2024 Interest Rate Announcements

 

Bank of Canada

The Bank of Canada will make scheduled interest rate announcements on the following dates:

• January 24, 2024*
• March 6, 2024
• April 10, 2024* 
• June 5, 2024
• July 24, 2024* 
• September 4, 2024
• October 23, 2024*
• December 11, 2024

*Quarterly Monetary Report 

Home Inspections

 

Home Inspection

When buying a home, townhouse, loft, condo or commercial building, it is good to do a home inspection by a registered home inspector, so you can satisfy yourself of the condition of the house. 

A home inspection report will include information about the following components:

• the structure and foundation, where visible
• roof
• plumbing
• heating, ventilation and cooling systems (HVAC)
• hot water tank, boilers or other water heater systems
• electrical
• moisture (a good inspector will have a moisture reader available)
• windows
• materials used - flooring, piping etc
• if it's a house, the grading around the perimeter of the house 
• other items pertaining to the Ontario Building Code and Fire Code such as hand rails, fire and carbon monoxide detectors etc. 

Sometimes in a busy market where most properties sell in bidding wars, you would be wise to do a home inspection before the offer date, and consider whether or not you will have a Condition for a home inspection in your offer. 

If you choose to add a Condition for a home inspection, it would look similar to this:

THIS OFFER IS CONDITIONAL upon the inspection of the subject property by a registered home inspector at the Buyer’s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 6:00 p.m. on the 5th business day following acceptance of this agreement (excluding Saturdays, Sundays and statutory holidays) that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein. The Seller acknowledges that the Buyer, his agent and/or the inspector may take photos and/or video during the inspection for the purpose of fixture and chattel identification and reporting purposes. 

Make sure that if you're planning on doing a home inspection before an offer date, that your buyer Agent speaks to the listing Agent to book enough time for the home inspection which could take several hours. 

The inspection reports typically take a day or two as well, so don't leave it to the last minute to do one. 

Buying A Tenanted Property

 

Duplex

Buying a tenanted property can be a good investment for many reasons. You might want to live in one unit and rent out another unit, offsetting your expenses with tenant income. You might want to own the property and have both (or more) units pay your mortgage and most of your expenses. You may want to have a property that earns excellent income in the future. 

Either way, you must do your due diligence before buying. 

Make sure you have your Realtor draft and include the following clauses and Conditions in the Offer:

• the Offer is Conditional on the buyer's solicitor's approval
• the Offer is Conditional on the seller providing current leases for all tenants living in the home
• the seller warrants and represents that there are no ongoing issues between tenants and the landlord 
• the seller agrees to submit proof of rent payment for all tenants from the beginning of each tenancy
• the seller warrants and represents the the tenants are paying for 'X' utilities and any other itemized expenses

Other considerations are the following:

• is there a property manager in place, and if so how much is the cost and what are the services and inclusions?
• include a Condition for a Home Inspection
• include a Condition for Financing and Home Insurance
• set up an appointment to meet the tenants 
• ask the City if the property conforms with appropriate zoning rental purposes (seems obvious but best to confirm with the Planning department)
• speak to the neighbours and see if they have any complaints 

If the right property comes along and requires minimal capital investment, and have reliable tenant income, then off you go towards including an additional income stream. 

Pre-Delivery Inspection (PDI) For Condominiums

 

Tarion 

When you purchase a pre-construction condominium, you typically do a Pre-Delivery Inspection around 30 days before you take possession and receive your keys from the builder. 

During the inspection, you will meet with the builder's rep to flag any damage inside the unit and the builder will fix these items before occupancy. 

You will be given information for items that need to be repaired under the Tarion New Home Warranty. The Warranty has a 1 year portion, 2 year portion and a 7 year portion. 

Here's what's covered: 

1 Year: 

• defects in workmanship and materials
• defects that cause the building to be unfit for habitation
• Ontario Building Code violations
• Major structural defects
• Unauthorized substitutions 

2 Year: 

• water penetration through the basement or foundation 
• water penetration through the building envelope
• defects in the electrical, plumbing and heating delivery and distribution systems
• detachment, displacement or deterioration of the exterior cladding
• violations of the Ontario Building Code that affect health and safety
• major structural defects

7 Year: 

• the seven year warranty provides coverage for major structural defects, and is outlined in Tarion's 'Bulletin 24"
• defects that result in failure of a load-bearing portion of the building or materially and adversely affects it's load-bearing function
• defects that materially and adversely affect the use of the building for the purpose of which it was intended

December 6 - Bank Of Canada Interest Rate Announcement

 

Bank of Canada

The Bank Of Canada holds it's overnight rate at 5%, with the Bank Rate at 5% and the Deposit Rate at 5%. Per the BOC website, the bank is continuing it's policy of quantitative tightening. 

