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Frequently Asked Questions

FAQ

A List Of Our Frequently Asked Questions; Sorted By Category

FAQ

A List Of Our Frequently Asked Questions; Sorted By Category

FAQ

Selling

WHAT IS AN AGENT’S COMMISSION RATE?

What Is An Agent’s Commission Rate?

One of the first questions potential clients want to know when they contact our brokerage is, how much commission do you charge to sell a property? Now, there is not a “one-size-fits-all” answer when it comes to real estate commissions.

It is common practice for Sellers to pay a 5% commission on their property’s final sale price in Toronto. Typically, a commission between the listing agent and the Buyer’s agent is evenly split – 2.5% to the listing agent and 2.5% to the Buyer’s agent. All amounts set out as commission are payable, plus applicable taxes (HST) on said commissions when the transaction closes. Real Estate commissions come out of the proceeds of the sale of the property. Generally, they are disbursed by the Seller’s lawyer to the listing brokerage, who in turn reimburses the Buyer’s agent with their split.

Real estate commissions and associated fees vary, depending on the brokerage and the level of services provided. In other words, commission rates are negotiable, and therefore, there is no standard or fixed fee as many assume. Commission rates or fees that brokerages charge are solely the choices of those providing the services. Keep in mind; commissions are written into the listing agreement, the contract between the Seller and the Listing Brokerage. Meaning, the Seller must agree to the commission before signing the listing agreement.

SHOULD I RENOVATE TO INCREASE MY RETURN ON INVESTMENT?

Should I Renovate To Increase My Return On Investment?

Even though there is no limit to how much you can spend on a home renovation, it’s essential to consider how your investment fits your lifestyle. This is also true if you are on a budget, as most are. If not planned out effectively, the cost of a home renovation may not be recouped. Especially, if and when you want to sell, this is something to keep in mind. So, the question is, how can you maximize both the utility and value of your home renovation?

First, you will want to consider the market data in your neighbourhood. This is when a real estate professional comes in handy – especially in the Toronto real estate market! Regardless of how familiar a designer is with a community, a real estate agent will have a greater understanding of the entire makeup of a neighbourhood and the homes within it. Local agents are exposed to a considerable amount of upgrades! They witness first-hand the impact that a home renovation has had on the value of not only the home itself but the neighbourhood as well. With this experience, an agent can discuss which renovations have returned the best value in each area. So, be sure to capitalize on their knowledge and build a baseline budget. You never know; it may end up being less or much more than anticipated!

Further, a realtor specializing in your neighbourhood is the best person to provide advice on the nuances of the market.

Using local market data and leveraging the first-hand experience, a competent agent can help identify reasonable standards in a given neighbourhood or area. This will tell you what you need to meet the standards of the homes in that area. Exceeding this standard may reduce your ROI. Sometimes it’s best not to be the nicest house on the street!You’ll also want to consider the fact that buyer perceptions vary. In other words, potential buyers may not have the same tastes as you do. Although there are classic and neutral designs that may seem ‘universally pleasing,’ it is challenging to predict the reaction of prospective buyers. A seasoned real estate agent can get to the heart of what drives certain perceptions. They can single out or establish those elements that are worth pursuing your home. Also, it is essential to remember that most buyers will not identify the difference between a $200 and $2000 bathroom sink. Can you?

While this is not an exact science as a rule of thumb from a strictly economic point of view, we recommend a benchmark of a return of $3 for every $1 spent. Your lifestyle, circumstances, personal preferences, and the timeline you expect to own the property could impact this calculation up or down.

Depending on the local market conditions, the value of your home may already be at its maximum potential. With this in mind, any renovation may become superfluous from an ROI perspective. There comes the point where a renovation can add little to no value to your home as an investment. Even in a hot market, homeowners must be mindful of over-renovating. Typically, this occurs when the value of a home is already significantly higher than its counterparts in that neighbourhood. Notably, a real estate professional can provide these statistics and walk you through the variables.

DO I NEED TO STAGE BEFORE I SELL?

Do I Need To Stage Before I Sell?

If you’re thinking about selling your property, you want to do it in a manner that shows your home in its best light. The art of selling your property always starts with the first impression. Some simple questions are; Does your listing stop a busy prospective buyer dead in their tracks? Can they visualize themselves living in your home and feel they would pay a premium to do so? But most importantly, can you afford not to have your property shown in its best possible light?

Most, if not almost all real estate searches start online. Studies show that you have 2.7 seconds to make a first impression! In real estate, this all starts and ends with staging & photography. Here’s why:

  • Over 90% of buyers decide what homes they want to look at based on online photos first
  • Most buyers form an opinion about a property within the first 7-10 seconds of arriving
  • A staged property will sell, on average, 17% higher than a non-staged home

When it comes to sales, people tend to buy with emotion and then justify with logic afterwards. Staging can be the fastest and easiest way to connect your property directly to the hearts & minds of your potential Buyer!

DO I NEED A PRE-LISTING HOME INSPECTION?

Do I Need A Pre-Listing Home Inspection?

It’s in the Seller’s best interest to elect to have a home inspection completed shortly before listing their property for sale. This report is called a pre-list inspection. There are three main reasons a seller may elect to do this.

