Tag Archives: real estate

Real estate market uncertainty is forcing appraisers to take a second look

The potential for rapidly dropping prices in southern Ontario is forcing appraisers to have a second look at properties they have already assessed to see how much the market has shifted.

Claudio Polito, a Toronto appraiser and principal owner of Cross-town Appraisal Ltd., says lenders basing mortgage decisions on value, as opposed to income and credit history, are really trying to stay on top of a market that appears to be changing rapidly.

By his estimates, prices in the Greater Toronto Area have dropped anywhere from five per cent to 15 per cent over the last 30 days. The next set of statistics from the Toronto Real Estate Board are due out Monday and will mark the first full month of data since provincial changes to cool the market that included a tax on foreign buyers.

“Lenders I deal with they want to know if your property is still worth $1 million if they are loaning you say $650,000,” said Polito. “They don’t base it on anything else. We have to be precise because it’s not a bank, (smaller lenders) can’t afford to lose a dollar.”

 

It wouldn’t be the first time, appraisals have lagged purchases prices — a phenomenon that previously caught some Vancouver buyers by surprise when it was time to close.

A lower appraisal could increasingly be an issue for people with previous deals, not yet closed, in Toronto, especially when buyers are coming up with only the minimum 20 per cent down payment for a non-government backed loan.

If you buy a home for $1 million with $200,000 down, you need an $800,000 loan to close. But if your appraisal comes in at $900,000, your financial institution will only agree to a maximum $720,000 loan based on 80 per cent debt to 20 per cent equity. Those buyers are left searching for a second mortgage — at a higher rate — to get the extra $80,000 if they can find someone to loan them the money.

“We are seeing some people walk away from deals,” said Polito, because they can’t close — a move that comes with myriad problems if the sellers seek legal damages. “What we are seeing is properties sold in January and February, values are still there but if it sold in March, it is very hard to support the value.” Toronto prices rose 33 per cent in March from a year earlier.

 

Keith Lancastle, chief executive of the Appraisal Institute of Canada, said the warning for buyers is probably not to get into bidding wars if they don’t have a cushion to come up with a higher down payment. “I would expect it’s quite routine where the appraisals are being done and it’s coming in at lower than people hoped to see.”

He says the volume of sale in Toronto makes it easier to find comparable sales but the pace at which the market is changing makes it “tough to keep up” and that forces appraisers to look at some data and consider whether it’s an anomaly or part of trend.

A more difficult market to assess is one like Calgary, which has seen transactions drying up, making comparisons hard to find.

“The more valid data you have access to, the simpler the task of preparing the appraisal becomes,” said Lancastle. “When the Calgary market was slow, the lender would say we want sales that are within the last 90 days for comparable. If nothing has sold for comparable for 90 days, you ask the lender if they want to extend the time or the geographic window.”

Nicole Wells, vice-president of home equity financing at Royal Bank of Canada, said her institution is relatively conservative when it comes to appraisals to begin with — limiting the impact of a shifting market.

“Given how quickly prices rise, you really have to make sure you are adequately appraising the property,” said Wells. “We always promote affordability, making sure you know what you want and what you can pay. It’s really dangerous to get into a bidding war (with the minimum down payment).”

Source: Financial Post – Garry Marr | June 1, 2017 

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The 5 priciest homes in one of the country’s hottest markets

Take a look at some of the country’s most luxurious homes currently for sale.

These are the most expensive homes currently for sale in and around the country’s hottest housing market.

As someone who covers housing for a living, there’s nothing quite like perusing some good old fashioned real estate porn. I’m sure you faithful readers can agree.

While modern builds with their sky-high windows or hard lofts with their sprawling floorplans are always fun to explore, there’s nothing quite like gandering at some of the country’s priciest homes.

And there seems to be a few more than usual currently on the market.

Pont2Homes, an online agency, rounded up the 10 most expensive homes currently for sale in and around Toronto. Check them out below.

1. A Yorkville Penthouse

Yorkville is one of the most sought-after neighbourhoods in Toronto (there are even rumours that Mike Babcock, current coach of the Toronto Maple Leafs, chose to coach in Toronto over Buffalo due to his wife’s desire to live in the posh ‘hood).

It’s home to some extravagant shopping spots and swanky restaurants; and also to the province’s current most expensive home.

Listed at a cool $36,000,00, this beauty is located at the top of the Four Seasons Hotel.

2. A Bridle Path mansion

“Millionaire’s row” is home to this 10 bedroom behemoth befit for Batman himself.

For a cool $35,000,000, this home includes a 5,000 square foot pavilion, a tennis court, a 50 foot indoor pool, and a hand-carved Louis XV fireplace.

3. A multi-million dollar country home

If city living isn’t your thing, this $24,950,000 equestrian estate in King City may be just what you’re looking for.

