Toronto Councillor Mihevc Opposes Scrapping Land Transfer Tax

The Toronto Real Estate Board (TREB) needs your help. With resale home sales declining, TREB members are asking you to contact City Hall about scrapping the recently added Toronto land transfer tax.

But Councillor Joe Mihevc (Ward 21, St. Paul’s) is calling TREB’s plea to drop the tax “opportunistic.” That’s because Councillor Mihevc seems to think home buyers can provide funding to the proverbial bottomless pit whenever City Hall comes up short in the cash department.

Despite all evidence to the contrary, Councillor Mihevc believes the hated tax has had no negative impact on home sales whatsoever. Because of his skewed thinking, he wants the milking of tax payers to continue, even if it means leaving potential home buyers unable to buy.

In response, TREB has stepped up to the plate, statistics in hand, ready to do battle.

“The land transfer tax is not balanced and not fair,” said board spokesman Von Palmer, citing a 21-per-cent drop in the number of sales for the first half of October, compared with 2007.

Last week, Mayor David Miller moved that as a stimulus, development charges on new home construction be frozen. “If you are concerned about the real estate industry [new developments] and what the economy is doing to that industry now, then you have to be equally concerned about the land transfer tax”, said Palmer.

Palmer suggested resale housing should receive the same treatment as new home construction. Others are also jumping into the fray. William Strange, professor of real estate and urban economics at the University of Toronto commented “It does not seem like the first place you would look,” in reference to City Hall’s milking of home buyers for extra funding.

The latest data from TREB revealed that the average sale price of homes in Toronto plunged 15 per cent – from $441,878 to $375,804 – compared to this time last year.

Let Councillor Mihevc know how you feel about the land transfer tax grab!

Contact him through his web site at:

www.toronto.ca/councillors/mihevc1.htm

Buffet: Be Greedy When Others Are Fearful

Warren Buffet, who many consider to be the world’s most successful investor, commented recently: “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”  

I would not say ”greedy” best describes home buyers who see opportunity in today’s real estate market, but Buffet’s investor wisdom can certainly be applied to our local central Toronto housing scene. 

Right now, a high percentage of sellers need to sell. Either they already bought another house and have to sell the first one, or there are other circumstances that leave them no other choice. This is what our industry refers to as “motivated sellers.”

In balanced market conditions, motivated sellers represent less than half of all homes available for sale. On average, only about 55% of new listings are sold, with the remainder reducing their asking price, withdrawing their home from the market, or giving up altogether. 

A buyer’s market – which we’re in now – is when the sales-to-new-listing ratio falls below 35%. And this is precisely where the opportunity for Toronto home buyers is.

So why are so many Toronto home buyers just watching from the curb when they could be taking advantage of the current opportunities?

Read the rest of this article »

Home Buyers – What Ottawa Giveth, Ottawa Taketh Away

First, the good news. This past year has seen a squeeze on credit from all sides. Even banks are experiencing rising costs in mortgage funding.

In response, the federal government has initiated a program to buy $5 billion in mortgages from Canadian banks. It’s part of Ottawa’s larger scheme to purchase $25 billion in home loans.

Under the plan, the Canada Mortgage and Housing Corporation will purchase all current loans. The banks will then use this cash to create new loans.

And now, the not so good news. Recent changes by Ottawa to tighten loose mortgage conditions will actually make it harder for some home buyers to get a mortgage now.

Here’s why:

1. Increased Total Debt Service (TDS) Ratio.  Under 100 percent financing, the TDS limit was maximum 40 percent. Now, the TDS has been upped to 45 percent.

2. Decreased Loan-To-Value Ratio.  You used to be able to get a loan to cover up to 100 percent of your home’s cost. Now you can only get up to 95 percent, which means you have to come up with at least 5% yourself.

3. Decreased Amortization Period. The maximum mortgage pay-off period has been shortened from 40 to 35 years.

4. Higher Credit Score.  You’ll now need a credit score of at least 620 to qualify for a mortgage. Home buyers who just barely make it into this bracket should consider applying for a mortgage ASAP and be very careful not to do anything in the meantime to decrease their score.

5. Proper Loan Documentation.  If you’re self-employed or own a business, you can get a mortgage by showing proof on paper (i.e. business license, GST returns, etc.) that you’ve been running your business for at least two years.

So it’s not all bad news. With just 5 percent down payment, and a credit score of at least 620, you can get up to $700,000 without having to show proof of income.

Now, whether or not the payments are still affordable – well, that’s up to you to decide!

