56% mistakenly believe HST applies to purchase price

 An Ipsos Reid survey commissioned by the Ontario Real Estate Association (OREA) and released today reveals that 56 per cent of Ontarians mistakenly believe that the new Harmonized Sales Tax (HST) applies to the full purchase price of a resale home. In fact the HST is only levied on the various transaction fees associated with the purchase of a home that has been previously occupied (i.e. not a newly-built home).

Currently, the average price of an Ontario resale home is around $330,000. Therefore, this confusion leaves the majority of Ontarians wrongly believing that the HST will add more than $40,000 to the transaction cost. There is growing concern among real estate professionals that this misperception about the HST is dampening the Ontario housing market.

“We see it on the front lines every day. Clearly, Ontarians still don’t know what the HST covers and what is exempt,” said Dorothy Mason, President of OREA. “This is not helping the housing market, and it’s not helping the Ontario economy. This confusion means that many buyers think the cost of a resale home is tens of thousands of dollars higher than it actually is.”

The results of the survey conducted earlier this month were consistent across all age groups. However, there were some differences across other demographic categories. For instance, of those surveyed, half of the university graduates, 71 per cent of northern Ontarians, 59 per cent of those living in eastern and southwestern Ontario, and 54 per cent of GTA residents all mistakenly believe the HST applies to the full purchase price of resale homes.

“We’re doing our part to inform our clients, but we shouldn’t have to do it alone. We’re calling on the Ontario government to launch an immediate public awareness campaign to educate taxpayers and end the HST confusion,” said Mason. “For average homebuyers, learning that the HST does not apply to the full purchase price means a $40,000 saving they weren’t expecting.”

Ipsos Reid conducted the survey among 830 Ontarians from Ipsos’s online panel, between October 4^th and 11^th, on behalf of the Ontario Real Estate Association. The estimated margin of error is /-3.8 percentage points, 19 times out of 20.

The Ontario Real Estate Association represents 49,000 brokers and salespeople who are members of the 42 real estate boards throughout the province. OREA serves its REALTOR^® members through a wide variety of professional publications, educational programs, advocacy, and other services.

Video interview clips available to view and embed on online news websites:

YouTube http://bit.ly/9MEdr3

REALTOR^® is a registered trademark of REALTOR Canada Inc., a company owned equally by The Canadian Real Estate Association and the National Association of REALTORS^® and refers to registered real estate practitioners who are members of The Canadian Real Estate Association. Used under license.

I was reading a publication that came across my desk today and an article caught my attention. One of the most important parts of all realtor’s jobs is ensuring that our clients are as educated as possible about every aspect of the transaction.

We often have the opportunity to help first time homebuyers make their dream of owning a home come true. many of these people look to us for guidance in finding their next home, however, we have much more to offer.

One of the common issues, and probably most important, is the financial side of the transaction. How much down payment do they have, can they afford the house they’re looking at, can they even afford to be looking!

The Financial Consumer Agency of Canada (FCAC) has recently launched a great website full of unbiased and independant information that can help buyers at any stage in their life.

The website has several tools available, such as: Three Steps to Successful Mortgage Shopping, Paying of Your Mortgage Faster and Understanding your Credit Report and Credit Score. They have tip sheets to help with budgeting, shopping for a mortgage and how to protect yourself from real estate fraud.

For more information visit the website at  http://www.fcac-acfc.gc.ca/eng/default.asp

Having your house clean and ready for selling is one thing, but getting it de-cluttered is another. When somebody comes in to see your home, they’re trying to invision their “stuff” in the home.

I came across an article today that I think sums up the idea really well.

I was reading an article about property tax today writen by John Spears in the Toronto Star, and thought it might be good to share.

For homeowners property tax is one of the most painful and visible taxes going. Instead of having the tax skimmed off their pay cheques at source, they generally have to cough up hefty installments either monthly or four to six times a year. Alternatively, they can see their mortgage payments swollen even more, if their lender insists on making the tax payments.