The rugged and rich outdoorsman (or outdoorswoman) will surely be drawn to the 80 acre property that is home to a pond and waterfall, skating hut, walnut grove, and groomed hiking trails.

4. A lakefront compound

If one home isn’t enough, this estate in Oro-Medonte is situated on a 17 acre lot with a 525 foot private beach on Lake Simcoe.

The lot is also home to two 12,500 square foot homes.

5. 10 bedrooms in Bridle Path

This estate has its own ballroom, a spa, a salon, and in in-home theatre.

All for the reasonable price of $19,380,000.

Source: Canadian Real Estate Magazine – by Justin da Rosa29 May 2017

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Waterloo Region real estate: What you can get for $300,000, $500,000 or $800,000

Not all that long ago, it wasn’t hard to get a grasp on what was happening in Waterloo Region’s real estate market.

Prices were going up, sure – but at stable, predictable rates. Once a buyer knew how much they could afford, or a seller knew how much they were hoping for, it wasn’t hard to figure out what sort of house would sell for $250,000, or $450,000, or – for the dreamers among us — $1 million, even if it wouldn’t be for a couple years.

Now? Forget it. With homebuyers flocking in from Toronto in record numbers, with average sale prices rising by several per cent on even a month-to-month basis, it’s virtually impossible to do any advance planning around real estate deals, or to even predict what a house might sell for in a few months’ time.

This, then, is a snapshot. Not of where things will be in 2018, or even this fall, but of where Waterloo Region’s residential market stands as of May 2017, and of what sort of house is likely to sell around three price points.

$300,000: The starter home

With the average sale price of a detached home in Waterloo Region edging closer to $600,000, some buyers might think that cheaper homes are simply out of the question.

Not so, says real estate agent Kevin Reitzel.  While $300,000 may be associated with condos and townhouses these days, there are still some detached homes listing in that range.

“They’re just going to be smaller than they were a few years ago,” he says.

Reitzel estimates that a $300,000 detached home is now typically between 900 and 1,000 square feet, with two bedrooms and one or two bathrooms.

He says homes of that sort are becoming more popular with first-time buyers who may have been looking a little further upmarket until recently.

“They’ve become less picky,” he says.

$500,000: The family home

If you’re looking for the sort of home that’s traditionally been just out of reach for the typical first-time buyer, paying half a million dollars for it may be the new normal.

Reitzel says a typical $500,000 sale is now a house featuring three or four bedrooms, two or three bathrooms, 1,800 to 2,200 square feet of space, and a single or double garage.

In many cases, houses priced in this range will now sell as-is, without renovations designed to increase the home’s value.

“The house will sell itself in this market,” Reitzel says.

Part of that drive is coming from Toronto-area buyers, as they realize that their money takes them a lot further in Waterloo Region than in the cities they’re used to looking in.

$800,000: Living in luxury

It wasn’t that long ago that paying $800,000 meant you weren’t just getting one of the nicest homes in the region – you were getting one of the nicest of the nicest.

Now, though, that mark seems to be the running price in higher-end neighbourhoods like Waterloo’s Colonial Acres – and once again, newcomers to the area are part of the reason why.

“If you look on a map, it’s one of the furthest (neighbourhoods) from the 401 – but it’s a very, very popular area for Toronto people. They love it,” says Reitzel. At the other end of Waterloo, the same principle applies to Laurelwood.

Eight hundred thousand dollars is the current going price for the sort of house that would have fetched $500,000 or so at the beginning of the decade.

These are homes with larger lots and at least 2,400 square feet of space. They’re the sort of homes Reitzel refers to as “more of a lifestyle choice” than a pure housing decision.

Source: Ryan Flanagan, CTV Kitchener Published Monday, May 15, 2017

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Ontario’s 16 new housing measures

Houses are seen in a suburb located north of Toronto in Vaughan, Canada, June 29, 2015.

The Ontario government has announced what it calls a comprehensive housing package aimed at cooling a red-hot real estate market on Thursday. Here are the 16 proposed measures:

  • A 15-per-cent non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations.
  • Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded.
  • Updates to the Residential Tenancies Act to include a standard lease agreement, tighter provisions for “landlord’s own use” evictions, and technical changes to the Landlord-Tenant Board meant to make the process fairer, as well as other changes.
  • A program to leverage the value of surplus provincial land assets across the province to develop a mix of market-price housing and affordable housing.
  • Legislation that would allow Toronto and possibly other municipalities to introduce a vacant homes property tax in an effort to encourage property owners to sell unoccupied units or rent them out.
  • A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.
  • A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges.
  • More flexibility for municipalities when it comes to using property tax tools to encourage development.
  • The creation of a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions.
  • An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.
  • A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions.
  • The launch of a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures and any additional steps that are needed
  • Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
  • A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.
  • Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.
  • Provisions that would require municipalities to consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes, among other things.