Home Buyers Looking to Sellers for Mortgage Help

By now, the financial crisis has touched most players in the real estate market.

Even some high-end buyers in Toronto who were scheduled to close home sales have run into an unforeseen glitch. 

The banks’ lending policies are currently tightening up so that some buyers are having trouble getting the full amount of financing they require. 

As a result, some buyers have started borrowing from the sellers themselves in the form of a “Vendor Take Back” (VTB) mortgage. 

Here’s an example of how a VTB works: 

Sale price:                                       $1,500,000

Buyer’s down-payment:                $500,000

Mortgage required:                         $1,000.000

If the bank is willing to advance the buyer only $800,000 of the required $1,000,000, the buyer still needs $200,000 to close the sale. Solution? Ask the seller to hold a second mortgage for $200,000, and the sale goes ahead. 

What are the risks of holding a seller-take-back? Provided the seller does not need the entire $1,500,000 in cash, then everything can work out fine for both parties. Typically, VTB mortgages are held by the seller for one to five years. At the end of the term, the buyer must pay the full balance owing in cash or ask to renew the mortgage with the seller for an additional one to five years.

What happens if the buyer fails to keep the monthly payments on this second mortgage? This is not a likely scenario, since the buyer is able to keep payments on the $800,000 mortgage and the $200,000 mortgage payments are a relatively small amount. But if the buyer does default, the seller’s only solution is to exercise a “Power of Sale” outlined in the mortgage agreement (unless both parties can work it out beforehand). 

Nevertheless, with financial institutions making it increasingly harder to borrow, VTB’s are proving to be a clean, viable and generally safe way of “bridging the money gap”.

Have a question? 

Let me give you an unbiased, no-strings-attached answer. Simply send me an email, or call me: Rosalin Smith-Carr, at my direct line (416) 482-8330 ext. 3519

Do You Know What Your Listing Agent is Saying About Your Home?

The statements below in bold text are actual written comments made by listing agents on the published listings on the Toronto MLS.

While most are innocent enough, other comments may influence buyers and other agents to take advantage of you, or dismiss your listing altogether. 

• Must Be Sold! Motivated Seller.
  Aren’t all sellers supposed to be motivated?
    
• Bring an Offer, Seller Is Very Motivated.
  Well, at least this seller is a bit more motivated that the previous one.
   
• Super Motivated Vendor!
  Wow! Now we’re really making some serious motivational headway!
    
• Motivated Seller Would Like To See All Offers. Limited Showings Between 10am and 4pm Mon-Fri. No Sign on Property.
  The seller will look at your offer, but only as a favour. And don’t come a-knockin’ after four (if you can even find the place!). 
• Motivated Seller! Will Entertain Reasonable Offers!
  Some buyers like “testing the waters” before they make their best final offer. If we dismiss them as unreasonable, we may lose them.  
• Listing Agent Must Be Present. Property Has Been Gutted. A Gem! – Ready to Build!
  Why is your agent making it so difficult to show your home by insisting he must be present? Is he afraid someone might walk away with an old piece of 2-by-4?  
• Previous Deal Fell Through.
  How is this going to persuade a buyer to make an offer? They may conclude there’s something wrong with the home or the seller is difficult to deal with.  
• Reduced $30K! Motivated Vendor! Price Reduced For Immediate Sale — Act Quickly! Translation: Since the seller has reduced the price, put in a really low offer and see what happens!  

The moral of this story is — the market has changed, and as a seller in today’s market you now need to be more involved in the selling process. Make sure you approve the text BEFORE your home gets listed.  

This is no time to place one of your most valuable assets in the hands of an inexperienced agent.  

More to come on this subject shortly.

Uncertain as to what to do in this market? I will be glad to give you a no-strings-attached answer. Simply send me an email, or call me Rosalin Smith-Carr, at my direct line (416) 482-8330 ext. 3519

Reflections on an Ever Changing Toronto Housing Market

The Toronto housing market has experienced an amazing change over the past few months. It goes without saying, it’s no longer “business as usual”.
But the change isn’t merely a shift from a sellers’ to a buyers’ market.

It’s a pervasive change, and all those involved in real estate – sellers, buyers, agents, mortgage brokers, builders, home-stagers – will have to adapt to the new real estate climate, or drown. 

Bear in mind that 2007 was a banner year for home Toronto home sales. Fast-forward to September 2008, we see home sales dropped by 11 percent compared to September ‘07. The average price also declined six percent over the same period, from $420,182 down to $393,647. 