1. Fixing to Sell

First, although a seller knows a lot about their home, a pre-list home inspection reduces the number of red flags in a buyer’s inspection report. An inspector will help point out minor faults that the Seller may quickly remedy before going to market. For example, missing handrails or switch covers over an electrical outlet or a leaky faucet, which the owner can quickly and inexpensively fix. An inspection report can be updated once any flagged items are managed.

2. Full Disclosure

Second, a home inspection will tell buyers about the details of your property. Beyond the ageing components and possible defects, it will tell buyers that you are willing to ‘show your hand’ as the Seller. An inspection will reveal all that’s known about the home’s condition at that particular point in time. An honest seller wants prospective buyers to know what they are walking into so there are no surprises later. A “caught-off-guard” buyer may suspect foul play and return to the Seller with legal action. Any known issues, either patent (obvious) or latent (existing but perhaps not yet visible), should be listed.

3. Seller Convenience

Finally, the third reason is for the convenience of the Seller. For in-demand properties, that can mean many inspection appointments at an average of three hours per inspection. If there are five separate bookings during one week of showings, that’s approximately 15 hours put into independent assessments. Additionally, if you need to live in your home during the showing period, that’s also the time you’ll need to spend trying to find somewhere else to be. You’ll need to give the potential Buyer and inspector privacy and time to look at the property.

Suppose you decide to provide a pre-list inspection to potential buyers. In that case, you’re giving them a sense of confidence about the property due to your transparency and upfront report (and you save those buyers a few hundred dollars each)! If you go this route, be sure to use a reputable inspection company to reassure the buyers of the report’s integrity.

As a seller, having a pre-list review does not necessarily mean no inspections by other parties. But, it may cut back on the total number of inspections to make things a little easier for you and a prospective buyer to offer on a property.

A reputable real estate agent will always have excellent recommendations for home inspectors they trust!

SHOULD I PAINT BEFORE I SELL?

Should I Paint Before I Sell?

Before listing your home for sale, we have found that the fastest, least expensive and most significant impact one can make on their property is by painting the space white!

Based on years of experience and bringing hundreds of properties to market, we can confidently say that there’s one colour that stands out above the rest. We are talking about white!

1. It’s Gives The Illusion Of More Space

It’s no secret that lighter walls make a room feel larger, and white is no exception. Especially in smaller condos, white paint can help make your space appear larger, especially when the ceiling is the same colour too!

Your space will also feel cleaner, fresher and brighter from top to bottom (it’s a guarantee)!

2. Easy to Visualize

White paint makes space feel more welcoming to potential buyers who may visit your home or condo. It allows them to easily visualize themselves and transport their style into your home without being distracted.

3. It Pairs Well With Cool Tones And Warm Tones

You can pair white walls with an icy grey couch or a moss green headboard – either way, the walls look great! There is no need to worry about ‘cool tones’ versus ‘warm tones’ when it comes to your decor when you use white paint.

4. It Flatters Virtually Any Piece of Furniture

If your home is staged or styled, you can rest assured that white-coloured walls will match anything! From ‘rustic’ to ‘contemporary,’ your walls will work seamlessly with any vision or decor style.

5. It’s Easy To Paint Over

No matter what colour you choose, the new owner will likely want to re-paint the walls in the colour of their choice. When a potential buyer considers the scenario, they’ll be much happier painting over white walls than a bold red or indigo blue accent wall.

SHOULD I SELL MY HOME USING MY FRIEND OR FAMILY MEMBER?

Should I Sell My Home Using My Friend Or Family Member?

Selling a home is a very serious business. Sometimes, it is not the best strategy to mix business with friendship or family. Suppose something goes wrong or experiences challenges along the way. In that case, it is much easier to objectively confront a detached professional rather than someone with whom you will be sharing the next holiday dinner. Sometimes, friends and relatives would work particularly diligently for you too and would be the best choice.

Objectively assess their capabilities and past performances with others before signing on the dotted line. If you feel obligated to use a friend/family member, but you don’t think they will do the best job for you, rest assured, there are alternate ways to involve them in the transaction. It is not unheard of for one realtor to pay the other a referral fee. Discuss the options with the realtor that you would prefer to use.

The best place to start is by getting recommendations from friends, relatives and colleagues who have recently transacted in real estate. Realtors particularly appreciate clients that have been referred. You can also go online to search out those who have been busy in your community, have great Google Reviews or a solid social media presence.

Remember, your realtor will be your trusted counsellor, guide, voice, & negotiator. Feel good about being with them. Be selective in your choice. Be sure to have respect for them & only move forward when you have complete confidence in their abilities.

Please don’t choose a realtor because they gave you the highest price estimate on your house (which happens all the time). Be very wary of a realtor whose valuation is considerably above the others! Always ask for justification! The why and the how!

WHAT ARE THE COSTS TO SELL MY HOME?

What Are The Costs To Sell My Home?

HOME REPAIRS

Before your property gets listed, you may incur some expenses to get it ready for the market. Fresh paint may cost a few hundred or a few thousand dollars. Landscaping and other repairs may come into play and require substantial investments depending on what needs to be completed.

