Quick Breakdown: The New Mortgage Stress-Test

Last week, the federal government announced some upcoming changes to the way it calculates qualifying interest rates when implementing the mortgage stress test.

These change will take effect on April 6, 2020.

Before the change, the stress test is based on the interest rates posted by the 6 major banks (more specifically, the government looks at the Big 6 Banks’ posted 5-year fixed rates and then adds 2% on top of that number).

After the change, the test will be based on the interest rates posted by the mortgage industry (more specifically, the government will look at the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, and then add 2% on top of that number).

Essentially, the change will make sure the stress test is dictated by what’s actually happening in the market, as opposed to what the banks dictate. And the stress test will be more dynamic, since it'll be based on the weekly numbers.

The Government of Canada’s press release from February 18th states, “This follows a recent review by federal financial agencies which concluded that the minimum qualifying rate should be more dynamic to better reflect the evolution of market conditions. Overall, the review concluded that mortgage standards are working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses. This adjustment to the stress test will allow it to be more representative of the mortgage rates offered by lenders and more responsive to market conditions."

While the change so far applies to insured mortgages, it’s expected to apply to uninsured mortgages as well. The February press release states, "The Office of the Superintendent of Financial Institutions (OSFI) also announced today that it is considering the same new benchmark rate to determine the minimum qualifying rate for uninsured mortgages. OSFI is seeking input from interested stakeholders on this proposal before March 17, 2020."

Insured Mortgages: When a borrower has less than a 20% down payment, lenders are required to obtain government-backed mortgage insurance. The mortgages must comply with the insured mortgage rules set by the Minister of Finance, including the insured minimum qualifying rate.

Uninsured Mortgages: When the borrower has a down payment of 20%, or more, of the sale price, insurance is not required. The minimum qualifying rate for uninsured mortgages is set by OSFI, the independent banking regulator.

So, what do the changes mean for the average borrower?

From what we're hearing, it’ll likely amount to a 2% - 3% increase in purchasing power.

For example, a budget of $800,000 under the current rules might increase to $815,000 - $825,000 under the new rules.

This might not sound like much, but any little bit helps in a tight market like Toronto’s.

If you have any questions just give us a shout and we’ll put you in touch with a mortgage specialist who can help.

Would You Buy A Home Near The Tracks?

Every buyer has a list of must-haves and deal-breakers when they start their home search.

As the search progresses, this list often changes.

Things that were initially important become less so when a buyer sees how little supply there is in the Toronto real estate market.

A few examples?

• Having a powder room on the main floor.

• Having a 4th bedroom on the 2nd floor.

• Having a private driveway.

Don't get me wrong, none of the above items are impossible to find in a house in Toronto.

Depending on location though, any one of them might be very tough to come by.

Plain and simple: a Toronto home buyer needs to be willing to compromise at least a bit on their list of must-haves and deal-breakers.

One thing that often stays on the list though, is avoiding houses that are close to the train tracks.

This is such a negative in some buyers’ minds, that it's not even up for discussion.

Anytime a new listing pops up that might work for one of our clients, we bring up the address on Google maps and check the house's specific location.

Too close to the tracks? Our clients might want to skip it.

Not every buyer has a clear-cut objection to being close to the tracks though.

Sometimes, if the house is only close-ish to the tracks, then it's okay.

Of course, every buyer's definition of close-ish is subjective!

A few years ago we worked with some buyers who were shopping for a home in The Junction.

There's a pocket there, north of Dundas St. W, that sits just south of the train tracks. It contains streets like Quebec Ave, Clendenan Ave, and a handful of others.

A house popped up for sale there, only about 10 houses from the tracks. Certainly close enough to hear the train while sitting in the backyard or from inside the house when the windows are open.

Not close enough to deter our clients from considering it though.

Evidently, the tracks weren't an issue for a handful of other buyers either...

The house sold on offer-night, for a sale price well above list. In fact, it set a new record for that type of house in that area.

Another house popped up in that pocket a few weeks later, roughly the same distance from the tracks. This house broke the record price set by the previous house!

So, it's clear that being close to tracks isn't a deal-breaker for everyone.

What about a house that backs directly onto the tracks?

No doubt, this is a tough sell for most buyers. And if we had clients that were considering it, we’d certainly caution them about the resale-ability of the property.

For some buyers though, it offers the opportunity to finally get a home in a very competitive market. Their willingness to look at a house that backs onto the tracks opens up possibilities that other buyers won't consider.

What about you? Would you consider buying a house near the tracks?

If you're thinking of making a move and would like to know how we can help, please contact us for more info.

Is January Too Early To Start Looking For A Home?

I'll let you in on a secret... the spring real estate market actually starts in January.

Well, not officially. And certainly not in full swing (that doesn't happen until March/April).

The early beginnings of the spring market do start in January though.

I was out with a new client yesterday and he asked a question that I often get this time of year, "Is it too early to start looking for a place?  It's only January... Am I better to wait until the spring?"

My answer was simple: "Not if the right property comes along".

Sure, you could wait another month or two.  There'll likely be more listings to choose from in late-February/March. The flip-side is that there'll likely be more buyers in the market then as well. More supply, but also more competition.

Getting out there and actively looking in January means getting a jump on the rest of the market.

What if things start to heat up in March and prices start to increase? Buying in January could mean paying less than what the same property is going to cost you in the spring.

And then there are the properties that've been sitting on the market all through December with no action. You may be able to benefit from a seller whose time is running out and needs to sell.

Of course, the right property might not come along until the spring. Even then, you can still chalk your January efforts up to "getting familiar with market". None of it is time wasted if it leads to you making a confident, informed purchase.

