Pooling resources with parents or siblings opens possibilities when it comes to buying a home everyone can afford. Homebuying requires careful planning though, since there’s so much at stake—and money is the least of it; we’re talking love and loyalty here.
If you want to buy a home with family members (and still be on speaking terms during family functions) this is what you need to consider.
Answer this: Why are you moving in together?
Perhaps mom and dad need to downsize and want to be closer to their children. Maybe one of those children needs after-school care for the kids, or someone has gone through a divorce and needs family support…
Besides saving money, families considering buying a home together often have non-financial issues that make it a good choice. Agree on how you’ll all help each other—cooking communal meals; driving parents to medical appointments or kids to school; etc.
Now you need to separate those personal arrangements from the legal aspects of buying a home together. This isn’t Thanksgiving dinner, it’s business.
Hire a lawyer.
All homebuyers should use a lawyer, and that’s especially true for families buying together. Be prepared to spend more on legal services too. Why? There’s more to cover.
The following commitments and promises should be considered when preparing binding legal documents.
Disclose your financial standing.
All potential co-owners should share their credit report (it’s free here) with the group. You may want wine for this meeting.
If you’re applying for a mortgage together (the Family Plan Program is designed to help with this) you need to know where each person stands to determine how that could impact all family members.
Be prepared to tell your clan how much you have for a downpayment and how much you can pay monthly. Add up everyone’s contribution and use our calculator here to figure out how much family home you can afford.
Imagine the future.
A home should be a long-term commitment, but life happens: job loss or out-of-town promotion, a baby, illness—those are just a few things that impact your life. Discuss what impact they could have on your housing arrangement.
For example, under what circumstances could the property be sold? For instance: What happens if not all co-owners want to sell at the same time?
Consider setting a minimum amount of time that everyone will commit. (Your mortgage term is a good place to start.) Then plan for what could happen after that.
For example, you may want to do some research around what financial options are available to you when one owner wishes to leave – such as buying out that owner’s share. Or, the empty unit could be rented to generate income that would pay back, over time, the owner who wanted to sell.
The solutions will be as unique as your family. Talk it all through first.
Consider upkeep and upgrades.
Decide how to cover emergency expenses, like a roof or HVAC repair, and less urgent improvements, such as exterior painting.
An easy approach is to open a high interest-rate savings account and have everyone contribute to it monthly.
Here’s where things get tricky: Let’s say you want to upgrade bathroom and kitchen fixtures. That will make your personal space extra nice, but it could also improve the building’s energy efficiency and resale value. Will all family members contribute financially to your upgrades?
These may seem like details for later, but small grievances can snowball into big resentments. Tackle them before signing day. And remember, for any transaction of this nature, it is crucial to consult with a mortgage professional before proceeding.
Back in the good old days – assuming you deem pre-Second World War the good old days – there was a time-honoured maxim. It went like this: “One week’s salary for one month’s mortgage payment.”
That was the measuring stick for how large of a mortgage you should get. It defined a comfortable life whereby your payment would never be big enough to cause ulcers, marriage breakups and other bad stuff.
Over the years, for reasons that follow, that measuring stick got bigger. But in 2016 and 2017, regulators put the smackdown on free-spending mortgagors, bringing us all the way back to the days when families gathered around the radio and ate dinner at the same table.
As the 1980s began, homeowners spent an average of 17 per cent of their income on mortgage payments, property taxes and heat. But as people demanded nicer homes closer to big cities, home prices climbed faster than incomes, and so did debt-servicing costs. By the fall of 2016, new home buyers were spending an average of 25.6 per cent of their income on basic housing outlays.
Most new buyers have never heard of the one-week pay rule because one week’s pay stopped buying what it used to. Today, it doesn’t get you to first base in our biggest cities. As of December, the average wage earner making $992.87 a week and putting down 20 per cent could get a $289,000 mortgage with a payment that’s 25 per cent above their weekly earnings.
As years went by, lenders and policy makers catered to home-buyer demand by allowing a bigger percentage of income to be consumed by housing costs. Whereas the old rule of thumb suggested no more than one-quarter of your income should go to housing, the industry let that number rise, up to 39 per cent (or even 50 per cent at pricey non-prime lenders).
The trouble is, not only did debt ratios and allowable amortizations go up, but interest rates went down. So people could take on more and more debt with the same payment size. That’s a concern when rates are falling. But it’s a macroeconomic danger when rates are climbing.
