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.

Moving arrangements

It’s never too soon to make moving arrangements; there’s nothing worse than having moving day rapidly approaching and not having anyone lined up to physically move your stuff to your new place.  In fact, it’s a great idea to contact movers before your house is even sold so they can come to your home and determine just how many items and what size items you will need move.  They will use this information to give you an estimated cost.  As soon as your home actually sells, get in touch with the moving service right away to be sure you can get on their schedule for the moving date you need.

If you are planning to rent a moving truck and take care of the hauling yourself, get in touch with local rental companies and reserve a truck as soon as possible.  Rental trucks tend to be hard to come by around the very end of the month and the very beginning of the month because this is their busiest time.  If at all possible schedule your move for mid-month; if this is not possible then the earlier you can reserve your truck, the better.

Don’t skimp on the size of truck you choose to rent.  A smaller truck might be less expensive than a larger truck, but if you have lots of items to move you may end up making two, three, or even four trips to get everything moved.  It’s much easier on everyone concerned to rent a larger truck and then make only one trip from your old place to the new place.

Packing

Most people underestimate the importance of proper packing, especially if they are only moving across town.  Packing, however, is a critical part of the moving process and can have a huge impact on the ease (or difficulty) of your actual moving day.  Using the wrong size boxes or improperly packing fragile items can cause a lot of extra work and leave you with broken items.

If you can afford the cost, it is well worth hiring a professional moving company to come in and pack your things for you.  Professionals are skilled in choosing the right boxes for the right items, not over-packing or under-packing.  They also have the personnel necessary to come into your home and make quick work of the packing process, plus they have the right tools to pack quickly, efficiently, and safely.

If paying for professional packing is not possible, then be sure to allow plenty of time in advance to take care of the packing yourself.  Choose smaller boxes rather than larger boxes whenever possible; a smaller box is easier to handle on moving day, while a larger box can quickly become too heavy or too awkward to be easily moved.  Don’t skimp on the quality of boxes or the packing material to be used in them; this is especially true for your fragile or precious items.  It’s well worth the cost to invest in specialty boxes for items such as china and other breakables; you can flatten the boxes and store them once you get to your new place, making them available for the next time you need to move.

Why is the selling agent so important?

It’s simple.  The selling agent is the one person who has perhaps the most influence on the sale of your home, both in terms of how fast it sells and the price at which it sells.  A good selling agent knows how to help you set a realistic sales price, backing up their opinion with the necessary facts and figures to support it.  Once your home is listed the agent is responsible for the effective marketing of your property; that is, getting it seen by real estate brokers, real estate agents, and plenty of buyers.

Once an offer comes in on your home the selling agent is vital to helping you understand what’s in the offer, whether it’s a reasonable offer for your property, and making a final decision on whether to counter offer or accept the offer as written.  Of course this final decision is yours and yours alone, but the guidance of a good selling agent can make it much easier to determine the right decision to make.

Finally, as your Toronto property goes through the closing process the selling agent should be an active participant at all stages, from home inspection to the signing of the final papers.  There are many obstacles that can arise during this time period and your selling agent should have the experience and knowledge necessary to help smooth them over and bring the transaction to a final close.

The right questions to ask when interviewing a selling agent

Since the selling agent is so important to your home sale process, it’s important to ask the right questions to determine which selling agent is right for your needs.  Some examples of areas to cover include:

Experience – How much experience does the agent have?  What certifications and/or expanded education does the agent have?  Is the agent familiar with the neighbourhood in which your home is located?  You want to choose an agent with the experience and knowledge necessary to understand the current real estate market and sell your home quickly.

Performance – What is the agent’s sales record over the previous 3 months?  6 months?  12 months?  What is the agent’s record of original listing price vs. final sale price?  Lots of selling agents claim to be high performers, but the real proof is in their actual sales record.  If the selling agent is not willing to provide you with this information then move on to someone else.

Marketing – What is the marketing plan for your Toronto home?  How will the selling agent make sure your home is seen by as many potential buyers as possible?  What is the marketing budget he or she has set aside for your home?  The better the selling agent is at marketing your home, the more exposure it will get in the market and the more potential buyers he or she will bring to your door.

