Effects of the HST on new condo purchases

Although nobody knows yet what the full effect of the HST will be on real estate in the greater Toronto area, what we do know is that real estate transactions will be subject to taxation via the HST in ways they haven’t been previously.  For instance, new condos will be subject to the 13% HST, with the tax being assessed on the selling price of the property.

Under this new system, new condos valued at less than $400,000 will be eligible for a tax rebate of 6%, but new condos that sell for $500,000 or higher will have to pay the HST.  In theory, then, buyers can avoid the HST by purchasing condos valued at less than $400,000, but the reality of the real estate market in Toronto is quite a bit different.

Real estate prices are substantially higher in Toronto than in other areas, making it difficult (if not impossible) to find a reasonably nice new condo for less than $400,000.  A quick look at the listings on the market today will show very clearly that new condo prices are much more likely to be at least $500,000 and in most cases go even higher.  So for all practical purposes, buyers in the market for a new condo will have to take the HST into account when it comes time to determine how much they can afford to buy financially.

Buyers who are set on purchasing a condo but are concerned about the new HST have two options to consider:

1.  Make their new condo purchase before July, 2010, when the HST goes into effect.

2.  If purchasing after July, 2010, choose to purchase an existing condo property rather than a new condo property.

If a condo purchase is something you are considering, we strongly recommend you talk with a qualified realtor sooner rather than later so you can plan your purchase accordingly.

Effects of the HST on the broader real estate market

The HST is not just applicable to new homes and condos, however; it is also set to be applied to the closing costs of all real estate transactions.  This means everything from closing lawyer costs to home inspection costs to real estate commissions and the like will all be subject to the HST.  For most buyers this can quickly add up to an amount of $2,000 or more, making it even tougher to afford the purchase of a real estate property.

Real estate professionals in the greater Toronto area are concerned about the impact of the HST in these cases, especially when it comes to first time buyers and middle income buyers looking to move up in the value of their property.  In some cases the impact of the HST on closing costs could have a significant effect on whether or not someone is in a financial position to afford to purchase a real estate property.

While the HST will definitely have an impact on the real estate market in the greater Toronto area, most local realtors believe it will not be disastrous.  With proper planning and the prospect of negotiating these costs as part of sales agreements, most realtors believe the market will continue to grow and prosper throughout 2010.

Why is the buying agent so important?

The buying agent you choose is important because he or she will be working closely with you through the buying process as well as the closing process to finalise your home purchase.  This person needs to get to know you fairly well to understand what it is you’re looking for in a home so that they can bring properties to your attention and take you through them on showings.  Going out and looking at houses is a very time consuming process, so if your selling agent understands your needs then you are far less likely to waste time looking at homes that are simply not right for you.

The role of a buying agent goes beyond just showing you potential homes, however.  Your agent’s job is to guide you through all aspects of the buying process, including but not limited to:

• Evaluating the pros and cons of potential properties
• Navigating the ins and outs of mortgage financing
• Advising you on pricing of potential properties
• Helping you write offer(s) when you find properties you would like to buy
• Negotiating on your behalf with the seller’s agent
• Guiding you through the steps between offer acceptance and final transaction closing

It’s clear, then, that the choice of a buying agent is one of the most important you will make.

The right questions to ask when interviewing a buying agent

The main reason to ask lots of questions of a potential buying agent is to ensure the person you choose is going to do a good job for you.  You need to talk about a number of things, such as:

Knowledge – What is the agent’s level of knowledge about the unique needs of home buyers?  Is the agent up to date on current first time home buyer programs?  If you have bought a home before, does the agent take the time to learn about that experience and suggest ways to make this new experience better or more successful?  Buying agents with the most knowledge about what buyers want and need are the most likely to be a good fit for your requirements.

Experience – What kind of experience does the agent have working with home buyers?  If you are a first time home buyer, does the agent have experience working with buyers in your position?  How familiar is the agent with the neighbourhood(s) you’re considering for your home purchase?  You’re going to get the best results choosing an agent who has the experience to meet your needs as a home buyer.

Clients – How many other buyers is the agent representing at this moment?  How many sellers is the agent representing at this moment?  Is the buying agent willing to provide you with references to previous clients?   A really good buying agent will have a number of clients at any given time, but not so many they can’t give each client the time and attention they deserve.  Always get references to previous clients and check those references thoroughly.