Until somewhat recently, the stats hadn’t been overly alarming. Most people were merely taking on the same amount of debt as they always have, relative to income. But a rising-rates environment changes everything. A significant minority of those same borrowers would find it much harder to make those payments if interest costs “normalized.”
Seemingly overnight, federal policy makers have taken us back to yesteryear.
By imposing new mortgage stress tests, they’ve required most lenders to use a two-percentage-point higher interest rate when assessing people’s debt-service capacity.
Effectively, that has pushed down the maximum mortgage payment that the average Canadian can be approved for to, you guessed it, about one week’s pay.
So, it seems what’s old is new again. Whether it was Ottawa’s intention or not, they’ve single-handedly brought us back to a quaint historic metric: “One week’s salary for one month’s mortgage payment.”
Economic class will make up about 60% of newcomers
Immigration Minister Ahmed Hussen said that by 2036 100 per cent of Canada’s population growth will be as a result of immigration, it stands at about 75 per cent today. (CBC)
Canada will welcome nearly one million immigrants over the next three years, according to the multi-year strategy tabled by the Liberal government today in what it calls “the most ambitious immigration levels in recent history.”
The number of economic migrants, family reunifications and refugees will climb to 310,000 in 2018, up from 300,000 this year. That number will rise to 330,000 in 2019 then 340,000 in 2020.
The targets for economic migrants, refugees and family members was tabled in the House of Commons Wednesday afternoon.
Hussen said the new targets will bring Canada’s immigration to nearly one per cent of the population by 2020, which will help offset an aging demographic. He called it a historic and responsible plan and “the most ambitious” in recent history.
“Our government believes that newcomers play a vital role in our society,” Hussen said. “Five million Canadians are set to retire by 2035 and we have fewer people working to support seniors and retirees.”
In 1971 there were 6.6 people of working age for each senior, Hussen said, but by 2012 that ratio had gone to 4.2 to 1 and projections show it will be at 2 to 1 by 2036, when almost 100 per cent of population growth will be a result of immigration; it stands at about 75 per cent today.
Immigration Minister on the government’s new multi-year plan
Immigration Minister on the government’s new multi-year plan6:58
Hussen said immigration drives innovation and strengthens the economy, rejecting some claims that newcomers drain Canada’s resources and become a burden on society.
He said the government is also working to reduce backlogs and speed up the processing of applications in order to reunite families and speed up citizenship applications.
The federal government’s own Advisory Council on Economic Growth had recommended upping levels to reach 450,000 newcomers annually by 2021. Hussen said the government is taking a more gradual approach to ensure successful integration.
“At arriving at these numbers we listened very carefully to all stakeholders who told us they want to see an increase but they also want to make sure that each and every newcomer that we bring to Canada — bringing a newcomer to Canada is half of the job. We have to make sure that people are able to be given the tools that they need to succeed once they get here,” he said.
Focus on integration: Rempel
Conservative immigration critic Michelle Rempel was critical of the plan, suggesting the government needs to do a better job of integrating newcomers.
“It is not enough for this government to table the number of people that they are bringing to this country. Frankly the Liberals need to stop using numbers of refugees, amount of money spent, feel-good tweets and photo ops for metrics of success in Canada’s immigration system.”
Luiz Capitulino, 11, of Brazil joins others take the oath as they become official Canadians during a citizenship ceremony at the National Arts Centre in Ottawa on Sept. 25, 2017. The federal government will welcome 310,000 newcomers to Canada in 2018. (Sean Kilpatrick/Canadian Press)
She said the Liberals need to bring Canada’s immigration system “back to order” by closing the loophole in the Safe Third Country Agreement that has seen migrants cross into Canada at unofficial border crossings only to claim refugee status.
She also said the immigration system should focus on helping immigrants integrate through language efficiency and through mental health support plans for people who are victims of trauma.
Dory Jade, the CEO of the Canadian Association of Professional Immigration Consultants, welcomed the news although he suggested the numbers should be higher.
“Canada will greatly prosper and grow once the 350,000 threshold has been crossed,” he said. “Nevertheless, we are witnessing a very positive trend.”
The Canadian Council of Refugees also welcomed the news, but wanted more, saying the share for refugees was only increased slightly from 13 per cent this year to 14 per cent in each of the next three years.
Calls for longer-range forecast
In past, there has been a one-year figure for how many immigrants will be permitted into the country, but provinces and stakeholders have called for longer-range forecasts.