Commission/Fee – What is the selling agent’s commission?  This is an area where it’s important to look at more than just the percentage amount and give proper consideration to what you’re actually getting for your money.  In general, selling agents who charge discounted fees do so for a reason and that reason is often that they are not as skilled at their profession.  You want to minimise your costs, of course, but not if that means lengthening the amount of time your home is on the market or ending up with a lower than expected final sale price.

Choosing the right selling agent for your Toronto home is a critical decision that can literally affect everything that happens along the road from listing to final closing.  Take the time to interview several agents and use the information contained here to help guide you in 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.

How a Building is Certified LEED

The certification works on a 100 point system, where a building is assigned a certain number of points for each aspect of building.  These include sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environment quality.  Bonus points are offered in two categories, including innovation in design and regional priority.  The total amount of points that can be awarded is 110.  A building can be LEED Certified with just 40 points, while with 50+ points it will be certified silver, 60+ points will certify it gold and 80+ points will certify it platinum.  The scale works like this:

• Sustainable Sites = 21 Points
• Water Efficiency = 11 Points
• Energy & Atmosphere = 37 Points
• Materials & Resources = 14 Points
• Indoor Environmental Quality = 17 Points

EXTRA POINTS:

• Innovation in Design = 6 Points
• Regional Priority = 4 Points

Total Points: 110 Points

Builders Focusing on LEED Certification

As more and more individuals become aware of the stress on the environment and the options they have to lessen that stress, more of them are demanding alternative options.  It’s more common now than ever for individuals to request homebuilders that are familiar with and committed to building to LEED standards.  There are many builders that fit into this category, including:

• John Desmond Builders, Inc. out of Connecticut
• Peter Erickson (Mosier Creek Homes)
• Laupen Homes, LLC
• And Many More…

‘LEED-ing’ Older Homes

Many things can be done to improve the ‘greenness’ of older homes. One of the easiest things is replacing water fixtures  such as installing low-flow toilets and faucets and energy efficient hot water heaters.  Using gray water or rain water for watering plants is another great option.  Individuals can install Energy Star windows to block out summer heat and reduce energy usage, and take advantage of solar or wind power in order to save more energy.

While there are a number of things that can be done to increase the eco-friendly aspect of older home, the LEED certification is strictly for new constructions.  With determination, however, homeowners can modify their homes to be just as eco-friendly as the LEED certified new constructions.

It shows responsibility and awareness for the bigger picture when individuals and businesses make a commitment to build to LEED specifications.  By choosing LEED certified build sites, using recycled or sustainable materials in the build, creating eco-friendly systems throughout the home or building and installing eco-friendly fixtures and appliances, individuals can create a home or building that will qualify for LEED certification.

Energy

Where energy is concerned, one of the most important things a homeowner can do is take advantage of wind or solar power.  Along with that, individuals can use less energy and save more money with the following tips:

• Installing energy efficient appliances, including washers and dryers, refrigerators, dishwashers and all other appliances.  Energy Star appliances are a good way to go, as they use less energy than other appliances on the market.
• Energy Star windows will keep more hot sun out, keeping the house cooler.  This will result in less of a need for artificial cooling.  Energy Star windows can also help keep harmful UV rays out.
• Insulation can help save energy, as it helps keep the cool or warm air in the house in the summer or winter.  It cuts down on the AC or heat usage.
• Open the doors and windows rather than turning on the AC.
• Leave the thermostat on 78 degrees – and use fans if you’re hot or wrap up in a sweater if you’re cold. This will save some energy, too.

Water

• Using less water is a goal all homeowners should have, and there are several ways to accomplish that goal, including:
• Installing an irrigation system that uses timers and sensors to prevent overwatering and water usage.
• Installing low-flow and water efficient fixtures like faucets, toilets, and showerheads.
• Catching rain water and using gray water for plants and flushing toilets.
• Fix any leaks that you might have in your home.  Leaks can account for a large portion of your water bill each month, and of course, they’re a huge waste of clean water.

Other Tips

When purchasing new things for your home – whether it’s flooring, furniture or art – purchase sustainable or recycled items.  For instance, bamboo floors are absolutely beautiful and they’re sustainable.  So it’s much better for the environment if you invest in bamboo floors than if you were to purchase oak or pine floors.  Or, take advantage of recycled wood floors – so you’re saving trees from being cut down and keeping the wood from ending up in the garbage.

