Sunday, March 30, 2008

Lawyers Face Changes in The Real Estate Transaction

The Law Society of Upper Canada has recently announced changes for its members regarding the processing of real estate transactions which might be a precursor to future changes governing the activities of REALTORS® as well.
Effective March 31, 2008 amendments to the "Rules of Professional Conduct" governing the legal profession will prohibit a lawyer from acting on behalf of both a Buyer and Seller in the same real estate transaction. In instances where a lawyer is faced with two clients engaged in the same transaction, one of said clients will have to be handed-off to a second lawyer within the firm or referred to another lawyer altogether. Obviously, having one lawyer represent two parties in the same transaction poses a threat re: a conflict of interest. The same however can and has been said of REALTORS®.
In real estate, the common term describing a situation where an agent brings forth a Buyer for one of his/her own listings is Dual Agency or "double-ending. In this scenario, the agent earns both the listing and selling portions of the commission thus doubling their potential income from that sale. In many instances both Buyers and Sellers like this arrangement thinking that (a) the agent in question is the most knowledgeable about the property and (b) a better deal might be had for both parties via the elimination of a second real estate brokerage. While there is some merit to both of these points, the fact is that it takes a very special person with the utmost in integrity to effectively yet impartially represent two parties in a real estate transaction. In short, it can be a situation filled with peril if not handled with the utmost of care.
The formally recognized term describing this relationship is "Dual Agency." When acting as a Dual Agent, a REALTOR® has fiduciary duties to obey, protect and maintain the interests and confidential details of both the Buyer and Seller. The terms of such a relationship must not only be fully disclosed to the parties involved but they must also consent to such an arrangement in writing as well.
Obviously the legal profession has taken issue with their members being able to act impartially and professionally when representing two clients in the same transaction hence their decision to change the respective "Rules of Conduct." Likewise, the Ontario Real Estate Association has similar concerns and it has been rumoured for some time that REALTORS® might someday see the day of "double-ending" eliminated. Given the recent actions of the Law Society, this day may be coming sooner than later.

For First Time Buyers, Your Opportunity is Now!

One of the areas of strength in the Canadian real estate market this year stems from the anticipated sales to first-time buyers. Despite a significant slow down in the U.S. economy, and wide spread lay-offs in the Canadian manufacturing sector, our economy is still performing very well with a substantial number of new jobs being created resulting in strong consumer confidence. In addition, interest rates remain comparably low and a land trasfer tax rebate further helps first-time buyers achieve the dream of home ownership. Presently there is a good inventory of residential properties on the market both new and resale making this the ideal time for first-time home buyers to enter the market.
In many situations, renting a family home is more expensive than buying. Even with an 8 percent mortgage for a 5-year term, the monthly payments would be less than $1,200 per month. Compare this to renting a three bedroom apartment or condo or home in the area and it's easy to see that buying a home is a much more attractive alternative. If you take a $100,000 mortgage at the same rate and term, the payments shrink to less than $800 per month. Even better, if you're willing to accept a one-year term, the interest rate drops at least two percentage points. This would peg a $100,000 mortgage at only $650 per month and a $150,000 mortgage at around $975.
There is another important benefit to home ownership that often gets overlooked. Over the course of 25 years (the usual amortization period for mortgages), the total amount of money paid by many renters can actually exceed the amount paid by a home owner. This is due not only to the fact that mortgage payments can be cheaper than rent, but because rental fees generally increase over the long term. Of course, interest rates may also rise, but so probably will the value of the property. Therefore, additional equity will be gained. Add to this the reality that after a mortgage is paid off, homeowners will no longer make monthly payments while renters will continue to bear the burden for the rest of their lives. This savings can greatly impact your quality of life upon retirement.
These figures are only intended to illustrate the monetary advanatge of owning versus renting a home. The fact remains that money spent on rent is money gone from your hands forever. If you're one of the thousands of Ontario families caught in the cycle of paying rent and seeing nothing in return, now is the time to make a move. Buying a home can pay off in so many ways and with present conditions being so favourable, you can't afford to pass up the opportunity. I would encourage you to talk to a REALTOR® and find out just how affordable satisfying your desire to own your our home can be.

Tuesday, March 18, 2008

Lake Huron & Georgian Bay Water Level Update

On November 28th I commented on the declining water levels in Lake Huron and Georgian Bay. The local probus club in Collingwood was recently treated to an excellent presentation by Mary Muter, Chair of the Envrionment Committee for the Georgian Bay Association. On behalf of the Association, Ms. Muter has been actively involved in studies pertaining to the drastic water level reductions in the Great Lakes, primarily in Lakes Michigan and Huron which of course includes Georgian Bay.

