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Archive for January, 2013

Steady as she goes for the Ottawa resale market in 2012

Members of the Ottawa Real Estate Board sold 618 residential properties in December through the Board’s Multiple Listing Service® system, compared with 695 in December 2011, a decrease of 11.1 per cent. The five-year average for December sales is 617.

The total number of homes sold through the Board’s MLS® system in 2012 was 14,308, only a minor decrease from the 14,389 homes sold in 2011. However, resale home sales in 2012 were slightly above the five-year average of 14,274. The average sale price for 2012 was $351,792, an increase of 2.3 per cent over 2011.

“Looking back at the 2012 market, home sales in the first part of the year increased in comparison to the first half of 2011,” said new President of the Ottawa Real Estate Board, Tim Lee. “However, with the introduction of tighter mortgage rules in July, and looming government layoffs, the market seemed to “cool down” for the second half of 2012. Although the government has succeeded in its plan to “cool down” the market, Ottawa remains steady and balanced, devoid of large fluctuations in resale activity. We are truly fortunate to live and work in such a stable market area, and it seems buyers and sellers agree that Ottawa remains a great place to call home.”

The average sale price of residential properties, including condominiums, sold in December in the Ottawa area was $336,591, an increase of 1.3 per cent over December 2011. The average sale price for a condominium-class property was $258,498, a decrease of 1.5 per cent over December 2011. The average sale price of a residential-class property was $358,211, an increase of 0.6 per cent over December 2011.

Single level condominium apartments, 2012’s figures showed a total of 1,434 sales for the year, compared with 1,624 in 2011. The average price for the year was $299,498, an increase of 4 per cent over the previous year.

Two-storey condominium townhomes, 2012’s figures showed a total of 1,329 sales for the year, compared with 1,359 in 2011. The average price for the year was $234,772, an increase of 3.9 per cent over the previous year.


Buyers out $10,000 as house deal falls apart

By Robert Hof

If a house deal falls apart because the buyer can’t close and the seller then sells the property to someone else for more, who gets the deposit?

Here’s what can happen:

A couple agreed to pay $289,000 for a new home from a developer. They accompanied their offer with a $10,000 deposit and the builder accepted it. The buyers got cold feet and the next day changed their mind, asking for the return of the deposit.

The builder refused to return it and resold the house for $700 less than the original deal, but kept the deposit. The couple sued in Small Claims Court for the return of the deposit. When it came to the hearing, the question for the court was whether the builder could keep it all. The judge decided the builder could only keep $700 — the amount by which the sale was reduced — and was ordered to give the balance of $9,300 to the buyer.

The builder appealed. Three years later, the Ontario Superior Court of Justice decided the builder could keep the entire deposit, even though he did not suffer any loss.

The judge quoted the law on the subject as follows:

“Even in the case where the seller re-sells at a purchase price that is high enough to compensate for any loss from the first sale, the seller may nevertheless retain the deposit.”

What this means is that, where it is the buyer’s fault that a deal does not close, the seller can keep the deposit. There is an exception to this rule if the amount of the deposit is out of all proportion to the losses suffered. In those cases, the loss of the deposit may be considered a penalty and then it will not be paid to the seller and will be returned to the buyer.

The buyers tried to argue that the loss of the $10,000 was out of all proportion to the losses suffered by the seller. The judge noted that the deposit paid was only 3.6 per cent of the purchase price.

In my opinion, the deposit would have to be greater than 10 per cent of the purchase price in order for the buyer to recover it if the seller suffered little or no damages.

Here are the lessons:

1. Understand your rights are before you sign a real estate contract and make a deposit.

2. If you are a buyer, understand that once an agreement is signed and accepted, you cannot simply change your mind, even one day later.

3. If a buyer defaults on their obligations, then not only can the seller sue for any damages, they can in most cases sue for the deposit, even if they have suffered no damages at all.

4. If a matter goes to court, any deposit will remain in the real estate brokerage trust account until the parties sign a mutual release or the matter is decided by a court, which in this case, took more than 2 years.

Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com


Bank of Canada signals rates likely on hold until 2014

The Bank of Canada announced on January 23rd, 2013 that it is keeping its key policy interest rate at 1 per cent, where it has been held for more than two years. In providing guidance on where interest rates are heading, the Bank said interest rate hikes are “less imminent than previously anticipated.” View PDF.


A $46,000 home buying mistake

By Robert Hof

Another cautionary tale from Mark Weisleder.