HOME INSPECTOR PRE-INSPECTION REPORTS

Sometimes, sellers have their house inspected prior to putting it on the market. This report can give assurance to buyers contemplating submitting an offer on the property. Pre-inspection reports tend to be priced in the $400 to $600 range. We can advise whether or not to get a pre-inspection report as part of our marketing strategy discussions.

PENALTY FOR EARLY DISCHARGE OF MORTGAGE

If you have to discharge your mortgage upon completing your sale, you may incur a discharge penalty from the mortgagee to do this. Talk to your mortgage broker or bank to find out what these costs may be. Even an open mortgage can incur a processing fee to be discharged.

LEGAL FEES

You will need a real estate lawyer to act on your behalf in the sale of a home as well. Legal fees for a home’s sale are significantly less than on a home’s purchase. Many legal fees in this regard are in the range of $1,000 to $3,000, depending on the value of your property.

REAL ESTATE BROKERAGE FEES

Most realtor fees are based upon the selling price of a property. Usually, 50% of the gross commission goes to the co-operating realtor and 50% goes to the realtor who listed your house. The Government also requires that HST be charged on collected commissions as well. Please keep this in mind when calculating your net profit!

MOVING COSTS

It isn’t easy to estimate how much one should budget for this, as there are so many factors to consider. Moving costs can run from the hundreds to the thousands of dollars depending on the size of your home, your possessions, and how far the movers need to travel to your new property.

CAPITAL GAINS TAX

Primary residential homes in Canada are exempt from capital gains tax. Investment properties are not. Review this matter with your accountant if you wish to look into this further.

WHAT IS A LISTING PRESENTATION?

What Is A Listing Presentation?

A Listing Presentation is a complimentary, no-obligation presentation outlining how a potential Selling agent will prepare and market your property for sale and why you should consider working with them to sell your home. The Selling agent should be prepared to address your questions about pricing, offer strategy, marketing, staging and much, much more. It’s essential that the presentation is customized to your particular property and highlights why working with this real estate professional is the obvious choice! They should work hard to earn your business and it starts at the “pitch”!

WHAT IS A LISTING AGREEMENT?

What Is A Listing Agreement?

The first formal step in a real estate transaction is to complete The Listing Agreement Form: a contract between a Seller and a Selling agent that permits the Listing Brokerage to act on the Seller’s behalf for a defined time.

The Listing Agreement details the conditions of the arrangement between you and your real estate agent and notes the length of time for which the agreement is valid.

The agreement will also include your property address, commission breakdown, the agreed listing price and details about what may be included and not included in your sale. Once the agreement has been finalized and signed by all parties, the listing agent is authorized to move forward with marketing your home on the Toronto Multiple Listing Service.

WHAT IS AN EXCLUSIVE LISTING?

What Is An Exclusive Listing?

An Exclusive Listing is when a property Seller enters a Listing Agreement with a real estate brokerage, but the listing itself does not appear on the MLS System. Exclusive Listings may be referred to as “off-market listings” or “pocket listings.”

Generally, agents and brokers can only be viewed within the same brokerage as the Selling agent, and these listings typically attract buyers through direct referral. When a property is listed on Exclusive, it will not appear on Realtor.ca (the public side of the MLS System) or any other popular search tools like Home Finder, House Sigma, or IDX feeds on brokers’ websites.

In light of this, the sale of your home may have less visibility to other real estate agents and prospective buyers compared to listings marketed on the MLS System.

SHOULD I SELL MY PROPERTY EXCLUSIVELY?

Should I Sell My Property Exclusively?

There are several reasons that a Seller may consider listing their property on Exclusive:

1. This is often a popular approach for luxury homes at higher price points. There is an added level of privacy during the home selling process.

2. Exclusive listings may be helpful for an estate property or a home occupied by elderly owners. It’s less invasive when the house is not open to the public. The Seller and their agent have more control and can oversee things by qualifying potential purchasers in advance of viewing to avoid unnecessary inconvenience, preparation and disruption.

3. Many agents and brokers list a property on Exclusive before going to the market using the MLS System. This strategy is an excellent way to “test the market” before exposing the listing to the public. In other words, agents can invite colleagues and clients to view a property to provide feedback on pricing, condition, location and staging before formally listing the property online. If any adjustments need to be made to the listing plan, they can handle it up front. It’s a wise choice for listings that are difficult to price or have a unique value proposition.

WHAT IS THE DOWNSIDE OF LISTING ON EXCLUSIVE?

What Is The Downside Of Listing On Exclusive?

In a market like Toronto that is currently hot-to-trot, it does not make sense for a Seller to list their property off-market unless there is a predetermined strategy or rationale as to why!

In a Seller’s Market like ours (lots of demand, little inventory) – it makes the most sense to expose the property to the open market to elicit the highest and best price for a home. If a home is not advertised to a sizable & qualified buyer pool, the Seller could leave money on the table. In these market conditions, it’s impossible to predict what a Buyer may be willing to pay you for your home – but we can guarantee that it’s often more than we would all expect these days!

WHAT IS A CONFIRMATION OF CO-OPERATION FORM?

What Is A Confirmation Of Co-Operation Form?