What are you waiting for? The early worm catches the bird!

If you’re thinking of making a move and would like to know how we can help, feel free to contact us for more info.

Who Lists Their Home For Sale In Late-December?

Who lists their home for sale in late-December?

People who have to sell, that’s who.

Otherwise they’d wait until the 2nd week in January, which is when the spring market starts and an influx of buyers begin (or resume) their hunt.

Sure, there are still some buyers out there looking in late December.

Not many though.

And the ones that are looking are likely doing so half-assed, as they’re distracted with holiday obligations, etc.

Sellers in the Toronto real estate market don’t always have a choice though, when it comes to timing the sale of their home.

Sometimes, listing in late-December is their only option.

For example, let’s say you make a purchase at the end of November, with a 60 day closing.

The good news here is that you go into the holiday season knowing that you’ve bought a house, and the stress of searching for a home is off your plate.

But now you’ve got a home to sell, just as the market is about to slow down!

Some of you are thinking, “Well, don’t buy a home at the end of November then! Make your purchase in September or October instead.”

The reality is that buying a home in the Toronto real estate market can be tough; there’s a tonne of competition when it comes to good houses and if an opportunity presents itself you have to jump on it, whether or not it’s actually the best time of year to make a move.

This isn’t necessarily a bad thing though.

If you have a great house in a great neighbourhood, and you’re able to get your act together quickly enough to list within that first week of December, then you’re likely going to be okay.

You might actually benefit from the fact that there won’t be many other listings to compete with, and you’ll appeal to those buyers who are seriously looking to lock down a purchase before the holiday season starts.

When To Wait

If it’s going to take a couple of weeks of prep time to get your home ready, then you need to consider putting off listing until the new year.

Or if you’ve got the kind of property that might take a little longer to sell (it ain’t the purdiest house on the block, and/or it’s in a less-than-desirable neighbourhood), you might want to avoid sitting on the market during the holiday season.

A house like this is going to look staler than last year’s fruit cake by the time mid-January rolls around (zing!).

Not everyone has the stress tolerance to wait though.

Going back to the example above, if the home you purchased is closing on February 1st, then waiting until the new year to list only allows you a couple of weeks to get yourself a firm sale (this is assuming that bridge financing is going to be an option).

A tight deadline like this is too stressful for some sellers, and they decide to swallow the risks of listing in late-December.

Either way, there are pros and cons to each option that a seller has to accept.

Our advice is to work with a realtor who has guided clients through this process before.

You need someone in your corner who has a handle on all the angles, especially at a time of year when there's so much else to stress about!

Happy Holidays!

If you're thinking of selling your home, and you want an agent who knows when the best time to list is, feel free to contact us for more info.

Wooly Bully Offer!

Bully offers have always been a part of the Toronto real estate market. Over the last few years though, they've become much more commonplace than ever before.

They've became so prevalent in fact, that almost every listing with a scheduled offer-date now includes the following note, "The seller reserves the right to consider preemptive offers".

(Yes, bully offers are now often being referred to as "preemptive offers". Us realtors are capable of putting a positive spin on any negative, and we're apparently trying to class-up the term a bit.)

It used to be, a listing would hit the market on a Tuesday or Wednesday with a scheduled offer-date for the following week, and the sellers would wait until then to review any offers.

This would give everyone plenty of time to see the home and do their due diligence before submitting an offer.

Buyers would have time to crunch their numbers and work with their mortgage person to get the financing in order, they'd have time to take a look at the pre-listing home inspection (or do their own inspection), and they'd be able sleep on it all for a few days before deciding whether or not to participate on offer-night.

Times have changed.

We're at a point now where sellers cannot bank on the fact that a home will still be available for sale come offer-night.

The new reality is that buyers have to be prepared to go and see a listing within just a few hours of it hitting the market, and potentially submit an offer that night!

And of course it goes without saying that their offer has to be a damn good one. No conditions, a significant deposit, and a price well-above asking.

This is just the way it is now; the whole concept of "offer-night" in the Toronto real estate market has been disrupted.

Our advice: move quickly to view a property you’re interested in… there’s no telling how long it’ll stick around.

If you're thinking of making a move and want an agent who's able move quickly and help you submit a competitive bully offer, feel free to contact us for more info.

The August Slow-Down

Toronto's real estate market is exceptionally active.

On any given day listings are being uploaded to MLS, realtors are out viewing properties with clients, and offers are being signed.

It seems as though the Toronto real estate market never sleeps.

It does take a breather though. Twice a year.

Once during the holiday season (late-December/early-January). And again during the 2nd half of summer (the month of August).

Things are noticeably slower as these are the two times of year when a relatively large portion of the real estate market (buyers, sellers, and realtors) are away on vacation.

Even those buyers who aren't away on an actual vacation are likely still taking a break from their home search.

Accordingly, many sellers (and listing agents) feel that once August hits it's probably best to hold-off until after Labour Day to list.

We can't say we disagree.

We met with a couple of perspective sellers just a few weeks ago and, after some discussion, both decided to wait until September to sell.

And our current buyer clients are in the mind-set of, "If something great becomes available in the next few weeks let's go take a look. But realistically I'm not expecting to find anything until the market picks up again in September."

There are always two sides to the coin though. And in some instances August can actually be a great time to buy and/or sell.

