Category Archives: appraisals

A Guide to Selling Privately

A Guide to Selling Privately

With the market going through constant change, it is natural that Sellers would be thinking about selling privately to maximize their profit. This is a tough market and you have to be primed to sell, so here are some suggestions that might help:

1. Make sure that everything in you house, construction-wise is perfect or close to it.

99% of homes in this market will be inspected for flaws, so you need a knowledgeable 3rd party to go through your home to make sure it will pass a home inspection. You might even want to hire a pre-selling Home Inspection by a certified Home Inspector.

2. I suggest that you disclose in writing what the Home Inspector finds.

Certain issues could prove to be an out for a Buyer at or before closing time, if you knew them and did not disclose them at the time of the Offer.

3. Follow their advice especially if it entails storing a lot of clutter.

I would suggest off-site storage rather than filling the basement or garage to the brim. This just broadcasts to the Buyer one of the shortcomings of your home.

4. Once your home looks great, the number one step in marketing is correct pricing.

Make sure that you know what the most recent sales are (not listings, as they may be overpriced) and then reduce your house to reflect that you are not using an agent.. If you are offering your house privately, the buyer must perceive a benefit to them. The biggest mistake private sellers make is pricing their house within the market range and not reflecting that there is no commission.

5. Develop a web presence for your home.

Very few people buy anything today without searching on the Internet so your home-sale web site must be viewable by the largest market out there. Remember that your competition is National, Regional and Local MLS that have spent years and thousands of dollars to be in the top positions, not to mention the Brokers and Franchises.

6. Make sure that you hire a professional photographer who offers Virtual Tours or Video.

Buyers want as much information as possible before they even view the property. I believe in these photo formats so strongly that I even pay for these photos for vacant houses or ones needing major renovations. Don’t waste your time or the Buyers by alluding to qualities that are not there or could-be-maybe-potentially there…Let the buyer decide.

7. Post the site on www.kijiji.com or on www.CraigsList.com.

Both offer great visibility. However, make sure that you re-post often as they keep the newer posts at the top or on Kijiji you can pay to have your post on the front page for a period of time.

8. Make sure that any contact phone numbers or emails will be answered by you or someone else immediately.

Unless I am in a business meeting, I respond as soon as I can. Buyers, mostly come from a generation that views microwaves as slow cooking….you must be prepared to respond ASAP.

9. Realize that you will get a lot of phone calls from Buyer-agents who will tell you that they have clients that would be perfect for your property.

They may be right, so allow them to show your house. Remember they, like you, will not work for free so your pricing should take that into account.

10. Open Houses are the way that a lot of Buyers surf the marketplace to buy. Make sure that you use proper signage.

The City of Toronto mandates that all Open House sign show the address and time of the Open House. Make sure that you have visited the local stock of houses in your area with a Buyer’s eye. To be noticed you will have to be the best on the market that day.

11. If you receive an Offer on your property you should have a knowledgeable 3rd party (Lawyer) lined up and ready to take you through the contract, explain the clauses and watch for conditions or timing that could pose future problems.

When I sit down with clients, their first thought is price, mine is the terms and conditions. I have seen too many times when sellers became so obsessed with price that they forgot other “small” issues that by closing became “huge” ones. The job of the 3rd party is to make sure that those issues are not missed in all the excitement. Make sure that if that 3rd party is also giving you pricing advise that they know the market and have a grasp of negotiation skills and can view the issues from the Buyers side., when needed, to give you a dash of realism when you have a flight of fancy.

Note: when I have bought or sold for myself I have always run through my offer with an Office Manager or Lawyer for that important 3rd party viewpoint. Sometimes they have presented my own offer for me so I can have the proper emotional distance to make the right decisions.

12. The Toronto Real Estate Board has a consumer info page that shows six of the major Forms that are used in Ontario with the plain language explanations. Follow this link for more information.

13. Put all communication that occur between Buyer and Seller, after the Agreement of Purchase and Sale has been accepted through the 3rd Party, by email rather than phone.

Make sure that all is kept in an online folder until closing and up to 6 years after just in case.

14. Do not use the same lawyer to close the transaction for the Buyer and Seller so that you can “save” money.

Make sure that all parties in the transaction disclose, in writing, their relationship to either you or the Buyer. REALTORS must always disclose their fiduciary duty in writing at the time of the offer.

15. The Agreement will usually allow for the Buyer to visit your property for a Building inspection and visits to measure.