Confirmation of Co-operation and Representation [Form 320] is presented to the parties in a real estate transaction before the offer or purchase, and sale agreement is tabled. This form documents the specific relationships of those involved in the real estate transaction. It serves as proof that both the Buyer and the Seller acknowledge the arrangement between the companies they’ve elected to represent their respective interests. It’s a document illustrating who is working for whom and how the commission is paid out.

WHEN IS THE BEST TIME TO SELL?

When Is The Best Time To Sell?

Depending on the province, city or neighbourhood, fluctuations in the market may follow a pattern. Patterns can be seasonal and repeat themselves every year, or they may depend on a transient variable. Generally speaking, Toronto locals move in the spring, summer and fall when weather conditions are most suitable. Because most real estate transactions have a closing period of 30 to 90 days, the most popular times to buy a home in Toronto are typically in the spring and fall. Holidays, extreme weather, interest rate hikes, changes to mortgage rules or local media coverage also affect buying behaviour.

Almost all houses look better in the late spring and summer, and if curb appeal is a factor, listing during the warmer months is something to consider. While home sales peak in the spring and fall, they do happen year-round, so if your goal is to move sooner rather than later, you will still be able to achieve your desired outcome, but it may just take a little longer. A mitigating consideration is that though there are fewer buyers from December to February and from June through August, there are fewer listings as well – which means less competition for your home once it’s on the market.

Selling your home is a considerable disruption, so if you are concerned about disturbing your day-to-day life during the school year, postponing your sale might make good sense. Though you may be reluctant to sell your home under less than perfect conditions, it’s essential not to delay a home sale unless you can afford to sit back and wait. Your agent should help you craft a strategic plan to determine the pros and cons – financial and otherwise – of moving forward with a sale or waiting for a better time to list.

HOW MUCH IS MY PROPERTY WORTH?

How Much Is My Property Worth?

The hard truth is that a home is worth whatever buyers are willing to pay for it. Determining a home’s fair market value at the outset goes a long way to setting the stage for a seller to receive the most that the market will pay. The fact is, the marketplace determines the ultimate selling price. And the single greatest factor in attaining top market value is the property’s initial listing price.

COMPARATIVE MARKETING ANALYSIS (CMA)

One of the essential things a realtor will do is collaborate with a seller on the initial listing price. Your realtor should be researching the market and perform a Comparative Market Analysis (CMA). The CMA compares your house to similar properties that have recently sold and properties currently listed for sale. CMAs consider elements such as location, pricing, features, lot size, and property condition. A comprehensive CMA and analysis of relevant sales often point to a market price suggestion for the subject property.

There are a host of factors and events a good realtor will consider to interpret the information when determining the story to tell:

  • How long did it take for this comparable property to sell?
  • Were there any price reductions to facilitate the sale, or did it sell in multiple offers?
  • Did it sell after having been withdrawn from the market, repositioned, and reintroduced into the marketplace?
  • Were there unique features that the marketplace either rejected or paid handsomely for?

Realtors should shed light on how these sales impact the sale of your own home and conduct an independent analysis to gauge all relevant market forces. Pricing considerations and recommendations need to be justified based on past sales and current market conditions.

What Is An Agent’s Commission Rate?

One of the first questions potential clients want to know when they contact our brokerage is, how much commission do you charge to sell a property? Now, there is not a “one-size-fits-all” answer when it comes to real estate commissions.

It is common practice for Sellers to pay a 5% commission on their property’s final sale price in Toronto. Typically, a commission between the listing agent and the Buyer’s agent is evenly split – 2.5% to the listing agent and 2.5% to the Buyer’s agent. All amounts set out as commission are payable, plus applicable taxes (HST) on said commissions when the transaction closes. Real Estate commissions come out of the proceeds of the sale of the property. Generally, they are disbursed by the Seller’s lawyer to the listing brokerage, who in turn reimburses the Buyer’s agent with their split.

Real estate commissions and associated fees vary, depending on the brokerage and the level of services provided. In other words, commission rates are negotiable, and therefore, there is no standard or fixed fee as many assume. Commission rates or fees that brokerages charge are solely the choices of those providing the services. Keep in mind; commissions are written into the listing agreement, the contract between the Seller and the Listing Brokerage. Meaning, the Seller must agree to the commission before signing the listing agreement.

Should I Renovate To Increase My Return On Investment?

Even though there is no limit to how much you can spend on a home renovation, it’s essential to consider how your investment fits your lifestyle. This is also true if you are on a budget, as most are. If not planned out effectively, the cost of a home renovation may not be recouped. Especially, if and when you want to sell, this is something to keep in mind. So, the question is, how can you maximize both the utility and value of your home renovation?

First, you will want to consider the market data in your neighbourhood. This is when a real estate professional comes in handy – especially in the Toronto real estate market! Regardless of how familiar a designer is with a community, a real estate agent will have a greater understanding of the entire makeup of a neighbourhood and the homes within it. Local agents are exposed to a considerable amount of upgrades! They witness first-hand the impact that a home renovation has had on the value of not only the home itself but the neighbourhood as well. With this experience, an agent can discuss which renovations have returned the best value in each area. So, be sure to capitalize on their knowledge and build a baseline budget. You never know; it may end up being less or much more than anticipated!

