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January 2008 eNewsletter

January 9th, 2008 Posted by Buying opportunity, eNewsletter, First-time buyers, Toronto Land Transfer Tax, Toronto Real Estate No Comment yet

As you know, the new City of Toronto Land Transfer Tax comes in to effect on February 1st, 2008. Some details are becoming a bit more clear. According to the information below (provided by the Toronto Real Estate Board), first-time buyers spending less than $400,000 will not be forced to pay the exempted amount up front and then wait for a rebate. First-time purchases up to $400,000 are now going to be fully exempt from day one. However, it is important to note that the LTT will NOT BE FULLY EXEMPT for purchases over $400,000. From the start, those first-time buyers will have to pay the full amount up front, then wait for the maximum rebate of $3,725. Hopefully, the Teranet system will be fully udpated soon, after which time first-timers spending more than $400,000 will only have to pay the LTT on the amount over $400,000!

First time home buyers of new AND re-sale homes will receive a rebate of the Toronto land transfer tax of up to $3,725 (this equals a 100% rebate on homes purchased for up to $400,000). Teranet will be collecting the Toronto land transfer tax for the City of Toronto. Once the City’s rebate policies are reflected in Teranet’s collection system, the rebate-eligible amount will be exempt at the time of registration. The City previously indicated that these arrangements would not be made until the “spring of 2008”, but has now indicated that changes will be made by February 1, 2008, when the Toronto land transfer tax takes effect. According to the City, purchasers who are eligible for a FULL rebate of the Toronto land transfer tax will not have to pay the tax (meaning that they do not have to pay the tax upfront and be rebated later). This means that first-time home buyers where the total Toronto land transfer tax is $3,725 (the Toronto land transfer tax payable on a home purchased for $400,000) or less, will not pay Toronto land transfer tax (see exception noted below). If you have any concerns, please check with your lawyer.

Note: First-time home buyers with Toronto land transfer tax payable above the maximum rebate amount of $3,725 (those purchasing homes above $400,000) will be required to pay the total Toronto land transfer tax, and then receive the maximum rebate of $3,725 at a later date from the City. Once all changes have been made to Teranet’s collection system, in the spring of 2008, these buyers will only have to pay the balance of the Toronto land transfer tax above $3,725.

Who qualifies as a first-time home buyer?

According to the City of Toronto, eligibility rules for the Toronto Land Transfer Tax first-time buyer rebate will mirror provincial rules, as follows:

– The purchaser must be at least 18 years of age.
– The purchaser must occupy the home as his or her principal residence no later than nine months after the date of the conveyance or disposition.
– The purchaser cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time.
– If the purchaser has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world while he or she was the purchaser’s spouse. If this is the case, NO refund is available to either spouse. Note: If a purchaser’s spouse owned an interest in a home BEFORE becoming the purchaser’s spouse, but not while the purchaser’s spouse, the purchaser may be eligible for some rebate.

Are Toronto Land Transfer Tax Rebates in addition to Provincial Land Transfer Tax Rebates?

– Yes. The provincial government also provides a rebate of the provincial land transfer tax for first-time buyers.*

*As of December 12, 2007, the Province of Ontario started offering first-time home buyers a $2000 rebate of the Provincial Land Transfer tax.

As a reminder, please note that the new Toronto LTT does not apply to transactions closing before February 1st, 2008. I’ll do my best to keep you up to date with these changes. As always, please feel free to contact me with any questions or comments.


Bully Offers

As some of you have experienced recently, there is a relatively new phenomenon occurring in the Toronto real estate market: the Bully Offer. By now, most market watchers are familiar with the typical marketing cycle for homes listed for sale. The listing is posted this week, an open house is scheduled for the weekend, and offers will be viewed next week. In the hectic Toronto market it has become important to make sure that we do sufficient marketing of a listing to ensure as good exposure as possible; we don’t want a listing being scooped up in one day. That leaves everybody wondering if the listing could have sold for more money – and maximizing the proceeds from a sale is the real estate agent’s duty to the Seller.

