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Archive for January, 2014

Ottawa remains stable in 2013, devoid of large fluctuations

Members of the Ottawa Real Estate Board sold 610 residential properties in December through the Board’s Multiple Listing Service® system, compared with 615 in December 2012, a decrease of less than 1 per cent.  The five-year average for December sales is 646, with sales from December in 2011 and 2009 increasing that average.

The total number of homes sold through the MLS® system in 2013 was 13,873, compared with 14,326 in 2012, a decrease of 3.2 per cent. The average sale price for residential properties, including condominiums, sold in 2013 was $357,348, an increase of 1.6 per cent over 2012.

“Looking back at the 2013 market, home sales in the first part of the year were, for the most part, down in comparison to the year before,” says new President of the Ottawa Real Estate Board, Randy Oickle. “The introduction of tighter mortgage rules in July 2012 largely affected the market well into 2013. However, as the year progressed the market began to pick up and then levelled out in November and December. Impending mortgage rate increases may have caused the increase in the second half of 2013, as many first-time buyers jumped into the market in advance of these increases.”

The average sale price of all residential properties, including condominiums, sold in December in the Ottawa area was $340,021, an increase of 0.9 per cent over December 2012. The average sale price for a condominium property was $245,349, a decrease of 5.1 per cent over December 2012. The average sale price for a residential property was $369,543, an increase of 3 per cent over December 2012.

“Although the government succeeded in its plan to “cool down” the market over the last year and a half, Ottawa remains steady and balanced, devoid of fluctuations in resale activity,” says Oickle.

Single level condominium apartments, December’s figures showed 74 sales for the month, compared with 63 in December 2012. The average price in December 2013 was $261,618, a decrease of 11.4 per cent over the previous year’s December.

Two storey condominium townhomes, December’s figures showed 61 sales for the month, compared with 60 in December 2012. The average price in December 2013 was $227,130, an increase of 3.3 per cent over the previous year’s December.

It’s a new year with new opportunities ahead. Call me for specific information on your own property.


Is using your RRSP to buy a house passé?

The Financial Post

by  Gary Marr, January 29th, 2014

The $25,000 Ottawa allows you take out of your retirement fund to buy your first home sure doesn’t go as far as it used to.

Under the home buyers’ plan, Canadians can take $25,000 out of their registered retirement savings plan and pay it back over the next 15 years without incurring any penalty. For a couple that means $50,000.

But the dollar amount has been stuck at $25,000 since 1999 while house prices have continued to escalate. At $50,000, you’re barely making the minimum downpayment if you are buying a home in Vancouver with a mortgage backed by the government.

The Canadian Real Estate Association says the average price of a home will climb to $391,000 next year, meaning that $50,000 is less than 13% and not enough to avoid costly mortgage default insurance.

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“I don’t know how effective the plan is now, so I’m not sure what would happen, if you increase the amount,” says Don Lawby, chief executive of Century 21 Canada.

It’s not just the amount. The tax-free savings account is now just as an effective savings vehicle. As of 2014, Canadians were allowed to contribute $31,000 and the amount increases every year. You can also withdraw money from a TFSA and put it an equal amount back later.

“I think you almost need a combination of the two plans together to fund that kind of investment,” said Mr. Lawby, about buying a house. “It depends on where you live in Canada.”

The home buyers’ plan was launched with a $20,000 withdrawal limit and it jumped to $25,000 in 2009.

One of the arguments against increasing the limit is it will encourage young Canadians to rob their retirement savings to buy a first home. Paying the money back over 15 years — there are significant penalties if you don’t — means you might not have the money to make current contributions.

“Some people say the RRSP is not the most efficient way of saving for a house,” says Benjamin Tal, deputy chief economist with CIBC World Markets.

He says there hasn’t been an acceleration in the use of the home buyers’ plan because first-time buyers are being squeezed out of the market.

“Older people and people buying second properties don’t use their RRSPs to buy homes,” says Mr. Tal. “You would expect, given rising prices there would be more use [of the plan.”

Vince Gaetano, a principal of monstermortgage.ca, says the home buyers’ program is mostly being used by people as a tax loophole.

“This is the most popular time of the year to do it. They manipulate the system to deliver a tax return on the downpayment they will (already be) making on their purchase,” he says.

If you know you are buying your first home in the next 90 days, you make a $25,000 contribution or $50,000 for two people. That means a big refund in April. You then withdraw the $25,000 or $50,000 to pay for that initial home.

