Unfortunate occurrences are taking place in the Toronto real estate market when buyers have a change of heart after inspecting a home. The sellers are refusing to return the deposit.
Here’s what is happening:
Most real estate offers in the GTA today contain substantial deposits, in many cases $25,000 or higher. The accepted offer is conditional on the buyer being satisfied with the results of a home inspection report, completed by a professional home inspection company. The buyer conducts the inspection and then says they are not satisfied with the home, and ask for their money back. The sellers are upset, because if other buyers hear about this, they will ask what is wrong with the house. The seller can’t answer because the first buyer does not have to give them a copy of the inspection report.
In general, the courts have indicated that when buyers are trying to satisfy any condition, including a home inspection condition, they must act honestly, reasonably and in good faith. Unfortunately this will have to be proven in court, and the result is that a buyer’s deposit could be held up for up to 2 years while this is being argued.
Sellers are not entitled to a copy of the inspection report unless it says so in the clause itself. In my opinion, sellers should always include a clause in any offer that if the buyer wants to negotiate a reduction or cancel the deal because of problems in the inspection report, then the buyer must give the seller a copy of the report. This will give the seller the opportunity to check this for themselves, with their own inspector or contractor, and will be able to explain it to any future buyer.
If the buyer does not conduct the home inspection at all, or perhaps brings in an unqualified person to conduct the inspection, then I believe that these might be examples of not acting reasonably and in good faith and it would thus be difficult for a buyer to try and cancel the agreement and argue that they acted in good faith. It is thus very important that buyers always use qualified home inspectors to conduct any inspection of a home.
If a buyer is not in a bidding war, I advise that you consider 2 deposits, a small deposit when the deal is accepted, and a larger deposit once you are satisfied with all of your conditions. That way, if you are not satisfied, there is not much of a deposit that will be worth fighting over. It is very important for buyers to understand all their legal rights and obligations relating to conditions before signing any offer to buy a home.
Click here to read the article: http://www.thestar.com/business/personal_finance/2013/11/08/why_two_deposits_on_a_home_purchase_offers_protection.html
Why 2013 has been a good year for GTA housing
A year ago many pundits were predicting a real estate collapse in 2013. My view was different. I expected the market to stay strong and prices to hold up, which is what has happened.
By the end of September, 68,909 total homes had changed hands in the GTA, 1,000 units less than the same period last year. But the first half of October was strong – about 20 per cent higher than a year ago. So, it seems that sales for the year will exceed 2012’s 82,200 units. Average prices are also almost 5 per cent higher than a year ago and there are still bidding wars in many areas, because there are more buyers than listings.
Here’s why this is happening:
Low interest rates
Events like the U.S. fiscal cliff, civil war in Syria and instability in the Middle East, have had little impact here. Canada remains an island of stability. Things will only improve as economies in the US and European Union continue to improve. Interest rates may rise a little over the coming year, but the moves are unlikely to have a serious impact on the market..
Canada’s appeal to immigrants
We continue to be the envy of the world when it comes to quality of life and the fact that so many cultures and communities can live in harmony. That is why over 150,000 people come to Ontario each year, with the majority in the GTA. They have to live somewhere.
Low rental vacancy rates
The Toronto condo market has slowed somewhat, but prices haven’t crashed. The reason is that the vacancy rate for rental condominium units in downtown Toronto is 1.7 per cent. As a result, the average rent for a two bedroom condominium is about $2,500, which is also the amount an investor needs to carry an average two bedroom condominium, even if it costs $500,000. If you can carry your condo, you are in no rush to sell or lower your asking price.
People have been predicting the real estate market crash in the GTA for the past 13 years. It hasn’t happened yet and won’t happen next year either.
