Top Real Estate Lessons From 2012

Excerpted from The Toronto Star
Top real estate lessons from 2012
December 28, 2012
Mark Weisleder

Lots can go wrong on the day a real estate deal is closed - including getting the wrong keys, or not enough of them.

 

Between signing a real estate deal and closing, there are plenty of things that can go wrong. By being prepared you can make sure that your deal is kept on the straight and narrow.
Here are some recurring themes I saw this year.

1. Appliance disappointments
Sellers will only guarantee that the appliances and home systems they leave behind will be working on closing. If something breaks down shortly thereafter, it is not the seller’s responsibility. Buyers should consider insurance against these types of breakdowns. Some companies that provide these policies are Canadian Home Shield, Resrx and Direct Energy. As with any insurance policy, check the deductibles and what is and what is not covered.

2. Closing day disappointments
Sellers have to move out as soon as title changes hands. This can be as early as 9 a.m., although most deals close between 1 p.m. and 4 pm. If the seller is still there after the title changes, they can be liable for any extra moving costs the buyer incurs.

Sellers must also be sure they give their lawyer the right keys so the buyer can get in. On more than one occasion in my experience, the seller left one key but there were two locks on the front door. The buyer had to pay a locksmith and sent the bill to the seller. The same goes for junk left behind. If you leave it, you may have to pay the costs to remove it.

3. Arrange bridge financing
Most buyers want to close their sale and purchase on the same day. Sometimes it doesn’t go smoothly. For example, if the person buying your home is late closing, your lawyer may not be able to get the money to the lawyer who is acting for the person selling their home to you in time. This can result in the seller cancelling the deal if you are late, or charging a penalty to extend it for another day. In addition, you will likely pay additional moving costs as your seller may not have left the home by the time your movers arrive.

Bridge financing gives you the ability to have the funds on hand if needed and merely pay interest on the money for one or two days.
4. Appraisal policy requirements
More and more lenders are requesting that an appraisal be done a few days prior to closing, after the buyer has waived their financing condition. If the appraisal says your home is not worth what you paid for it, they will not lend you what you expected, and you will have to come up with this additional down payment yourself. This can be disastrous at the last minute.
Ask about your lender’s policy regarding appraisals before you apply for any mortgage loan. Make sure they will provide all approvals before you have to waive any finance condition.

5. The new home HST rebate
People who buy a new home or condominium from a builder must understand that the HST rebate is built into the sale price. The builder will get this money, after closing, from the Canada Revenue Agency (CRA), so long as you move into the home. If you are not moving in, but intend to rent it out or resell it immediately, you will have to pay this HST, typically between $20,000 and $30,000, to the builder on closing. Otherwise CRA may chase you for the money later.
By being properly prepared in advance, you should enjoy a positive home closing experience in 2013.
Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com

Biggest Property Tax Increases Expected In Davenport, Willowdale Neighbourhood

Biggest property tax increases expected in Davenport, Willowdale neighbourhoods

Published on Tuesday December 04, 2012

Excerpted from The Toronto Star

Andrew Livingstone
Staff Reporter

ci-proprtyassessment4

Homeowners in the Davenport and Willowdale neighbourhoods will likely end up paying more property tax next year, based on recent assessments.

But they’re also the neighbourhoods with the highest increases in property values.
“Our values are consistent with the trends and patterns in the real estate market,” said Joe Regina, with the Municipal Property Assessment Corp. which assesses properties across the province. “These are generally in high demand (and) it’s outpacing their supply.”

Parkdale-High Park, Trinity-Spadina, Rosedale, Davenport and Willowdale all came in well above the average 22.8-per-cent increase in the value of city homes since 2008.
The assessments, which are done every four years, will be used to calculate property taxes in 2013. To cushion the impact, the increased assessments are phased in over four years, with the average assessment going up 5.5 per cent per year to reach the full amount in 2016.
The key to determining a tax bill is where a property ranks with respect to the average in the municipality. If the increase in assessment has been above average, the homeowner will see a tax increase; if it’s average there will be no change; and if it’s below average, the resident will get a tax decrease.