Be sure to make sure that any requests to ensure things like a home’s oil tank is in good working order are in writing before you buy or sell a house.

As part of a home sale, many buyers ask for repairs to be done before the deal closes. But if the details are not set out clearly, there can be serious consequences.

Here’s why. Some time ago, a woman agreed to buy a house for $174,000, with a closing date of October 31. The contract was later amended, with the seller agreeing to ensure the oil tank was working properly, certain pipes were properly installed and repairs were made to the roof, garage and drainage system. They were to be done by Oct. 1.

The buyer visited the house with her inspector on October 14 and the inspector concluded that some of the repairs weren’t done. The buyer said if the outstanding items weren’t fixed, she would not close the deal.

The seller offered her $1,000 off the purchase price to close, which she refused and the deal fell apart. The seller ended up selling to someone else for $128,000, some $46,000 less than the first offer. He sued her for that amount.

Two years later, a judge of the Ontario Superior Court of Justice decided that the first buyer had no right to refuse to close, because the seller had made most of the repairs she had requested and offered cash for those outstanding. She was ordered to pay the $46,000.

The woman had claimed it would be expensive to complete the work, but offered no proof of those costs. The seller argued the house was for the most part what she agreed to buy. The Judge agreed with the seller.

Here are some things you can conclude from this case: When a deal is conditional on the buyer being satisfied with something like a home inspection, if the buyer is not satisfied, they can usually get out of the deal. But if a seller undertakes to do something like minor repairs and they are not done, the buyer is entitled to reasonable compensation to complete the work, but cannot refuse to close.

Frequently, buyers find problems during a home inspection and negotiate with the seller to have the defects fixed before closing. I get nervous when I see these clauses because it can come down to who decides whether something was completed in a professional manner or not? Or who is going to decide how much it will cost to fix the problem if it is not completed?

My advice is to try and figure out what it should cost to fix using estimates from contractors and then reduce the price by that amount. Let the buyer deal with it after closing. If you are going to insist on the seller fixing it, then also make it clear in advance that if the buyer is not satisfied with the work, then a preset amount will be held back on closing, until the problem is solved.

Buyers should never assume they have a right to refuse to close any deal just because there are some damages to the property or repairs that were not done properly. Both buyers and sellers should get professional and legal advice, preferably before signing any contract or amendment, dealing with any repair obligations or issues.

By lawyer Mark Weisleder – reproduced from Moneyville magazine


Why more home sellers are listing in January

By Robert Hof

With an uncertain housing market, more homeowners are opting to put their houses on the market in January.

Traditionally, January is a slow month for real estate as most sellers choose to wait until the middle of February in the hopes of capitalizing on the early spring market. However, given the uncertainty in the housing market right now, more sellers are opting to put their house on the market in January.

This presents an opportunity for buyers. Most people are reluctant to uproot their families during the school year, so that means less competition — and fewer bidding wars. Lenders will not be as busy, so buyers can expect a more efficient process to get approved for a mortgage to ensure they have financing in place before making an offer.

But there are things you simply won’t be able to inspect during the winter. Here are some tips for protecting yourself when making a deal during the winter months:

Sellers

Spruce up the outside: Use urns with light wood branches to brighten up the exterior of your home, to compensate for any overcast day or snow on the ground.

Get rid of the Christmas lights: homes that look dated on the outside give the impression that they are probably dated on the inside.

Make sure your fireplace is working during any showing, that the temperature is comfortable in the home and that any interior lighting compensates for what is usually grey lighting from outside.

Have pictures of your landscaping available from the summer and autumn, showing how beautiful your home looks year round.

Have available any inspections that you may have done on your air-conditioning unit or swimming pool before they were closed for the winter, as buyers will likely not be able to conduct inspections on these items and will have questions.

Consider inviting a company to do an environmental audit on your home in advance, confirming that there is no moisture behind the walls that could lead to mould and that you have sufficient insulation behind the walls.

Buyers

If there is anything that cannot be inspected because of the winter, such as the air-conditioning system or any swimming pool, then negotiate an extended warranty in the agreement, to give you until at least May 1, to inspect and have the seller be responsible for any damages. In addition, also negotiate a holdback of, say, $2,000 so that if a problem arises, the money comes out of that fund to fix it and you don’t have to chase the seller in court later.

Be careful about snow accumulating around the base of the home. It will be difficult for a home inspector to figure out whether the grading is likely to cause water problems in the basement later. Consider doing your own environmental audit to check for moisture behind any walls.