Tenants pay property tax, too – arguably at higher rates than homeowners in some municipalities – but landlords build it into their rent. If you can’t avoid it, you can at least understand it.

1. How is it calculated?

Your municipality takes the assessed value of your home and applies the tax rate. If your home is assessed at $300,000 and the tax rate is 2 per cent, your tax is 2 per cent of $300,000, or $6,000 a year.

2. How is my assessment determined?

A non-profit agency called the Municipal Property Assessment Corporation (MPAC) assesses your property, and sends the owner a notice of its assessment. The assessment is supposed to reflect the price it would likely fetch if you put it up for sale. MPAC tracks real estate sales neighbourhood by neighbourhood so it can put a value on a one-bedroom condo in the St. Lawrence neighbourhood, say, or a four-bedroom detached home in Stouffville. It may reduce the assessment if the home is on a busy corner beside a gas station, or boost it if it’s on a prestigious street backing on ravine.

3. How is the tax rate set?

Your city or town council sets a tax rate through the annual budgeting process. The regional council, if there is one, also sets a tax rate. (Toronto has no regional government, but the other municipalities in Greater Toronto each have both local and regional governments.) Finally, the provincial government sets a tax rate for education. The three rates are added together.

If the local tax rate is 1 per cent, the regional rate is 1 per cent, and the education rate is 0.5 per cent, the total tax rate is 2.5 per cent. The city (or town or township) collects the tax on behalf of all the other governments, so you get just one tax bill.

4. I think my tax rate is too high

There’s not much you can do. Politicians on local and regional councils set property tax rates for their areas, and the provincial government sets a province-wide rate for education. If you don’t like the tax rates, you’ll have to persuade the politicians to change them, or run for office yourself.

5. I think my assessment is unfair

First, you should call MPAC at 1-866-296-6722. If a phone call doesn’t change your mind, you should ask MPAC to send you a list of the assessment on properties similar to yours. There is no fee. You can also send MPAC a list of properties you think are comparable and they will select six properties of their choosing. You can do this in the “About My Property” section of the MPAC website. Your assessment notice should contain the User ID and password you’ll need.

If you still think you’re over-assessed, you can make a “request for reconsideration,” an informal process in which you state your case in writing, and MPAC tries to respond within 60 days. Instructions are on the MPAC website. This is free.

6. I’m still not happy

You have one further avenue, which is appealing to the Assessment Review Board, a tribunal independent of MPAC. This is a more formal process involving a hearing before a board member. You can represent yourself, or hire a lawyer. You must pay a fee of $75. You must have already been through the “request for reconsideration” process, and must file your appeal within 90 days of the mailing date of your request for reconsideration decision.

7. If my assessment rises, do my taxes go up?

Not necessarily. If everyone’s assessment goes up 10 per cent, but the cities and school systems don’t increase their budgets, they should be able to lower their tax rates 10 per cent and still collect the same amount of money. It’s seldom that everyone’s assessment rises by the same proportion, of course. A hot housing market in one neighbourhood may drive up assessments faster in that area than in others.

8. Do businesses pay property tax?

They do. In fact, some business property owners in Toronto have long complained that they bear more than their fair share of the property tax burden.

9. What happens if I don’t pay?

You get charged credit-card type interest on unpaid tax. Toronto, for example, charges 1.25 per cent a month. If you put your head in the sand and continually refuse to pay, the municipality can seize your property and sell it to recoup the taxes, although this is a long and seldom-used process that often takes years. The property owner gets whatever is left over. This doesn’t happen often, but towns and cities do use this power in some cases if payments fall far in arrears.

10. Where does the tax money go?

Property tax goes to local governments to pay for services such as roads, parks, police, fire fighting, ambulance and transit. Municipal property taxes also cover part of the cost of welfare. Some of the proceeds also flow to the public and separate school systems; taxpayers are given the option which system to support.

If you’re thinking of selling your home in the near future, you may think that all that’s required is a “for sale” sign strategically placed on your front lawn — but any real estate professional will tell you there’s much more to it than that.