Homeowners in hot real estate neighbourhoods are at highest risk of seeing their property taxes go up in 2013.

Davenport ranked highest out of Toronto’s 44 wards with an increase of 33.72 per cent. Wards 23 and 24, both in Willowdale, were the next highest with 31.44 per cent and 29.56 per cent increases, respectively.

Property assessments in Trinity-Spadina rose 29.25 per cent, Rosedale jumped 28.73 per cent, and Parkdale-High Park was up 27.03 per cent. Rouge River in Scarborough recorded a 27.41-per-cent jump in assessed value.

Wards in North Etobicoke, Centre Etobicoke and York West were well below the average. Assessed value of York West properties increased 13.98 per cent (Ward 8) and 14.97 per cent (Ward 7). In Etobicoke North they rose 15 per cent (Ward 1) and 16.03 per cent (Ward 2), while Etobicoke Centre wards increased 16.64 per cent (Ward 3) and 17.39 per cent (Ward 4).
Due to the variety of buyers in the market it’s hard to pinpoint what areas will be hot, however neighbourhoods in the vicinity of the subway lines are popular for first-time buyers, said John Pasalis, president of Realosophy Realty.

“These areas are most affordable,” Pasalis said. “Neighbourhoods like the Dovercourt area, they’ll be popular.

An area with houses around $600,000 or close to downtown and near the subway will be in high demand, Pasalis said, adding some areas in the east end, like Leslieville, remain affordable, but he imagines that won’t last long.

The Toronto Real Estate Board home index lists the Junction Triangle/High Park area as having the highest increase in house values measured over five years — not four, like MPAC — at 41.77 per cent.

Pasalis said “blue chip” areas will remain in high demand for second-time buyers and families looking to upgrade and focus on quality schooling.

“Davisville, Riverdale, the Beach, they’re still within reach for most second-time buyers,” he said. Houses in the $750,000 to $850,000 range are still available to dual-income families with kids in those areas, he added.

Sales in condo-centric areas like Liberty Village and City Place will slow in the coming years, Pasalis said.

If the market cools and prices begin to dip, condo owners looking to upgrade to something bigger might be caught in a tough spot, he said.

“Some young condo owners are buying houses first before selling their condos and they end up being in a pinch if it doesn’t sell on time,” he said. “It’s already starting to create challenges for some people, and I think that’s going to continue.

Home Sales Drop In The GTA, Condos Take Biggest Hit

 Excerpted from The Toronto Star
Condos take the biggest hit as home sales drop in the GTA
December 05, 2012
Susan Pigg

The biggest declines in condo prices were in the City of Toronto, a far cry from the boom days and bidding wars.

Toronto Star file photo

 

Home sales continue to slide and prices soften, especially in the 416 region, according to the Toronto Real Estate Board, which recorded a 16 per cent decline in sales compared with November, 2011.
Condos took the biggest hit with resale transactions down 25.5 per cent across the GTA and prices down an average of 2.3 per cent. The biggest declines in condo prices were in the City of Toronto, where they were down almost 4 per cent year over year.

Overall, resale house prices held relatively steady across the GTA, up 1.6 per cent year-over-year to an average of $485,328. But that’s a far cry from the boom days and bidding wars that defined the market up until last spring, with ‘for sale’ signs now gracing front lawns an average of 30 days.

“Transactions have been down on a year-over-year basis since June, after being up substantially in the last half of 2011 and the first half of 2012,” Toronto Real Estate Board President Ann Hannah said in releasing the monthly statistics Wednesday.

“Some buyers pulled forward their decision to purchase, which has impacted sales levels in the second half of 2012.”

Once again, TREB attributed tougher mortgage lending rules — especially the capping of amortizations at 25 years instead of 30 years — and the City of Toronto’s land transfer tax for pushing many buyers to the sidelines.