We’'ve written a few articles in the past that are worth a read here:

1. Are There Deals To Be Had In The Last Few Weeks Of Summer? (read it here)

2. Why Wait Until After Labour Day To List Your Home For Sale? (read it here)

3. Is It Better To Wait Until After Labour Day To List Your Home For Sale? (read it here)

Whether you decide to stay active or take a break from the market this August is up to you. We know we'll be working the majority of the month, so if you got any questions just give us a shout. If not, enjoy the rest of your summer and we'll see you in September!

If you’re thinking of making a move and would like to know how we can help, please contact us for more info.

Who Actually Benefits From An Open House?

There’s a misconception out there that open houses are not worth doing.

A lot of realtors think they're a waste of time. And a lot of sellers assume that the only people who come to open house are nosy neighbours and tire kickers.

Some people think that open houses do nothing more than benefit the listing agent, who uses them to try and capture new buyer leads.

In my opinion though, open houses are definiely worth doing and should be an important part of any home's marketing strategy.

In fact, an open house can potentially benefit all of the parties invloved in the buying/selling process.

How does the seller benefit?

The seller benefits from the added exposure the property gets. Open houses allow any number of potential buyers to view the property who were not able to book a private showing during the week. Yes, this includes nosy neighbors and tire kickers, but that's to be expected.

How does the buyer benefit?

The buyer benefits because it allows them added opportunities to get in to see the property. There are some buyers whose schedule does not allow them to book a showing with their realtor during the week, and open houses allow them a more relaxed time frame on the weekend to see the property.

Open houses are also great for buyers who have already seen the property with the realtor and want to come back for a second showing on the weekend. Perhaps bringing in family members, contractors, etc.

How does the buyer's realtor benefit?

The buyer's realtor benefits because it allows them to get their clients into the property if they are not available to show it themselves. Often times, buyers who are working with a realtor will still go out on their own and tour open houses on the weekends. They will then report back to their realtor if any of the houses are of interest and go from there.

How does the listing agent benefit?

The listing agent's most important job is to market the property and expose it to the highest number of potential buyers possible. Public open houses are an excellent way of doing this!

Yes, the listing agent might connect with some buyers at the open house who do not yet have a realtor (this is how I found the majority of my buyer clients when I first started in the industry). I'll be the first to admit that this side benefit no doubt strengthens a realtor's motivation to dedicate 3 - 4 hours of of their time on a Saturday or Sunday.

Still, the primary goal when a listing agent holds open houses is to expose the property and get it sold!

If you’re thinking of making a move and would like to know how we can help, please contact us for more info.

Under Pressure: Will Some Sellers Benefit From The New Mortgage Stress-Test?

Ever since the new mortgage rules were announced almost 2 weeks ago, I've been monitoring the Toronto MLS to see how many new listings hit the market and try to take advantage of the upcoming changes.

I found a few listings that explicitly highlight the impending rule changes in the "extras" section of the property description. Take a look at the screenshots below:

Under Pressure: Will Some Sellers Benefit From The New Mortgage Stress-Test? Photo

Under Pressure: Will Some Sellers Benefit From The New Mortgage Stress-Test? Photo

Whether or not prospective buyers will actually feel the pressure to make a move on either of these particular properties remains to be seen, but no doubt there are sellers out there who see a potential opportunity here.

I've already heard from a few seller clients of my own who are seriously considering bumping up their plans to list.

Instead of waiting until spring 2018 as previously planned, November 2017 has become a very attractive alternative.

While not every buyer needs to stress about the new stress-test (as I outlined in my blog post from last week), some will certainly be affected by the new rules. Specifically those who need to push their mortgage amount to the maximum.

Consider first time buyers, for example. They have no home equity to throw into the pot, and rely only on whatever down payment they have saved. These buyers would typically need to push their mortgage amount to the maximum in order to break into the market.

And these are the buyers that some sellers are hoping to capitalize on in the coming weeks.

A buyer with a current maximum budget of $450,000 might see their maximum budget reduced to as little as $360,000 after January 1st, 2018.  This person will be highly motivated to make a purchase in the coming weeks, as they’ll be priced out of the market come the new year.

And it goes without saying that a buyer as highly motivated as this will be more inclined to pay a higher price in order to secure a property in time.

We’ll see how things play out over these next 2 months. I'm sure we'll see properties sell for higher-than-expected prices, and I'm sure that a number of sellers will benefit from buyers who are acting under pressure.

Dum-dum-dum Da-da Dum-dum.

Dum-dum-dum Da-da Dum-dum.

If you're a buyer and you have any questions just give us a shout and we’ll put you in touch with a mortgage specialist who can help.

If you're a seller and you're considering listing your home in the coming weeks, give us a shout and we’ll help you make the right move.

Who's Actually Going To Be Affected By The New Mortgage Stress-Test?

Since last week’s announcement by the Office of the Superintendent of Financial Institutions (OSFI) about the upcoming changes to the Canadian mortgage rules, I’ve seen plenty of buyers fret that their budgets are going to be reduced by as much as 20%.

This isn’t necessarily the case though, and not every buyer needs to stress about the new stress test. Let’s recap what sort of changes are coming once the new rules are implemented on January 1st, 2018.

The Biggest Change

Once the new rules come into play no-one will be able to qualify at less than the benchmark rate (which today is set at 4.89%). And in fact, borrowers with a down payment of more than 20% will have to qualify at either the benchmark rate or their contract rate + 2%, whichever is greater. So it’s quite possible that some borrowers will have to qualify at a rate that is greater than the current benchmark rate of 4.89%!

To give you some perspective: Since the last round of mortgage rule changes came into effect last year, only default-insured borrowers (these borrowers typically have a down payment of less than 20%) have had to qualify at the benchmark rate.