Statistics regarding water levels in the Great Lakes have been maintained since the turn of the century with the last 2o or so years reflecting a steady, if not increasing rate of decline in lake levels most notably in the two bodies of water noted above. Unlike Lakes Superior, Erie and Ontario all of which have control gates to limit their outflow, Lakes Michigan and Huron have no means of controlling the exit of water which happens via the St. Clair River at Windsor and Sarnia. Great Lakes shipping lanes require a depth of 30 feet in order to accomodate the freighter traffic that plies their waters. In the early 1960's, the areas in and around the St. Clair River were dredged in order to increase its depth to faciltate shipping traffic that resulted from the opening of the St. Lawrence Seaway. Studies now indicate that as the result of that dredging combined with other shoreline modifications upstream as well as erosion etc. the 30 foot depth of the St Clair River has now increased to as much as 75 feet in some places below the bridge from Windsor to Detroit. It was estimated that once dredging was completed, an addtional 845 million gallons of water more would exit Lakes Michigan and Huron daily. Studies now indicate however that as the result of the aforementioned condtions and increased river depth, as much as 2.5 billion gallons of additional water exits these two lakes on a daily basis.

It is estimated that the Great Lakes contain just over 20% of the world's fresh water. Further, only 1% of the water in these lakes is replenishable. The rest is an accumulation of glacial run-off which for all intensive purposes can not be replaced. This winter's heavy snow fall will help to some small degree with this summer's water levels now predicted to be equal that of last year. The longer term solution to this problem is going to depend on the intervention of many levels of government on both sides of the border. It would appear that ample studies have been done and the problem has been indentified. It's now imperative that a remedial plan be implemented to stem the flow of water down the St. Clair River before any more environmental and or economic damage is done that might be irreversible. Letters to both our MP's and MPP's would seem to be warranted. In addition, the Georgian Bay Association would be most appreciative of your support via way of a donation to help support their continued to fight to save this valuable resource that we have taken for granted for far too long.

The Georgian Bay Association's latest newsletter detailing this problem can be accessed by clicking the following link:

Sunday, March 16, 2008

Condo Owners Continue to Fight for Fair Taxation

The Collingwood Condominium Ratepayers Association (CCRA) recently released their latest newsletter lamenting the lack of follow-up that local politicians have shown to issues that were raised by condominium owners during the last municipal election. The primary concerns stems with the alleged unfair taxation condo owners face wherein services such a snow removal, garbage pickup and other services typically provided by municipalties must be paid for a second time (in addition to taxes) through monthly condo fees. No one will argue that there is an element of inequality here but the problem is that with the local municipality as well as our provincial government strapped for cash, no one wants to or can afford to rectify the situation.
Another issue brewing for condominium owners in the province is with a proposal by the Municipal Property Assessment Corporation (MPAC) to separately assess the "common elements" of condominium developments. Common elements include areas such as hallways, lobby areas, member's meeting rooms, the exterior grounds, recreational amenities etc. These elements have always been included in the assessed value of each individual unit. The proposed change would see common elements assessed separately with the fear being that this represents a form of double dipping with the result being increased taxes. We will continue to monitor this situation closely, watch future postings for updates.

If you would like to read the full CCRA Newsletter, on the link below.

Does The Real Estate Transaction Scare You?

In the current issue of Mcleans magazine, columnist Steve Maich claims that using a REALTOR® to buy or sell a property makes no economic sense and the only reason consumers do so is out of fear. His claim is based on the results of a study (a U.S. one at that) inwhich 680 home sales were reviewed from 1980 to 2005. The point of this study was apparently to determine if using a REALTOR® resulted in a home selling for more money. The homes used in this research were hardly a good representative sampling as they were all homes located on the campus of Stanford University. The average commission rate of the properties reviewed was 6% and equated to $34,000 U.S. In working the numbers backwards this results in an average selling price of $566,700. Not many consumers that I know of are in the market for or have ever purchased a half a million dollar home on a university campus so one might argue that this is hardly a good representative sampling.
The conclusion of this article, based on the somewhat questionnable reserach is that consumers use a REALTOR® out of fear. The article fails to explain the exact nature of this fear so one can only surmise that consumers are just fearful of any or all aspects of their particular real estate purchase or sale going wrong and for good reason. Due to various circumstances, real estate transactions continue to become more complex. Whether it is due to zoning, financing, environmental, insurance or other issues that are constantly changing, successfully navigating one's way through a real estate purchase or sale is not as easy as it once was. In addition is the matter of price. As both a Broker and a Market Value Appraiser I have seen numerous instances where buyers have purchased a home privately and in many case for a far higher price than fair market value. This stems from two fundamental reasons. First, most buyers tend to believe that with no REALTORS® involved there is no commission being paid by the seller so they in turn must be getting a "good deal" as a result of this perceived saving. Secondly, without the use and expertise of a REALTOR® the buyer has no access to comparable market information that would help them to ascertain whether the seller's asking price is relevent to market conditions or not.
Contrary to what consumers might believe real estate commissions are negotiable. What you ultimately pay should be commensurate with the knowledge, skill and service that the particular REALTOR® you select renders. If you wish to read the Mclean's article in full, click on the link below.