This is the third rate hold in a row. 

It will be interesting to see what sort of market response happens going into the Spring market. 

Many people are waiting until rates go down before buying/selling, and many are looking for the theoretical 'bottom' of the market to buy. 

Click here to read the Bank of Canada Press Release. 

 

TRESA - DAY 1

 

And so it begins. 

The new regulatory framework called the "Trust In Real Estate Services Act" takes effect today, replacing the "Real Estate and Business Brokers Act". 

So what does this mean? Here are 6 key points: 

• Brokerages are now permitted to enter designated representation agreements with clients,

• Customer relationships have been eliminated,

• Sharing contents of offers is now permitted with the seller’s written direction,

• Enhancements have been made to information and disclosure obligations to promote clarity in communication,

• The Code of Ethics has been revamped that will focus on ethical obligations including provisions around conflicts of interest and confidentiality, and

• Revisions have been made to RECO’s Discipline Committee, authority, composition and procedures.

Updates in practice to follow. 

Buying Pre-Construction - BRING AN AGENT

Bring a licensed agent

Sometimes buying a pre-construction condo can be a good idea. Many times, it's risky and it's a bad idea. 

How can anyone know what will happen 3-5 years into the future?

How do you make a good decision and what should you look for in your purchase? Ask a licensed agent. 

BEFORE you go to the builder sales centre, speak to a licensed agent, and make sure to go together on the first visit.* 

So why is that though? Here are 6 reasons: 

1) your agent SHOULD BE LICENSED, and therefore working for your best interest, not for the builder. 

2) repeat - a builder sales rep is working for the builder, not for you. They will give you a booklet, show you a nice building model, and will give you a price list and inventory sheet. These are units they release periodically. 

3) a builder sales rep is typically not licensed. They sell you units that are released at that moment in time. Sometimes better units come up later (for more money). They might want to sell you the one that is the hardest to sell. You know, the one above the garage or garbage entrance, or has low light or a weird layout, maybe with a column or two. 

4) a licensed agent will ask the builder reps about closing costs (and making sure they are capped at a fixed amount on closing), development charges, assignment privileges (ability to sell your contract to a new buyer if your situation changes), will try to negotiate upgrades if available, and any other questions you need to know. 

5) a builder rep will take you through the process to buy, but may not get specific on the consequences if things change in the future.. for example, interest rate increases, builder delays, mortgage challenges, builder extortion fees before closing, and proper referral to lawyers. 

6) CHOOSE A REPUTABLE BUILDER WITH A TRACK RECORD OF SUCCESS OVER A LONG PERIOD OF TIME. Your licensed agent should know who they are, and if they don't, choose an agent with experience in pre-construction sales. 

*if you don't bring your licensed agent on the first visit, the builder typically won't pay a commission and subsequently your licensed agent will not be able work for you in the transaction, for your best interest. 

Buying A Condo, Think About Resale

Toronto Condos

There are certain things to consider when buying a condo. 

One of the most important things to know when buying a condo is actually not just the unit or the actual building, but focus on the resale potential. 

Make sure it has what the next buyer will want: 

• a nice view
• an open balcony
• not above the garage entrance or garbage area
• not beside the garbage chute

It is also important to get as much square footage that your budget allows. If you can get the den, get the den. If you can afford the 2nd bedroom, absolutely get the 2nd bedroom. 

In the future, space is sparce, and people in the future will pay to have more of it. 

Builders are always building smaller units, so get as much as you can today. 

Airbnb and STR's

Airbnb Furnished Rental

Airbnb and sort-term rentals (STR's) are popular and can be profitable, but buyer's should be kept up to date on current municipal and provincial regulations. 

Before buying a property, make sure to research the rules and regulations both for your principle residence, and if it's a condominium, if it is allowed per the condo rules. 

In Toronto, STR's are parts of a dwelling unit that are rented for less than 28 days, and must have a City issued registration number. 

Currently there is a City has a one-time licence application fee of several thousand dollars (in Toronto the cost is $5,321.85 and an ongoing fee of a $1.06 for every short term rental night booked through the company).   

Make sure to understand the rules before operating an STR business and make sure to have a good accountant on board to help with your business. 

Photography

When people are looking to buy a house or a condo, or a pair of shoes or jeans, or tomatoes or broccoli, they will click to see more if the photos are really good. 

If the photos are really good, they are likely to proceed with asking questions and eventually buying. 

Everyone has a camera on their cell phone, and in some hot markets it matters a little bit less, but nothing is more appealing to the consumer than professional photography.

If an agent skimps on taking professional photos, it signals that they are going to skimp on negotiating, and it is very likely that you will get a skimpier price. 

If your agent isn't promising to take professional photos, perhaps ask why they won't spend a few hundred bucks to sell your property that is mostlikely worth several hundred thousand dollars. 