Make sure these are stipulated in the contract by both the number of visits and the length or you could be in for a big surprise when all the 20 long-lost buyers’ family members visit with three contractors looking to compete for quotes. I usually suggest two or three visits of no more than one hour at mutually agreeable times. I would suggest you not be there and .that all questions and answers be done in writing so there are no misinterpretations later…the old he said-she said.

16. Ask for a substantial deposit, 5-10% of the Purchase Price to be held by your lawyer in Trust.

The amount of deposit gives you a sense of the seriousness of the Buyer.

Annex Street And Houses
Annex Street And Houses

17. Conditions on Financing and Building Inspection: Most offers in this market will have conditions that must be met within a specified time period. Keep the time as short as you can.

For a Building Inspection or Financing, I suggest no more than three Business days. Hopefully your Buyer will have been pre-approved by the Bank and then there is little to do but a quick appraisal of your property. Building Inspectors should be able to complete a full inspection within 3 Banking days and give the report to the Buyer. Be aware that the Buyer may try to renegotiate the price if the Inspection is of poor quality.

18. Conditional on the Sale of the Purchaser’s Property: This is a tough one, made tougher because you have no control of the asking price of the Buyer’s Property.

You may have sold your property conditionally for a great price and find that the Buyer decides to overprice their home. In essence, your home is pulled from the marketplace with little guarantee that the Buyer will get a satisfactory offer and start the ball rolling. You might want to ask the Buyer to have a Professional appraisal of his property before agreeing to this Condition.

19. Do not accept any cash as part of the transaction.

FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) is keeping an eye on suspicious movements of cash and I am authorized to ask for and retain the personal information of all Sellers and Buyers.

20. Be careful of Scam artists. They sometimes hunt for Private Sellers because they think that there will be less scrutiny in the transaction.

A client of mine whose brother helped her sell privately accepted a long conditional offer. A week after it fell through we listed at $399,000. Imagine our surprise when a Bank called to say they had an offer sitting on the desk of their fraud department for $540,000 of the property. The conditional Buyer was trying to finance a house for $150,000 more than the value. Thankfully, the transfer was held up by the Bank’s scrutiny.

Hopefully, some of these suggestions will help you sell privately but if not know that there are a number of excellent hard-working Realtors in the marketplace every day to help you. If you have any further ideas, please feel free to comment!

Source; Torontoism.com; Richard Silver and Penny Brown

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Need a mortgage on a cottage? Here’s what lenders look for

Ottawa — The Canadian Press

Whether you call it a cottage, a cabin or a camp, when the temperature begins to rise, the dreams of sitting on the dock at a place of your own start this time of year.

But if you don’t have the cash on hand to buy one outright, you’ll have to borrow the money.

And while the basic process of applying for and qualifying for a mortgage are the same, lenders will look at many more variables when assessing a property before lending money to buy a cottage.

Barry Gollom, vice-president of mortgages and lending at Canadian Imperial Bank of Commerce, says while your strength as a borrower is important, banks will also take a close look at the property being acquired when determining how much they are willing to lend.

“Lenders will look at the location, proximity to a major market, sometimes is it on a big lake, is it on a small lake, access to the property, year-around is best, paved roads is a plus,” Gollom said.

“Lenders will want to ensure that there’s a safe and consistent water source as this can sometimes materially impact the marketability and value of the cottage.”

Mortgage broker Frank Napolitano says most lenders want a cottage to be a four-season property if they are going to loan you money, but he says some will finance three-season cabins.

“It is difficult to get financing if you can only access the cottage by water,” says Napolitano, managing partner at Mortgage Brokers Ottawa.

“The property has to be marketable.”

If you aren’t putting down at least 20 per cent, you’ll need mortgage default insurance just like an ordinary home purchase.

However, CMHC changed its rules last year so that it would no longer insure mortgages on second homes. That means you’ll have to go with a private mortgage insurance company which can provide the necessary coverage if your lender requires it due to the size of your down payment.

Insurers may also have limits on the amount they will cover for a vacation property, depending on its characteristics.

Depending on your situation, you could also consider refinancing your home or using a home equity line of credit if you have paid off enough of it to use it to borrow the cash you need.

Gollom says it is not uncommon for buyers to use a combination of financing through their home and the vacation property to make the purchase.

However, if you only made a small down payment on your home when you bought it and haven’t owned it for very long, you may not have the room you need to finance your new purchase.

Joe Walsh, a mortgage broker with Bedrock Financial Group in Toronto, says no matter how you choose to finance your purchase, for the lender it is about whether you can repay the debt.

“You need to have a lot of room in your income to be able to service the additional, what $200,000, $300,000?” he said.

Gollom said it’s important to make sure the decision to buy a cottage fits within your overall financial plan.