Whether you are a first time home buyer or have bought homes in the past, a good buying agent takes the time to get to know you and works closely with you throughout the process.  It’s a good idea to interview several potential agents before making a final choice.

Disadvantages of Multiple Offers

Buyers Don’t Want to Fight!

One of the most important disadvantages of multiple offers is that many potential buyers are going to be turned off by the thoughts of fighting it out with bids.  They just want to buy a house and move into it, and get their lives moving.  They don’t want to spend weeks making offers and counter offers to try and get this one particular house – especially when it’s easy to make another offer on another house.

While some bidders with a competitive spirit and a deep wallet might want to continue the war until they come out with the deed – this bidder is rare.  Most likely, one or more of the bidders is going to walk away.  Another issue is that as the bidding process continues, it draws things out and potential buyers have time to second guess themselves.  Things that looked charming at first may soon seem not so wonderful about the house – and they may lose interest.

Buyers Don’t Want to Overpay!

Most of the time, buyers are looking for a home that has most of everything they want – but with the lowest price possible. There are those potential home buyers out there that have all the money in the world and they’re not going to stop looking until they find the perfect home for them no matter what the cost is.  However, this is not representative of the majority of home buyers.  The majority of homebuyers do not want to overpay for their next home.

When a bidding war ensues, if things are going strong, these potential homeowners are going to see that it’s quite likely that they’ll be overpaying.  Even if the house is wonderful, these people are not going to want to pay thousands over what the original asking price was just to beat out another bidder.  If you’ve underpriced the house in the first place, you may leave money on the table.

For the most part, people wish for multiple offers and everyone wants to get the most from the house they have for sale.  However, as you can see from the issues above – it’s not always a good thing.  In one particular example, a seller asked her agent to list the home and then have any offers wait one week unless the offer was full price or better.  Of course, the seller was hoping to see a bidding war.

There was one offer on her home early, but she refused to look at the offer until that week had passed.  When the week had passed, that offer was the same and only one made on the house and she nearly lost that offer.  The point is that the more time that passes, the easier things are likely to change. Sometimes, one decent offer is much better than having a bidding war commence over your home.

Stale homes which have stayed the course through the sleet and snow are now hanging sold signs on the front lawns. These properties that have sat for 6 months are now selling in multiple offers. It is almost like a spoiled child syndrome. No one wants to play with it until another child indicates that they like it.

It is not just rumours that properties are selling in multiple offers. I have been involved in two recently and have talked to many colleagues who are finding the same thing. One agent had 11 offers registered on a place in midtown Toronto. That means there are now at least 10 unsatisfied people who are ready to jump on the next ‘right thing’ in Toronto.

We are not seeing the builders or flippers out in droves but they are starting to come out of hibernation. What does this mean? If they get started up again we will definitely see the return of central core Toronto real estate, especially if they can get access to this low interest money.

We were never too far down in prices in the central core, 5%-8%. The media mainly focused on properties that were grossly overpriced in the first place. People overvalue their homes in both good and bad economies.

Are these buyers all just optimistic suckers? Or are they the last of the people who will be getting the “good deals”? The economy seems too fragile right now to set stand in one camp or the other.

I must say that I am not so naive as to think we are in the clear, but I am certainly enjoying the sun while it is shining.

There doesn’t seem to be imminent doom but the fall out of GM and Chrysler has yet to be seen. These are good reasons to keep your money invested in bricks and mortar. People will always need shelter to buy or rent.

I will continue to say that right now is a great time to sell, especially if you are moving laterally, moving up or diversifying your portfolio of real estate.

If the market keeps trucking along like it has this spring Toronto proper seems like it will tighten up, if you look hard there are still some really good prices on properties right now.

Another cause to applaud is the government’s reluctance to change Canada’s immigration policies. Immigration has been a staple when it comes to the health of Toronto’s real estate. Of the 250,000 permanent landed new-Canadians 60% of them move to the GTA. That is exactly what we need to keep stimulating our housing market.

Canada has embraced immigrants in good times as well as bad and has been rewarded with the newcomers strengthening the country’s economy. A lot of newcomers generally are more inclined to own homes. People from Hong Kong, China and India all put a very high importance on home ownership. Quite often their first order of business is to buy a home.