Hussen on immigrant integration funding
Hussen on immigrant integration funding0:17
A statement from Ontario’s Immigration Minister Laura Albanese, before the announcement, said the province supports the introduction of multi-year levels plans “to provide more predictability to the immigration system and inform program planning.”
“Significant variation in year-to-year immigration levels can dramatically impact the requirement for provincial year-to-year resources. A longer term outlook would help in planning for appropriate service levels and use of resources.”
The statement said Ontario supports growth in immigration levels, particularly in economic immigration categories to support the growing economy.
Diversity drives innovation
During the government’s consultation period, the Canadian Immigrant Settlement Sector Alliance presented “Vision 2020,” what it called a “bold” three-year plan to address growing demographic shifts underway in the country, calling for increased numbers in the economic, family and refugee categories.
It recommended a target of 350,000 people in 2018, which climbs to 400,000 in 2019 and 450,000 by 2020.
Chris Friesen, the organization’s director of settlement services, said it’s time for a white paper or royal commission on immigration to develop a comprehensive approach to future immigration.
“Nothing is going to impact this country [more] besides increased automation and technology than immigration will and this impact will grow in response to [the] declining birth rate, aging population and accelerated retirements,” he told CBC News.
Source; CBC.ca – Kathleen Harris, Chris Hall, Peter Zimonjic, CBC News
I’m very interested in buying a certain house, but the seller wants me to fork over a really big deposit. If I change my mind, can I get my deposit back?
The short answer to your question is that, in most cases, real estate transaction deposits are not refundable.
There’s no set amount for deposits, however. If the owner’s demand for a large deposit is a major sticking point, you could ask your real estate representative to try to negotiate a lower deposit amount with the seller.
A deposit is the money you put down to secure a property that you want to purchase. Providing a deposit is both a gesture of good faith and a serious commitment. Once the seller accepts your written offer, it becomes an Agreement of Purchase and Sale (APS), which is a legally binding contract.
Once the APS is signed and the deposit is provided to the seller’s rep, attempting to renege on the APS by saying, “Sorry, I’m no longer interested” is highly inadvisable. You will almost certainly lose your deposit. The seller also might sue you for damages for any difference between the amount of your offer and the amount they accept from another buyer, along with any additional legal fees and carrying costs. You don’t want to go down that road.
Deposits are sometimes returned to would-be buyers when conditions are placed on an offer and the conditions aren’t satisfied. For instance, if you make an offer on a house on the condition of financing, but your bank won’t approve it. Or your purchase depends upon the successful sale of your current home, but it doesn’t sell in time. Or you make your purchase conditional on a home inspection and the home inspector discovers a problem that stops you from moving forward.
If you can’t go through with the purchase because your conditions haven’t been met and you want your deposit back, you’ll have to sign a release form and get the seller’s signature, too. It’s a pretty straightforward procedure and sellers will usually go along with such requests. But if the seller suspects you didn’t act in good faith, they could refuse to hand over the money.
What happens next? Well, the deposit would stay in a trust account, usually with the seller’s brokerage, and the dispute between you and the seller would become a legal matter. If you and the seller are unable to arrive at a settlement, a judge could eventually release the funds through a court order. But I’ll warn you: that can take a long time.
It’s a myth that a seller can pocket a buyer’s deposit any time a deal falls through. Cases involving deposits of $25,000 or less can be decided in small claims court, which is relatively inexpensive and easy for ordinary Ontarians to use. Cases involving larger deposits, however, are decided in Ontario’s much more formal Superior Court of Justice. Court cases can quickly become expensive, so you should carefully consider all of your options before taking this route.
If you’re serious about buying this house, I strongly recommend working closely with both a lender — to get your financial ducks in a row — and a real estate salesperson before you commit yourself to a deal and hand over a deposit.
Source: By JOE RICHER Registrar, Real Estate Council of Ontario Sat., Jan. 27, 2018
Whether you’re a first-time buyer or a seasoned investor, there are new rules in 2018 that you will want to understand if you plan to buy a condo in Toronto. In this blog post we are going to explain the new rules and give you some tips to navigate them.
The 2018 condo market at a glance:
What are the new rules and changes?
We spoke with James Harrison, President of Mortgages.ca, to give us a full understanding of what to expect this year.
The new rules are simple:
As of January 1st, 2018, the Bank of Canada’s “Universal Stress Test” is in effect.
The buyer must now qualify for their mortgage based on the 5yr posted rate (4.99% today) or their contracted rate plus 2.00%, whichever is greater.
What does it mean for buyers in 2018?
