Most Important for Those Who Buy to Flip

April 12, 2008

Beware if you're buying new to flip

A recently discovered policy of the Tarion Warranty Corp. could have an enormous impact on the thousands of buyers of new homes and condominiums who resell the properties without moving in.
The policy was brought to my attention by Vidas Augaitis, a colleague who practises real estate law in Collingwood.
In April 2005, two of his clients, whom I will call Deb and Chris, bought a new house in Wasaga Beach from Pinevalley Developments Corp. On closing, the buyers received a Certificate of Completion and Inspection and a warranty certificate from Tarion confirming that the house was enrolled under the warranty program.
When they closed the transaction with the builder, Deb and Chris intended to sell their existing home and move into the new one. For various reasons, they changed their minds and eventually decided to sell the new house. The resale closed on July 24, 2007.
In January of this year, Deb and Chris received a visit from a senior investigator with Tarion's enforcement department. He told them that they should have registered the house with Tarion when they resold the property, since he believed it had not been occupied during the period of their ownership. The Tarion representative pointed out that anyone who sells a new home in Ontario without registering it with Tarion is liable to a fine of up to $25,000 or a term of imprisonment of up to one year, or both.
Deb and Chris were told that they would not be charged under the warranty legislation if they registered the house with Tarion at a cost of $600. In addition, they might have to post a $10,000 performance bond.

It makes no difference to Tarion that the house had already been registered by Pinevalley and that the original warranty remains in place for seven years, even if the house changes owners. If a new house is not occupied between the first sale and the second, it remains a new house, and the seller must register – or re-register it.

Since this sounded rather bizarre, I checked with Tarion spokesperson Robert Mitchell, who confirmed that Tarion requires the house to be registered twice.
When the first buyer resells the home without moving in, Mitchell emailed me, "the home is still a new home – it has never been occupied. The moment (the first buyer) sells a previously unoccupied home they fall within the definition of "vendor" under the Act and they must be registered.

"The two registrations are helpful from a consumer protection perspective because the home has the benefits of all the warranties, including the delayed closing and deposit protection. Since it is (the original buyer) who will now be the one selling the home, taking deposits ... and setting up a closing date, it makes sense that they should have responsibility for those warranty obligations."

In other words, even though the one-, two- and seven-year Tarion defect warranties carry over from Pinevalley's enrolment of the house to all owners within the warranty periods, Tarion requires the second owners to be protected by a second warranty enrolment.
In response to Tarion's position, Augaitis, who represents the original buyers, told me that both parties to the second transaction were clear that this was a resale, with no expectation of, or need for, deposit or delayed closing protection.
The house has still not been registered a second time with Tarion. The warranty police are currently examining the gas bills to try to verify that the house had been occupied by a tradesman who lived in the house rent-free from November 2005 through April 2006 while he built a recreation room in the basement. If occupancy can be verified independently, then presumably the house is exempt from double registration.

The ramifications of this case extend far beyond one house in Wasaga Beach. In recent years, thousands of Toronto-area homes and condominiums have been "flipped" by buyers without being occupied. Is Tarion on a campaign to extract a double set of registration fees and performance bonds (or fines) from investors who buy and sell without moving in?

The logic of the warranty corporation's position in this matter completely escapes me.

Source: Bob Aarron - Toronto Star

KEEPING STANDARDS HIGH

Public expectations of the real estate profession today are higher than ever. Ontario's new approach to real estate licensing education and emphasis on ongoing educational development by real estate practitioners continue to uphold the profession's commitment to fair dealing and high integrity.

The purchase or sale of property is a business transaction of tremendous complexity. There are distinct advantages to having a REALTOR® who is well-educated, knowledgeable, experienced and sincere. A REALTOR® also has access to an array of services, including the Multiple Listing Service, which can provide you with instant, thorough and accurate information on properties that might interest you or issues that concern you.

If you are selling, a REALTOR® will not only fairly assess your property, but listen to you and develop a marketing plan that best meets your needs. He or she will give you tips on how to improve the marketability of your home and make a first good impression to potential buyers.

If you are buying, a REALTOR® will act as an intermediary and help you deal at arms length with potential vendors. He or she will assess what you can realistically afford, target appropriate neighborhoods, provide facts on the costs of running a home and what to look for when considering a particular property.

A REALTOR® can also provide you with a list of lenders, lawyers, mortgage brokers and other professionals whose expertise you may require to complete a real estate transaction.

Source: OREA

ZEN LIVING

Zen is the way to harmony, simplicity, serenity and peace.

"Our most basic need is for space-space in which to live, to breath and to grow.

The use of materials, colour and light, are based on a recognition that we relate to our environment primarily through our five senses-the doorways of perception. If this relationship is to be harmonious our interiors must be pleasing to the senses-not simply comfortable. Balance, simplicity and unity help us to coordinate our use of space, materials, colour and light to create interiors that are in tune with both ourselves and the world we live in."

Reference: Peace at Home-Simple Solutions for Relaxing Rooms

Juliet Pegrum

March 19, 2008 -- Resale home transactions in the Greater Toronto Area continued at a moderate pace during the first half of March, Toronto Real Estate Board President Maureen O’Neill announced today.

“It’s important to recognize that we have endured the snowiest winter since 1939 and this has undoubtedly affected the market,” said Ms. O’Neill. “The storm that pounded the GTA during the second weekend of March likely had more people focused on shoveling sidewalks than house hunting.”

Despite moderate activity, the value of homes in our city continues to appreciate. At an average of $385,405 in the GTA and $409,116 in Toronto, prices have increased five and four per cent respectively compared to a year ago.