Borrowers with a down payment of more than 20% (and not default-insured) have had the benefit of only needing to qualify at their contract rate (which is typically less than the benchmark rate).

Come January 1st 2018 though, all borrowers, regardless of their down payment amount and regardless of whether or not their mortgage is default-insured, will have to qualify at the benchmark rate (or possibly higher).

Not Everyone Will Actually Be Affected

I’ve spoken to a handful of buyer clients this past week (after urging them to check-in with their mortgage broker regarding the new rules), and all of them are happy to report back that they will not be affected.

Why not?Because not every borrower pushes their mortgage amount to the maximum.

For example, if a buyer qualifies for a maximum purchase price of $1,000,000 but only plans on spending a maximum of $800,000, then they won’t actually be affected by the new rules.

Buyers are often approved for mortgages that are significantly higher than what they actually want to spend. I’ve worked with plenty of buyers who are simply amazed at how much the bank will lend them and have no intention of going anywhere near that maximum number.

Some will certainly be affected by the new rules though.  Specifically those who do need to push their mortgage amount to the maximum.

Consider first time buyers, for example. They have no home equity to throw into the pot, and rely only on whatever down payment they have saved. These buyers would typically need to push their mortgage amount to the maximum in order to break into the market.

Will You Be Affected?

At this point, there are still some unanswered questions with regards to the timing of the implementation of the new rules. We’re advising all of our buyer clients to reach-out to their mortgage brokers immediately to secure financing options before the changes come.

If you have any questions just give give us a shout and we’ll put you in touch with a mortgage specialist who can help.

Multiple-Offers Are Still Very Much A Part Of The Toronto Real Estate Landscape

Multiple-Offers Are Still Very Much A Part Of The Toronto Real Estate Landscape Photo

We're in the 2nd week of the fall real estate market now, and anyone who's been following along knows that in the past 4.5 months (ever since the Liberals announced their "16-Point Fair Housing Plan16-Point Fair Housing Plan" in April) we've seen a decline in the number of sales and, perhaps more notably, a decline in average sale prices.

Q:  Do these declines mean that there's now room for price negotiation on every single property that comes on the market? A:  Nope.

In fact... plenty of houses are selling for 100% of the list price. And an even larger number of houses are selling for more than the list price!

Despite all the talk of a "buyer's market", there are still plenty of buyers out there willing to pay full price for the right property, or even compete with other buyers and pay more than the list price if need be.

Let's take a look at all sales in the first 10 days of September for some insight (we'll go as far west as the Humber River, as far east as Victoria Park, and as far north as the 401):

Houses

• 83 sales total

• 58 sales at less than the list price

• 10 sales at 100% of the list price

• 15 sales at more than the list price (the highest being 119% of the list price)

Condos

• 162 sales total

• 77 sales at less than the list price

• 37 sales at 100% of list price

• 48 sales at more than the list price (the highest being 117% of the list price)

Percentage-wise, this breaks down as follows:

Houses

• 70% of houses sold for less than the list price

• 12% of houses sold for 100% of the list price

• 18% of houses sold for more than the list price

Condos

• 47.5% of condos sold for less than the list price

• 23% of condos sold for 100% of the list price

• 29.5% of condos sold for more than the list price

While these numbers don't reach the heights that we saw in January - April 2017 (in March, for example, there were a total of 2,145 combined house & condo sales - 73% of which sold for more than the list price), they do show us that buyers aren't being scared out of moving forward with their home searches. If a property warrants it, buyers will make agressive offers and fight for what they want.

Let's see what the rest of the month brings...

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Buy In The Summer And Then Sell In The Fall?

Buy In The Summer And Then Sell In The Fall? Photo

"Should I stay or should I go?"

The classic 1982 Clash song (which I fondly remember being a highlight on the dancefloor at the Dance Cave, circa '99-'01) is a fitting soundtrack for anyone considering a move in the current Toronto real estate market.

While buying is nowhere near as stressful as it was in the first four months of the year, selling is a different story. We're in a transitioning market now and selling your home isn't as simple a process these days.

This change in the market has many buyers and sellers confused about how to proceed.

I've got a number of clients right now who are hesitantly contemplating a "move-up" purchase into something larger than their current space.

While they're tickled by the fact that they aren't shopping for a home in the same feeding-frenzy market we saw in January - April, the prospect of having to sell their home in this more relaxed market has them second-guessing whether or not now is the right time to make a move.

While their hesitation is certainly warranted, I don't think anyone should be totally writting-off the possibilty of a move in this current market.

Keep in mind, shopping for a home in the fall might not be the relaxed affair it is right now. Although no one can predict exactly what's going to happen in the fall, we need to consider the possibilty that market activity will pick-up again and we'll all be looking back at May/June/July/August as a four-month blip.

A few possibilties to consider when looking at how the market might be spurred towards greater activity in September:

1. With today's interest rate increase by the Bank of Canada (I'm writing this blog post on July 12th, the same day that the Bank of Canada has announced their first rate increase in 7 years), there are going to be buyers out there motivated to make a purchase before their current pre-approval rate-hold expires in 90-120 days.

2. After "taking the summer off" from their home search, buyers who've been sitting on the sidelines since the Liberals announced their 16-Point Fair Housing Plan in April will simply decide to get off the fence and take the plunge.

If the market does start to warm-up again in September we could all be looking back saying, "those who bought in the summer and then sold in the fall did very well for themselves...".

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Point-By-Point: Ontario's Fair Housing Plan

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Today, Premier Kathleen Wynne finally announced changes to real estate in Ontario in an attempt to increase supply and address affordability.