Toronto real estate seems to be in a very healthy space right now. The whole World’s economy seems to be fragile but at least it appears that we are moving in the right direction.

Now that the snow has melted, the golf clubs are out, and the patios are bustling it is time to start planning your spring events. Winter hibernation is finally over.

The City of Toronto has so much to offer for its inhabitants. I want to share the many reasons why I think Toronto is such a great city and provide proof of why we are the best place to live.

The event season kicked off a few weeks ago on April 2nd with the first official party at the new Frank Gehry designed AGO. The AGO Massive Party, www.ago.net/massive-party-2009 It was a success with money being raised for the gallery by the 1600 people that were in attendance. There were a number of groups performing very unique versions of art that fit the 2009 theme of Massive Uprising. It was a perfect blend of Bay St. business types and those who are affiliated with the art scene.

There is another great fundraiser event April 30^th 2009, The LG Innovators Ball, www.lginnovatorsball.ca This Ball is held at the Ontario Science Centre with a great theme of Espionage and Intrigue. I am sure every guy in a tux will be thinking they are as smooth as 007.

I don’t want anyone to miss the opportunity to check out Toronto’s great events so I put together a list of my picks for this May. If you know of anything I missed please let me know and I will happily add it to the list.

All of May is Museum Month so in order to take advantage of the extra perks that the various museums are putting together check out their web sites,

The ROM, www.rom.on.ca

The Campbell House, www.campbellhousemuseum.ca

The Textile Museum, www.textilemuseum.ca

The Museum of Television, www.mztv.com

The Redpath Sugars Museum, www.redpathsugars.com

The Gardiner Museum www.gardinermuseum.com

Todmorden Mills Heritage Museum, www.toronto.ca/culture/museums/todmorden.htm

Mackenzie House, www.toronto.ca/culture/museums/mackenzie.htm

Spadina Museum, www.toronto.ca/culture/museums/spadina.htm

The Art Gallery of Ontario, www.ago.net

Another Great Event that runs throughout May is Contact, www.contactphoto.com Contact is a photography exhibition that uses unique spaces throughout the whole city as gallery walls. The majority of the participants are local photographers like Caley Taylor, www.caleytaylor.com but there are an increasing amount of international artists. The coordinators have a theme every year, 2009 is Thematic Innovation.

The City of Toronto Festival of Architecture and Design also runs throughout the month of May. There are walking tours, lectures, films and readings that take place in various noteworthy places within Toronto. www.toronto.ca/fad/

The first weekend of May, 1^st-3^rd is The Clothing Show, www.theclothingshow.com This is great place to find really unique and interesting clothes and accessories from independent designers, artisans and haberdashers. This is on all weekend at the Better Living Centre at Exhibition Place.

On Saturday May 9^th Mooredale House will be celebrating their one day Mayfair festival in Rosedale Park, www.mooredale.org This year it is Mayfair Goes Hawaiian so make sure to bring your coconuts and grass skirts. All the money raised goes to keeping Mooredale House operating.

The Toronto Comic Arts Festival, www.torontocomics.com/tcaf/ runs Saturday May 9^th and Sunday May 10^th. The main venue is the Toronto Reference Library just north of Yonge and Bloor, but there are a lot of additional events held all over Toronto starting May 2^nd.

On Sunday May 10^th you better find a brunch, a florist or at least a phone to celebrate Mothers Day. It is certainly one of the most important days in my annual calendar.

Monday, May 11^th Casa Loma will be hosting the gTO Green Tie Fundraising Event. This is an important event to raise money for the Toronto Parks and Trees Foundation, www.torontoparksandtrees.org . The featured guest is Sarah Harmer, she will be performing and speaking.

Summer’s unofficial start date is Victoria Day Long Weekend, or May Two Four Weekend is May 15^th- May 18^th. If you don’t have chores to do or gardening to take up time there are tonnes of great things to do throughout the city www.toronto.about.com/od/eventsattractions/a/victoriaday.htm There is always a great fireworks display at Ontario Place. I don’t want to sell out the city, but I think that long weekends are at their best anywhere from one to five hours outside of Toronto, usually on a lake or golf course.