“It is a decision that really does require very thoughtful planning,” he said. “It is so important to understand the broader implications of the purchase of a vacation property as it relates to your other goals.”

Diverse homes on Toronto’s Brunswick Avenue show city’s history

The Globe and Mail

Walk down a residential street in downtown Toronto and you can’t help being struck by the odd jumble of housing types.

A stately red-brick Victorian stands beside a modern three-storey job with black cladding and picture windows. One side of a semi-detached has a cottagey look, with a roofed porch and turret windows. The other side is done over like a suburban bungalow. One house is covered in that fashion crime of the housing world, angel stone. Another has a second-floor facing of green shingles. One family has put patio bricks over its front yard and a mosaic portrait of the Virgin Mary next to the door. Another has a yard of wildflowers and a back-lit street number by the door.

To an eye that likes visual order, it can look like a dog’s breakfast. Wouldn’t it be better if we had like next to like, with uniform streets of matching dwellings from a similar era? Shouldn’t the city have enforced some sort of standard instead of letting these streets become so adulterated and mongrelized?

Historian Nicole Schulman has a different view. To her, the crazy-quilt streetscapes of central Toronto are a window into its history and a testament to its diversity. One sunny morning earlier this month, she led a group down Brunswick Avenue on a Jane’s Walk, the wonderful annual series of guided tours through parts of the city.

Brunswick runs north-south and lies between Bathurst Street and Spadina Avenue. Ms. Schulman took the group from Bloor Street south to College Street, stopping on the way to point out how it has evolved over the generations as the city grew. “This has continually been happening,” she told us. “The neighbourhood has been constantly reinventing itself and changing to meet technological changes, demographic demand and people’s aspirations.”

The first houses that went up on Brunswick in the 1870s were primitive even by the standards of the day, with no flush toilets or gas lighting or basements. But when the city’s population began to boom, builders started putting in more substantial houses, creating what were in effect some of Toronto’s earliest subdivisions. Middle-class people moved in and the neighbourhood was coming up in the world.

By the 1920 and 1930s, when the Great Depression came along, the neighbourhood was changing again. Many houses were broken up and converted into multiple apartments for low-income families and immigrants from eastern Europe and other places.

By the 1970s, educated and affluent people resisting the flight to the suburbs started moving in. Today, the vogue for downtown living has made Brunswick a wildly popular street of million-dollar homes (for contrast, some of the biggest, nicest houses on the street were assessed at a little over $3,000 in 1905).

But the evidence of its ups and downs is all around. Some of the old Victorians were replaced by modern houses in stucco or brick. Some have additions slapped on front to add space. Some have aluminum siding, a post-War innovation. One actually has a driveway, a rarity in this dense quarter, but a sign of what happened to the street with the rise of the automobile.

As Ms. Schulman puts it, “People always want their houses to be nicer.” So, over the years, they have updated, renovated and renewed. The result is the endlessly varied street of many colours that we see today.

Heritage buffs may not like it – she loves old houses herself and ends her tour with some of the big, handsome Victorians on Brunswick just north of College – but “it’s a very different thing to say all these changes are bad and we have to restore it just the way it was.”

She is surely right about that. Cities are always changing. On a street like Brunswick, you can see all the phases of the city’s history. The effect is a visual mishmash, a mix of styles and influences. What could be more Toronto?

Canadians plan to spend $17K on renos this year

home renovation

Source: Money Sense

by Alexandra Posadzki, The Canadian Press May 8th, 2015

TORONTO – When Corinne McDermott’s mortgage came up for renewal, she and her husband considered moving.

“We always thought this house would be our middle house,” McDermott said of the east-end Toronto abode she shares with her husband and two kids.

But sky-high home prices, hefty realtor fees and land-transfer taxes deterred her. Instead she’s opted for a large-scale renovation — including building on a three-storey addition with an ensuite master bathroom and a walk-in closet — to the tune of roughly $150,000.

“We’re creating our dream home, that we plan on never leaving,” McDermott said.

Renovation contractors say soaring home prices in Toronto and Vancouver are encouraging many homeowners to pursue renovations instead of shopping for new homes.

“They can’t afford to buy new, so what they’re doing is they’re improving the living spaces that they’re in now,” said Jon-Carlos Tsilfidis, the renovators council chair at the Building Industry and Land Development Association.

According to a poll released by CIBC (TSX:CM) on Thursday, Canadian homeowners plan to spend an average of $17,142 on renovations this year, with basic maintenance such as painting, flooring and replacing appliances coming in as the top category for planned repairs.

However, that’s down 13 per cent from last year, when homeowners planned to spend $19,754 fixing up their houses.