No doubt, there's going to be some confusion about the effects of the changes. Keep in mind though, the fundamentals of a healthy market have not changed.

Take a look at the plan below, point-by-point. If you've got any questions just give me a shout.

There are 16 proposed measures:

1. 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.
2. Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded.
3. 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.
4. 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.
5. 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.
6. A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.
7. A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges.
8. More flexibility for municipalities when it comes to using property tax tools to encourage development.
9. 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.
10. An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.
11. A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions.
12. 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.
13. 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.
14. 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.
15. Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.
16. 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.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Deposit Cheque: Don't Show Up Empty-Handed!

Deposit Cheque: Don't Show Up Empty-Handed! Photo

Early in my real estate career, I was working with a young couple looking to purchase a loft in the city's west end.

Back then, just like now, most properties were receiving multiple offers and selling for above the asking price.

And just like now, listing agents were requesting that all potential buyers show up on the offer date with a certified deposit cheque in hand.

I don't recall the specifics now, but on the first offer we did together those clients of mine were not able to obtain a deposit cheque prior to submitting the offer.

Of the five offers that were submitted that night, my clients had the highest price.

The property should've been theirs...

The sellers ended up working with the second highest offer though, because we didn't have that damn deposit cheque in hand.

Needless to say, those clients never submitted another offer without being sure to have the certified deposit cheque ahead of time.

Fast forward to 2017, and just the other night I saw the same thing happen again (thankfully, it wasn't my clients who made the mistake this time).

A condo in the east-end received 20 offers and sold for $710,000. The highest offer was actually $730,000... but those buyers did not have a certified deposit cheque in hand.

Imagine the disappointment there - being the highest of 20 offers and still not getting the property!

There's almost 10 years distance between those two stories, but the lesson is the same for each: show up on offer night empty-handed, and you might go home empty-handed too.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Toronto Land Transfer Taxes Are Increasing. Ugh.

Toronto Land Transfer Tax Costs Are Going Up On March 1st Photo

If you haven't already heard, the City of Toronto Council has approved changes to the Toronto Land Transfer Tax which will result in additional costs for some home buyers with a closing date on or after March 1, 2017 (which is when the tax will be harmonized with the provincial LTT).

Click here to see the detailed City of Toronto Notice on the "original" proposed changes posted in December 2016 (NOTE: changes made to original proposals as per below).

Status

The following changes to the Toronto Land Transfer Tax were considered and approved by Toronto City Council on February 15, 2017. The changes are effective AS OF MARCH 1, 2017, for real estate transactions closing on or after this date:

• Added an additional LTT of 0.5% of the value of a residential or non-residential property from $250,000 to $400,000 (an additional $750)

• Added an additional LTT of 0.5% of the value of a residential property above $2 million

• Added an additional LTT of 0.5% of the value above $400,000 of a non-residential property

• Increasing the maximum allowed First-Time Home Buyer Rebate to $4,475, up from $3,725

• Amended the first-time home buyer rebate program eligibility rules to restrict rebate eligibility to Canadian citizens or permanent residents of Canada

TREB Efforts Achieved Significant Concessions – First-Time Buyers Protected

TREB (Toronto Real Estate Board) undertook a comprehensive campaign to oppose the proposed changes. As a result of these efforts, significant concessions were made to the proposals that went forward for City Council's consideration as follows:

• Under the original proposal, first-time buyers would have been forced to pay an additional $475 in Toronto LTT. However, TREB pushed for an increase in the rebate from $3,725 to $4,475, meaning first-time buyers will not face an increase.

• Many first-time buyers would have lost eligibility for the first-time buyer rebate entirely, meaning a total LTT increase of $4,475. TREB pushed back and all first-time buyers will be eligible for a rebate.

• As a result of TREB's efforts, first-time home buyers will NOT see any change.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Four Major Changes To Canada's Housing Rules

If you haven't already heard, the Canadian Department of Finance made an announcement earlier this month outlining a handful of changes that will have an impact on the mortgage/housing market.

The Globe & Mail followed the announcement pretty quickly with a detailed breakdown of all the changes, and how the affects might be felt.

Below is a reposting of that article in full. Enjoy!

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From the Globe & Mail, on October 3rd, 2016:

Four Major Changes To Canada's Housing Rules

The Liberal government has announced sweeping changes aimed at ensuring Canadians aren’t taking on bigger mortgages than they can afford in an era of historically low interest rates.

The changes are also meant to address concerns related to foreign buyers who buy and flip Canadian homes.

Below is a breakdown of the four major changes Finance Minister Bill Morneau announced Monday.

The current rules

Buyers with a down payment of at least 5 per cent of the purchase price but less than 20 per cent must be backed by mortgage insurance. This protects the lender in the event that the home buyer defaults. These loans are known as “high loan-to-value” or “high ratio” mortgages.

In situations in which the buyer has 20 per cent or more for a down payment, the lender or borrower could obtain “low-ratio” insurance that covers 100 per cent of the loan in the event of a default.

Mortgage insurance in Canada is backed by the federal government through the Canada Mortgage and Housing Corp. Insurance is sold by the CMHC and two private insurers, Genworth Financial Mortgage Insurance Company Canada and Canada Guaranty Mortgage Insurance Company. The federal government backs the insurance offered by the two private-sector firms, subject to a 10-per-cent deductible.

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The change

Expanding a mortgage rate stress test to all insured mortgages.