Click here to read the article: http://www.thestar.com/business/personal_finance/2013/11/01/why_2013_has_been_a_good_year_for_gta_housing.html
5 Things to consider when buying a resale home
The decision to buy a resale home is one of the most important ones your family will ever make. In order to be properly protected, here are 5 things to consider:
1. What information is the seller providing in advance?
Sellers used to provide property disclosure statements, telling buyers in advance about the condition of their homes and disclosing problems. Lawyers told them not to do this anymore, because of the potential for lawsuits. Some sellers are now conducting home inspections by a professional home inspection company before they list the property for sale and are giving a copy of the report to any buyer. This has proven to be a benefit to a seller, since they can correct any deficiencies noted by the inspector so they do not have to negotiate with the buyer later after the buyer conducts their own home inspection. Some sellers are also providing home history reports, which can be obtained from homeverified.com or Iverify.com which indicate whether the home has been the subject of an insurance claim for water, fire, flood or sewage backup, and whether the home was ever listed as a grow house or meth lab. The more information a buyer has in advance, the more informed their purchase decision. Still, even with this information, buyers should complete their own home inspection before committing to any purchase.
2. Ask the seller hard questions
Ask the sellers or their agent if they have had basement flooding problems, or mould or roof leaks, even if the leaks have been repaired, or any other adverse neighbourhood conditions, whether it is a suicide or murder in the home, or a half way house down the street. Watch how they answer. Sellers are required to respond truthfully to these questions if you ask them directly. If the seller refuses to answer or acts suspiciously, then you need to discuss this with your home inspector and your real estate agent and either adjust your purchase offer or walk away.
3. Check with the neighbours
During your home inspection, or before you put an offer in the first place, walk around the neighbourhood and ask the neighbours about the house you are interested and the neighbourhood itself.
4. Include the right additional clauses
Make sure that everything you expect to receive on closing is included in your offer. This includes mirrors, closet organizers, window coverings and TV brackets. Ask for 2 complete sets of keys, to get into the home and garage, especially if it is a condominium unit.
5. Make sure you can afford it
Get qualified in advance by a professional mortgage broker or your bank so that you know how much you can safely borrow. Make sure your lender will complete their appraisal of the property before you waive any financing condition. Be careful about getting caught up in a bidding war, because if your lender thinks you paid too much, they will not lend you what you may be expecting.
By following these tips, you should be better protected the next time you buy a home.
Click here to read the article: http://www.thestar.com/business/personal_finance/2013/10/25/5_key_things_to_consider_when_buying_a_resale_home.html
5 Key Questions when buying a new home from a builder
Here are 5 questions to ask when buying a new home from a builder to make sure that you do not make a mistake that you will regret later:
What is the builder’s reputation/references?
This may be the most important research you can do before buying from a builder. Check any prior home/subdivision/condominium project that they have built in the past. Look at the Tarion website under the Licensed Builder Directory. Better still, go visit any prior homes and talk to the neighbours. For example, ask if the builder was diligent in fixing every problem with the home that was identified by the buyer during their pre-delivery inspection.
Is the builder contract unfair to buyers?
In many ways the contract favours the builder. For example, the builder usually has the right to extend the closing date, change the layout or square footage of your home and also many of the finishings and there is little the buyer can do about it. This can cause real problems if the delay affects your child’s new school year or your employment plans. Again, remember to ask prior buyers if their home was delivered on time, and whether they received substantially what they were promised.
What extra charges will a buyer have to pay?
When you buy a new home or condominium, the price quoted to you in the sales office will be the base price of the home, inclusive of HST. If you order any upgrades, that is extra. In addition, there is now a separate schedule of additional charges that you also have to pay. Some of these are spelled out with an exact dollar figure, such as Tarion Enrollment fees, legal fees, grading deposits, hydro or water meter installations. Other items are more vague, which may relate to levies or development charges which are added by any governmental authority after the agreement is signed. I have seen some cases where these extra charges exceeded 6% of the original sale price, and the buyers only found out about this a few days prior to closing. Make sure you get a cap on the total amount of these extra charges. My own rule of thumb is that the total should not exceed 1.5% – 2% of the original purchase price.
What upgrades does a buyer need?
Builders in general make a lot of profit from upgrades which they offer to buyers for finishings in the home. Here is where you may want the assistance of a professional real estate agent, who will tell you in advance which rooms these upgrades will make the most difference on any re-sale. An agent can also offer helpful advice about which lot or unit location and layout will have a higher re-sale value.
Can a buyer transfer the agreement before closing?
When you sign your builder agreement, the home may not be ready for 2-3 years down the road. Things change. Try to negotiate right away the right to transfer your contract to someone else before closing if your circumstances change. Some builders will not allow it, others permit it for a fee, while some will permit it one time only, for no fee.