If you are an architecture junkie or one of those people who can’t drive by an open house sign without stopping the car Saturday May 23^rd and Sunday May 24^th are two great days this month. Doors Open Toronto¸ www.toronto.about.com/od/eventsattractions/a/doorsopen.htm returns with lots of neat opportunities to check out all kinds of great buildings that we have throughout the City of Toronto.

I have not been to this specific arts show, but The Distillery Spring Arts Show, www.artisansatthedistillery.com looks like it could be worth a quick trip to check out on either May 23^rd or May 24th. This is a show that is put on by the various merchants and artists within the tiny enclave.

Another great activity to get you out doors on the 31^st of the month is Great Strides; Taking Steps to Cure Cystic Fibrosis, www.cysticfibrosis.ca. This is a fundraising walk held at the Toronto Zoo.

Please keep checking my site as I will be releasing the list of Toronto events for June in the last week of May. If you want me to mail it to you directly please send me a request at evan@evansage.ca

We are now seeing the best opportunities to purchase in several years. Competition for properties is low, interest rates are a bargain (3.99% for a 5 year fixed) and Canada looks like it will have the quickest economic recovery.  Now is the time to make a move and create some wealth for your future.

If you look you can find a situation where you have a strong Toronto Real Estate Agent representing you and an eager seller or a property that has been on the market for a long time. Just make sure your agent is capable of negotiating and can prove that they have done so in the past.

The move up buyer is the person who currently owns their own home but is looking to buy a larger lot, a nicer home, something that is completely renovated or maybe leaving a condo for a house. It is true that you will lose money selling your existing home in the current market, but that is fine because you will be buying something at a higher price which will allow you to make back every penny of the loss and create new gains.

The real estate buyer who is in the best position is the one who was on the fence 6 months ago about whether or not they should buy a better home or someone who received a promotion or raise but has been too busy with the new job to execute a move. As long as you have some job security, now is the best time to make the jump.

If you bought your current home for $600K in 2007 and now you can maybe sell it for $500K. You have taken $100K loss. That is okay if you buy a more expensive home in the same market because the home that was bought for $1.2M in 2007 is only selling for $1M today. Therefore you make back the $100K you lost on the sale of your existing home plus you saved an additional $100K by buying in today’s market. The above mentioned situation will vary depending on your specific situation so be sure to work with your real estate agent to work out the exact figures to ensure it is a profitable move for you.

In central and downtown Toronto it does not seem like things are going to slow down much more, we are starting to see the surplus inventory dry up and there is a lag in new listings.

First time buyers are also in an amazing position to jump into the real estate market feet first. The official description of a first time buyer is someone who has never owned property before or has not had an interest in owning a property for at least 4 years. There are a lot of government programs available to assist the first time purchaser. There are rebates for land transfer tax, both municipal and provincial, there is a tax credit to help with closing costs, and you can access $20,000 of your RRSP, tax free, for your down payment. And most importantly, at the introductory level there is a surplus of properties to choose from and negotiate for. The key is to have an agent who is not afraid to go in and fight for the best price for you.

Investment Buyers are also in buying heaven. Right now there are many homes that are available to buy that have multiple units in them.  The rental market has stayed strong in Toronto proper and there are still a number of potential tenants filling the appointment books. This is the time to buy because you can lock in a low interest rate with a nominal down payment, which will allow all of the operating costs to be carried by the rental income.

The other segment of the investor buyers are builders. If a builder has sold off their finished products and are now sitting with cash in the bank they can buy up inventory at a good price for future projects and sit on them until the higher markets return.

In every market there are opportunities to be had, you just need to know where to look and be in the right position to take advantage of them.

How far down do I own the land when I buy a house in Toronto, Ontario?

My initial thought was to say 6 Feet, I have no idea why, it just felt right. I am glad I didn’t go with my gut. Apparently this was not right, however it wasn’t wrong either.

I started my search to try and find a specific depth. With the surge in commodities over the past few years there has been a sudden influx in Prospectors staking claims to various mineral rights. There have been some changes in technology that allow a Prospector to stake a property online instead of having to walk the property and physically stake the claim.