Sunday, March 9, 2008

The Whys & Whens of Selling Part 2

In my lasting posting I explained two of the four primary factors that come into play with the decision making process of selling one's home. The following are the remaining two significant issues or drivers that many home owners face when they are contemplating the need to sell.

Family Issues
The family issue homeowners cite more than any other when deciding to sell is children. Most often, people want a bigger home to accommodate a newborn, or may find their family has simply outgrown the home. If this is the case, you're in a perfect position relative to today's marketplace. First and foremost, you can afford to put in enough time to sell at the right price and then find a home that suits your requirements. Contacting your Realtor well in advance of the date you wish to move will virtually guarantee you'll find a good home at a good price.
Lifestyle Changes
The two most common lifestyle changes that motivate sellers are retirement. For those planning to retire, truly enjoying your latter years may involve a "cashing in" of assets. Again, it's a wise to look far enough ahead in order to use the market to your advantage and sell at a good price. Changes in lifestyle can include things such as buying a condominium to ease the workload involved with maintenance and upkeep; city dwellers who want to live in a more rural environment, or even those who want to set up a home business.

Once a homeowner has a clear grasp of the issues at hand when faced with the prospect of selling their home, they will be able to make rational, fact based decsions that will make the whole process of selling much easier to deal with. If you are currently faced with making a real estate decision that involves one of these factors or others and need to seek advice, please feel free to contact me without obligation.

The Why's & Whens of Selling Part 1

When it comes time for one to consider selling their home, typically four factors come in to play in the decision making process. Two of those factors are the current "market conditions" and "employment changes." The following is a summary of how these factors affect the decision of when to sell and why.
Market Conditions
Almost every aspect of real estate involves market conditions and financial issues--for the seller they are of the utmost importance. After all, it's the seller who is putting property, equity and sometimes, years of hard work on the line. With so much at stake, it's imperative that sellers contact a real estate professional. Only REALTORS® have the hands-on experience and intimate knowledge of the real estate industry needed to get the best possible price for your property.
We've all heard of "buyer's" and "seller's" markets. These terms refer to the proportion of people wanting to buy versus the number of homes on the market. If the number of homes for sale outstrips potential buyers, then it's a buyer's market. If there are not enough homes to satisfy demand, then it's a seller's market. If you're selling for financial gain, you'll obviously want to do so in a seller's market. But, if you plan to purchase another home after sale, there isn't as big a difference as you would first think. In a seller's market, you may sell your home more quickly and for a better price, but you'll be facing the opposite challenges when purchasing. In a buyer's market, you may have to wait longer to get a fair price, but you'll have more selection and pricing options when looking for your new property.
Right now, interest rates are some of the lowest we have seen in decades. This has lead to unprecedented opportunities for those wishing to buy, especially first time buyers that can also benefit with a refund of the land trasnfer taxes they pay. Often, mortgage payments will be less than rent on an apartment or townhome, therefore, a large number of consumers are considering ownership, many for the first time. For sellers, this holds the potential for a huge boom.
"Seasonality" is a term that Realtors use to gauge when home sales are expected to climb. Although this is only one factor to be considered when selling, in Ontario, springtime tends to be a time of higher activity. Buyers with children especially prefer to look in the spring in order to settle in a new home before school begins in the fall.
Employment changes
Employment changes can affect a decision to sell. There's the obvious matter of relocation if a new job or promotion takes you to a different city. In this case, selling most often becomes a necessity unless the homeowner wishes to retain a property for investment or other purposes.
Moving to a smaller urban centre may also allow you to purchase either a similar home for less money or a bigger one for the same outlay. Even if a new job does not require you to move a great distance, you should use the opportunity to assess your home ownership needs and move up if you can. The reality is that with interest rates as attractive as they are, it's more possible than ever to make a major move without lowering your family's standard of living.
In my next post I will explore the other two factors affecting the sale process, "family issues" and "lifestyle changes."