What it is

As of Oct. 17, a stress test used for approving high-ratio mortgages will be applied to all new insured mortgages – including those where the buyer has more than 20 per cent for a down payment. The stress test is aimed at assuring the lender that the home buyer could still afford the mortgage if interest rates were to rise. The home buyer would need to qualify for a loan at the negotiated rate in the mortgage contract, but also at the Bank of Canada’s five-year fixed posted mortgage rate, which is an average of the posted rates of the big six banks in Canada. This rate is usually higher than what buyers can negotiate. As of Sept. 28, the posted rate was 4.64 per cent.

Other aspects of the stress test require that the home buyer will be spending no more than 39 per cent of income on home-carrying costs like mortgage payments, heat and taxes. Another measure called total debt service includes all other debt payments and the TDS ratio must not exceed 44 per cent.

Who it affects

This measure affects home buyers who have at least 20 per cent for a down payment but are seeking a mortgage that may stretch them too thin if interest rates were to rise. It also affects lenders seeking to buy government-backed insurance for low-ratio mortgages.

Why

The government is responding to concerns that sharp rises in house prices in cities like Toronto and Vancouver could increase the risk of defaults in the future should mortgage rates rise.

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The change

As of Nov. 30, the government will impose new restrictions on when it will provide insurance for low-ratio mortgages.

What it is

The new rules restrict insurance for these types of mortgages based on new criteria, including that the amortization period must be 25 years or less, the purchase price is less than $1-million, the buyer has a credit score of 600 and the property will be owner-occupied.

Who it affects

This measure appears to be aimed at lowering the government’s exposure to residential mortgages for properties worth $1-million or more, a category of the market that has increased sharply in recent years in Vancouver and Toronto.

Why

Vancouver and Toronto are the two real estate markets that are of most concern for policy makers at all levels of government. These measures appear to be targeted at those markets.

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The change

New reporting rules for the primary residence capital gains exemption.

What it is

Currently, any financial gain from selling your primary residence is tax-free and does not have to be reported as income. As of this tax year, the capital gains tax is still waived, but the sale of the primary residence must be reported at tax time to the Canada Revenue Agency.

Who it affects

Everyone who sells their primary residence will have a new obligation to report the sale to the CRA, however the change is aimed at preventing foreign buyers who buy and sell homes from claiming a primary residence tax exemption for which they are not entitled.

Why

While officials say more data are needed, Ottawa is responding to extensive anecdotal evidence and media reports showing foreign investors are flipping homes in Canada and falsely claiming the primary residence exemption.

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The change

The government is launching consultations on lender risk sharing.

What it is

Currently, the federal government is on the hook to cover the cost of 100 per cent of an insured mortgage in the event of a default. The federal government says this is “unique” internationally and that it will be releasing a public consultation paper shortly on a proposal to have lenders, such as banks, take on some of that risk. The Department of Finance Canada acknowledges this would be “a significant structural change to Canada’s housing finance system.”

Who it affects

Mortgage lenders, such as banks, would have to take on added risk. This could potentially lead to higher mortgage rates for home buyers.

Why

The federal government wants to limit its financial obligations in the event of widespread mortgage defaults. It also wants to encourage prudent lending practices.

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Five previous federal housing moves since 2008

Monday’s package of announcements is the sixth time since the onset of the 2008 financial crisis that Ottawa has taken policy action in response to concerns about Canada’s housing market. July, 2008: After briefly allowing the CMHC to insure high-ratio mortgages with a 40-year amortization period, then Conservative finance minister Jim Flaherty moved to tighten those rules by reducing the maximum length of an insured high-ratio mortgage to 35 years.

February, 2010: Responding to concern that some Canadians were borrowing too much against the rising value of their homes, the government lowered the maximum amount Canadians could borrow in refinancing their mortgages to 90 per cent of a home’s value, down from 95 per cent. The move also set a new 20-per-cent down payment requirement for government-backed mortgage insurance on properties purchased for speculation by an owner who does not live in the property.

January, 2011: The Conservative government under Stephen Harper tightened the rules further, dropping the maximum amortization period for a high-ratio insured mortgage to 30 years. The maximum amount Canadians could borrow via refinancing was further lowered to 85 per cent.

June, 2012: A third round of tightening brought the maximum amortization period down to 25 years for high-ratio insured mortgages. A new stress test was also introduced to ensure that debt costs are no more than 44 per cent of income for lenders seeking a high-ratio mortgage. Refinancing rules were also tightened for a third time, setting a new maximum loan of 80 per cent of a property’s value. Another new measure limited the availability of government-backed insured high-ratio mortgages to homes valued at less than $1-million.

December, 2015: The recently elected Liberal government moved to tighten lending rules for homes worth more than $500,000, saying it was focused on “pockets of risk” in the housing sector. The package of measures included doubling the minimum down payment for insured high-ratio mortgages to 10 per cent from 5 per cent for the portion of a home’s value from $500,000 to $1-million.

Is It A Bad Idea To List Immediately After Labour Day?

Is It A Bad Idea To List Immediately After Labour Day? Photo

Summer doesn’t officially end until the Autumnal Equinox in the 3rd week of September, but we all know it really ends the day after Labour Day.

Every year, the Tuesday after Labour Day sees the kids go back to school, the white clothes go back into the closet, and the real estate market come back to life after the August slow-down.

A whole slew of new listings hit the market during that first week after Labour Day, and plenty of eager sellers (and realtors) are excited to get the ball rolling.

In my opinion though, it’s a good idea to consider waiting until the following week to list your home for sale.

The goal is to expose the property to as many buyers as possible, but a good chunk of the buyer pool is distracted at this time of year.