This has led to a lot of confusion and several instances have blown up and landed in court. A gentleman by the name of Rob Westie was involved in one of these conflict claims and said “A free miner is the last free man in Canada. They have more power than the RCMP to go on to your property and do whatever they wish.”

The confusion and conflicts are caused by all the different types of rights someone may claim on a piece of land. There are mining rights, mineral rights, surface rights, free entry, who has access to the land for living on and who has rights for exploration. A lot of the laws date back to The Gold Rush in the middle of the 19th century, some of them don’t really stand up in today’s society.

All of the conflicts that are raised in Ontario are heard by the Mining and Lands Commissioner.

If you want to be a Prospector and stake a claim you need to be over 18, fill out a form and hand over the large sum of $25.50 for a prospectors license. Here is the link if you are interested, prospectors license.

This licence will allow you to stake claims on land and get access for exploration purposes. To register a claim it is $3 per hectare in Ontario.

Canada has what is called a ‘Free Entry’ mining system which allows anyone with an exploration claim to stake a site and explore the land. All you need to do is provide the owner of the surface rights with one days notice that the exploration will be taking place.

In a residential area no claims are allowed to take place under the dwelling portion of a property without consent of the home owner. For any exploration to take place on a residential lot in a registered of sub division additional permission is needed from the Minister of Northern Development and Mines.

There is a legal way you can protect your property from someone else claiming the mineral rights to explore the land. You simply need to do it first!

You will need to sign up for your prospectors licence and then stake a claim on your own property. The catch is that you need to actively test and explore the land otherwise the claim becomes inactive and is back out on the open market again. You will need to show assessments with a minimum value of $400 per year. One gentleman dealt with it by registering his property as a shooting range and then put signs up everywhere notifying people that they risked being shot if they wandered around his property. It was crude but effective.
Here is a link to all the properties in Ontario that have claims on them or the surface rights and mineral rights are combined, Ontario Claims Map

If you see a black circle that means the surface rights and mineral rights are combined, if you see a semi circle that means either the Crown or someone else has the mining rights.

Condo and loft properties rely heavily on previously sold properties price per square foot. Adjustments are made for the differences in time since the last sale, size, location in building, view, layout, outdoor space, parking, etc… Every condo building is fairly unique so price comparisons should remain within the building. Pricing a house gives you a bit more latitude with looking in different parts of a neighbourhood. It is best to compare apples with apples with as few differences as available.

If it has been a long time since a similar property has sold you can look in to a different building or area and see what the percentage increase, or decrease has been over the time period and apply that percentage to your specific property. Sometimes a property is just on the other side of the street but it backs on to the train tracks, so it won’t be a valid comparable. All details must be considered and assessed a value.

After you have done your assessment there are some ways to double check whether it is accurate. It is common for a good Realtor to ask a colleague to come through the property and give their thoughts. This is important if the property is very unique. We sometimes use the cities tax assessments and add a commonly accurate percentage to get the ball park figure. The common percentage is different for each neighbourhood and changes each year.

The average Realtor will be involved in more home purchases and sales in a one year than the typical buyer or seller will be in their entire lifetime. Sometimes pricing is a combination of quantifiable variables and a gut feeling based on exposure and experience. A good Realtor is great with pricing.

Why is it important to list at the right price? The best price to list your property at is the price that will be the closest to what it will actually sell for. I know that sounds obvious but we run in to a lot of clients who feel that their property is worth a lot more then it is and they want to “try” their higher price first.

Some Realtors are tempted to let their clients do this because they have a fear that they won’t get the listing and some other agent will. Some clients might say that the real estate agent just wants to sell it at low price so it will be quick and they can move on. If that is the Realtors attitude you will sense it in all of their work with you, not just the price. A good Realtor will actually stick to their pricing and not suggest that they can get more for you just so that they can get the listing.

First impression is the most important thing when selling a home. People search for real estate in select areas and tight price brackets. $325-$375K Loft Downtown, $400-$450K in Leslieville, $800-$900K in Summerhill, $1.3M- $1.5M in Lytton Park, $2.5M-$3M in South Rosedale, etc… They will typically look at houses that are listed for lower than the ceiling of their budget but serious buyers will never look at properties beyond their budget.

