding for the NeighborhoodHomeowners may, in an attempt to increase the value of a home, make improvements to the property that unintentionally make the home fall outside of the norm for the neighbourhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighbourhood of small, one-story homes.

In general, home buyers do not want to pay $250,000 for a house that sits in a neighbourhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighbourhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighbourhood follow suit.

3. Extensive LandscapingHome buyers may appreciate well-maintained or mature landscaping, but don't expect the home's value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.

4. High-End UpgradesPutting stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your home if the bathrooms are still vinyl-floored and the shag carpeting in the bedrooms is leftover from the '60s. Upgrades should be consistent to maintain a similar style and quality throughout the home. A home that has a beautifully remodelled and modern kitchen can be viewed as a work in project if the bathrooms remain functionally obsolete. The remodel, therefore, might not fetch as high a return as if the rest of the home were brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the home.

In addition, specific high-end features such as media rooms with specialized audio, visual or gaming equipment may be appealing to a few prospective buyers, but many potential home buyers would not consider paying more for the home simply because of this additional feature. Chances are that the room would be re-tasked to a more generic living space.

5. Wall-to-Wall CarpetingWhile real estate listings may still boast "new carpeting throughout" as a selling point, potential home buyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and colour that you thought was absolutely perfect might not be what someone else had in mind.

Because of these hurdles, wall-to-wall carpet is something on which it's difficult to recoup the costs. Removing carpeting and restoring wood floors is usually a more profitable investment.

6. Invisible ImprovementsInvisible improvements are those costly projects that you know make your house a better place to live in, but that nobody else would notice - or likely care about. A new plumbing system or HVAC unit (heating, venting and air conditioning) might be necessary, but don't expect it to recover these costs when it comes time to sell. Many home buyers simply expect these systems to be in good working order and will not pay extra just because you recently installed a new heater. It may be better to think of these improvements in terms of regular maintenance, and not an investment in your home's value.

The Bottom LineIt is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home's value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck. Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don't really add value to a home.

© 2013 The Globe and Mail Inc. All Rights Reserved.

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Top 6 Real Estate Scams- And How To Avoid Them

 

The Globe and Mail

Excerpted from The Globe and Mail

18 Toronto

Top 6 real estate scams – and how to avoid them

Christopher Myrick

Published Friday, Aug. 09, 2013 06:00AM EDT
Last updated Thursday, Aug. 08, 2013 03:24PM EDT
 

The following article is from Canadian Real Estate Wealth Magazine.
Fraud and investment scams abound at all levels of the real estate market – whether it be a contractor who charges hundreds of dollars for work not done to an “investment agent” who embezzles hundreds of millions – protecting yourself can require a measure of vigilance and legwork, but it can also come down to exercising skepticism and common sense.

1. Title fraud.Although relatively rare, one of the most devastating frauds for property owners is title fraud. This type of fraud starts with identity theft. The scammer will use false documents to pose as the property owner, registers forged documents transferring a property to his or her name, and then gets a new mortgage against the property. After securing a mortgage or line of credit, the criminal takes the cash and leaves the owner on the hook for future payments.

While an identity thief may get a forced discharge of an existing mortgage, it is generally held that fraudsters are more likely to go after homes that are free and clear of mortgages: these have fewer complications and they tend to be held by older people who may be less aware about how to guard against identity theft. Criminal Services Intelligence Canada notes that homeowners who rent out their homes or who have no existing mortgages on high-value properties are more vulnerable to being targeted in title-fraud schemes as a large mortgage can be secured with the property.

Sale of a fraudulently held property may also occur, but it is much rarer as potential buyers are unlikely to consider a purchase without inspecting a property.

“Title insurance” is the best protection against this type of fraud. As well as protecting against title fraud, it also guards a new owner from against existing liens against a property’s title (such as unpaid debts from utilities, mortgages and unpaid property taxes), encroachment issues (a structure on a property needs to be removed because it is on your neighbour’s property) and errors in surveys and public records.

The other key to prevent being a victim is to engage in protection of personal data (see box). Taking precautions can also mitigate against more common types of identity theft –related losses (such as credit card fraud. As well as protecting their own information, investors and homeowners should ensure that trusted parties are taking proper security measures.

Canada’s Office of the Privacy Commissioner of Canada (OPC) launched a probe in 2009 after mortgage brokerages reported 14 data breaches in the space of a few months. Among the OPC’s findings: some brokers stacked files containing personal information on the floor or on desks within accessible offices; brokers lacked shredders capable of securely destroying documents; credit reports were sometimes obtained prior to consent from a client being recorded and there was no ability for clients to opt out of secondary uses of their personal information, such as marketing; there was a lack of training about privacy responsibilities.

In addition to title fraud by strangers, there have been cases where fraud has been perpetrated by spouses and business partners. For instance, one spouse may mortgage a property for their own benefit by using an accomplice to impersonate their spouse. Fraud can also occur through breach of an undertaking, where the lawyer or notary fails to pay off and obtain a discharge of a mortgage, instead absconding with the funds that had been intended to be used to pay an existing mortgage.