Furniture created using sustainable or recycled materials also helps you ‘green’ up your home.  When you buy recycled materials, you keep them from ending up in a landfill and reduce the new items that are made – which used energy and resources to be created.  By employing eco-friendly practices and purchasing sustainable and energy-reserving goods, you can really create an eco-friendly home to be proud of.

Repairs:

Repairs are a large part of staging a home. You don’t want anything to take away from the beauty and charm of your home – and that means broken door handles, cracked tiles, holes, or any other kind of eyesore.  Make all of those repairs before having any visitors.  You’d be surprised to know that even one small crack or hole can stop a potential homebuyer from making the deal.

According to HomeGain 2009, just repairing problems with floors can increase the sale price between $1500 and $2000, and 91% of agents recommend that this is done before a showing.  Go through the house and check for any other minor repairs that need to be done – such as sticking drawers, leaky faucets or drafty windows.

Cleaning:

It’s important for the house to sparkle when potential homebuyers visit; both inside and out.  Start on the outside, and try to see the house as a potential homebuyer would.  Is the brick or siding clean?  If not, a pressure wash would help. Is the lawn free of trash? Are the outside windows sparkling and clean?  Take care of any problems on the outside before moving on to the inside.

On the inside, obvious cleaning should be done – like the cleaning you do everyday.  This might include having all of the dishes washed and put away, making sure the floors are vacuumed, swept and mopped, and dusting everything.  However, before showing the house, you’ll want to do some deep and detail cleaning on the inside so that everything looks great.  This might include:

• Wiping out the insides of cabinets and drawers.
• Dusting baseboards.
• Scrubbing bathroom and kitchen tile and porcelain.
• Organizing closets, pantries and linen closets to show more functionality and space.
• Straightening things to provide a more uniform look – such as making sure all the coffee mug handles go the same   way, organizing the contents of cabinets and making sure everything looks neat and tidy.
• Washing the insides of the windows.
• Polishing the steel of sink handles and faucets, towel bars, etc.
• Etc.

Have a friend walk through the house with you when you’ve finished to see if they can spot anything else that needs to be done.  When the house is as clean as possible, you’ll have a better chance of making a sale.  In fact, HomeGain 2009 says cleaning an de-cluttering is recommended by 98% of agents and can bring an extra $1500 to $2000 to the sale price.

Staging:

For the actual staging, it’s important to set things up the best possible way to get potential homebuyers picturing themselves living there.  There are more than a few ways to do this. The first would be to remove anything that does not absolutely need to be there.  This includes personal items.  So, the personal products from the bathroom counters and medicine cabinets should be stored in baskets under the sink.  Pictures should be removed from the walls and stored somewhere else. No drawings or personal saying should be left on the refrigerator or anywhere else.

De-personalize the house so that it becomes a blank canvas for the potential homebuyers to imagine themselves there.  If you have too many personal items, it will seem crowded and the canvas will already be painted on.  You should have as little furniture as possible in each room as well.  This helps the home look more spacious and inviting, while a small amount of furniture allows potential homebuyers to know exactly what a particular room is for.

By staging and preparing the house the proper way, you will not only increase your chances of selling the house quickly, but you may increase your sale price as well.

Once the home has been staged, the marketing plan has been finalized, the marketing materials prepared, the feature sheets printed, and the custom site built it is time to launch. At this point another contract is signed for the MLS listing.

The first step in launching the marketing is loading the listing onto MLS.net.  This will advertise the home to the 27,000 Toronto Real Estate Board (TREB) Realtors, their clients, and anyone who checks Realtor.ca. Once the listing is live on MLS the descriptions and photos are then placed on the Agent’s personal web sites, any third party listing site, the Brokerages site, and this is also when the custom site is put live.

Within 24hrs the listing will be sent by MLS to everyone who has signed up for a new listing automated email for properties that match your home.

At this time the “For Sale” sign is placed on the property. All the neighbours will now be buzzing, talking to their friends and family who always wanted to live in the area.