The telephone poll of 1,020 Canadians conducted by Nielsen Consumer Insights is considered reliable within 3.1 percentage points, 19 times out of 20.

In Toronto, however, contractors say demand for renovations shows no signs of waning.

“I can attest to the fact that we’ve never been busier,” said Brendan Charters, development manager at Eurodale Developments.

Charters attributes the renovation boom to rock-bottom interest rates and soaring home prices, which mean that many people who bought properties years ago, when they were cheaper, now have excess equity in their homes.

In addition, many professionals who work downtown are migrating towards the city core, where many of the homes were built between the 1930s and 1950s.

“We have a very aging housing stock in Toronto that is ripe for renovation,” Charters said.

Some contractors say weakening demand in western provinces like Alberta and Saskatchewan, where housing markets have been hurt by the declining oil price, are likely dragging down the national average.

“Canada is so diverse from coast to coast,” Charters said, noting that piping-hot real estate markets in the Greater Toronto Area and Vancouver are quite different from the remainder of the country.

Brent Ballash, owner and managing director of Calgary-based Amorea Designs, says consumers are certainly spending more conservatively as a result of massive layoffs in the oilpatch.

However, that could also end up boosting renovation spending since many homeowners would rather fix up their homes than purchase new ones during such uncertain times, he said.

“Our experience is that people feel safer staying put and reinvesting in their current home when things are uncertain,” he said.

— Follow @alexposadzki on Twitter

Cheap but crucial curb appeal fixes

Curb Appeal Can Curb Buyer Enthusiasm

Source: Real Estate Professional

Jazzing up the exterior of the home will set high buyer expectations – before they even set foot inside. And many of the fixes outside the home represent some of the highest return on investment of all renovations. To boot, they’re oftentimes the cheapest. Here are four easy – and inexpensive – outdoor renos.

1 – Doors
Doors are one of the first things a buyer notices about a house. Changing the front door can change the entire look of the home. Add a door with square feet of glass for a light and airy look; or try a steel door for better security. Plus, lots of doors are customizable, making it easy to set your client’s property apart from others up for sale on the same block.

2 – Gates and Fences
Just as there are several different types of doors, there are a slew of different styled fences and gates that your clients can choose from. And, like doors, these fences can be used to compliment the style of the home. A quaint property might benefit from a traditional picket fence, while a large stone house might be completed with a wrought iron gate.

3 – Front Yard
Nothing’s changed here: Simple landscaping maintenance continues to go a long way to enhancing curb appeal. Suggest your clients lay new sod, if necessary, or add colourful plants to a flowerbed. Lawns will need to be mowed as often as twice a week while the property is listed, and weeds pulled. In the wintertime, ensuring walkways are plowed and salted are also a must.

4 – Back Yard
Canada’s brief summers put outdoor living spaces on almost any buyer’s wish list. There are several ways your clients can play up the house’s backyard space. Again, ensure the lawn and flower beds are well-groomed. If the property has a pool, have your clients clean it of any debris before showings. Staging an outdoor space is increasingly a good investment. That exercise extends to adding a patio set and a barbecue and laying deck tiles. Show buyers what their summers can be like if they’re lucky enough to win this house.

The danger in dropping a home inspection…

Most sale agreements in Ontario include a clause that has the seller guarantee that, to the best of their knowledge, there is not and never was any UFFI in the home.

In its reminder, RECO says listing agents must explain the implications of this clause. Namely, sellers must only agree to the warranty based on what they know. For instance, a seller must disclose that UFFI once existed in the home, but was removed.

Also, agents must ensure that the home inspection matches what the seller describes in the warranty.

The reminder comes as a growing number of buyers are expressing a willingness to forgo the home inspection clause when confronted with a multiple-bid situation.

In the case of UFFI disclosure, it is important to note that this warranty extends beyond the transaction’s close. Both the seller and the agent could face litigation if the warranty turned out to be false.

The best way to protect your seller clients is to educate them regarding the implications of a UFFI warranty. Those agents representing buyers, on the other hand, would be wise to insist that a full inspection is completed, particularly for homes built before 1980.

Has your home been fraudulently overpriced?

Eight years ago, back when Laura Kemp began her career as an appraiser, her father-in-law, also in the business, shared one of his weirdest home visits.

The bank once sent him to check out a bungalow on a 20-acre lot outside Winnipeg, requiring a full appraisal before it would release the funds for a mortgage. But when he arrived there after hours of driving, he was in for a surprise.