This procedure has basically become the de facto standard in recent years. However, a counter-strategy has emerged that can really make things difficult for everybody. A “bully offer” is one registered prior to the scheduled date – often several days early – to be presented ASAP. The Listing Agent is obliged to present the offer to the Sellers. The ball is then in the Sellers’ court: do they take the ‘bird in hand’, or wait for the scheduled date in the hopes of getting competition? To be attractive to the Seller, the bully offer is typically (almost always, in fact) for more money than the asking price, and often ‘firm’, meaning with no conditions attached. It’s a tough decision that can only be made by each Seller on a case-by-case basis.

What about other potential Buyers? The Listing Agent is obliged to inform only Buyer Agents who have registered an offer intended for the scheduled date. Since we usually don’t register until the scheduled day of offers, every other Buyer who has looked at the house may be left out. However, it seems most Listing Agents are taking the time to notify every other agent who has shown the property. (Also, I typically call the Listing Agent if my Buyers express any interest at all in a property; I ask to be kept up to date with changes or developments.) A bully offer puts tremendous pressure on the other Buyers, who may have been counting on more time to make their decision, arrange financing, etc. But, that’s the point of the bully offer – to ‘box out’ the competition.

How do you beat a bully offer? Firstly, be as ready as you can be to make a purchase: have your financing pre-approved. Secondly, if you are interested in a property, consider a pre-home inspection. That costs money, and you might still get out-bid, but that will allow you to make a ‘firm’ offer, if necessary. Thirdly, try not to fall in love with any particular house! You may not get the house, and if you are emotionally committed to it you risk disappointment. (Remember: in any negotiation, you have to be ready to walk away if you don’t get what you want/need.) If you are ready and willing to make a competitive offer, you have just as good a chance against a bully offer as any other situation.

Being prepared to deal with bully offers is now part of the whole buying process. No matter what we encounter, I always recommend that my clients be flexible and co-operative in negotiations – even if the other side starts to get prickly. Staying cool and ‘professional’ helps get you through even the most difficult negotiations.


New Toronto Land Transfer Tax

Recently, I sent you some information about the new Toronto Land Transfer Tax; I got a number of follow-up questions and comments, so I thought that I would respond with some figures and brief comments about what’s happening in the market as a result of the recent decision by Toronto City Council to basically double the existing Land Transfer Tax.

Here’s what the actual taxes will be for a sale at $400,000:

Ontario Land Transfer Tax $4,475
Toronto Land Transfer Tax $3,725
Total $8,200

Here’s what the actual taxes will be for a sale at $500,000:

Ontario Land Transfer Tax $6,475
Toronto Land Transfer Tax $5,725
Total $12,200

Here’s what the actual taxes will be for a sale at $600,000:

Ontario Land Transfer Tax $8,475
Toronto Land Transfer Tax $7,725
Total $16,200

Here’s what the actual taxes will be for a sale at $1,000,000:

Ontario Land Transfer Tax $16,475
Toronto Land Transfer Tax $15,725
Total $32,200

Basically, the total Land Transfer Tax rate will be 4% per $100,000 over $400,000! That’s a powerful incentive to act now. The new tax could hurt first-time buyers who are on a budget by eating up a significant portion of their down payment, even if the City provides a refund of some or most of the amount. For buyers of more expensive homes, the dollar amount will be quite high, which won’t be fun to deal with. (Plus, anybody who rolls the amount into their mortgage will pay double or triple the tax amount over time.) Either way, acting now to avoid the tax makes sense.

Not surprisingly, this has already motivated a lot of buyers to try to buy ASAP to beat the tax. (Please refer to yesterday’s email to find out how that works.) As a result, in the last couple of weeks the market has become busier than ever. If you are a buyer, that means a bit more competition – which is added incentive to buy sooner rather than later, as these price increases will be compounded over time as the market continues to rise due to other factors. If you are a seller, it makes now a great time to sell, as the number of prospective buyers for your home has spiked.

Overall, I don’t expect the new Toronto Land Transfer Tax to have a serious negative impact on the market; it’s basically 1% of the average sale price (which is still under $400,000). Considering that the market is rising at greater than 5% per year, that’s not a big deal. However, markets almost always react to new taxes by trying to avoid them – thus the recent increase in activity. If you are thinking of buying or selling, now is a great time to do it!

As always, please call me with any further questions or comments. I’m here to help!!