But also impacting average price growth has been a shift away from pricier homes, says TREB.
“The share of detached homes that sold for over one-million dollars was down substantially, which influenced the overall average price,” says Jason Mercer, TREB’s senior manager of market analysis.
The number of detached homes that changed hands this November compared with November, 2011 was down 13 per cent across the GTA — a drop in sales of 18.5 per cent in the City of Toronto and 10.6 per cent in the 905 regions.

Prices for detached homes were down almost 4 per cent in the City of Toronto, but up 3.5 per cent in the 905 regions, according to the TREB figures, and averaged $741,480 and $556,745 respectively.
Sales of previously owned condos sank by 25.1 per cent in the City of Toronto and 26.5 per cent in the 905 regions. Prices were down 3.9 per cent in the City of Toronto and up 2.5 per cent in the 905 regions over last November, with prices averaging $350,540 and $279,483 respectively.
Semi-detached homes saw an 11 per cent drop in sales, especially in the City of Toronto. But prices held up better in that market segment than all others, with prices up 5.8 per cent in the 905 regions to average $392,067, and 3.8 per cent in the City of Toronto to an average price of $583,117 in November.

Townhouse sales were down 13.6 per cent overall across the GTA, with the biggest decline recorded in the City of Toronto, where sales were off more than 28 per cent. Average prices were up 5.3 per cent in the 416 region to $440,930 and 1.3 per cent in the 905 regions to an average of $347,461.
New MLS listings were up slightly year-over-year, with 9,838 homes for sale across the GTA last month. A total of almost 5,800 homes changed hands across the GTA in November, down from 6,908 a year earlier.

Homes slightly more affordable in Q3: RBC index

Excerpted from The Toronto Star

Published on Thursday November 22, 2012

Sunny Freeman
The Canadian Press

Royal Bank says the cost of home ownership became more affordable in the most recent quarter due to a modest decline in home prices and gains in Canadian household incomes.
RBC’s affordability index for a detached bungalow stood at 42 per cent of income nationally in the second quarter.

That means an owner would need to spend 42 per cent of pre-tax annual income to pay for mortgage payments, utilities and property taxes — one percentage point lower than in the second quarter of 2012.

The index fell even more for two-storey homes, by 1.2 percentage points to 47.8 per cent and eased 0.6 percentage points to 28 per cent for condos.

The bank, which publishes the index on a quarterly basis, says ultra low interest rates have been the key factor in keeping affordability levels from reaching dangerous levels in recent years.
Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages.

RBC notes that Canada’s housing market cooled further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance.
The bank expects the negative effect of the changes on home sales will ease by the end of the year and that resale activity will stabilize next year.

The July-September quarter fully reversed the mild erosion in affordability that occurred during the first half of 2012, said RBC chief economist Craig Wright.

“The broad affordability picture has been somewhat stationary over the last two years, alternating between periods of improvement and deterioration, resulting in an affordability trend that is, on net, essentially flat,” Wright said.

Wright expects the Bank of Canada to begin raising its overnight lending rate for banks —which affects bank’s prime lending rates — from the current one per cent in the second half of next year, assuming the euro crisis remains in check and U.S fiscal issues are addressed.
“This, along with the expected continued growth in household income, will lessen the risk of marked erosion in affordability,” he said.

Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages,
As is often the case, Vancouver’s extremely expensive real-estate skewed the national figures.
“The cost of owning a home took a smaller bite out of household pocketbooks in the third quarter as home prices fell – most notably in the Vancouver area, though it remains the least affordable market in Canada by a wide margin,” explained Wright.

The index in Vancouver stood at 83.2 per cent of income, followed by Toronto at 52.4 per cent, Montreal 40.2 per cent, Ottawa at 38.7 per cent, Calgary at 38.3 per cent and Edmonton at 31.1 per cent.