Indeed, there are all kinds of ways unethical home buyers and sellers dupe their way into a bigger mortgage or better selling price. Whether driven by greed, desperation or opportunity, fraudsters have been caught doing everything from inflating salaries on mortgage applications to posing as a legitimate property owner, taking out numerous mortgages and fleeing with the cash while the real owner is left picking up the pieces.

Yet there’s another real estate scam that tends to fly under the radar, but can still have serious ramifications: mortgage valuation fraud.

Also known as appraisal fraud, it’s used to artificially and deliberately raise a property’s value by having it appraised above its market value. In some cases, an appraiser is in on the con, but more often their report is tampered with after the fact, without the appraiser’s knowledge. Sellers are either trying to convince buyers the house is worth more than it is or the buyer is fudging numbers to make it appear the home is a great deal, thus less risky for the lender.

Value fraud tends to be easier to pull off in hot markets when house prices are skyrocketing, and an unexpectedly hefty price tag seems genuine. What’s more, buyers who are worried they will be outbid on their dream home – again – might be loathe to ask for independent appraisal reports, even if they have a niggling feeling the current appraised price seems unnaturally high.

“If I’m in an overheated market and want to make a deal, that’s a situation where fraud is more likely to happen,” maintains Keith Lancastle, chief executive officer of the Appraisal Institute of Canada in Ottawa.

While there are no hard numbers and national statistics tracking how prevalent this particular type of fraud is in Canada, back in 2012, Equifax, the consumer credit company, released a report stating that two-thirds of all fraud uncovered that year was real estate related, at $400-million.

That might just scratch the surface of Canada’s $1-trillion-plus mortgage industry (and again, it reflects only illegal dealings that came to light), but the problem may have gotten the lenders’ collective attention. Ms. Kemp says many of the big banks and credit unions have put new guidelines in place to eradicate bogus reports.

Want to show your appraisal to the Bank of Nova Scotia or Toronto-Dominion Bank when applying for a mortgage? Sorry. It’s got to come directly from the appraiser’s e-mail account now.

“Obviously they’ve seen enough cases of appraisals being altered to put that new rule in place,” she says.

Raymond Leclair, vice-president, public affairs at Lawyers’ Professional Indemnity Company (LAWPRO) in Toronto, with 25 years as a real-estate lawyer, says fraud goes underreported, partly because financial institutions consider the risk part of doing business.

“They’d rather lick their wounds until it gets out of hand,” he says.

Unfortunately, the cost increases as organized fraudsters turn to house “flipping” to falsify home values and make big money. They buy a cheap home in a good neighbourhood for, say, $200,000, turn around and sell it to a buddy for $250,000, who then sells it again to someone else on the take for $300,000. Eventually, the house gets unloaded on legitimate buyers for an inflated price and they have no idea they have just overpaid.

No one wants to be that person, so it’s not a bad idea for potential buyers to get their own full appraisal, which includes a three-year sales history.

“If you saw bump, bump, bump on the subject property, that would certainly raise a red flag,” Mr. Landcastle says.

WHAT TO LOOK OUT FOR

While most appraisals are requested by banks and lenders, about 10 per cent are requests from individual buyers, says Laura Kemp, owner of Winnipeg-based Kemp Appraisal Ltd.

Experts advise potential buyers, especially those participating in private sales, to stay sharp and cast an eagle eye over details to help protect them from mortgage value fraud.

Quantity counts

You’ve fallen in love with a house back-split in a child-friendly neighbourhood and the private sale is going ahead just fine and the seller gives you the one-page report. Wrong. “That’s not an appraisal report,” Ms. Kemp says, explaining it should be about 10 pages long. “Why haven’t they given you the entire report? Ask for the whole thing.” And don’t forget to look for the appraiser’s signature.

Best before date

Appraisal reports are only relevant for so long. A neighbourhood or whole city’s real estate landscape can change quickly (such as Calgary recently) and that old appraisal might be out of date. The general rule? If it’s more than 90 days old, it’s time for a new appraisal. That is usually the lenders’ rule, too.

A trifecta of trickery

When reading an appraisal report, look at the effective date – and the appraised value – wherever they appear, usually at least three times in a report. Ms. Kemp says that fraudsters might forget to fudge the numbers and dates all the way through the document. “They change one, but are not smart enough to see it’s there more than once.”

Know whom you’re dealing with

Cases across the country these past few years have revealed criminal rings engaging in mortgage fraud schemes, which included lawyers, bank employees and mortgage brokers. Get references from friends and family for real-estate professionals. “You always have to ask yourself, ‘Okay, who stands to benefit from this transaction going through?’” Mr. Landcastle explains. “Will they cross that legal or moral line to make it happen?”