Further, a realtor specializing in your neighbourhood is the best person to provide advice on the nuances of the market.

Using local market data and leveraging the first-hand experience, a competent agent can help identify reasonable standards in a given neighbourhood or area. This will tell you what you need to meet the standards of the homes in that area. Exceeding this standard may reduce your ROI. Sometimes it’s best not to be the nicest house on the street!You’ll also want to consider the fact that buyer perceptions vary. In other words, potential buyers may not have the same tastes as you do. Although there are classic and neutral designs that may seem ‘universally pleasing,’ it is challenging to predict the reaction of prospective buyers. A seasoned real estate agent can get to the heart of what drives certain perceptions. They can single out or establish those elements that are worth pursuing your home. Also, it is essential to remember that most buyers will not identify the difference between a $200 and $2000 bathroom sink. Can you?

While this is not an exact science as a rule of thumb from a strictly economic point of view, we recommend a benchmark of a return of $3 for every $1 spent. Your lifestyle, circumstances, personal preferences, and the timeline you expect to own the property could impact this calculation up or down.

Depending on the local market conditions, the value of your home may already be at its maximum potential. With this in mind, any renovation may become superfluous from an ROI perspective. There comes the point where a renovation can add little to no value to your home as an investment. Even in a hot market, homeowners must be mindful of over-renovating. Typically, this occurs when the value of a home is already significantly higher than its counterparts in that neighbourhood. Notably, a real estate professional can provide these statistics and walk you through the variables.

Do I Need To Stage Before I Sell?

If you’re thinking about selling your property, you want to do it in a manner that shows your home in its best light. The art of selling your property always starts with the first impression. Some simple questions are; Does your listing stop a busy prospective buyer dead in their tracks? Can they visualize themselves living in your home and feel they would pay a premium to do so? But most importantly, can you afford not to have your property shown in its best possible light?

Most, if not almost all real estate searches start online. Studies show that you have 2.7 seconds to make a first impression! In real estate, this all starts and ends with staging & photography. Here’s why:

  • Over 90% of buyers decide what homes they want to look at based on online photos first
  • Most buyers form an opinion about a property within the first 7-10 seconds of arriving
  • A staged property will sell, on average, 17% higher than a non-staged home

When it comes to sales, people tend to buy with emotion and then justify with logic afterwards. Staging can be the fastest and easiest way to connect your property directly to the hearts & minds of your potential Buyer!

Do I Need A Pre-Listing Home Inspection?

It’s in the Seller’s best interest to elect to have a home inspection completed shortly before listing their property for sale. This report is called a pre-list inspection. There are three main reasons a seller may elect to do this.

1. Fixing to Sell

First, although a seller knows a lot about their home, a pre-list home inspection reduces the number of red flags in a buyer’s inspection report. An inspector will help point out minor faults that the Seller may quickly remedy before going to market. For example, missing handrails or switch covers over an electrical outlet or a leaky faucet, which the owner can quickly and inexpensively fix. An inspection report can be updated once any flagged items are managed.

2. Full Disclosure

Second, a home inspection will tell buyers about the details of your property. Beyond the ageing components and possible defects, it will tell buyers that you are willing to ‘show your hand’ as the Seller. An inspection will reveal all that’s known about the home’s condition at that particular point in time. An honest seller wants prospective buyers to know what they are walking into so there are no surprises later. A “caught-off-guard” buyer may suspect foul play and return to the Seller with legal action. Any known issues, either patent (obvious) or latent (existing but perhaps not yet visible), should be listed.

3. Seller Convenience

Finally, the third reason is for the convenience of the Seller. For in-demand properties, that can mean many inspection appointments at an average of three hours per inspection. If there are five separate bookings during one week of showings, that’s approximately 15 hours put into independent assessments. Additionally, if you need to live in your home during the showing period, that’s also the time you’ll need to spend trying to find somewhere else to be. You’ll need to give the potential Buyer and inspector privacy and time to look at the property.

Suppose you decide to provide a pre-list inspection to potential buyers. In that case, you’re giving them a sense of confidence about the property due to your transparency and upfront report (and you save those buyers a few hundred dollars each)! If you go this route, be sure to use a reputable inspection company to reassure the buyers of the report’s integrity.

As a seller, having a pre-list review does not necessarily mean no inspections by other parties. But, it may cut back on the total number of inspections to make things a little easier for you and a prospective buyer to offer on a property.

A reputable real estate agent will always have excellent recommendations for home inspectors they trust!

Should I Paint Before I Sell?

Before listing your home for sale, we have found that the fastest, least expensive and most significant impact one can make on their property is by painting the space white!

Based on years of experience and bringing hundreds of properties to market, we can confidently say that there’s one colour that stands out above the rest. We are talking about white!

1. It’s Gives The Illusion Of More Space

It’s no secret that lighter walls make a room feel larger, and white is no exception. Especially in smaller condos, white paint can help make your space appear larger, especially when the ceiling is the same colour too!

Your space will also feel cleaner, fresher and brighter from top to bottom (it’s a guarantee)!