2. Foreclosure and home-equity fraud.Criminals and criminal enterprises can take advantage of property owners who find themselves in a cash crunch, being short on funds for liabilities such as mortgage payments or other purposes. Two common scams that exploit a victim’s need for cash are foreclosure fraud and home-equity fraud.

The Financial Consumer Agency of Canada (FCAC) warns that foreclosure fraud occurs when a property owner who is having difficulty making mortgage payments is approached by a criminal offering a loan to cover expenses and consolidate loans, in exchange for upfront fees and an agreement to transfer the property title. However, in contrast to real debt consolidation programs, the FCAC says, the criminal will keep all the payments made by the owner and ignore bills and taxes. The criminal then remortgages the property and absconds with the money, leaving the former property owner without the home but still in debt.

Cash-crunched property owners or investors seeking can be vulnerable to other scams or unscrupulous behaviour to tap equity. There is always risk when leveraging properties, but a legitimate bank, broker or private lender should be forthright when explaining risks. However, those looking to borrow on equity should be alert for less scrupulous lenders, such as those who invite owners to embellish their application by exaggerating income, down payment or property assessment value sources in order to secure a larger loan.

CSIC has noted that organized crime groups often pretend they are buying or selling properties that are much larger, newer or more recently renovated than other homes in the area. These properties receive fraudulently inflated values through illicit property flipping from which a large mortgage is obtained. When the criminals deliberately default on the mortgage, financial institutions and end buyers are left with an overvalued mortgage (or worse, former property owners are without holdings, in debt and possibly implicated in the fraud).

Criminal activity can also be in the form of money laundering, a process where dirty money from criminal activity is transformed into “clean” assets. Financial Transactions and Reports Analysis Centre of Canada (FINTRACT), the agency responsible for tracking money laundering, warns that criminal or terrorist groups will purchase big-ticket items such as real estate for laundering purposes. FINTRACT requires that real estate brokers, Realtors, developers and others involved in suspicious transactions (such as large all-cash purchases or “buyer unseen” transactions).

3. Online rental/sale scams.In these scams, rental property is advertised (usually at low costs) on online classified sites like Craigslist or Kijiji. The ads use information and photos describing the property that has been “scraped” from legitimate ads, such as those on the MLS. A scammer will impersonate the landlord, property manager or estate agent and will respond to emails and calls from prospective tenants. The scammer indicates he or she is unable to meet a prospective renter at the property, and instead proposes a meeting off site to exchange keys, sign a tenancy agreement and collect rental deposits. Victims may only learn they’ve been duped when they show up at a property to discover that it is already occupied.

Provincial and regional Realtor and real estate associations have warned members to be alert for this type of fraud, which has been common in major markets, but there is little a property owner can do to prevent image or data scraping. Property owners can search for the addresses of their units on search engines and they can use services like Google Image Search to help discover if a scraped picture from MLS or another online source is being used illicitly. Property owners should also digitally watermark any photos they use in rental ads, including business contact details and website.

While rental scams are common, online classified advertising and social media have also been used for investment scams and property fraud. Things to be alert for in such listings include claims of urgency, such as “must sell now,” promises of high returns or “low-cost/no-cost” financing. These sort of claims are usually too good to be true, and they also can be prevalent in off-line scams.

4. Property investment seminars and courses.Educating yourself about property investment can be essential for success, but prospective investors should be alert and do their research on seminar providers. There are legitimate speakers and seminars that provide beneficial information, others exist primarily to take money from the credulous … and there are some that are in between.

Prospective investors should be cautious when it comes to seminars or courses that offer investor education. The value of the information provided can vary wildly, as can the costs. Some may be free, with sponsorship by a company or association, others will charge money, ranging from nominal amounts to upwards of tens of thousands of dollars. Still, even if someone pays for a course that provides basic information that could be found through a simple Internet search, it does not mean that the seminar was a scam. A rip-off may charge excessive prices but be completely illegal, but a scam typically involves legal wrongdoing, misrepresentation or fraud.

One common type of seminar is designed to hook buyers into “sure-fire” investments that are promoted by the seminar hosts. Potential investors may be invited to these seminars through an ad in a newspaper or magazine, a phone call, an email or other method. These seminars may include a motivational speaker, an “investment expert” or a “self-made millionaire.”

Some seminars may make money by charging attendance fees, selling highly priced reports or books and selling property and investments through high-pressure sales tactics. Real estate investment companies holding the seminars may suggest attendees follow high-risk investment strategies, such as borrowing huge sums of money, to buy into an investment offered by the seminar hosts.

Some companies have been known to fly prospective investors to view real estate developments. This could be a tactic to pressure commitment to a deal without time to obtain independent information or advice. Investors sometimes end up having to pay for their travel and accommodation if no investment is made.

The relatively booming market in Alberta has been a hotspot for these scams, and the Alberta Security Commission has issued a list of “red flags” to look out for when approaching a property investment seminar (see box). The basic advice, be skeptical of claims and do your due diligence before committing any money to an expensive course or investment.