If the snow on the roof looks like it is evaporating faster than the snow around the house, it is likely a sign that there is not enough insulation in the home.

Check with your insurance company early as to whether you will have any difficulty obtaining insurance on the home; for example, by finding out whether there have been claims made in the neighbourhood about water damages or sewage backups.

Check whether snow accumulation makes it more difficult for street parking, as this may be the only parking available on certain streets. Also see how bad weather may affect your morning commute.

Check the last electric/gas bills, to determine how energy efficient the home is in winter.

People tend to hibernate and stay at home in the winter, so take the opportunity to get to know the neighbours before you finalize your purchase.

By being properly prepared in advance, buyers and sellers can negotiate a safe and successful winter home sale.

Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com


Canadian home sales little changed in December

According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity was little changed on a month over month basis in December 2012, holding it in line with levels reported in August when demand first geared down in the wake of tighter mortgage lending rules. View PDF.

Should home seller disclose if someone died in the house?

By Robert Hof

In November the Toronto Star reported that a Bowmanville couple is suing their real estate agent and the people from whom they bought their house for not disclosing that there had been a double murder there 15 years earlier — including that of a 6-year-old girl.

Two years ago in Orangeville, a homebuyer was able to get out of his deal after learning that the house was owned by a nurse who had been murdered nearby.

These cases, and others like it, raise interesting legal issues about what should or shouldn’t be disclosed when a house is sold. Should sellers be required to say that there has been a murder or suicide in the house? If yes, how far back should you go? One year, five years, 10 years? About half of American states require disclosure if the death happened within three years. In Canada, there are no laws governing these situations.

For buyers and sellers, the question is whether disclosing this information will affect the value of the property. Toronto real estate agent and appraiser Barry Lebow believes it does.

Lebow, who has 45 years in the business including giving expert evidence on property stigmas, says a “death house” carries a stigma that will almost always negatively affect its value. In many cases, the home has to be demolished and the address changed. In other cases, even if it does not bother a current buyer, it will bother a future buyer when they try and sell it later.

In 1974, Hungarian-born real estate developer Peter Demeter was convicted of arranging the murder of his wife at their Mississauga home. He later couldn’t sell the home so he arranged for someone to burn it down in 1983. He was later convicted of arson. Not a good plan.

The home on Bayview Ave. in St. Catharines that Paul Bernardo used to commit his sexual assaults and tortures was later demolished. The new home built there was given a different street address, to further distance it from what had occurred in the past.

In Lebow’s opinion if you live near a murder house, the stigma will typically not affect the value of neighbouring properties. But even so, what goes on next door can be an issue.

In a 1998 case from Kelowna, B. C., Ron and Marlene Allen made an offer to buy a beachfront house. They asked the sellers, Ken and Dorothy Summach about the empty lot next door. The Summachs said it was a public beach, neglecting to say it was a nude beach.

The Allens refused to close. Now some might think a nude beach would add value to the home, but the Allens didn’t. Five years later, the B.C. Court of Appeal decided the Summach’s did not need to disclose that fact, as the ‘defect’ was not occurring on their property.

A little closer to the GTA, a couple with two young children bought a home in Bracebridge. The sellers did not disclose that the house across the street was owned by a man convicted of possessing child pornography. The buyers sued and the sellers brought a motion to have the case thrown out. They argued they weren’t under an obligation to disclose the fact.

In a decision dated March 3, 2010, Judge Alexandra Hoy let the suit go ahead. She said:

“The buyers’ claim is novel. And it raises policy issues, including the protection of children and whether, if successful, the claim will have the effect of making the re-integration of persons convicted of certain crimes into society more difficult.”

The buyers never moved in. They subsequently resold the home at a loss and settled the case out of court with the sellers. So we will not learn what the final decision might have been.

In Ontario, real estate agents must disclose any material fact that they are aware of under the rules of their Code of Ethics. In my opinion this includes whether a murder or suicide had occurred on the property and could also include certain neighbourhood conditions.

Buyers can always Google the property address which will likely turn up articles about prior violent crimes. Before you buy, you can always tour the neighbourhood, speak to people and ask questions about the home. In addition, put a clause in your offer where the seller states that they are not aware of any murder or suicide ever being committed on the property in the past. If sellers are asked, they must respond truthfully.

It is time for government to give guidance on what stigmas need to be disclosed, so that buyers, sellers and real estate agents are better prepared for this very difficult issue when buying or selling a home.

Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com


Top real estate lessons from 2012

By Robert Hof

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

By Mark Weisleder | Fri Dec 28 2012

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