Buyers are now definitely in the driver’s seat. But it’s taking some sellers far too long to figure this out. 

In the “old days”, when buyers were plentiful and bidding wars were the norm, offers conditional on home inspections or on financing were simply not considered. Home prices were based solely on how badly a buyer wanted the home, and how much they were prepared to pay for it. 

As a sobering sign of the times, bidding wars have virtually disappeared, along with the free-spending buyers.  

So what does the future hold for the Toronto real estate market?
Is it all gloom and doom? I don’t think so. Back in 1910, Florida real estate lost 90 percent of its value. It was widely believed at the time that Florida real estate prices would never recover. Well, they did. And I believe that the Toronto market will recover, too.

Slowdowns and recessions come and go. And recovery will come, though probably not tomorrow.

In the meantime, we all must adapt to the changing economic times if we are not only to survive this new real estate climate, but thrive in it.

Old Attitudes May Prevent The Sale of Your Home in Today’s Market

Last week, I had a client in from the States. She’s moving back to Toronto, and looking for a home in the million-dollar range. Since she could only be here for the week-end, I phoned six real estate offices to set up Saturday-morning showings. 

But all of my calls hit brick walls. 

One agent required appointments be within a half-hour period, a challenge when showing several houses.  Another said the home could only be shown during certain hours.  Yet another request I made to show a home, advertised as “land value only” was refused because  the property could only be viewed while the seller’s agent was present!

So, if you are selling your home now, why would your agent make the buyer’s agent jump through hoops to show your home?

When I finally succeeded in making a single appointment, both my client and I had to rearrange our entire schedules to accomodate the sellers.

Hello! Hello! — am I the only one who knows the real estate market has changed, and that sellers no longer have the luxury of dictating when their home can be shown? In order to get your home sold today, it must be made available all day, every day (including weekends), at short notice, and with or without your agent present. 

You should be aware that a home for sale in today’s market has a lot more competition than it did even a few months ago. In some Toronto neighborhoods, listings have increased 50%! 

Buyers – not sellers – are now in the driver’s seat, and if you want to sell your home, buyers must be accommodated as much as humanly possible. 

If you’re not flexible in making your home available, it will be dropped from the list of homes to be shown.

Leaside Market Report and Average Sale Price – October 2008

Leaside sales came down by 33%, but the average sale price climbed by 13%.

Surprisingly, the listing price versus the sale price decreased from 104% to 97%, which is a relatively modest decline compared to other Toronto neighbourhoods. 

As I have mentioned before, Leaside buyers don’t appear to be too concerned about the economic turmoil in the U.S. and Canada.
Will they be proven right? The jury is still out.

Leaside 

There were 2,546 transactions recorded last month in the City of Toronto, an 11 per cent decline from the 2,854 sales in September 2007, and a five per cent drop from the 2,680 sales in September 2006.

The average price of $393,647 came down six per cent from the September 2007 average of $420,182.

The Greater Toronto Area (GTA) showed a six per cent decline with 6,424 homes changing hands last month, compared to the 6,866 sales that took place in September 2007. The GTA resale housing market has seen home sales decline by 14 per cent from the 73,827 transactions recorded a year ago.

There have been 63,595 sales through the Toronto MLS system this year. In the City of Toronto, year-to-date sales have declined 16 per cent from last year’s figure of 30,059 to 25,257 transactions in 2008.

I will be reporting changes in these areas as they occur, so be sure to check back for the latest updates.

You can also have this information delivered direct to your inbox. Simply enter your email address in the section above “CATEGORIES” on the left-hand side the page.

Would you like to know the value of your home in today’s market?

Click “What is my home worth” and I will send you an evaluation by email.

Lawrence Park Market Report and Average Sale Price – October 2008

Comparing sales activity from July to September 2007 with the same time period in 2008, we see that home sales in Lawrence Park have remained steady. However, the average sale price has dropped 22%. Be aware that the average sale price using such a small sample can give a distorted view.

This is the first time we’ve noticed the effects of the market slowdown in this upscale neighborhood. 

Other indicators of slower activity are the decline in the percentage of the sale price received, and the increase in the number of days on the market (DOM).

Lawrence Park

It will be interesting to see how the financial crisis will impact these prime Toronto neighbourhoods.
I will be reporting changes in these areas as they occur, so be sure to check back for the latest updates.  

You can also have this information delivered direct to your inbox. Simply enter your email address in the section above “CATEGORIES” on the left-hand side the page.