5.Home Improvement scams.As well as being cautious about big investments, property owners should be alert to smaller-level scams. The Canadian Council of Better Business Bureaus listed “rogue door-to-door contractors” as among their top 10 scams of 2013.

These operators may come with unsolicited offers and deals that are too good to be true. Typical approaches include: offers to seal or repave a driveway, or a roofer who can work cheaply using leftover material from a previous job. BBB warns that fraudulent “contractors” will use high pressure sales tactics and offers of a one-time deal to entice consumers.

The BBB advises that property owners take the time to do due diligence. Property owners should get the company, name, address and ensure that all verbal promises are backed by a written contract. A scammer may ask for pay in cash or via a cheque and offer to come back at another time to finish the job. After cash changes hands, the BBB says, “you will probably never see them or your money again.”

Generally, for the hiring of any contractor, it is advisable for a property owner to check references and ensure that the company or person has a reputation for fair dealing and quality work. This can be good sense when dealing with legitimate contractors, ensuring that you are likely to receive such as on-time and on-budget estimates.

“It could never happen to me”Perhaps the biggest mistake people make when it comes to scams is to think “it could never happen to me.” It’s a common perception that investment scams are fly-by-night operations that prey on the gullible and operate in dark, unmonitored corners of the economy. That may be often true, but some of the most outrageous scams have operated openly, under regulatory supervision and have swindled the best and brightest.

Bernard L. Madoff Investment Securities, for instance, ran a Ponzi scheme that was regulated by the U.S. Securities and Exchange Commission and swindled corporate luminaries such as DreamWorks’ CEO Jeffrey Katzenberg, New York property developer Larry Silverstein, director Stephen Spielberg as well as global banks and hedge funds. This was a high-profile entity, watched by regulators (though poorly watched) and many of the investors were highly successful and brilliant people.

Closer to home, in 2011-12 there have been more than 20 Alberta-focused property investment firms that have folded or been shuttered resulting in shareholder losses of up to C$20-billion. Many of these firms advertised openly, were licensed by regulators such as the Alberta Securities Commission (ASC) and they offered RRSP-eligible investments. Dozens of lawsuits have been filed against and shareholder groups have formed to seek compensation. It’s up to the courts and regulators to decide on the finer details of each case: some were high-risk ventures that went bust, while others may have used misleading practices, and the ASC has fined others for outright fraud.

What to do if scammed
Federal and provincial law can provide some recourse to Canadians who are victims of a fraud or scam, although losses are almost never made whole and the recovery process can be long and burdensome. For scams involving out-of-country or overseas investments, the recovery of losses may be impossible… and the perpetrators may not be prosecuted.

From Canadian Real Estate Wealth Magazine, a monthly publication focused on building value through property investment, covering topics such as values and trends, mortgages, investment strategies, surveys of regional markets and general tips for buyers and sellers.

© 2013 The Globe and Mail Inc. All Rights Reserved.

Toronto Real Estate Sales Soar in July

Toronto Star

Business / Real Estate

Excerpted from Toronto Star

Toronto real estate sales soar in July

House sales across the GTA in July reached their highest levels for that summer month since 2009, with a 16 per cent surge in sales.

House sales across the GTA in July reached their highest levels for that summer month since 2009, with a 16 per cent surge in sales. BLOOMBERG

By:Susan PiggBusiness Reporter, Published on Fri Aug 02 2013

House sales across the GTA in July reached their highest levels for that summer month since 2009, with a 16 per cent surge in sales.

 

It was the third best July for sales on record, says the Toronto Real Estate Board.
 

The average selling price also spiked, up eight per cent to $513,246, largely based on resale home sales, according to figures released Friday by TREB.
 

Condo apartment sales, and prices, were also up. Sales increased some 10.5 per cent for the GTA over a year earlier – with sales strong in both the 905 and 416 regions – and average sale prices up 3.4 per cent to $338,854, the figures show.
 

Part of the upward price pressure is because of a lack of inventory for sale, largely on the single-family home side. New listings were up just 2.3 per cent from July, 2012.
 

The numbers also come a year after tighter mortgage lending rules, which went into effect July 9, 2012 and sent the market into a bit of a tailspin from which it’s slowly been recovering.
 

Realtors are finding that first-time buyers have slowly adjusted – the year since the mortgage rule changes has given them time to save up bigger downpayments – and seem to be out looking again.

The sales increase also reflects the fact that many buyers with pre-approved mortgages of three per cent or less, jumped into the market out of fear that a slight spike in interest rates recently was just the beginning of an upward trend.
 

Even the condo sector is seeing a firming up of prices, which largely flatlined as of a year ago, although the number of units for sale remains high.
 

“We are forecasting continued average price growth for the remainder of 2013 and through 2014 as well, says TREB senior manager of market analysis, Jason Mercer. “Months of inventory for low-rise homes remains near record lows, suggesting that sellers’ market conditions will remain in place the second half of 2013.”