“In my opinion, this will negatively impact one’s buying power by approximately 15-20% on average,” says James Harrison.
This stress test is an expected addition to the federal government’s measures to limit over-leveraged buyers from entering the housing market. In February of 2016, the federal government raised the minimum down payment from 5% to 10% for properties between $500,000 to $1 million. As we discussed in a previous blog post about those down payment rules and changes, the aim was to “reduce taxpayer exposure and support long-term stability.”
The newest round of stress tests is also about creating a buffer zone, but it applies to uninsured mortgages (borrowers with 20% down payment). Effectively, everyone applying for a loan through a regulated lender will now be stress tested. In a previous post, we explained in plain words how your buying power may change under the new mortgage rules.
“This will have a huge impact on some buyers but not all,” says James Harrison. “I believe this will negatively affect first time buyers as they tend to have lower incomes and also carry some debt from school. With one’s buying power negatively affected by 15 to 20% you would think this will mean prices will come down. I would be surprised if prices came down more than 5% in 2018.”
“For the well qualified buyers (those with higher incomes and little to no debt) 2018 will most likely see less competition, which could mean more of a buyer’s market. We have not seen this in a very long time in the GTA.”
“If you purchased a property prior to January 1st, 2018, you can still qualify for a new mortgage based on the old mortgage rules (with some lenders). Some top Brokers may also have lenders that can still qualify clients under the old rules (or at least using the discounted 5 fixed rate of 3.29% for example) and a 25yr amortization. This can increase one’s buying power by about 10- 15%.”
“If a buyer bought a property (same for pre-construction) prior to October 2016 (they could also qualify for an insured mortgage based on the rules prior to the first stress test for insured buyers). This is a huge benefit for some buyers of pre-construction units.”
What to do if you’re not approved for a mortgage under the new rules?
“If a buyer no longer qualifies to purchase a property they want they may have to look for a strong co-borrower to sign on to the mortgage to help increase the income and bring the debt services ratios in line. Unfortunately, this may mean a lot more potential buyers will now be looking for a rental property, which in itself is already very challenging in Toronto.”
Alternatively, there are mortgage lenders that operate outside The Office of the Superintendent of Financial Institutions (OSFI). The ‘stress-tests’ apply only to lenders that are regulated under OSFI, such as the Big Five banks, while some second-tier banks and credit unions fall outside the new rules. These lenders have often been painted as “shadow lenders,” but they do fill a gap in the home buying process.
For buyers who don’t approve under the new mortgage stress tests, these non-regulated lenders can be a viable option and many of them offer rates competitive with top tier banks. One thing to keep in mind, however, is that non-regulated lenders are still hoping to limit risk, which means they tend to prefer borrowers with strong credit history. If your credit is weak, you may face higher rates on your mortgage. As always, it’s best to do some research.
“It is more important than ever for each and every buyer (or anyone looking for a mortgage) to connect with a very experienced Mortgage Broker. Going to your local bank branch is simply not a smart option anymore and has not been for years, but the new stress test will show this even more. A good Mortgage Broker will be able to help explain this fully and find you more options. Even if you are a well-qualified buyer you may not qualify with your bank but you may still qualify for excellent schedule A products with another lender. Do not give up until you speak with a good broker.”
Why is the government implementing these new mortgage rules?
“The reality of these most recent mortgage rules is that the federal government has serious concerns with the level of personal debt loads in Canada. So, they are continuously coming out with ways to help make sure everyone can truly afford the mortgage they are taking on. I personally feel this was too much, and I would not be surprised if the government is forced to pull this back within the next two to three years.”
“I am optimistic that 2018 will still be a strong year in real estate, but realistically a lot of buyers may be out of the market completely. I expect that 2018 will most likely be the year of mom and dad providing the down payment and co-signing for the mortgage as well.”
“I strongly encourage each and every buyer to contact a well-qualified and experienced mortgage broker for all of their mortgage needs, whether it is a purchase, refinance, or renewal.”
When Karen Somerville and her husband Alan Greenberg showed up for the pre-delivery inspection of their brand new luxury home in Ottawa they were horrified. Electricians, drywallers, plumbers and a variety of other tradespeople were still busy constructing their home and, despite assurances from the builder, the couple seriously doubted their $443,000 new build would be ready for possession in 14 days. Electrical wires hung from ceilings and stuck out from unfinished walls, appliances and cabinets were stacked in the kitchen, and only a portion of the hardwood floors had been installed. They immediately hired an independent contractor to examine the home. The result was a deficiency report citing 130 problems, including an undersized furnace and ductwork, poor ventilation and improper roof installation.