September 07 eNewsletter

September 15th, 2007 Posted by eNewsletter, Market Commentary No Comment yet

Welcome to the latest issue of my Real Estate Market Update newsletter! The basic data comes from the Toronto Real Estate Board’s “Market Watch” report (see link at left). The rest is my ‘editorial commentary’* on the state of things. Enjoy the report, and feel free to contact me with any follow-up questions or comments!

Modest Price Increases keep houses affordable
For some time now the Toronto real estate market has been described as a “sellers’ market”. In recent years, the market has been driven by first-time buyers, aided by historically low interest rates. With so much attention paid to ‘bidding wars’, and “Sold Over Asking” marketing, the thought of participating in the market may seem daunting. However, as I have pointed out before, real price gains are not nearly as high as they seem. As I mentioned in my last report, April ’07 prices averaged just 3% higher than April ’06. May ’07 prices were up 5% over May ’06, but the average sale price remained basically flat through June. Among other factors, increased supply has helped keep homes affordable. That allowed the market to set a new record for number of transactions in a month (11,146 sales in May) without a price spike. In June, 10,451 sales set a new record for that month, too. The moral of the story? Don’t believe the hype – and yes, you can afford to buy a house!

CONDOS: New or Used?
Market still strong
As many of you know, I was leary of the condo market for some time. However, despite the obvious boom in condo construction in and around Toronto, prices have posted modestly higher gains than houses. The best condo investment – if you can stomach the long delays and pricey upgrades – might be new construction. The builder shares the risk with buyers by selling for a lower price. (The buyer’s main risk is those long wait times.) Once you move in, you might still have to wait for title to be transferred into your name. (Don’t worry, your lawyer will make sure everything works out!) Then, watch as those temptingly low monthly fees start to climb! It’s all part of the game. By contrast, when you buy resale you have a better idea of what you are getting into – plus you have a fixed price and a set possession date. Whatever route you take, make sure you sign up with your Agent first. Builders love nothing more than a buyer without his or her own Representative!
Family news

We are extremely fortunate to have 3 great little boys (Owen, Foster and Shannon). In just a few months we’re going to even up the numbers with the addition of Milberry Baby #4. Who knows – maybe Owen will get the baby sister he’s been asking for…? Stay tuned – and keep those referrals coming! If it is a girl, Amanda is going to have to build a new wardrobe from scratch! 😉

Speaking of referrals, I greatly appreciate the clients that you send to me! The next time you hear of a friend or family member who wants to buy or sell real estate, just call or email me and I’ll do my best to take great care of them!

April 2007 Newsletter

April 15th, 2007 Posted by eNewsletter, Interest Rates, Market Commentary No Comment yet

April ’07 was the busiest month in the history of the Toronto Real Estate Board, with 9,452 sales recorded. As active as the market is, and with quite a bit of attention being paid to ‘bidding wars’ and sale prices tens of thousands of dollars over asking, it’s interesting to note that the year-over-year price increase was just 3%. Buyers, watch for unusually low list prices: they’re usually pegged to generate competition! If it looks too good to be true, it probably is!

Be Prepared to Make an OfferShopping for a house in a market this busy can be stressful. On many nights, lots of bidders are going home empty-handed. However, many buyers are wizening up to the low price strategy, and are waiting in the wings to see what happens on offer day. If nobody else steps in, they wait a day or two then make their move. This has resulted in some buyers making a good purchase, but has also been leading to competition 2 or 3 days after the scheduled offer night. If you are interested in making an offer, but don’t want to get buried in competition, be ready to go on offer day. If nobody else shows up (or just 1 or 2 others), you have a good chance of purchasing the house that night. If you wait too long to see what happens you may miss out!

Interest Rates May Rise

Canada’s economy continues to steam ahead. Job creation is great, GDP growth is steady, housing permits are up, and interest rates are still low. However, concerns about rising inflation may lead to a Prime hike, which will likely lead to Mortgage rate hikes. Most borrowers can still get an interest rate around 5% – through a Mortgage Broker – but that probably won’t last long. If you’re in the market for either a new mortgage or a mortgage renewal, make sure you shop around! I work with 3 Mortage Broker companies. Call me if you would like a referral to speak with one of them about your options.