While a sign on your lawn is of paramount importance to the sale of your home, a well-thought-out marketing plan is also essential. Your REALTOR^®, of course, is another vital component in the process, and one of the first things he/she will discuss with you is a marketing strategy designed to give your home maximum exposure.

 Keep in mind that effective marketing of your home requires a lot of communication between you and your REALTOR^® and there are several things you can do to make sure your home gets the best possible exposure.

Be Candid with Your REALTOR^®
First of all, disclose everything you can about your property and the neighbourhood in general. This information will help your REALTOR^® a great deal and he/she can choose how and when this information can be related to prospective purchasers. For example, there may be something about your home or the area you live in that you may take for granted, but that characteristic could be a major selling point for your home — such as its close proximity to local schools and recreation facilities.

It’s also wise to be candid about any potential drawbacks as well, so both you and your REALTOR^® can be realistic in arriving at a suitable list price. Where possible, your REALTOR^® is likely to have some suggestions as to how these problems can be improved upon.

As well, your REALTOR^® may notice some serious flaws in you home or even some basic elements that are missing. They may not bother you, but could work to your detriment when it comes to selling your home. As a result, your REALTOR^® is likely to make helpful, reasonable recommendations that will enable you both market your home successfully. It’s important to keep an open mind and follow his/her advice.

Operating Costs
It’s also a good idea to have information on hand that will give the REALTOR^® an idea of the costs of running your home — annual heating bills, along with documentation of any recent major repairs or upgrades — such as a new roof or new wiring or plumbing. These can be very effective marketing tools.

Open House
Your REALTOR^® will also tell you that an open house can be another effective marketing tool. While some homeowners are adverse to this idea, it’s one you should discuss with your REALTOR^® if you really want your home to receive maximum exposure to interested buyers. During an open house or prearranged showings, it’s a good idea to make sure that you and any other members of your family (including pets) are absent. Many buyers are intimidated by the presence of homeowners and tend to rush through a home as a result.

Clean and Clutter-Free
Before any showing or open house, it’s imperative to make sure your home is clean and uncluttered — both inside and out. Get rid of junk (don’t forget the garage) and any unpleasant odours from smoke, cooking or pets. A neat exterior is inviting and a clean and neat interior just makes good, plain marketing sense.

Consider having your home painted. It’s a relatively inexpensive way to show it in its best light.

Financing and Closing
Financing is another area where you may be able to help market your home more effectively. You can make your home more attractive to some purchasers by taking back a mortgage. It’s an excellent marketing tool, especially if you’re trading down to a less expensive home.

Flexibility on the closing date is another important factor in the successful marketing of a home. Real problems can arise when vendors and purchasers can’t agree on a closing date. Again, it’s important to work with your REALTOR^® and listen to suggestions. Some deals are lost simply because the vendor and purchaser can’t agree on a closing date.

Stay Informed
Your REALTOR^® should keep you informed by following up after each showing and providing you with a weekly update on how the marketing of your home is progressing. By the same token, if you have any questions or ideas, don’t hesitate to share these with your REALTOR^®. 

You’ll find that a team effort, combined with a realistic approach will help you market your home much more effectively.

If you have any questions about this post, please email me or call me at my office. 519-745-7000

Here is a little information that may help shed some light on the situation…

Closing is the point at which ownership and usually possession of the property is transferred from the seller to you. It takes place after the parties involved agree that all legal and financial obligations have been met. Your lawyer and your REALTOR^® will do much of the work, but here’s a checklist that will show you what to expect as the process unfolds:

• Make sure a copy of the signed Agreement of Purchase and Sale is sent to your lawyer right away. Your REALTOR^® will usually do this for you. Your lawyer needs to see any conditions that exist, and the date you and the seller have agreed to close. The lawyer will ask you how you (and others involved in the purchase) want to be registered on the title to the property.
• Immediately begin satisfying any of the conditions of the agreement that require your action. These have definite dates attached to them and if you miss one you may have to arrange an extension or possibly risk losing the entire deal. As each condition is met, the REALTOR^® will fill out a waiver form for signatures. Note that most lawyers won’t be doing many of the tasks they need to do for closing until the conditions are waived.
• Upon your direction and after the conditions have been met, your lawyer will begin searching title to the property. This is an exercise of going back through government records to ensure a clear title that is transferable. Electronic registration and title insurance have significantly changed the way titles on properties are transferred.
• If you decide to have the home inspected, your offer should contain a condition that the property passes inspection.
• If no current land survey exists on the property, arrange for one soon. Your lender may require it, and you’ll want it for your own peace of mind, anyway.
• Contact your lending institution to begin the process of finalizing mortgage documents. Ask if your lawyer can draw up the documents; this will usually save money.
• Your lawyer will contact the seller’s lawyer with any questions or issues regarding title and costs.
• Your lawyer will check with local utilities (hydro, gas, water) to ensure there are no outstanding claims and to get final meter readings on the day of closing. You should contact the utilities and telephone and cable companies well in advance to arrange for services in your name.
• Meanwhile, your lawyer is busy making sure that property taxes on your new home are up-to-date, local zoning and building restrictions have been met and there are no liens on personal property, such as appliances, to be sold with your house. You want your lawyer to make sure that what you’ve agreed to buy is what you’ll get — nothing more or less.
• Well before closing; contact your insurance agent to arrange homeowner’s insurance coverage to become effective on the date of closing. Your insurance agent can give you a “binder” letter, certifying coverage is in place. If you’re moving from your current owned (rather than rented) home to another, your insurance agent will handle the homeowner’s insurance transfer for you.
• Your lawyer will review and verify the draft deed, statement of adjustments and other closing information provided by the seller’s lawyer, and will deal with any problems as they arise.
• A day or two before closing, you’ll meet with your lawyer to go over and sign the closing documents. Bring the certified cheque(s) to cover costs involved. Your lawyer will let you know the amounts in advance.

The big day arrives. You don’t need to be present, usually. The lawyers for both parties exchange documents, keys and cheques and then register the deed and mortgage. Soon thereafter you’ll be given the keys to your new home.

Now the celebration begins.

I was talking to a friend of mine the other day about location and how it effects where people buy and how much they’re willing to pay.

Here’s an outline of our conversation…

Location Has a Price Tag
Two thirds of future first time home owners* would consider paying more than the asking price for a home based on its location- Bank Of Montreal (BMO) survey

A recent BMO Bank of Montreal survey revealed that among current and future first-time home owners, location is the main reason they would consider offering more than the asking price for a home. The survey also highlighted notable differences of opinion between men and women when it comes to home buying.

The survey found that:
• 70 per cent of current home owners would consider offering more for a home based on its location
• 63 per cent of future first-time home owners would consider offering more for a home based on its location.
• Future first-time home owners who are men are more likely (70 per cent) than their female counterparts (57 per cent) to consider offering more for a home based on its location.

“Especially in today’s heated market, it’s easy to get caught up in the emotions of a home purchase,” said Jane Yuen, Senior Manager of Mortgages, BMO Bank of Montreal. “It’s hard to walk away from a home you believe is ‘the one’ but homebuyers need to avoid getting caught in a bidding war that pushes their mortgage payments outside their comfort zone. In short, you need to know your limit and stay within it.”

If you have any questions about the market in Kitchener-Waterloo, please call me! 519-745-7000 or drop me an email andrew@fielding.com

A home inspection prior to purchasing a home or condominium can bring peace of mind when you sign the sales contract. Knowing what to expect both inside and out will help you make an informed decision about the value of the home and the future upkeep.

A home inspection accomplishes two important goals. First, it gives you a chance to determine the condition of the house, its structural soundness, and the condition of its mechanical systems. Second, it brings any problems to the seller’s attention at a time when they can be resolved before closing a sale.