At first, Karen, then a university professor, and her husband Alan, an account manager with Sun Microsystems, tried to negotiate with the builder to resolve the problems. When this proved futile, the couple turned to Tarion—the private corporation that regulates Ontario builders and provides warranties on new houses and condos. Tarion sent its own inspector who confirmed that there were 85 defects in the home—but only 39 were considered to be under warranty.
Karen and Alan would be on the hook to fix the other defects themselves, which would cost the 40-something couple $4,000 or more. “This is the largest purchase we, as consumers, make,” says Karen, “and Tarion is supposed to be there to help.” Instead, she found herself having to document and defend an appeal against the provincial warranty program’s decision—despite paying a $650 fee for her new home warranty.
Buying a new home directly from the builder, whether a condo, townhouse or detached, is a popular choice. Almost one third of all homes sold in Canada each year are brand new. In Ontario alone, more than 52,500 buyers opted for a new build last year, and a forecast by the Canada Mortgage and Housing Corporation (CMHC) predicts that number will only climb. Despite the problems Karen and Alan encountered, it’s easy to see the appeal: Buying direct from the builder means you can customize your dream home to your exact tastes. It means higher energy efficiency ratings than older homes, and often higher quality building materials. New homes also have lower maintenance costs and are less likely to surprise you with a serious issues such as a cracking or tilting foundation, severe plumbing problems, asbestos or knob-and-tube wiring that needs replacing.
But as Karen and Alan discovered, there are some pitfalls specific to a new home purchase too—pitfalls that we don’t want you to run into. To help out, we’ve compiled the top 10 mistakes that new home buyers make, so you can be sure to avoid them. Read on to find out why you should be wary of the show home, what to do if your new place isn’t ready on time, how to save big money on upgrades, and most importantly, how to make sure that the dream home you’re expecting is the one you actually end up getting.
Mistake #1: They fall in love with the show home
When Jason Saxon and his wife Emily set out to find a builder in the quaint Edmonton suburb of Spruce Grove, they were surprised to find only two builders operating in the area. “Only one of them offered the separate dining room that we wanted,” says Jason, which made their choice easy. The deal was clinched when they toured the builder’s magnificent show home. “It had everything we needed,” gushed the systems analyst. The couple (whose names have been changed to protect their privacy) was so impressed by the show home they booked an appointment with a salesperson on the spot. Within days they had a signed purchase agreement and were busily designing their dream home.
That, of course, is the result every builder is aiming for, explains Stan Garrison, an industry insider with more than 20 years experience (we’ve changed his name to protect his privacy). “Most people fall in love with the show home, but you have to realize that everything you see in that model home is an upgrade,” he says. “And upgrades are a major portion of a builder’s 10% to 20% profit margin.”
Upgrades are so profitable for the builder because the industry standard is to charge double the sub-trade’s fee—a cost that is passed directly to the buyer, Garrison says. “That means the $8,000 granite countertops you ordered really cost your builder $4,000. Now multiply that by 25 buyers and you can see how builders make a profit.”
That doesn’t mean you should never order an upgrade, but you do need to be clear on what is an upgrade and what isn’t—and do a little bargaining so you don’t get taken for a ride. “With new builds there is no room for negotiation on the base sale price,” explains Max Wynter, a realtor with Re/Max Realtron Brokerage in Markham, Ont. “But there is room to negotiate the price of your upgrades.”
The rule of thumb is the more upgrades you spring for, the bigger the discount you should angle for. “If you purchase $5,000 in upgrades the builder may only give you a 10% discount,” says Garrison. “But purchase $50,000 in upgrades and you can start asking for $10,000 to $15,000 off the final price.”
Mistake #2: They trust the floor plan
Ken Grunber, who works at a video production house in Toronto, found out too late that the new condo unit he bought in 2007 wasn’t nearly as large as advertised. When he and his partner moved in and measured the area, they discovered it wasn’t 700 square feet after all. The condo was actually 560 square feet—if you don’t count the balcony and bathroom.
“That’s not unusual,” says Martin Rumack, a real estate lawyer with over three decades experience in new build construction. “Condo sales staff will often include balcony or terrace measurements as part of the total square footage. New home sales staff will provide square footage based on measurements of external walls. You can’t rely on their verbal assurances, on the floor models, or on the sale pitch or brochure.”
