Tag Archives: micro condos

Ontario gov’t releases new guide to protect, educate condo buyers

The Ontario government has introduced a new measure to protect condominium buyers, a lot of whom have felt short-shifted in past purchases.

“Realtors in Ontario have been very frustrated that purchasers of preconstruction condos have been misled or ripped off with far too many projects that got delayed, or where the final product was not what they were promised,” Tim Hudak, CEO of the Ontario Real Estate Association, which lobbied the provincial government for mandate, told CREW.

“There are too many stories of people who purchased condos that are either badly delayed, never developed, or not what they were promised. OREA went to bat to raise consumer protection with preconstruction condos. We need a level playing field when it comes to protecting consumers from buying homes.”

Beginning this year, developers operating in Ontario must provide purchasers of new or preconstruction condos with a copy of the Ontario’s Residential Condominium Buyers’ Guide, which was prepared by the Condominium Authority of Ontario, and failure to do so could nullify the purchase agreement.

The 37-page guide will cover everything from the purchasing process to condo corporations and any issues that may arise while the resident is living in their unit.

Moreover, effective Feb. 1, as per the New Home and Construction Licensing Act, Tarion will no longer be responsible for regulating new home builders and vendors, ceding the authority to the Home Construction Regulatory Authority.

Led by Hudak, the former leader of the Progressive Conservative Party of Ontario, OREA had been lobbying the provincial government to expand protections for consumers in the real estate sector because many of them enter purchase agreements at sales presentation centres without fully understanding the terms of the agreements, which can be costly. Hudak says sales centre representatives should adhere to stringent professional standards and ethics like real estate sales agents do.

“It’s a great document that OREA had input on, with clear language about the process, the rights consumers have, and their options if they feel they’re not being provided what they contracted for,” said Hudak.

Erica Mary Smith, broker of record at Stomp Realty, says that, unfortunately, not many consumers who visit presentation centres know what they’re walking into, and seemingly small clauses that can carry hefty price tags can be averted with the guidance of a sales agent.

“My business partner and I worked in sales offices for five or six years, and a lot of people don’t know you can bring a realtor into a preconstruction office and the sales office rep will know they can’t get away with anything,” she said. “Your closing costs for preconstruction are typically 16-20% if you don’t know how to negotiate, whereas a realtor can keep it down to 5%.”

Alex Balikoev, senior vice president of sales at Sotheby’s International Realty Canada, welcomes the government-mandated condo guide because, he says, the majority of condo purchasers grew up in ground-related homes and aren’t familiar with the ins and outs of condominium ownership, often to a surprising degree.

“Even current owners don’t know how condo corporations are run,” he said. “That’s why some buildings have higher condo fees—because owners are not involved, not because they’re lazy, but simply because they’re not aware of how much involvement they can have. A condo corp might interview three or four contractors for repair work, but an active board will interview 10 to 20 and find the best and cheapest ones. It’s all about how active and involved the condo corp is.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. 

Source: Canadian Real Estate Magazine – Neil Sharma 11 Jan 2021

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Micro unit financing made easy

Securing financing from A institutions for micro condos—categorized as anything below about 500 sq ft—has always been thorny, and with the COVID-19 pandemic taking a bite out of many downtown condo markets, it’s certain to remain so. However, it can still be done.

The big banks are chary about financing these units because they’re rarely end user-occupied, and nearly always purchased as income properties.

“They’re typically investor units or short-term rentals, essentially serving as hotel substitutes, and there are issues around financing,” said Toronto-based Simeon Papailias, co-founder and managing partner of REC Canada. “The bank always mitigates risk on a default scenario, and it’s not a very marketable property. They look at the heavier risk they take by lending on a micro-unit as opposed to a regular unit.

“There are special programs the five major banks rotate between themselves, depending on what the banks’ goals are for the year. CIBC can do it one year, then TD could the next. There are special programs made for this, and it’s something a prudent investor should know.” 

Alternatively, the B channel is a much less knotty way to secure micro condo financing, although the rate will be higher.

 “I had private financing with Home Trust, at the time, on a 380 sq ft micro-unit investment property in Yorkville back in 2011, when those units just started becoming more common in the marketplace,” continued Papailias. “Today, around 30% of most condo buildings are under 500 square feet, and the reason has everything to do with affordability.”

Locale is another variable, says Dustan Woodhouse, president of Mortgage Architects. A micro-unit in a building near a university or college, for example, is far more likely to receive funding than a similar-sized condo situated around fewer amenities.

Securing financing for a resale micro-unit is a little easier, he added.

“Pull title on the property,” said Woodhouse. “Pull title on that unit and pull title on four more units in the building and see who the lender is on the title. Then you’ll know who to call.”

The pandemic has left downtown condo markets reeling, but as any savvy investor knows, that’s when opportunity comes knocking.

“Prices on micro condos are dropping the furthest and the fastest over any other type of properties. On the one end of the spectrum, detached houses are rocketing upward, and at the other end of the spectrum you have micro condos dropping in price.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. 

Source: Canadian Real Estate Wealth – Neil Sharma 16 Dec 2020

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