Once it has been on MLS for a couple of days it is very beneficial to host an Agent’s MLS “Open House” with a catered luncheon. Realtors love free food. This open house is important because it allows Agents to get a good sense of the property so that they can determine whether it is worth bringing their clients through.

A colour picture ad is sometimes placed in the Globe and Mail’s Friday Real Estate Section. Several companies carry large ad space on a weekly basis that has specific sections for listings.

A picture ad is also placed in the Globe and Mail, weekend edition. Even though you are getting to 86% on line, you certainly don’t want to miss the rest of them and it never hurts to touch the same person twice. It is also great to advertise the custom website as where they can go for more information.

The Globe and Mail is also a good spot to advertise an Open House if the seller chooses to have one. It is very rare that someone will attend a public open house on the weekend and then end up purchasing the home. Serious buyers will typically request a private showing. The public open house usually benefits the Agent the most because it allows them to interact with potential new clients.

Depending on the rest of your customised marketing strategy the other pieces should be rolled out according to your execution plan.

Private showings will be requested throughout this period, it is very important that the house is looking its best and that no one is home during the showings.  Think about when you buy something at the store, you will never buy something with crappy, beat up, torn packaging if there is the same thing right beside it in a nice new package.

Step 9: Accepting Offers

Depending on the property and the market conditions it is typical to set an offer date upfront in the initial MLS listing. I find 7:00 PM, 9 days after the home is first put it on MLS is the ideal offer time. This allows enough time for everyone to get through the home, make solid decisions and do their own inspections if need be.

Typically if offers are restricted they will be presented at the Listing Brokers office. It is best to set the time so that everyone can prepare their offers, have dinner and arrive for presentations ready to settle in for an evening of negotiations that is why 7:00 pm works well.

If there are no restrictions then any offers to Purchase will be presented to the Seller at the time they are registered. A Buyers Agent will call the Listing Agents office after their client has signed the offer in order to verify that they have an offer and it needs to be presented to the Sellers. Other Agents can also call into an office to ask how many offers are registered this way they will know what kind of competition they are walking in to.

Hopefully multiple offers will come in. This allows you to get market value for your home along with a nice competitive bonus.

Once a suitable agreement of purchase and sale has been negotiated all contracts are forwarded to the lawyer and the certified deposit cheque is placed in the Listing Brokerages trust account and held until closing. Both Realtors commissions are paid out of the deposit so that is one reason why they may insist on a large amount, at least 5-6% deposit.

Step 10: After the Offer is Accepted

The “For Sale” sign is replaced with a “Sold” sign which will be taken down after 2 weeks of exposure.

You may want to be wary about closings that are less than 30 days. A month is not a lot of time especially if something goes wrong. A typical closing time is 60-90 days from the date of purchase so that there is time to arrange a new home to live, storage, movers, mail, etcetera…

This 10 step sequence of events is what I find to be the most successful. Time and again it has achieved the greatest amount of money in the most efficient amount of time for many of my Sellers.

Once the photographs have been taken you are ready to plan your marketing and start to pull together all of the different marketing materials. There are many different tools that I will use to market a property. Depending on the home and the target market I will pick and choose the right combination of tools. Some approaches work great for selling a home in Summerhill but is the completely wrong approach for selling a loft in Leslieville. Some of the tools that need to be used include: Feature Sheets, Newspaper ads, MLS listings, personal agent websites, company websites, affiliated corporate sites, syndicated sites, custom property websites, Search Engine Optimization, Search Engine Marketing. This is by no means a complete list, it is just the start.

Developing an extensive Feature Sheet is a true art form that requires a lot of time, but it is time very well spent.  A flimsy black and white photocopy of a one page info sheet printed off of Realtor.ca just doesn’t cut it anymore. A proper feature sheet should answer every question a purchaser might come up with. It is drawn up and presented to the seller for approval before it goes to print.

In a high quality feature sheet there should be a room by room written description that catalogues the intimate details of the home. There should also be professional photographs, a property survey, a list of the average annual costs for utilities, a customised schedule B that protects the sellers interests, a neighbourhood summary, a list of exclusions and inclusions, and the appropriate contact information if they have any further questions.