“Most people have the RRSP room. If you are buying a house by June and you have the downpayment in cash, you make the contribution to trigger the refund,” said Mr. Gaetano, noting the $25,000 has to be in the plan for 90 days before you can take it out.

“You can garner $20,000 in refunds,” said Mr. Gaetano, pointing out it will depend on what your marginal tax rate is.


Why it’s hard to win an expropriation fight

By Robert Hof

Frank Meyers, a farmer in Trenton, Ontario, made the news last week about his 7 year fight to stop Canada’s National Defence Department’s plan to expropriate his farm, which has been in his family since before Confederation, in 1798. His case is a good example of how difficult it is to fight when the Government wants your land. The Defence Department wants Frank’s land to build a new training and administrative campus for the Canadian Special Forces Command.

Each of the Federal, Provincial and City Governments have the power to expropriate land. The general principle is that it must be for the greater public good if the government is going to take land away from a private land owner. It also must be finally approved by someone that we, the people, elect. In Ontario, the process is governed by the Ontario Expropriations Act. If the government wants your land, the land owner is entitled to a hearing, where the government agency that wants your land sends representatives to show why it is necessary. The owner can challenge this with his own evidence. The hearing takes place in front of someone called an Inquiry Officer, who is an independent third party appointed by the Province of Ontario.

The Inquiry Officer then makes a recommendation and sends it to the Approving Authority, who is the elected official who will make the final decision. In Frank’s case it is the Canadian Minister of Public Works, Diane Finley. Here’s the problem; even if the Inquiry Officer had recommended that the expropriation not take place, the Government does not have to follow the recommendation; they can take your land anyways. In addition, the Government does not compensate you if you hire lawyers for the hearing before the Inquiry Officer, so you would have to pay these costs yourself. Frank’s land is close to the existing Canadian Forces Base at 8 Wing Trenton, so it does make sense why it was chosen by the Government. You can make the argument that all Canadians will benefit from this land.

In my opinion, the only way to effectively stop an expropriation is to make it political. In the late 1960′s, The Toronto government wanted to build the Spadina (Allen) Expressway, which would have provided an alternate downtown route from the 401 to the City. The City of Toronto expropriated most of the land to do it. But a “Stop Spadina” group of activists emerged who gathered hundreds of thousands of names and launched protests to stop the Expressway from happening. The activists included Alan Powell, a University of Toronto professor, Jane Jacobs, who wrote “The death and Life of Great American cities and who had won the battle to stop the Lower Manhattan Expressway in New York City, and John Sewell, who was elected to Toronto Council on his promise to fight to stop Spadina. The result was that on June 6, 1971, Bill Davis, the Premier at the time, got up and cancelled the Expressway. It is now known as the Allen Rd., and ends at Eglinton Ave. In Toronto. Bill Davis later used this during his own campaign for re-election in 1972, which he won. The issue had become very political.

Frank’s case has now hit social media, and on-line petitions and protesters have come forward to try and still stop the expropriation from happening. I do not personally see this as a potential election issue in 2015, but who knows.

A consoling point for Frank is that the Government must still pay fair market value for his land. Both the Government and the land owner who is affected will obtain separate appraisals and hopefully come to a settlement. If an agreement cannot be reached as to price, it will be determined at the Ontario Municipal Board. For a lot of Canadians, it is difficult to accept the notion that any government should have the right to take away your land. However, in my opinion, if it is demonstrated that it is for the greater public good and fair value is paid, move on and find another property.

Click here to read the article:

http://www.thestar.com/business/personal_finance/2014/01/26/why_its_hard_to_win_expropriation_fights.html


See Mark’s Canada AM interview – January 15, 2014

By Robert Hof

Frank Meyer’s home that has been in his family for over 200 years is now being expropriated by the Canadian Ministry of National Defence. See Mark’s interview where he discusses the law of expropriation. It is the second link on the right hand side of the page. There is a short commercial before the interview:

http://canadaam.ctvnews.ca/i-m-still-standing-up-to-it-farmer-frank-meyers-says-of-dnd-expropriation-fight-1.1640006


Missing a page can nullify a real estate contract

By Robert Hof

Mark Weisleder

Mark Weisleder

You can never be too careful – as Mark Weisleder demonstrates here – Robert.