Bidding Wars

Bidding Wars

Bidding Wars - people hate losing them, people hate winning them. 

Buyers hate them, Sellers love them. 

There's something unsettling about being in a blind-bidding situation and having no idea if you are close, far, or bidding against yourself. 

The overall outlook should be to remember your budget, and be willing to walk away if you are near your max. 

Every bidding war has a different chance of success, and several factors will determine the chance success, including the area and the starting list price (whether it is very low or priced at market price). 

After December 1, 2023, Sellers will be able to decide if they wish to disclose the contents of offers, but Buyers will not be able to make that decision for themselves. 

Buyers should understand their budgets and not get swept up in the emotional whirlwind of winning. 

The other factor is whether your mortgage lender will have a different opinion on the purchase price, so make sure that your Offers are likely to appraise (your Agent should be able to guide you with pricing), and be prepared to deal with appraisal fallout if more cash is needed. 

Communication is key here, and good discussion about strategy before you submit your offer is recommend. 

How To Buy A House

 So how do you buy a house? Or a condominium? 

Whether you are traditionally employed by a company or institution or are self-employed, the process will be similar as we see in the following points. 

The very first day: Call a real estate agent and have an in-depth conversation about what you want, and decide if it will be a good fit working together. They can help navigate the overall process and can refer professionals if needed, for example mortgage brokers, lawyers and so forth. 

1) Mortgage Broker - this is the first person to call and determine what your budget is. You will fill out a mortgage application, do a credit check and your mortgage broker will find the best lender out of their database. It is recommended to work with an experienced mortgage broker with several years of experience and good connections in the lending space. 

2a) Real Estate Agent - your real estate agent will work to narrow down properties in your search and arrange showings based on your preferences including budget and area. They will also help refer other professionals if needed: Home inspectors, lawyers, appraisers, surveyors, mortgage brokers etc.

2b) Real Estate Agent - once you find a property you would like to buy, your agent will will negotiate the price, conditions, clauses and closing date, and will help to explain the process of successfully closing. Pick an agent with experience in the industry as there are complexities in the process. Agents are for your benefit and protection, choose wisely! 

3) The Lawyer - your lawyer will be the point of contact once you have an accepted Offer on a property. They will connect with your mortgage broker and lender to transfer funds to the seller on closing, and will assist with title searches and even permit lookups if needed. 

4) Closing - your lawyer will let you know when title is transferred on closing day, and when you are fine to pick up your keys and enter your new home.

5) Celebrate! - buying a new property is challenging and complex in process, so enjoy the day! 

Deposits

Bank Draft or Certified Cheque

Why do we need a deposit with an Offer? 

It is a show of good faith that the buyer intends to close their purchase transaction with the seller. There is no specific requirement for how much the deposit needs to be, but in big markets, 5-6% is desirable to sellers. More than that may be offered to the seller to show their strength in financing. 

When an Agreement of Purchase and Sale has been signed by all parties, typically a deposit will need to be delivered to the listing brokerage in a specific amount of time.

The Agreement may say "Upon Acceptance", "Herewith", or "As otherwise agreed",  and there are different timelines that apply.

• Upon Acceptance: the deposit will be delivered within 24 hours after acceptance. That means that it's 24 hours, not business days. If that means it's on a Sunday, that's how it goes. Appropriate adjustment to verbiage is needed if the Buyers cannot deliver it on Sundays. 

• Herewith: the deposit will be delivered immediately after acceptance. Typically this applies in multiple-offer scenarios where buyers show they are ready to hand it over to the seller's brokerage if their offer is accepted. Sellers like this, and ensures that there will not be a problem where the Buyer does not deliver it as agreed. 

• As otherwise agreed: the deposit may take more than 24 hours to be delivered to the listing brokerage, so this would require specific verbiage to clarify the timelines. 

It is important to understand that once an Offer is accepted by all parties, the deposit is due in the timeline agreed to. If the buyer does not deliver it by the due date/time, they are considered to be in a legal breach, and the Seller has powers available to them to pursue legal action, and/or potentially sell to another Buyer. This is a very complex scenario, so it is best to ensure funds are available to deliver it on time. 

Trust In Real Estate Services Act (TRESA)

TRESA

On December 1, 2023 there will be a change from the Real Estate Business Brokers Services Act (REBBA), to the Trust In Real Estate Services Act (TRESA). 

AI Home Price Values, Are They Accurate?

HouseSigma 

Some real estate companies have a home price estimate tool that gives users a value for a property. 

There are complex algorithm's built into the valuation models but ultimately, until these companies actually go inside a home, will it truly be accurate? 

Every home is different, some are old, some are new, some are renovated well and so forth. 

I think these are good tools and people like them, but further improvements in technology will determine how reliable these numbers are.