Ask the right questions before you buy a home from a builder and you won’t be disappointed later.
Click here to read the article: http://www.thestar.com/business/personal_finance/2013/10/14/5_key_things_to_ask_when_buying_a_new_home.html
How to prevent a condo board breakdown
When owners lose trust in a condominium Board o Directors, necessary repairs do not get done, lawyers get called and the value of all of the units in the building start to decrease. Here are some tips both before and after you buy to make sure this does not happen to you.
- Read all the condo documents before you buy, including the rules, restrictions and financial statements of the corporation. Make sure they are not operating a deficit and there is enough money in the reserve fund to pay for needed repairs;
- Volunteer to join committees to assist in making the building more of a community; to learn about problems and pass them on to the property manager for resolution;
- Attend all meetings to make sure that you understand and agree with all decisions being made.
- Remember that most directors do this work for no compensation, and are required to make sure that there is enough money being collected to pay all current and future repairs that are necessary.
Click here to read the article: http://www.thestar.com/business/personal_finance/2013/10/04/how_to_avoid_condo_board_breakdowns.html
Now is the time for home closing protection insurance
Since writing my column on how to avoid a real estate train wreck, I have received many inquiries from buyers, sellers and realtors about home closing protection insurance, and how it can solve many of the problems associated with delayed closings.
Due to the growing possibility of buyers being declined their financing at the last minute, sellers need some protection in the event their closing is delayed or cancelled and they are forced to carry 2 homes for an extended period of time.
One company that I have dealt with that provides this coverage is Canadian Home Shield. Their President, James Vlachos, who is an insurance broker, advises me that for as little as $99, sellers can purchase a $25,000 insurance policy that will cover all mortgage payments, real estate taxes, utilities and insurance premiums up to a total of $25,000 in the event that the deal does not close through no fault of the seller. I personally have had 2 seller clients recover over $9,000 in costs after a buyer failed to close their purchase agreement.
Buyers can also purchase breakdown insurance protection for their home systems and appliances. Since most real estate contracts provide that sellers only warrant their systems and appliances to the date of closing, this provides buyers with the opportunity to purchase additional insurance protection for a year after closing.
For further information, please see: http://www.canadianhomeshield.com and read the article here: http://www.thestar.com/business/personal_finance/2013/08/16/bridge_financing_can_ease_closing_day_stress.html
How to avoid a difficult tenant
The Alberta case about the tenant Andreas Pirelli, who claimed that he was a “Freeman on the Land” and that the property had become a foreign embassy highlites the need to properly qualify tenants in the first place, so this does not happen to you.
Here are some helpful tips to remember:
- When you advertise for a tenant, make it clear that you do background and credit checks;
- Ask any tenant to complete a detailed rental application, showing every place they have lived at least in the past 5 years;
- Ask for a current cheque stub from their place of employment, as proof that they are regularly employed;
- Ask for at least 3 personal references and call each one, including any prior landlord;
- Interview the tenant where they currently live, to see for yourself how they treat someone else’s property;
- Check out the tenant on social media – whether it is pictures that they post or blogs that they may have written. For example, if you search Andreas Pirelli, the Alberta tenant referred to above on linked in, you will see that he claims to be the senior chief justice at Tacit Supreme law court;
- Have the property regularly inspected, to make sure that the tenant is properly maintaining the property and not causing any damages;
- Treat your tenants with ongoing respect, and they will look after your property better; consider a gift card if rent is always paid on time, or a Christmas present.
Click here to read the article: http://www.thestar.com/business/2013/09/27/difficult_tenant_heres_how_to_avoid_it.html
My Law Practice
I have received many inquiries about my law practice, providing legal services to real estate buyers, sellers and investors. Working with Real Property Transaction Centres, I am now able to close real estate transactions throughout the GTA. If you require any assistance on a transaction that you are working on, please email me at email@example.com
If you or your clients are looking for a written quote, please visit www.realproperty.ca and search under “How much does it cost” or contact Suzanne at 1-877- 219-9618, ext. 231.
About Mark Weisleder
Mark is a lawyer, author, instructor, Toronto Star columnist and keynote speaker for the real estate industry.