There’s so much happening in people’s lives during that first week after Labour Day, that there’s a good chance many of the new listings are going to slip-by unnoticed.

• People are busy getting back into the swing of things at work.

• Anyone working in a seasonal industry is likely focused on transitioning over to their fall market.

• People are coping with the fact that summer’s over and the cold & rainy weather is just around the corner (ugh).

• And then of course there are the families that have small children…

I know that my wife & I are going to be preoccupied these next few days with starting our oldest daughter in JK. If we were searching for a home right now we’d almost certainly be taking a week off from our search to concentrate on the start of school.

I myself have a new listing coming out soon, and we’re waiting until that 2nd week after Labour Day to go to market. My clients are fully onboard with the idea that we’ll reach the maximum number of potential buyers if we wait that extra week.

That’s not to say that a seller won’t still do well if they list right after Labour Day. And not every seller is even going to have the option of waiting until mid-September to list.

If you really want to maximize your odds of success though, you do need to consider all of the angles and strategize accordingly.

So, while it might not necessarily be a bad idea to list immediatley after Labour day, it might be a good idea to hang back and wait a week.

Here’s to a kick-ass fall market!

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Understanding Your 2016 Property Assessment Notice From MPAC

Back in April, MPAC started mailing out their 2016 property assessment notices to property owners across the province of Ontario. If you don’t have yours yet - keep checking the mail; they should all be out by the fall.

I’ve spoken to a number of clients recently about their assessments, and most are asking the same two questions:

1. The assessed value is significantly less than what we know our property is worth. Is this normal?
2. The assessed value has increased since the previous assessment. Does the municipality increase my property taxes by the same rate?

These are both excellent questions! Below are my answers.

The market value of your property is very likely going to be higher than MPAC’s assessed value.

While some assessments in the City of Toronto do come-in fairly close to market value, MPAC’s numbers are usually quite a bit lower than what the property would sell for on the open market. Sometimes the difference is quite significant!

It’s not uncommon to see MPAC’s assessed value be hundreds-of-thousands-of-dollars less than the current market value (depending of course on price point, location, etc.).

MPAC relies on a number of factors when doing their assessments, but apparently recent comparable sale prices don’t weigh heavily in the process!

Just because MPAC’s assessed value of your property has increased doesn’t necessarily mean you’ll pay more in property taxes.

In the City of Toronto, your property taxes should only increase if the value of your property has increased at a greater rate than the City average (unless of course the City has increased taxes as part of its budget requirements…).

Here’s a quote from the the FAQ section of the City’s property tax website:

• Reassessment at the municipal level, is "revenue neutral" and does not generate any additional revenue for the City. With a reassessment, the City must adjust the tax rate to remain revenue neutral, so no new funding comes to the City of Toronto as a result of property valuation changes.
• If your property value increases at a rate less than the City average, your property tax may decrease due to the reassessment.
• If your property value increases at a rate more than the City average, your property tax will increase due to reassessment.
• The City may need to increase taxes due to its budget requirements, however, this is separate and not related to reassessments.

Do you have any further questions about your assessment?

Maybe MPAC’s valuation actually seems too high to you, and you’re wondering if there’s cause to fight it? Give me a shout and I’ll be happy to provide you with the recent sales in your area. Who knows, you might be able to make a case…

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Liberty Village, Givins/Shaw, And A Lesson In School Catchment Changes

 

How would you feel if you purchased a home in a particular neighbourhood specifically because of the school catchment, only to find later that your child would actually be going to a different (arguably less desirable) school?

That's basically what's happened to a bunch of young families who live in Liberty Village.

Up until April of this year it was understood that Liberty Village was part of the Givins/Shaw catchment.

About halfway through the month though, a letter went out informing everyone of a proposed redistricting. My family got the notice because we live in the catchment (my oldest daughter is starting kindergarten at Givins/Shaw in September, and her younger sister will be following suit in another couple of years).

The letter contained a poorly detailed map showing where the new boundaries would be; the map was vague and had a lot of people unsure of whether or not they’d be affected.

None of us got any real answers until the public meeting that was held a couple of weeks later in early May.

I was at that meeting, and what it all boils down to is this:

Givins/Shaw school is over capacity now and will certainly be unable to accommodate all of the students that are entering the system over the next bunch of years. The school board took a look at the neighbouring schools, and saw that the Queen Victoria school in Parkdale was well under capacity. So, it made sense for them to propose a rejigging of the catchment boundaries and send a chunk of the population over to Queen Victoria. Liberty Village will make up the bulk of that chunk.

Are parents in Liberty Village upset with this news? Without a doubt.

A bunch of Liberty Village parents were there at the meeting in May to voice their opinions about the proposed redistricting and about how all of this has been handled.

We heard from one father who's now going to have two sons in different schools at the same time. The logistics of dropping off and picking up his boys is going to be a daily hassle, and it’s going to significantly alter their after-school routine (which currently consists of quality-time spent in the Givins/Shaw area).

We heard from another parent who said their home search was based primarily around buying into the Givins/Shaw catchment. If they had known that the catchment was going to change, they never would've bought in Liberty Village.

From my perspective as a realtor, it's this last point that interests me most.

School catchment is usually at the top of the list of must-haves & deal-breakers when a young family shops for a new home. It’s certainly a big part of my focus when I’m working with buyers who fit into this category.

And while I’ve seen catchments get tweaked in the past (some clients of mine got a helluva deal in Roncesvalles last year, partially because of this catchment change), it’s rare to see an entire neighbourhood get redistricted the way that Liberty Village is going to be.