Sunday, March 2, 2008

2008 Residential Sales Off to a Strong Start!

Statistics just released by the Canadian Real Estate Association (CREA) indicate that residential home sales across the country dropped on average 6.3% in January. Saskatchewan and Newfoundland were the only two provinces that did not record a decrease from the same month in the prior year.
Closer to home, sales results throughout the Georgian Triangle in both January and February were the opposite of those noted above. Total unit sales for the month of January were up 17.9% over January 2007 while unit sales in February posted a 4.2% gain. Year-to-date unit sales are subsequently up 13.8%. This winter’s weather with an over abundance of snowfall has created less than ideal conditions for viewing property yet this, nor concerns about the Canadian or U.S. economies appear not to have deterred buyers for Georgian Triangle real estate. I have always been a keen follower of the statistics pertaining to our local real estate market. In addition I pay close attention to the demographic make-up of potential property buyers that we as REALTORS® deal with on a daily basis. As a result I maintain a strong belief that our area is somewhat insulated from the economic and other factors that will affect real estate activity either to the south of us in the GTA or elsewhere across the country and the aforementioned numbers would bear this out. This area has and will continue to see a strong migration of people from the GTA and other parts of southern Ontario. Notwithstanding the exodus of higher paying industrial jobs in the area, our real estate market continues to be positively impacted by those persons looking to move here for recreational and or retirement purposes and this trend is only in its infancy.
The number of new listings that came onto the market across Canada during January totaled almost 75,000 units reflecting a 10.7% gain over December. It is worth noting that this is the largest month-over-month increase in new listings in almost 7 years. This sharp increase in new MLS® listings coupled with the proliferation of new home developments underway in most markets only serves to reinforce the fact that buyers have a multitude of choices out there to satisfy their home buying needs. Locally the number of new listings that have come onto the market through the end of February are equal to the first two months of last year. It is necessary to once again stress the importance of correctly pricing your property reflective of its true market value. With so many choices out there at buyer’s disposal both new and resale, the list price of any property must be consistent with others of similar location, features and condition etc.
Although we are only two months into the year, the strength in our local real estate market continues and notwithstanding a significant deterioration in the economy there is no reason to believe that this trend will change any time soon.

Saturday, March 1, 2008

Federal Budget a Disappointment

Many if not most Canadians were disappointed this past week with the Conservatives Federal budget including the real estate community. The Canadian Real Estate Association (CREA) was disappointed that a plan to introduce a deferral of capital gains taxes and the recapture of capital cost allowance on property was not part of the new budget.
“REALTORS® welcome investments in infrastructure and transit that have been made by Minister Flaherty in this budget, and in previous ones,” says CREA CEO Pierre Beauchamp. “The fact remains that there are still punitive tax consequences for small investors when they sell and reinvest in a new property.” Capital gains tax adjustment remains the last unfulfilled major Conservative Party campaign promise from the last election. “We believe the Conservative government remains committed to fulfilling its promise to permit capital gains tax deferrals, and REALTORS® will continue to work with the government, and with members of all parties, to ensure this becomes a reality”
As REALTORS® we know that real property investments continue to be at a disadvantage in Canada’s tax code and believe that small investors should be allowed to sell and reinvest in the same way that they can with their stocks and bonds inside an RRSP. It is CREA’s view that tax deferral on reinvestment in rental property would promote the supply and affordability of rental housing, promote environmentally friendly urban regeneration, and lead to greater equity compared to the income tax treatment of shares, businesses and owner-occupied properties.
One of the issues that continues to be of growing concern in the Collingwood area is the overall lack of affordable housing and this is not a problem that is unique to our area. “Canada’s rental housing markets continue to face a problem that some other countries have addressed. Properties are ’locked-in’ because small investors essentially lose their growth in capital if they choose to sell and reinvest,” CREA's Beauchamp explains. “However, they still aren’t selling because they can’t afford to pay the capital gains taxes.” CREA’s research and policy analysis for the capital gains rollover proposal shows the tax deferral on reinvestment in rental property will promote the supply and affordability of rental housing, promote environmentally-friendly urban regeneration, and result in greater equity compared to the income tax treatment of shares, businesses and owner-occupied properties.
Hopefully the Conservative party will make good on their pre-election promise and address this issue in the near future. Anything that will promote investment in residential real estate can only help to benefit the shortage of affordable housing not only in our area but across Canada as well.

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Royal LePAGE Locations North (Brokerage)

330 First Street, Collingwood, ON L9Y 1B4


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