Unfortunately, many new home decisions are based solely on brochures or artist renditions. For instance, a sales brochure sold the Saxons on upgrading to French doors for the entrance to their walkout patio. “We’d originally seen the sliding doors in the show home, but a brochure highlighted the double French doors and we loved the look,” says Jason. They quickly paid the upgrade fee, but when they moved in they were surprised to find the doors didn’t have the little window panes with wooden slats between them that they had seen in the photo. Instead there was just one huge pane of glass in each door. “The price quoted by the builder’s sales rep didn’t include window slats, just clear glass. It would cost us more to get slats,” Jason says. “Now I know: get every detail in writing.”
In fact, the builder has the discretion to change an image, or floor plan, or layout and “you have no say,” says Rumack. He suggests asking for a breakdown of room sizes and plan details, and to “get it in writing.” Then, if there’s a substantial difference between what you’re sold and what you get you can either negotiate a price reduction or try and get out of the deal.
Mistake #3: They don’t get their contract lawyered
Whether you’re buying a new detached home or a condo, the purchase agreement is the legally binding document that spells out what you’re getting and the conditions of the sale. It’s full of fine print and legal-speak, and if you sign without legal representation, you risk being bound to terms you don’t understand or don’t want. More importantly, says Rumack, it destroys any chance of re-negotiating the terms of the sale.
“Skip legal advice and you could end up with an electrical utility box on your front lawn that you can’t do anything about, or no side door on your garage, regardless of what the plans looked like,” he says. “You could find yourself stuck with any manner of substitutions, exclusions or inclusions that could detract from your home’s future value.”
When you’re buying a condo, depending on the province you live in, you may have a cooling off period of up to 10 days. This gives you a chance to pay $800 to $1,600 and hire a lawyer to go through your contract after it’s signed. If you don’t like what they find, you can back out of the deal.
Unfortunately, there’s no such period for freehold homes, and many home builders demand that you sign a contract on the spot to secure your sale price or lot selection. Try to avoid this situation if possible, but if you must, at the very least insist on adding a clause that makes the deal conditional upon approval by your solicitor. “These days more and more builders are offering buyers a two-day period where they can seek legal advice before the contract becomes binding,” explains real estate lawyer Sheldon Silverman.
Mistake #4: They don’t bother with an inspection
During the home buying process there are two specific times when it’s important to have your house inspected. The first is the pre-delivery inspection, a mandatory walk-through for all new homes under warranty. This inspection takes place with your builder shortly before you officially take possession of your home. The second inspection should be scheduled for about one month before your home warranty expires. In Ontario the first and broadest portion of your warranty expires 12 months after your possession date, in B.C. it’s 24 months after possession.
During the pre-delivery inspection, you probably don’t need to pay for a professional inspector, but you might want to “take along a friend who’s wise about construction,” says Silverman, “because if you don’t write down the deficiency then the builder isn’t obligated to fix the problem.”
However, hiring a professional home inspector to do a second walkthrough before your warranty expires is a must. This will allow your home to go through all four seasons, which is enough time for major defects to start showing up, and you’ll still be able to get them fixed under the first stage of the standard provincial warranty, which covers against material and labour defects.
Mistake #5: They accept delays without a fight
Believe it or not, until quite recently, if your new house wasn’t ready on time, it was your problem. “Builders were not required to provide reasons or to limit their delays,” says Rumack. But that all changed when Toronto condo buyer Keith Markey challenged a Tarion decision five years ago.
In 2001, Markey bought a unit in a soon-to-be constructed condominium tower in downtown Toronto. His initial possession date was Nov. 30, 2002. But as the date approached, the builders kept sending letters announcing delays. Markey’s possession date was moved back six different times—he wasn’t able to move in until eight full months after the initial possession date.
He requested $5,000 from the builder to compensate him for the delays. The builder refused, the case went before a tribunal, and Markey won. Tarion appealed the case, but in 2006, Markey was vindicated: Not only did he receive almost $5,000 in compensation but close to $9,000 in damages. The case changed how Tarion and other provincial warranty programs handle builder delays.
“The law is now clear and critical dates are now included as part of the purchase agreement and contract,” says Silverman. “If a builder misses these critical dates and requires an extension, a buyer can either agree, and seek compensation, or simply get out of the deal.” Either way, Silverman suggests seeking legal advice whenever you’re presented with a request to delay a critical date.