2. Easy to Visualize

White paint makes space feel more welcoming to potential buyers who may visit your home or condo. It allows them to easily visualize themselves and transport their style into your home without being distracted.

3. It Pairs Well With Cool Tones And Warm Tones

You can pair white walls with an icy grey couch or a moss green headboard – either way, the walls look great! There is no need to worry about ‘cool tones’ versus ‘warm tones’ when it comes to your decor when you use white paint.

4. It Flatters Virtually Any Piece of Furniture

If your home is staged or styled, you can rest assured that white-coloured walls will match anything! From ‘rustic’ to ‘contemporary,’ your walls will work seamlessly with any vision or decor style.

5. It’s Easy To Paint Over

No matter what colour you choose, the new owner will likely want to re-paint the walls in the colour of their choice. When a potential buyer considers the scenario, they’ll be much happier painting over white walls than a bold red or indigo blue accent wall.

Should I Sell My Home Using My Friend Or Family Member?

Selling a home is a very serious business. Sometimes, it is not the best strategy to mix business with friendship or family. Suppose something goes wrong or experiences challenges along the way. In that case, it is much easier to objectively confront a detached professional rather than someone with whom you will be sharing the next holiday dinner. Sometimes, friends and relatives would work particularly diligently for you too and would be the best choice.

Objectively assess their capabilities and past performances with others before signing on the dotted line. If you feel obligated to use a friend/family member, but you don’t think they will do the best job for you, rest assured, there are alternate ways to involve them in the transaction. It is not unheard of for one realtor to pay the other a referral fee. Discuss the options with the realtor that you would prefer to use.

The best place to start is by getting recommendations from friends, relatives and colleagues who have recently transacted in real estate. Realtors particularly appreciate clients that have been referred. You can also go online to search out those who have been busy in your community, have great Google Reviews or a solid social media presence.

Remember, your realtor will be your trusted counsellor, guide, voice, & negotiator. Feel good about being with them. Be selective in your choice. Be sure to have respect for them & only move forward when you have complete confidence in their abilities.

Please don’t choose a realtor because they gave you the highest price estimate on your house (which happens all the time). Be very wary of a realtor whose valuation is considerably above the others! Always ask for justification! The why and the how!

What Are The Costs To Sell My Home?

HOME REPAIRS

Before your property gets listed, you may incur some expenses to get it ready for the market. Fresh paint may cost a few hundred or a few thousand dollars. Landscaping and other repairs may come into play and require substantial investments depending on what needs to be completed.

HOME INSPECTOR PRE-INSPECTION REPORTS

Sometimes, sellers have their house inspected prior to putting it on the market. This report can give assurance to buyers contemplating submitting an offer on the property. Pre-inspection reports tend to be priced in the $400 to $600 range. We can advise whether or not to get a pre-inspection report as part of our marketing strategy discussions.

PENALTY FOR EARLY DISCHARGE OF MORTGAGE

If you have to discharge your mortgage upon completing your sale, you may incur a discharge penalty from the mortgagee to do this. Talk to your mortgage broker or bank to find out what these costs may be. Even an open mortgage can incur a processing fee to be discharged.

LEGAL FEES

You will need a real estate lawyer to act on your behalf in the sale of a home as well. Legal fees for a home’s sale are significantly less than on a home’s purchase. Many legal fees in this regard are in the range of $1,000 to $3,000, depending on the value of your property.

REAL ESTATE BROKERAGE FEES

Most realtor fees are based upon the selling price of a property. Usually, 50% of the gross commission goes to the co-operating realtor and 50% goes to the realtor who listed your house. The Government also requires that HST be charged on collected commissions as well. Please keep this in mind when calculating your net profit!

MOVING COSTS

It isn’t easy to estimate how much one should budget for this, as there are so many factors to consider. Moving costs can run from the hundreds to the thousands of dollars depending on the size of your home, your possessions, and how far the movers need to travel to your new property.

CAPITAL GAINS TAX

Primary residential homes in Canada are exempt from capital gains tax. Investment properties are not. Review this matter with your accountant if you wish to look into this further.

What Is A Listing Presentation?

A Listing Presentation is a complimentary, no-obligation presentation outlining how a potential Selling agent will prepare and market your property for sale and why you should consider working with them to sell your home. The Selling agent should be prepared to address your questions about pricing, offer strategy, marketing, staging and much, much more. It’s essential that the presentation is customized to your particular property and highlights why working with this real estate professional is the obvious choice! They should work hard to earn your business and it starts at the “pitch”!

What Is A Listing Agreement?

The first formal step in a real estate transaction is to complete The Listing Agreement Form: a contract between a Seller and a Selling agent that permits the Listing Brokerage to act on the Seller’s behalf for a defined time.

The Listing Agreement details the conditions of the arrangement between you and your real estate agent and notes the length of time for which the agreement is valid.

The agreement will also include your property address, commission breakdown, the agreed listing price and details about what may be included and not included in your sale. Once the agreement has been finalized and signed by all parties, the listing agent is authorized to move forward with marketing your home on the Toronto Multiple Listing Service.

What Is An Exclusive Listing?

An Exclusive Listing is when a property Seller enters a Listing Agreement with a real estate brokerage, but the listing itself does not appear on the MLS System. Exclusive Listings may be referred to as “off-market listings” or “pocket listings.”