Real estate contracts must be properly signed and accepted. This applies when offers are transmitted via email communication as well. Careless errors or omissions can cause a contract to be cancelled. Here is an example:

On September 22, 2011, a couple put in an offer to buy a home in Kitchener $400,000. They asked for a closing date of November 16, 2011. This offer was not accepted. The sellers changed the price from $400,000 to $420,000 on the front page of the offer. They also changed the closing date to December 16, 2011 because they had a tenant who would not leave before that date. Their real estate agent then scanned the offer and sent it by email to the buyer’s real estate agent on September 23, 2011. However, the counter offer was missing the actual signing page, so there was no signature of the seller included in the offer that was transmitted.

The agent met with the buyers and they changed the price on page one of the offer to $410,000 and initialed it. He then scanned it and sent it back to the seller agent by email on September 25, 2011. Again, the offer that was emailed continued to be missing the actual signing page. The offer was open for acceptance until 6 pm on September 25, 2011. The seller agent then told the buyer agent verbally that the sellers had accepted the price change of $410,000 and he re-sent the offer to the buyer agent by email. However, the sellers did not initial the price change on page 1 of the offer.

The sellers later claimed that they never agreed to $410,000 and that they always thought that the sale price was $420,000. The deal couldn’t close because the tenant refused to vacate on December 16 and the parties could not figure out a way to settle the matter. It ended up in court. The buyers sued for $17,000, based on their losses as a result of the sellers’ failure to close the deal on December 16.

In a decision dated January 8, 2014, Deputy Judge Sebastien Winny in the Superior Court of Justice of Ontario Small Claims Court, decided that there was never any valid contract signed and accepted. He found as a fact that the missing page 4 was not correctly inserted into the offer until October 11, 2011, so by then, the buyer’s last offer had expired.

In order to have a valid contract, it must be signed and accepted and the acceptance must be communicated to the person making the offer, before the contract deadline. Real estate agents can sometimes accept this communication on behalf of their clients. However, verbal communication is not good enough. It has to be in writing. In this case, because the offer was missing the signing page and because the last price change was never initialled by the sellers, the contract was cancelled.

It is interesting that the judge ruled that if he had decided that the contract was valid, he would have given the buyers $13,000, being their damages as a result of the sellers not being able to close on time, including moving costs, legal fees, renting alternate accommodations and mental distress.

There are several important lessons from this case:

  • Make sure that all important terms of a contract, especially the price and closing dates, are initialed by the buyer and the seller
  • When scanning and sending any offer by email, make sure that all pages are included. It is easy for errors to happen with the scanner, if for example, 2 pages go through together;
  • Make sure that any tenant on your property will vacate in time for closing, before you sign any agreement.

Click here to read the article:

http://www.thestar.com/business/personal_finance/2014/01/17/why_real_estate_contracts_must_be_properly_accepted.html


Canadian home sales moderate further in December

According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity posted its third consecutive month over month decline in December 2013. View PDF.

The Perils of Buying or Selling a pre-construction condominium

By Robert Hof

 

Mark Weisleder

Mark Weisleder

By real estate lawyer, Mark Weisleder.

For the last number of years, it was almost a given that if you bought a pre-construction condo, you would be able to sell it at a profit when the building was finished several years later. I am now seeing examples in my own law practice where there is no such guarantee.

In one example, the condo was purchased by Syrian immigrants 5 years ago, prior to the outset of hostilities in that country. When the building was finished in 2013, the buyers could not get access to their money in Syria. As such, they could not close their purchase and could not find anyone to purchase their contract. They forfeited all deposits paid, which were more than $30,000.

In another situation, the buyer was approved for financing 4 years ago when the condominium agreement was signed with the developer. However, when the building was finished, the same lender refused to give the financing, stating that the buyer’s financial status had changed and that they no longer qualified for the mortgage. In this case, the buyer was able to sell their contract before closing, but they had to take a loss of $20,000, and had to pay real estate commission on the sale as well, increasing their losses.

In another situation, the buyers were able to sell their contract before closing at a profit of $30,000. They later received a re-assessment notice from the Canada Revenue Agency on the basis that since this buyer never actually received title to their unit, they had to pay tax on the full $30,000 gain as though it were income, and not as a capital gain, where they would have been taxed on one half the gain, or $15,000.

Is there any way buyers can be protected from any of the above situations occurring?

