Buying A Home

Pre-construction real estate risk and rewards

Recently I sat down with Daniel Char, a mortgage broker who helps real estate buyers get mortgage financing. We talked about a lot of things that home buyers should be aware of, including some risks and rewards of buying pre-construction homes.

The Reward: When buying a pre-construction home, you’re typically required to put down a deposit of around 20% of the purchase price, and the builder is contractually required to provide occupancy of the home within a few years. If the housing market keeps on rising, by the time the home is completed the fair market of the home may be more than the purchase price.

The Risk: Of course, the housing market does not always go up. There is a risk that the fair market of the home is less than the purchase price when the builder finishes construction and requires you to complete the closing of the property. That’s when having a mortgage broker like Daniel can help you get the mortgage financing that you need to complete the purchase.

Check out our full conversation here:

Pre-construction real estate risk and rewards

New first time home buyer incentive

Earlier this year, Trudeau’s federal budget for 2019 outlined a new incentive to help first time homebuyers buy their first home that he called a “shared equity mortgage”. It’s effectively an interest free loan from the federal government for eligible homebuyers.

More details have since been released, and it’s looking like it’ll be an exciting end of the year for first time homebuyers.

The program will be ready to receive applications on September 2, 2019, with the first closing taking place on or after November 1, 2019.

The definition of “first time homebuyer” is quite broad, and in fact includes buyers who have actually owned a home before:

  • you have never purchased a home before;
  • you have gone through a breakdown of a marriage or common-law partnership; or
  • in the last 4 years, you did not occupy a home that you or your current spouse or common-law partner owned.

If you’re looking to buy a new home soon, remember to ask your mortgage lender or broker about this incentive!

Supplementary tax bill for new house or condo

A new house or condo can be very exciting. If you’re a first time homebuyer as well, that’s doubly exciting. But as an owner of a new house or condo, there are also special challenges as well.

One of the things that an owner of a new house or condo must plan and budget for is the Supplementary Tax Bill. At the time of closing, the property is likely assessed as “vacant land” for the purposes of property taxes. Therefore, the first few property tax bills you receive only takes into account the value of the land, but not the value of the buildings or improvements made to the land.

About 12 to 18 months after title to the property is transferred to you, the Municipal Property Assessment Corporation (MPAC) will perform a re-assessment of your property, taking into account the value of the buildings or improvements made to the land.

Once the MPAC assessment is completed, you will receive a “Property Assessment Notice” in the mail, setting out the reassessed value of your property. A Supplementary Tax Bill will follow, using the reassessed value of the property and calculating the amount of property taxes owed from the date of occupancy. Depending on the type of building or improvement made to the land, the Supplementary Tax Bill can be many thousands of dollars. The due date for the Supplementary Tax Bill is also relatively short considering the amount payable, and can be as short as 90 days from the date the bill was issued.

It is very important that homeowners of new homes plan and budget for this expense.

Status certificates are an essential resource when buying a condo

You’re all excited because you’ve just brought a condo in the city that you love. Whether it’s your first place or an investment property, when buying a condominium there are some special things to always keep in mind amidst all the excitement.

An important thing to keep in mind when buying a condo, especially a resale condo, is that you’re not just buying the condo unit itself – you’re also buying a share of the entire building, including all its assets and liabilities. As such, the financial and legal health of the condo corporation is very important and should be taken into account when deciding whether to buy that condo you just saw or not.

A client found out first hand when she brought a condo this spring. The condo was in dream location downtown, within easy walking distance to Queen’s Park. It wasn’t a new condo, but the building looked well maintained, and the unit itself had a spectacular view of the downtown skyline. She made an offer for the condo, and to her delight, it was accepted. She just brought her dream home!

Amidst the euphoria of buying a new place, she also did something very smart. She had me review the Agreement of Purchase and Sale before she put in the offer, and I advised her that she should put in a condition for her lawyer to review the condo’s status certificate and to be satisfied with it if the deal is to go through.

A status certificate is a report on the financial and legal health of the condominium corporation. Anyone can request a status certificate from the condo management office as long as they pay a $100 fee. A status certificate can reveal many things, for example:

  • upcoming major projects, for example installing new elevators or new exterior windows, which may result in an increase in management fees
  • pending legal action against the condo corporation, which may result in the condo corporation requiring management fee increases in order to pay a legal settlement
  • unpaid condo management fees by the seller
  • potential problems with non-standard improvements made to the condo by the seller

As this client found out, having me review the status certificate for a condo paid off. She found out that the condo corporation was planning to undertake a major rooftop renovation, which would result in an increase in her condo management fees of about $100 a month. With this information in hand, she was able to renegotiate a lower purchase price for the condo.

By having me review the status certificate to spot potential problems, she avoided any surprises when she moved into her dream home.

What can a lawyer do for me as a homebuyer?

Whether you’re a first time homebuyer or a seasoned homeowner looking to move into a new house, it’s always recommended that you retain a lawyer to help you make sure the transaction goes as smoothly as possible.

A real estate lawyer can help:

  • Advise and explain the Agreement of Purchase and Sale and what it means in relation to your rights as a homebuyer
  • Ensure clear title to the house you’re buying, so that you’re actually buying the house that you think you’re buying and that there are no problems with the title to the house that may expose you to litigation or other hazards in the future
  • Ensure compliance with municipal bylaws, zoning requirements, and all required building and fire codes – especially important for buyers who intend to rent out a basement apartment for example
  • Draft and take care of all paperwork in relation to the real estate transaction, including the deed, mortgage and lending documents with your lender, the bill of sale for chattels, residency declarations, and more
  • Advise on tax matters related to the real estate transaction, including the Ontario Land Transfer Tax, the Toronto Land Transfer Tax, and the Harmonized Sales Tax (HST/GST)
  • Advise on federal and provincial incentives and rebates for new and existing homeowners