If you sign a contract before inspection, consider including a clause that the sale is contingent upon a satisfactory structural inspection, and specify when the inspection is to be carried out. That way, you are protected.

A comprehensive inspection includes a visual examination of the structure from top to bottom, including the heating, air conditioning systems, the interior plumbing and electrical systems, the roof and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement and visible structure.

Following the examination, the inspector will provide a report that not only points out possible defects or areas of concerns, but also the positive aspects of the structure as well as the type of maintenance that will be necessary to keep the home in good shape.

Even the most experienced homeowners lack the knowledge and expertise of a professional inspection firm. For example, watermarks in the basement may indicate a chronic seepage problem, or simply may be a result of a single incident.

A professional assessment will provide complete information about the condition of the property you are considering and will help avoid any unpleasant surprises after the sale. In addition, a home inspector can remain totally objective, while you as a prospective homebuyer may be emotionally involved.

The inspection fee for a typical single-family house can vary depending upon the geographic area. The particular features of the home such as size, age and special structures will be taken into consideration. A decision to have a home inspected is a good investment. You might save many times the cost of inspection by being aware of defects, maintenance requirements, and upgrading requirements.

Good decorating should not sell you on a house. Remember, you’re also buying structural and mechanical systems. Walk through a house twice before you hire an inspector. The first time, look at the rooms, the floor plan, and envision your own decorating ideas for the house. The second time, go back and look at the condition of the walls, doors, appliance, and plumbing. If the home still looks good after two visits and you’re getting serious about the purchase, hire an inspector.

Inspectors should be licensed in building-related fields; architects, contractors, and structural engineers are good examples. When interviewing a potential home inspection firm, carefully inquire about the specifics of their work and company. Ask how long they have been in business, ask for references from previous customers. Find out what type of insurance they carry and do they guarantee inspections?

A home inspection usually lasts about three hours. Professional inspection companies will be happy to answer all your questions. Avoid firms that issue only a verbal report. The report should be in narrative form, not just a checklist of items inspected. The home inspector should also issue a written report with accurate cost estimates for any major defects discovered during the inspection. You may find it valuable to accompany the inspector as he goes through the house.

Property inspections are not limited to residential properties. Many inspectors help homeowners with analysis and solutions to specific problems such as energy conservation, wet basements or cracked foundations. Inspectors also inspect work upon completion to ensure that a contract has been properly fulfilled.

If you are considering purchasing a home, the Ontario Real Estate Association advises that you invest in an inspection by a reputable and qualified inspection firm. Buying a home is one of the biggest decisions you will make. Know what you are buying and what your future upkeep obligations will be.

I recently received some exciting news that I couldn’t keep to myself. So many people I talk to still ask whether or not the tough economic times are still affecting the real estate market. Is now a safe time to sell? Will you get a good price for your property? Can you expect interest in my home from the community?

The short answer… absolutely YES!

This past month brought in record numbers and proves that the local real estate market is alive and well. This is a great time to sell your house! In fact, the sales in January in our region were an amazing 84% increase over last year’s dollar figures.

The President of the Kitchener-Waterloo Real Estate Board, Ted Scharf, says, “This year we are off to quite a different start compared to last year … it’s really encouraging. January is traditionally a slower month for residential sales. These results show that there is definitely demand in the market.” Many people say they’ll wait until the spring to sell their home, but given this sales trend, the time to give me a call is now!

You don’t want to miss out on this momentum!

Whether your home is a semi-detached, condominium or single family dwelling – the numbers show that sales were strong in January across all property types. Overall, the average sale price of all residential properties sold last month went up by 12.3%.

Ted Scharf says the low interest rates will continue to be a driving force in the local real estate market, but we cannot predict a sudden threat to these rates – so don’t wait!

If you or someone you know is ready to join the real estate market and sell your home, please give me a call today!

I read this article in a recent real estate publication and thought it was important to share.