Generally, agents and brokers can only be viewed within the same brokerage as the Selling agent, and these listings typically attract buyers through direct referral. When a property is listed on Exclusive, it will not appear on Realtor.ca (the public side of the MLS System) or any other popular search tools like Home Finder, House Sigma, or IDX feeds on brokers’ websites.

In light of this, the sale of your home may have less visibility to other real estate agents and prospective buyers compared to listings marketed on the MLS System.

Should I Sell My Property Exclusively?

There are several reasons that a Seller may consider listing their property on Exclusive:

1. This is often a popular approach for luxury homes at higher price points. There is an added level of privacy during the home selling process.

2. Exclusive listings may be helpful for an estate property or a home occupied by elderly owners. It’s less invasive when the house is not open to the public. The Seller and their agent have more control and can oversee things by qualifying potential purchasers in advance of viewing to avoid unnecessary inconvenience, preparation and disruption.

3. Many agents and brokers list a property on Exclusive before going to the market using the MLS System. This strategy is an excellent way to “test the market” before exposing the listing to the public. In other words, agents can invite colleagues and clients to view a property to provide feedback on pricing, condition, location and staging before formally listing the property online. If any adjustments need to be made to the listing plan, they can handle it up front. It’s a wise choice for listings that are difficult to price or have a unique value proposition.

What Is The Downside Of Listing On Exclusive?

In a market like Toronto that is currently hot-to-trot, it does not make sense for a Seller to list their property off-market unless there is a predetermined strategy or rationale as to why!

In a Seller’s Market like ours (lots of demand, little inventory) – it makes the most sense to expose the property to the open market to elicit the highest and best price for a home. If a home is not advertised to a sizable & qualified buyer pool, the Seller could leave money on the table. In these market conditions, it’s impossible to predict what a Buyer may be willing to pay you for your home – but we can guarantee that it’s often more than we would all expect these days!

What Is A Confirmation Of Co-Operation Form?

Confirmation of Co-operation and Representation [Form 320] is presented to the parties in a real estate transaction before the offer or purchase, and sale agreement is tabled. This form documents the specific relationships of those involved in the real estate transaction. It serves as proof that both the Buyer and the Seller acknowledge the arrangement between the companies they’ve elected to represent their respective interests. It’s a document illustrating who is working for whom and how the commission is paid out.

When Is The Best Time To Sell?

Depending on the province, city or neighbourhood, fluctuations in the market may follow a pattern. Patterns can be seasonal and repeat themselves every year, or they may depend on a transient variable. Generally speaking, Toronto locals move in the spring, summer and fall when weather conditions are most suitable. Because most real estate transactions have a closing period of 30 to 90 days, the most popular times to buy a home in Toronto are typically in the spring and fall. Holidays, extreme weather, interest rate hikes, changes to mortgage rules or local media coverage also affect buying behaviour.

Almost all houses look better in the late spring and summer, and if curb appeal is a factor, listing during the warmer months is something to consider. While home sales peak in the spring and fall, they do happen year-round, so if your goal is to move sooner rather than later, you will still be able to achieve your desired outcome, but it may just take a little longer. A mitigating consideration is that though there are fewer buyers from December to February and from June through August, there are fewer listings as well – which means less competition for your home once it’s on the market.

Selling your home is a considerable disruption, so if you are concerned about disturbing your day-to-day life during the school year, postponing your sale might make good sense. Though you may be reluctant to sell your home under less than perfect conditions, it’s essential not to delay a home sale unless you can afford to sit back and wait. Your agent should help you craft a strategic plan to determine the pros and cons – financial and otherwise – of moving forward with a sale or waiting for a better time to list.

How Much Is My Property Worth?

The hard truth is that a home is worth whatever buyers are willing to pay for it. Determining a home’s fair market value at the outset goes a long way to setting the stage for a seller to receive the most that the market will pay. The fact is, the marketplace determines the ultimate selling price. And the single greatest factor in attaining top market value is the property’s initial listing price.

COMPARATIVE MARKETING ANALYSIS (CMA)

One of the essential things a realtor will do is collaborate with a seller on the initial listing price. Your realtor should be researching the market and perform a Comparative Market Analysis (CMA). The CMA compares your house to similar properties that have recently sold and properties currently listed for sale. CMAs consider elements such as location, pricing, features, lot size, and property condition. A comprehensive CMA and analysis of relevant sales often point to a market price suggestion for the subject property.

There are a host of factors and events a good realtor will consider to interpret the information when determining the story to tell:

  • How long did it take for this comparable property to sell?
  • Were there any price reductions to facilitate the sale, or did it sell in multiple offers?
  • Did it sell after having been withdrawn from the market, repositioned, and reintroduced into the marketplace?
  • Were there unique features that the marketplace either rejected or paid handsomely for?

Realtors should shed light on how these sales impact the sale of your own home and conduct an independent analysis to gauge all relevant market forces. Pricing considerations and recommendations need to be justified based on past sales and current market conditions.

Buying

WHAT IS A BULLY OFFER?

What Is A Bully Offer?