“Condominium apartments have weathered the winter best so far this year, with 733 sales to date but we remain confident that once the snow has melted, we will see a very active spring market overall,” said Ms. O’Neill. “The land transfer tax in Toronto concerns us and we continue to keep a watchful eye on how this tax plays out in the market.”

Source: Toronto Real Estate Board News

PROTECTING YOUR RENOVATION INVESTMENT

Get it in Writing to Protect Your Renovation InvestmentWhen planning a renovation project, homeowners often consider how improvements will affect the value of their property should they sell their home in the future. In many cases, a well-designed renovation project will significantly enhance both the value of your home and its marketability. Upgrades to living areas, particularly kitchens and bathrooms, tend to generate the greatest return on your renovation dollar.

However, a trend towards greater property disclosure in the real estate business highlights the importance of doing it right—making sure renovation work is done properly and that all building permit and inspection requirements are met.

Property disclosure forms are becoming a common requirement for anyone selling a home. These forms provide buyers with information about the property that may otherwise be difficult to obtain, including any renovations and improvements made by the seller.

Disclosure forms vary from one province to another, but typically sellers are asked to provide information about the systems and the structure of the house, as well as their knowledge of any problems. Sellers are also asked to indicate if they have undertaken any renovations, additions or improvements, and if so, was it done according to code, was a building permit obtained, and was a final inspection done or an occupancy permit issued?

Homeowners who work with a professional renovator will be able to offer potential buyers clear information about the work done. Having obtained a proper contract for the work, including plans and specifications, they will have complete documentation—including a record of what permits were required and obtained. At the time of resale, these documents will back-up information provided in disclosure forms.

Informal business arrangements done on a handshake and without a written contract simply won’t provide the documentation you may need when you someday sell your home.

Source: Canadian Home Builders Association

THE ADVANTAGES OF HAVING A REALTOR

When you dream of your dream home, what do you see? Each of us has a vision of what it will be, but getting as close to that vision as possible is a practical, step-by-step process that begins with finding a REALTOR®. A REALTOR® is your best ally throughout the home buying process. He or she can provide expert advice and help you determine how much you can afford, what kind of home you can buy in that price range, and where it may be located.

You've no doubt heard the phrase: location, location, location. That's because it's the most important factor in making any real estate purchase. To find the right location you must think of where you want to live both in broader terms and in more detail. First of all what type of area do you want to live in?

Urban: Urban communities offer the broadest range of housing types, but generally at higher prices than similar-sized homes in non-urban locations.
Suburban: The suburbs are typically made up of newer neighbourhoods, schools and shopping centres. Prices may or may not be lower than those of the central city, but you often get more square footage, larger rooms and bigger lots.
Smaller towns and cities: A slower-paced lifestyle and lower taxes and housing prices are often big draws to Ontario's smaller communities. There are fewer types of homes available and the number for sale could be limited.
Rural: A stream flowing over a few acres sounds appealing and your housing budget will often buy you more in a rural setting than any alternative above.

Features

Once you've considered the broader location options above, it's time to think about the features you need and want in a home. Prepare a shopping list. How many bedrooms and bathrooms? One or two-car garage? Large backyard or small? List the features you are looking for as needs or wants.

Comparing homes and locations

Now you want to match the type of home you'd like with the location. Start reading the real estate ads in local newspapers and REALTOR®-produced publications. These ads will give you an idea of the communities that best match your criteria for home and location. Drive through the communities that are likely candidates.

Check out the types of homes available, how well the neighbourhoods are maintained, the availability of schools and shopping, recreational and religious facilities. Be aware of drawbacks: highway noise, train tracks, airports and large industrial centres. Drive through the neighbourhoods at different times of the day.

You'll find the services of a REALTOR® invaluable in helping you locate the home that's right for you.

Source: OREA

Purchasing A Secondary Property

If you're thinking about buying a piece of real estate as an investment property,


market conditions are definitely in your favour. While the resale housing market has seen a tremendous amount of activity from first-time buyers in the past year, it's also a perfect time for existing homeowners to invest in secondary residential properties.

With record-low interest rates and significantly lower prices it's hard to go wrong - unless, of course you lack the financial means to make the investment. After all, you have to be ready to meet all the obligations that come with owning more than your principal property.


For instance, keep in mind that if you intend to rent out the second property, you'll also have to be prepared to deal with tenants and handle maintenance costs.


LeverageSecondary home ownership is an attractive investment option because it gives you even more leverage than you have with your principal residence. Leverage is when a relatively small amount of your money controls a much larger asset - like a property.
The more leveraged you are, the greater the financial return on your down payment becomes if the value of your property increases. There are very few other investments which can be purchased with such a small percentage of your own money.


For instance, let's say you acquire a second property for $100,000, with a $15,000 down payment, and during the first year that you own it, the property increases by a value of three per cent for a $3,000 gain. As a result, the return on your down payment of $15,000 is 20 per cent - $3,000 divided by $15,000.

Don't make the mistake of assuming that a rental income of $500 per month will carry a mortgage payment of $500 per month.

(Many inexperienced purchasers think that owning rental properties will allow them to "get rich quickly" and when this does not happen, the owner becomes disillusioned and loses interest in the property.)

Costs you should also be aware that the cost of obtaining a mortgage (for legal and appraisal fees) on a non-owner occupied property can be higher than the cost of obtaining a mortgage on an owner-occupied property, when more than one unit - such as a duplex or triplex is involved.

Interest rates charged on rental properties might also be higher because some lenders view these properties as being a higher risk.

As mentioned above, the main responsibility of having a second property is being able to carry it financially.
Some parents with grown children ready to go off to university or college choose to purchase secondary properties for their offspring to live in while they attend school. This gives them an excellent investment and they are assured that the occupants will take good care of the home.
If you'd like more information about purchasing a second property, consult a REALTOR® .


Source: OREA