Your best market exposure is the first 21 days after you first expose the property to the open market. This is when you will get the most amount of money for your home and hopefully not leave anything on the table. The market experts will get their first glimpse of what you have to sell. The experts are all of the active Realtors in the market and their buyer clients. These people know everything about your market and what is going on in it. The Experts will see it in their daily updates and will be calling their specific clients who want to buy a property like yours. Neighbours will be calling their friends who have always talked about wanting to move into the area, and people who are looking in the papers, or online resources will be seeing it for the first time and will be contacting their Realtor.

Trying an unrealistic list price will result in you you will not reaching the right group of experts and they will simply be unimpressed with what you are offering at the inflated price. They are looking in their price bracket and they will not want to buy something that is not comparable to what else they are seeing in their price category. This will actually just help the other listed homes look like a better value.

If you waste that opportunity to make your first impression you will never get it back. As soon as you have stopped getting showings and everyone realizes  that the property is overpriced it will take at least a 10% price reduction to stir up some new interest.

Someone with a budget of $1.6M looking to buy a house on Alexandra in Lytton Park will not want to purchase a 25 foot wide property, un-renovated that the owner thinks is worth $1,595K when it really shouldn’t be higher than $1,400K. This will annoy the experts and they will talk poorly about wasting their time, which will give you further negative exposure, it will sit on the market becoming stale, it will get a stigma of something being wrong with it and most importantly it will miss reaching the realistic market of active clients looking to buy a house in Lytton Park for $1.3M-$1.450K.

One of the key things a good Realtor does each week is go and visit every new listing in our select market place. This helps us build an automatic sense of what the right price is, what is too high, or what is great value. That is a really good reason to hire an agent that works specifically in the area that you want to live in.

Condo refers to a type of ownership not a type of building. A Toronto condo usually takes the form of a high or low rise apartment style building.  However, some condos could be in the form of a factory loft or town house.

When you buy a Toronto Condo what are you actually buying?
1)    The physical unit that has a title to the space.
2)    A portion of the common elements in the building. This portion is a percentage relative to the size of your unit, the bigger your unit the higher percentage ownership you will have of the common elements. Common elements tend to include: elevators, hallways, the lobby and any other communal spaces i.e. gym, pool.
3)    The use of exclusive-use common elements. Some of these may include a parking spot, locker, balcony ect. The rights to exclusive use elements come with the unit, so if a parking spot is sold separately from the unit than it is not considered an exclusive use common element.
What are maintenance fees?

These fees are paid to upkeep the building and the common elements. A unit’s maintenance fee is proportionate to the size of the unit as compared to others. The bigger your unit the more you pay. Each month a part of the fees are set aside to build up the reserve fund for any major repairs.

Who is the Condo Corp?
The condo corporation is made up of all owners in a building. As a member of the corporation you have the opportunity to vote for the board of directors. The board handles the business affairs of the corporation.

Is my prospective Condo Corp in a good position?
A status report contains the pertinent information that will tell you if the building is in a good or bad situation. The creation of a status report is a legal requirement in Ontario. The status report outlines the following:
-    All units percentage ownership of common elements
-    All units rights to exclusive use common elements
-    The condo corps rules and regulations
-    Any special assessments that outlines planned major repairs
-    Recent financial statements and budget

If you are submitting an offer to buy a Toronto condominium, you should include the condition that the purchase is conditional on the review and approval of the status certificate. If the building is not in good standing it should be clear to your lawyer or Toronto real estate agent upon review of the status certificate.

Is a condo a good investment?
As with any real estate, a condo could be a good or bad investment. It all depends on the building and the market. There are some great condo investments in Toronto and there are also some terrible investments. Look to the advice of your Toronto real estate agent as to whether the building you are looking at is a good investment.

Building inspection, should I have one done?
It all depends. Many buyers of new buildings will not bother with an inspection, but you may want to consider having an inspection done on older buildings. An inspection should include the review of the major systems to ensure the necessary repairs are anticipated and planned by the condo corp.

Is condo living right for you?
Condo living is not for everyone. It offers convenience, security, and amenities that would not be available in a home at the same price. First time buyers find condos a good option as it is usually a good amount of space for the price. Baby boomers are also finding condos a great option as they are more convenient and less work to maintain than a home. But in the end any individual may find some condos features that they like and perhaps some that they do not.