Source: The Canadian Press – April 20, 2017

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Ontario to place 15 per cent tax on foreign buyers to cool GTA housing market: Sources

Ontario to place 15 per cent tax on foreign buyers to cool GTA housing market: Sources

The Canadian Press has learned that the Ontario government will place a 15-per-cent tax on non-resident foreign buyers as part of a much-anticipated package of housing measures to be unveiled today.

The measures are aimed at cooling down a red-hot real estate market in the Greater Toronto Area, where the average price of detached houses rose to $1.21 million last month, up 33.4 per cent from a year ago.

Premier Kathleen Wynne and Finance Minister Charles Sousa have said the measures will target speculators, expedite more housing supply, tackle rental affordability and look at realtor practices.

Sousa says investing in real estate is not a bad thing, but he wants speculators to pay their fair share.

He says the measures will also look at how to expedite housing supply, and he has appeared receptive to Toronto Mayor John Tory’s call for a tax on vacant homes.

Sousa has also raised the issue of bidding wars, and has suggested realtor practices will be dealt with in the housing package.

The Liberals have also said that the government is developing a “substantive” rent control reform that could see rent increase caps applied to all residential buildings or units. Currently, they only apply to buildings constructed before November 1991.

Source: The Canadian Press – April 20, 2017

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Buying an unbuilt condo? Think twice, agent says

Being exceedingly careful in one’s condo purchase is never a bad thing, especially in light of the $3-million class action by over a hundred condo owners in Ottawa.

Toronto-based real estate agent David Fleming, who says that he has never been involved in a pre-construction condo transaction in his 13 years as a professional, advocates one simple bit of advice: “Never buy new.”

“I liken it to buying a pair of jeans. If you walked in [to a store] and you couldn’t try them on and didn’t know how long they would be, and what the waist was … that’s a hundred-dollar pair of jeans. So why would someone buy a million-dollar condo the same way?”

The most important aspect that buyers should remember is the fact that they can back out with no penalty, as Ontario provides a 10-day “cooling off” period that can serve as an out for hesitant consumers. The countdown for the 10-day duration starts once the would-be buyer receives a copy of either the disclosure statement or the fully signed purchase and sale agreement, whichever comes later.

Another wise step would be to always hire a lawyer, who should be tasked to review all of the documentation involved in the transaction. If the lawyer suggests amendments to areas of concern, these proposals should be forwarded to the developer.

“If the developer says no, then don’t go ahead with the transaction.”

Fleming also noted that it would be helpful to remember that the people in the showroom are still salespeople who work for the developer, no matter how warm and accommodating they might seem. Working with one’s own real estate agent should help a consumer avoid an ill-advised purchase.

Source; Canadian Real Estate Wealth – by Ephraim Vecina 03 Apr 2017

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The Role of Appraisals How do the three main types of building appraisal work?

Whether it’s a retail strip plaza, a mall, an agricultural compound, a single family home, or an industrial building of 5,000 or one million square-feet, getting an appraisal is an important first step in any property acquisition process. In order to learn how to weight the importance of different factors when forming their opinion on value, registered appraisers go through a stringent examination process.

When determining the value of a property or building, there are several methodologies that qualified appraisers have to choose from, which are driven by the scope of the assignment and the property type.  The first is the ‘Direct Comparison Approach’; a methodology whereby the appraiser develops an opinion of value by analyzing completed sales, listings or pending sales of properties that are similar to the subject property. “Estimates of market rent, expenses, land value, cost, depreciation and other value parameters may be derived using a comparative technique,” explains Dan Brewer, President of the Appraisal Institute of Canada (AIC) and licensed mortgage and real estate broker.

Another methodology commonly adopted by appraisers is the ‘Cost Approach’, which considers the land and building components separately, and reaches a value conclusion by adding these estimates together to form an opinion. “Like the Direct Comparison Approach, the Cost Approach is based on a comparison of the cost to replace the subject (cost new) or the cost to reproduce the subject (substitute property),” Brewer says. “The total cost estimate is adjusted by deducting the accrued depreciation (i.e., physical wear and tear, functional deficiencies and external influences) of the dwelling and the site improvements (e.g., garage, deck, pool, etc.). The Cost Approach is most reliable when a property is newer due to the lower depreciation, although it’s generally not a weighted approach.”

The third methodology is the ‘Income Approach’, which is used to determine the valuations of income-producing properties. “Typically purchased as investments, the earning potential is an important element affecting the value of these properties,” says Brewer. “Through the Income Approach, the appraiser analyzes a property’s annual income and expenses to convert the net income into a present value. This methodology is typically not applied when valuing a residential property.”

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