Mistake #6: They forget they are moving into a construction zone
Anyone considering a new condo or home purchase should take into consideration the impact of ongoing developments. As one reader, who bought into the first phase of a three-phase condo development, recalls: “It’s noisy, everything is dusty and the air quality is just plain horrible—not even the best furnace filter could catch this dust. Combine that with the fact that the whole area is ugly for quite a long time and that access points can open and close, depending on the phase, and you have a recipe for long-term aggravation.”
Still, others, such as Jason Saxon, were mentally prepared for living in a construction site, and actually found it kind of fun—at times anyway. “You take the dust and dirt and noise with a grain of salt,” he says. “And it’s actually nice watching the homes go up.” In fact, there were only two days out of that first construction year when the Saxons and their neighbours felt truly inconvenienced. “When the builders put the final grading on our road no one could drive or park on our street,” Jason recalls. “For many of our neighbours that meant a hike through muddy and overgrown fields just to get home.”
Mistake #7: They think they have a warranty—but they don’t
Most buyers assume that all new-build lofts, condos and homes are covered by a provincial warranty, but this isn’t the case. Only three provinces—B.C., Quebec and Ontario—make warranty coverage mandatory. In fact, those are the only provinces that require new home builders to register with their respective provincial regulator at all.
“In Ontario, it’s illegal to build without being registered,” says Janice Mandel, vice president of corporate affairs at Tarion. But in other provinces, where the warranty program isn’t mandatory, builders can simply opt-out of coverage. Often they’ll try to convince home owners that they’re saving them the registration costs.
Buyers should be proactive and get their new home warranty in writing, says Mandel. They should also go online to determine if their builder is registered with a provincial regulator as a new home builder. This is particularly important for loft or condo conversions—residential units constructed inside an existing building shell. In such situations, new-build warranties often don’t apply.
Mistake #8: They’re not speedy with their warranty claims
When the Saxons first moved into their dream home near Edmonton, they were delighted. But they soon found themselves caught in a bureaucratic nightmare. During that first winter in their new home, they noticed a large crack in the cement-block floor of their garage. So they called the builder, who told them that when the ground thawed in the spring the problem would be fixed. A few months later, when the ground started to thaw, they noticed even more cracks stretching from their garage down their driveway. “We phoned, spoke to the site super, and even flagged down a builder’s representative, who promised us a new driveway.”
But weeks went by and nothing happened. “What was frustrating was coming home to see that our neighbour had a newly poured driveway and ours was still pock-marked and cracked.” That’s when Jason started sending emails. “You have to hound the builder, who seems willing to fix anything, but just needs a lot of motivation.” After weeks of sending emails and making calls the Saxons finally got a new driveway and garage floor.
The Saxons were able to get the problem fixed because they were proactive and understood that there are strict time limits on making claims. To ensure you understand how long you have, carefully read the package you get during the pre-inspection, as there are different deadlines for different types of warranty claims. “My advice: get a calendar and mark down those deadlines, and then make sure you get the claim in at least five days before the deadline,” says Peter Balasubramanian, vice president of claims for Tarion.
While you’re reading your new home package, you should also familiarize yourself with the maintenance you have to do to ensure your warranty remains valid. For instance, if you forget to change your furnace filters or fail to clean out your gutters you could find a claim regarding deficient heating or water penetration into your basement is deemed to be invalid.
Mistake #9: They’re ambushed by hidden closing costs
When you sign the purchase agreement for your new place, many of the closing costs are estimates. These costs often escalate as you approach your possession date, and both Rumack and Silverman have seen their fair share of “absurd” adjustments tacked on to a buyer’s purchase contract. For instance, you may find large charges that suddenly materialize for hooking up gas and electricity meters, plus mortgage discharge fees, development fees, deposit verification fees—Rumack has even seen a fee for “public art contributions” to cover the cost of a sculpture by a building’s entrance. “That’s why I pay close attention to the adjustments and try and get a cap on certain items and remove others,” Silverman says.
Mistake #10: They buy at the wrong time
If you’re buying a new condo or townhouse as an investment, the key is to get in as early as possible. In order to get the financing to start a new project, builders will often raise initial funding through pre-sales. These pre-sales often kick off with invitation-only VIP events, says Wynter. Usually, only high-volume realtors who specialize in the type of building on offer are invited. “If you see a line-up at a sales office, it’s often because a VIP event has been scheduled.” Once the VIP event is over, the builder will open sales up to all interested realtors, then finally they’ll open the project up to the public. “By the time a builder throws a grand opening for the general public, often 50% of the units have already been sold and the price has gone up three or four times,” explains Wynter.