According to many of Canada’s top economists, higher interest rates – and debt servicing costs – may be just around the corner. Exactly when rates will rise is unclear and depends on who you talk to.

In its latest Financial System Review, The Bank of Canada judges that vulnerability of Canadian households to adverse wealth and income shocks has grown in recent years. “At present, Canadian household finances appear quite healthy,” Governor Mark Carney says, but it is the responsibility of households now to ensure that in the future, when the recovery takes hold and extraordinary measures are unwound, they can still service their debts.”

The Bank of Canada still maintains it will hold the line on rates until July of this year, and many analysts believe rates may start to rise in the fall of 2010, with some expecting a full three percentage point hike by the end of 2011. Here’s a summary of a few of the forecasts for where interest rates are headed over the next year and a half:

TD Quarterly Economic forecast
With home prices on track to grow a further 9.4% in 2010, the housing market will continue to support economic activity through much of the year, while rock bottom interest rates, improvements in financial asset and housing wealth, and a recuperating labour market will help underpin consumer spending. Home price growth will slow significantly thereafter, and residential investment is expected to detract from economic growth through 2011 and 2012. The slower rate of home price appreciation will also limit the rate at which household wealth increases, posing a hurdle for Canadian consumer spending. Second, households may be very sensitive to rising interest rates, particularly given the high rate of debt accumulation that occurred in response to record low interest rates. As such, an expected rise in short term interest rates of a full 3 percentage points by the end of 2011 is likely.

RBC Economics
In the near-term, with interest rates likely to remain low and the supply of homes available for sale relatively limited, we do not expect to see a sharp drop-off in sales activity. In the second half of 2010, however, the combination of higher mortgage rates and higher prices are likely to take some steam out of the market. In 2011, conditions in the housing market are likely to be relatively stable as the strengthening economy leads to job and income growth, which will offset some of the effect of the steady rise in interest rates throughout the year. The Bank of Canada will honour its conditional commitment to hold the policy rate at its current level until the end of the second-quarter 2010. Our baseline forecast looks for the Bank to raise the policy rate by 100 basis points in the second-half 2010. Another 225 basis points in rate hikes are expected over 2011 with the policy rate expected to settle at 3.5%.

Scotia Economics
For most other central banks, the process of normalizing the emergency level of short-term interest rates should begin around mid-year — led by the European Central Bank, but quickly followed by the Federal Reserve and the Bank of Canada, and belatedly by the Bank of England and the Bank of Japan. Overall, we expect that the Fed and the Bank of Canada will raise their overnight rates 2 percentage points by mid-2011, after which they are likely to remain on hold as the U.S. economy adjusts to a slower growth trajectory. U.S. bond yields should continue to trend higher against a backdrop of a revival in private sector credit demands, a less accommodative central bank stance, and the massive financial requirements associated with large and sustained government deficits.

CIBC World Markets
The US consumer upturn has been more vigorous than we would have expected, a challenge to our view that a rising savings rate would sap growth momentum. But we’re still a long way from the big job gains needed to bring unemployment down on a sustained basis, and we’re sticking to our view that the Fed will stand pat until early 2011. Still, Canadians must be prepared for when interest rates inevitably rise. “They are emergency rates, they won’t be here forever,” says Benjamin Tal, CIBC World Markets.

BMO Nesbitt Burns
As long as these conditions continue, the Fed should remain on hold. We look for the unemployment rate to peak during Q1 and remain in double digits until the autumn, with core inflation drifting down consistently during the year. We’ve pencilled in a September rate hike start, by which time the outlook for resource utilization, inflation, and inflation expectations should be signalling a precautionary requirement to begin removing monetary stimulus, and also reflecting the Fed’s concern that keeping policy rates too low for too long “could lead to excessive risk-taking in financial markets”. Rate hikes are likely to be gradual and could easily be postponed into 2011 because of continued high unemployment and inadequate credit creation.

Andrew Fielding

Sales Representative

Prudential Grand Valley Realty

519.745.7000

andrew@fielding.com

www.fielding.com

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