In all cases, buyers should make sure when they sign a pre-construction contract, that they have the right to sell or assign it before closing without requiring the permission of the seller.

The situation with the Syrian buyers was very unfortunate, but it does not give them a legal right to cancel a contract. The same is true of the buyer whose financing gets pulled at the last minute. In order to have this right, it has to be negotiated at the time the contract is signed. Buyers should consider negotiating a clause with the builder that states that if there is a change of life circumstance before closing, such as death, serious injury or loss of employment, that they can cancel the contract upon the payment of a set amount or penalty.

For buyers who have no choice but to sell before closing, there may be a way to fight a re-assessment by the Canada Revenue Agency if you can demonstrate that at the time you bought, you clearly intended to close the sale, but that circumstances changed at closing, requiring you to sell. Since every individual situation will be different, it is best to always seek tax advice from a lawyer or accountant before making any decision to challenge a re-assessment. In addition, if you are ever called by someone from the Canada Revenue Agency inquiring about any prior transaction you may have made, my advice is to tell them you will call them back, and then get legal or accounting advice first. In my experience, it is very unsettling to get a call out of the blue from the Canada Revenue Agency and it is easy to say something wrong or get confused.

Click here to read the article:  

http://www.thestar.com/business/personal_finance/2014/01/10/

beware_the_perils_of_buying_or_selling_a_preconstruction_condo.html

 – Mark Weisleder


Home inspection may require a team approach

By Robert Hof

Since writing about changes coming to the home inspection industry, I have received countless emails from home inspectors, real estate agents and buyers. Buyers complained after closing about problems with their home that were not caught during the home inspection. This included serious mould behind one of the walls in the basement, a defective fireplace and a furnace that was working but would soon require to be replaced. Some buyers blamed their real estate agents, stating that they only recommended an inspector who would approve the home quickly.

In the situations noted above, it would have been difficult for a home inspector to have noticed the issue, primarily because they are not able to look behind any walls or under floors and only furnace and fireplace specialists may be able to detect certain flaws in these items. Real estate agents will typically provide the names of three inspection firms for their clients to choose from.

In rural properties, it is common to have separate inspections for the home, the well and the septic system, as these all require different expertise to properly inspect and advise potential buyers. When you consider the soaring average prices for homes, and with a majority of homes being over 20 years old, it may be time to take a similar team approach when it comes to inspecting a home prior to any purchase decision.

For example, every fireplace should be inspected by a qualified wood energy technology transfer professional once a year. This is a real safety issue as an improperly working fireplace can cause a fire in your home. Homes built before 1955 likely have unlined chimneys, meaning that there is not much protection between the heat and the rest of the house.

Homeowners should have their furnaces and HVAC systems checked once each year for similar reasons. Not only should you make sure that your equipment is operating safely, you may be able to make changes to your equipment that will make your system operate more efficiently, saving you money in the long term. Sellers should consider such an inspection before they put their home up for sale, to demonstrate to any buyer that the system is operating safely.

Mould is becoming an even larger issue with older homes. The good news is that there are now companies that can inspect for moisture in the wall cavities with their sophisticated infra-red equipment. To make sure the mould investigation is done correctly, you need to complete these two steps: infrared inspection and the air quality testing. By doing so, it will give the buyer comfort in knowing that they will not be facing significant bills in the future to remediate a mould build-up.  This can be very expensive as it typically requires removing substantial amounts of drywall and then spraying the entire interior of the home to remove the mould spores.

Some companies that offer this service are Tri-Star Disaster Recovery Services http://www.tristardisasterrecovery.com/buying-or-selling-a-home/, Canada Restoration Services http://www.canadarestorationservices.com/ andGreenstream Environmental http://www.greenstreamenvironmental.ca /

Konstantino Zaraliakos, the President of Tri-Star Disaster Recovery Inc., tells me that the cost to conduct a mould inspection can be done for as little as $300 for two air quality samples and an infrared inspection. The size of the home and the extent of the mould damage within the home will determine how many samples are needed.  He says that more and more buyers are now requesting this inspection as part of their home inspection process. He also states that even homeowners who are not selling their homes are requesting these inspections because of their desire to know that their home is healthy.

When you are about to make one of the largest purchase decisions of your life, it is important to have as much information that you need in advance. A home inspection team may supply the answer.

Click here to read the article:

http://www.thestar.com/business/personal_finance/2014/01/05/home_inspection_may_require_a_team_approach.html