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Canadian house prices were down in October

Excerpted from The Toronto Star
Published on Wednesday November 21, 2012

 

Sold sign

MARK BLINCH/REUTERS A sign indicating a house has been sold on the real estate market is seen in Toronto, Ontario in this April 9, 2009 file photograph. Signs are everywhere that Canada's long run-up in house prices is over.

A new survey shows Canadian housing prices declined in October compared with September, the latest indication of a cooling trend that has been largely attributed to tighter rules on mortgage lending.

The Teranet-National Bank National composite house price index, released Wednesday, said house prices were up an average of 3.4 per cent across Canada in October compared with a year ago.
However, the index also showed an 11th consecutive month of deceleration in year-to-year price increases and a drop in average prices from September levels.

The composite index was down 0.2 per cent from September — only the third time in 13 years of data that there was a month-to-month decline in October, Teranet said on its website.
The index also declined between September and October 2008, just before a major recession was sparked by a crisis in the U.S. financial industry.

Teranet says Canadian housing prices were down from the month before in seven of the 11 metropolitan markets surveyed, including Quebec City, off 0.9 per cent and Victoria, 0.6 per cent. Both markets experienced their third consecutive month of decline.

Ottawa-Gatineau was down 0.4 per cent and Montreal 0.3 per cent, a second consecutive monthly drop for both.

Toronto was down 0.6 per cent on the month, as was Calgary (-0.2 per cent) and Halifax (-0.1 per cent), while Winnipeg was flat.

Prices were up 0.1 per cent in Vancouver, 0.3 per cent in Edmonton and 0.4 per cent in Hamilton.
In Montreal, 12-month inflation has decelerated in 10 of the last 11 months, in Toronto in each of the last six months and in Winnipeg in each of the last four months.
Twelve-month price changes continue to vary widely.

In October, the 12-month gain exceeded the national average by a wide margin in four metropolitan areas: Halifax (8.9 per cent), Hamilton (7.2 per cent), Toronto (6.4 per cent) and Winnipeg (5.9 per cent).

Montreal, with a gain of 3.6 per cent and Calgary, at 3.5 per cent, were close to the national average, while price increases of 2.6 per cent in Quebec City and Edmonton and 2.5 per cent in Ottawa-Gatineau were below the national average.

Vancouver and Victoria both saw price deflation of 1.0 and 1.7 per cent respectively.
Several industry groups have noted a moderation in housing sales since the federal government began tightening mortgage eligibility rules. The most recent change, in July, reduced amortization periods to 25 years from 30.

The index is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation

GTA Realtors Release Monthly Resale Housing Figures

Excerpted from TREB WATCH
GTA REALTORS® RELEASE MONTHLY RESALE HOUSING FIGURES

TORONTO, November 3, 2012 – Greater Toronto Area REALTORS® reported 6,896 transactions through the TorontoMLS system in October 2012 – a decrease of 7.1 per cent compared to October 2011. There were two more business days in October 2012 versus October 2011. On a per business day basis, transactions were down by 15.6 per cent.

“Sales have decreased in the second half of this year compared to 2011, especially since the onset of stricter mortgage lending guidelines at the beginning of July. The prospect of higher monthly mortgage payments due to the reduced maximum amortization period has prompted some households to delay their home purchase,” said Toronto Real Estate Board (TREB) President Ann Hannah.

The average selling price for October transactions was $503,479 – up 6.2 per cent compared to October 2011. The MLS® Home Price Index composite benchmark price, which allows for an apples-to-apples comparison in terms of home attributes, was up by 5.1 per cent.

“We continue to see price increases well above the rate of inflation. Active listings have remained low from a historic perspective, so substantial competition between buyers still exists, especially for low-rise homes,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“It should be noted, however, that the annual rate of price increase has been edging lower over the past few months as the market has gradually become better supplied,” continued Mercer.
*NOTE: The majority of transactions are entered into the TorontoMLS system on business days. There was a mismatch of two business days in September and October of 2012 compared to the same months last year. This is why sales on a per business day basis were noted in releases dealing with these months. The business day anomaly between the two months has now balanced out.