It’s easy to get in on these VIP pre-sales, but you’ll need to work with a realtor who specializes in new developments and be ready to move quickly. For instance, the Paintbox development—the second phase of condos in the newly revitalized Regent Park area of Toronto—gave VIP realtors a week to register their clients for the pre-sale. Four days after registration closed clients were required to sign the paperwork.
Despite the potential savings on purchase price, this can be a risky way of buying real estate. When the Vancouver condo market turned in 2008 many pre-sale buyers found themselves with a contract price that was much higher than the current value of the unit. The builders refused to renegotiate the purchase contracts, and their banks refused to grant pre-arranged mortgages for the original purchase price. Many buyers were forced to either default—and lose their money—or find additional funding elsewhere, at significantly higher interest rates.
If you’re purchasing a freehold home, keep in mind that purchasing at the right time of year can also save you tens of thousands. For instance, in the Greater Toronto Area, the summer is the best time to shop for a new development, says Garrison. “People are on vacation in July and August and don’t have time to look for houses. When things slow down for a builder you have more bargaining power as a buyer.” Another good time to look is in December and January, but by mid-February activity starts to pick-up, says Garrison, and deals are taken off the table.
In Vancouver’s Lower Mainland the opposite is true: real estate and new home purchases are typically hot in the summer and slow down significantly over the rainy months of November and December. Each local market has its own cycle, so it’s best to talk to an experienced realtor.
It’s no secret that it’s expensive to live in Mississauga. Recent data released by the Toronto Real Estate Board (TREB) indicates that, as of December 2017, detached houses were running buyers approximately $910,216 (up from the high 800s in November and down from the $1 million mark they hit in winter 2017).
And while the market could cool or stabilize in 2018 due to the Ontario government’s Fair Housing Plan and the OSFI stress test (a test that some say could disqualify up to 10 per cent of prospective buyers from the market), the fact remains that Mississauga is a desirable city to call home—and therefore a costly one.
But while the city might contain housing that’s (unfortunately) too costly for many residents (hence the city’s affordable housing plan), it’s still attracting buyers.
Zolo, a tech-powered brokerage company, has some interesting stats about the Mississauga market and what neighbourhoods are the most highly sought after.
The stats point out the obvious—home prices are, generally speaking, getting higher and higher every year. According to Zolo, the asking price of homes for sale in Mississauga has increased 11.09 per cent since January last year. Also, the number of homes for sale has increased 75.28 per cent.
According to Zolo’s current data, the median asking price for a detached low-rise is $1.1 million. Other home types are also expensive, with sellers asking about $660,000 for a townhome and $429,000 for a condo
While those prices are indeed high, they’re not terribly surprising. Bordering Canada’s biggest and arguably most economically and culturally successful (sorry, Vancouver and Montreal) city, Mississauga has a lot to offer. Besides proximity to Toronto, Mississauga offers a low unemployment rate (nine per cent, according to Zolo) and a slew of ambitious development projects (the LRT and Inspiration Lakeview and Port Credit initiatives, to name a few).
As for now, the median listing price of a home (and this is all home types combined) sits at $585,000. The median selling price is only a little below asking at $570,000—so sellers are, on average, walking away with enviable profits.
In Mississauga, homes typically sell in less than a month (again, this is all home types combined).
And while homes are expensive, they’re not Toronto expensive.
“There was a time when you could buy a house in Mississauga for just under $100,000. That’s no longer the case,” Zolo writes. “Still, buyers know there are good deals in this western GTA city, with most properties selling for significantly less than surrounding areas. But to grab a piece of Mississauga’s real estate, you need to act fast.
So, which neighbourhoods are the best to invest in?
According to Zolo, the city’s top five neighbourhoods are Streetsville (#1), Applewood (#2), City Centre (#3), Port Credit (#4) and Lakeview (#5).
As for why, the neighbourhoods—beyond being well-known—are hot, Zolo’s data suggests the homes are selling quickly (25-36 per cent are selling within 10 days or less) and for more than asking price (11 to 17 per cent).
Another interesting fact is that, as of now (and this could change), Mississauga remains a city of homeowners.
According to Zolo’s data, 25 per cent of residents rent while 75 per cent own their homes. While rental rates are increasing, the data suggests that—at this stage, least—renting is still cheaper than owning. According to Zolo, renters pay an average of $1,062 a month while homeowners pay about $1,519.
So while it’s impossible to say where house prices will stand in 2018, it’s hard to dispute the fact that Mississauga is—and will remain—a popular (and likely expensive) city to call home.