“Shouldn’t residents in Liberty Village have seen this coming?” I’ve heard some people say. “How can you realistically think that there wouldn’t eventually be some sort of change in such a quickly-developing area?”

Fair enough. But I think the fact that the parents weren’t notified of anything beforehand is one of the hardest things to swallow here.

And I think a number of parents assumed that other measures would’ve been taken.

A few alternative solutions were brought up by parents at the meeting: Why not build a new school in (or near) Liberty Village? What not rent space from the Artscape building on Shaw St? Why not take over the Señor Santos Catholic School at Ossington and Osler? Why not build an additional storey onto the current Givins/Shaw building? Why not consider adding portables at Givins/Shaw?

Many parents wondered why the TDSB didn’t start planning for all of this sooner; didn’t they see that the demographics in Liberty Village showed an increasing number of families?

The TDSB’s answer to this last question was simple: “We didn’t anticipate that families would be living in condos.”

Honestly, I think a lot of people didn’t anticipate it either. With the prices of freehold homes at such a high though, condo-living has become a much more viable option for many.

And the numbers are there to prove it.

While Liberty Village is home to plenty of young professionals (singles and couples), there’s no denying that families also make up a significant part of the population. Just take a look a this Toronto Star article from January 2016.

As it stands now, the board is reviewing the proposed redistricting and taking into account the feedback that was provided by parents at the meeting in May. We should have an update in the next couple of weeks about how the changes will be implemented.

It's important to note that not all children in Liberty Village will be going to Queen Victoria; the proposal outlines a set of criteria where certain children will be attending Givins/Shaw.  You can read the latest news about the proposal/review on the TDSB website here.

Regardless of the specifics, the catchment boundaries are changing in September 2017 and Liberty Village is going to be affected by the change more than anyone.

Going forward, this will hopefully serve as an example (to school boards, housing developers, and parents alike) that rapidly growing neighbourhoods/areas are subject to change, and plans need to be set in place for how to handle a growing school population. Other areas in the city have already done this, so there is certainly a precedent.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

What A Difference A Season Makes

More than once over the course of these past few months, I've seen a house come on the market and sell for significantly more than what it was unsuccessfully listed at back in the fall/winter.

You could argue that this makes sense - that in a rising market a house should sell for more now than it would’ve 6 months ago.

Maybe, maybe not. (More on that towards the end of this blog post).

Regardless, it’s interesting to see such a scenario play out in real time with one specific property.

Here’s a breakdown of what happened with one of the houses I’m referring to:

House is listed in June 2015

Located in a very hot area in the west-end of the city.

Priced at $679,000, with a hold-back on offers.

Offer night comes and goes, and the property doesn’t sell.

They re-list the following day at $719,000, with offers welcome anytime.

After 3 more weeks without selling, they take it off the market.

Same house is re-listed in February 2016

7 months after unsuccessfully trying to sell, they’re back on the market.

Priced again at $719,000, with offers welcome anytime.

In less than 24hrs they receive 3 competing offers and the house sells for $755,000 (105% of list price).

No one wanted the house back in the summer, but by winter’s end there were three buyers tripping over each other to pay well above the asking price.

Wow! What a difference a season (or two) makes.

Does this necessarily mean that the same scenario would play out for every single house listed for sale in the Toronto real estate market right now? Is every single seller out there guaranteed to sell for significantly more if they just wait another 6 months?

Not necessarily. I’m sure there are sellers out there who did better 6 months ago than they would today, for a number of reasons; maybe they were competing with fewer similar listings than they would be today, maybe there were more buyers in the market that week for their particular house than there would be this week, etc.

On the whole though, prices are increasing and you’ll very likely pay more for a house 6 months from now. Just ask the three buyers who bid on the house in my example above.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Did There Really Need To Be 15 Offers?

Did There Really Need To Be 15 Offers? Photo

I was involved in a multiple-offer scenario last week, on a condo townhouse in the east end.

The property had a helluva view, and there was no doubt that it was going to attract plenty of interest and receive a bunch of offers.

“A bunch” ended up being an understatement.

There were 15 offers. FIFTEEN!

The property sold for 125% of the list price (it was listed at $409,000 and sold for $510,000).

With so many offers and such a high sale-to-list price ratio, you have to ask yourself, “Did they really need to under-list the property by that much?”

Couldn’t they have listed at, say, $449,000 (which would still be “underpricing” the property, albeit less drastically)?

While there was obviously one very happy “winner” on offer night, there were 14 other buyers that went home empty handed.

No doubt, some of those buyers went in offering less than $449,000. And despite submitting what they (and/or their realtor) thought was a reasonable offer, they never actually had a chance.

Couldn’t the sellers have been a bit less extreme in their pricing, and perhaps spared a handful of those hopeful buyers on offer night? Wouldn’t they still have ended up with a $510,000 sale price?

Truth be told, there’s no way to know for sure if they would’ve ended up at the same sale price (although I think they would have). Sure, it’s possible that the top offer wouldn’t have come in as high had there only been 7 or 8 offers (unlikely I think, but possible).

On a funny side note, the listing agent had made a point of saying that he felt that there was no need to put anyone through the hassle of going to get a certified cheque ahead of offer night, as it would only add undo stress and waste too many people’s time.

Okay…

But he felt it was reasonable to under-list the property by $75,000 - $100,000? He didn’t think that would result in wasting a bunch of people’s time? Ha!

Granted, the listing agent did a great job for his clients. He orchestrated a process that got them a record-high price for their property.

It’s a frustrating process though, when one happy seller and one happy buyer have to leave 14 other disappointed parties in their wake.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.