It is very important to have an attractive, unique, detailed feature sheet because quite often this is the piece of marketing that makes the largest impact on the purchasing decision. It will hang around on the seller’s coffee table or dining room while they are comparing and contrasting the different homes they have seen.

Once the final approval for the feature sheet has been given an Agent should develop a Customized Web-Site with its own unique domain name and should reflect the information in the feature sheet. Property specific web sites are great for so many reasons. Through the use of analytic software you are able to understand exactly how users interact with your site. This will tell you a lot about what different aspects of the home are the most important to the average buyer. This knowledge can then be applied to the other aspects of the marketing mix. If the picture of the master bedroom gets clicked on 10 times more than the picture of the front of the house than you know which picture should be on the cover of your next direct mail piece.

You can also use the site to generate leads through creative calls to action. This platform also allows you to also share your home with the world. Someone locating to Toronto from the other side of the world will have an elaborate, interactive feature sheet right at their fingertips.

There are other really cool tools that can be added to the site that can increase the perceived value of the home. Some of these applications include designer software that allows a potential purchaser to manipulate photographs of the home.  This lets them see what it would look like if they changed the clay tiles in the front hall to dark hardwood or change the kitchen counter from red Corian to black granite.

Other great online marketing approaches include Search Engine Optimization (SEO) so that the home’s website positions well for search terms related to the property. Another tactic that I typically use is Google Pay Per Click, this generates traffic faster than SEO. I will also usually integrate into my digital marketing mix videos and virtual tours.
The opportunities to effectively market a property online are tremendous. It seems that each day there is a new cool trick used in other industries that can be applied effectively to real estate. It is truly exciting being in this business at this time.

Agents must have a clear and defined plan for how the property will be displayed and marketed online. If they don’t than there is a tremendous amount of opportunity lost. Missing that opportunity comes at a steep cost to the client. A great stat from the National Association of Realtors states that 86% of home buyers are using the internet to search for their home. This was in 2008, this is certainly a figure that won’t plunge any time soon. Be sure to ask all prospective Agent how they would market your listing online.

Continue reading: Part 4 of 4

While the house is being staged the Agent should coordinate some of the other prep work for the marketing of the property. This work includes a pre-inspection if it is a house or ordering the Status Certificate from the property manager if it is a condo. While the Agent is doing this the Seller can fill out a ‘Seller Property Information Statement’, SPIS, form. This is a form that was generated by the industry in order to help bring better transparency to the home buying process. It is filled out by the current homeowner and discloses any issues that may exist and asks questions about the age and state of the property. These items show that there is nothing to hide and discloses all the deficiencies up front so that hopefully there is no need for a conditional offer. It also saves the Seller from going through problems after an agreement has been made and potentially saves them from a law suit.

Step 5: Floor Plans

Another thing that can be done while the staging occurs is to have professional floor plans drawn up. Floor Plans are technical measurements that show each aspect of the house, walls, doors, windows, radiators, etc… They should be made available both online and included in the feature sheets. The floor plans will allow people to understand the layout of the home before they see the home, remember where everything is after they see the home, and can be shown to other interested parties who could not physically see the house.
Once the house has been staged, the pre-inspection done, and the floor plans drawn up it is time for the fresh flowers and photographer.

Step 6: Professionally Photograph the Home

It is well worth an Agent’s money to bring in a professional photographer to capture a home at its very best. These photos form the foundation of the marketing for the property. I have had Buyers refuse to “waste their time” visiting a home because of poor quality grainy pictures that they see on line, even though the house had everything they want. I know that it sounds crazy, but the photographs really make that big a difference.

Photographs are used in many different ways, all of which are critical to the effective marketing of the property. They are used for Feature Sheets, Newspaper ads, MLS listings, personal agent websites, company websites, affiliated corporate sites, syndicated sites, custom property websites and various other sources necessary for marketing the home effectively. Sometimes they are even used as Christmas cards by the new purchasers, but that is a long story.

Point and shoot photography simply lowers the perceived value of the Home and all of the marketing. It also tells you that the Agent may not know where to wisely invest their marketing dollars. During your Agent interviews be sure to ask prospective Agents if they use professional photographers. If they scoff take note.

Continue reading: Part 3 of 4