A bully offer is a pre-emptive offer. The purpose is to ‘bully’ other buyers out of the buying process. You do so by making an aggressive over-asking offer in advance of the prescribed offer date indicated in the Broker Remarks. This way, you can potentially avoid the competition by offering a “sweet deal” that the Seller cannot turn down.

The analogy we like to use when working with buyer clients is that it’s like going to a nightclub. There’s a lineup outside that runs down the street and around the corner. So, a nightclub goer who’s tired of being in the cold chooses to pay the doorman “a premium” to bypass the line. In the same way, many buyers fed up with being out in the preverbal Toronto real estate cold (after losing out on several properties in bidding wars) sees the long-term benefit of paying a premium for a property.

As a rule of thumb, a bully offer is generally significantly over the list or asking price. It’s almost always a firm offer, meaning no conditions. And it is presented with a sizable certified deposit cheque. For a bully offer to work, the offer price has to be so enticing to the Seller; they fear losing the opportunity to sell at a premium. There is often a misunderstanding that a bully offer means being the “first buyers to offer” on a home. This is inaccurate. Instead, a bully offer is an offer that the homeowner would have a tough time refusing!

WHAT IS AN IRREVOCABLE, AND WHY IS IT IMPORTANT?

What Is An Irrevocable, And Why Is It Important?

When you offer on a property, that offer has an expiration date and time, and for a good reason. When offering on a property, you don’t want a seller coming back three years from the time of submission long after you have moved on saying that they have accepted your offer. The expiration of your offer is known as you’re irrevocable. When submitting an offer as part of your offer strategy, you will need to decide how long of a period to give the Seller to consider your offer before it expires.

Many factors go into deciding how long your irrevocable period should be. The first consideration is that the longer your irrevocable period, the more time you are exposed to the open market and the greater the possibility of competing against other offers. Remember, it is the Selling agent’s job to drum up multiple bids once yours has been submitted. They will inform all parties that have seen or expressed interest in the property that an offer has been submitted. However, the flip side is that Toronto is perpetually in a seller’s market. You want to ensure that you give the sellers enough time to respond without making them feel unduly pressured or causing them to get their back up before you have even commenced negotiations.

Suppose you are offering on a prescribed offer night. In that case, an irrevocable is less of a consideration. Still, it starts to become very strategic when a property is taking offers at any time or if you are in the process of trying to negotiate a Bully offer. Deciding the length of how much time to give on your irrevocable is a bit of a dance, and it’s important to obtain solid guidance from your buyer agent. An experienced buyer agent will try to feel out the right strategy by communicating with the seller agent.

WHAT IS A STATUS CERTIFICATE?

What Is A Status Certificate?

One of the most important documents you should pay attention to is the status certificate when buying a condominium. This document is a financial snapshot in time (good for 30 days only) of the current state of a condo corporation. It provides essential information and insights about the financial health of the building.

You can score a copy of the status certificate from the building’s property management. Typically, this is around $100.00. Under the Condominium Act, the certificate must be given to you within ten days from the order date. Most lenders will want to see a copy before releasing funds on close.

As a prospective buyer, it’s part of your due diligence to obtain and review the status certificate. The importance of this document cannot be overstressed enough, especially given that ill-informed buyers will often overlook this step in the condo purchasing process. Essentially, when purchasing a condo, you are not just buying a property. Instead, you are becoming a part-owner of the condo corporation. As such, you want to ensure that the corporation is in good financial health.

Furthermore, you should ensure this potential acquisition is the right fit for your lifestyle, budget, and long-term investment goals. For these reasons, it’s beneficial to have a lawyer review the status certificate – and then explain it to you in plain English! You want a lawyer who comes from experience with downtown Toronto condominiums. This action is one of the most critical first steps in doing your due diligence before purchasing a condo.

Generally, a status certificate is quite lengthy and far too complex for the average reader to digest without proper training and context. As real estate brokers with experience in the condo-buying process, we strongly recommend having a lawyer review the document before considering purchasing any condo. There are a lot of unknowns and unforeseeable outcomes when buying a condo. However, you can mitigate many of these risks with the simple act of having a competent and experienced real estate lawyer review the status certificate.

In working with sellers, we often secure a status certificate in advance before going to market. This way, we have all the information about the property and can confirm that the MLS is factual ahead of time. Remember, the status certificate can take up to 10 days to receive to be current and up-to-date from the property management. As listing agents, we don’t want to have any delays or possible unforeseen surprises come up in the sale of your property. That’s why it’s essential to keep these timelines and processes top of mind.

DO I NEED TO PAY THE BUYER AGENT COMMISSION?

Do I Need To Pay The Buyer Agent Commission?

If you are working with a buying agent, you may be asked to sign a contract called a Buyer’s Representation Agreement (BRA) before you start looking at properties. You may sign one of these documents but are not in any way required to do so. Generally speaking, the buyer agent is compensated through the listing brokerage from the proceeds of the sale. So, the purchaser is not responsible for any commissions or associated fees.

Typically buyers are usually only accountable to directly compensate the buying Realtor if they purchase a property that has not been listed for sale on the MLS System. However, there are exceptions to this rule! As a buyer, you should review compensation with your realtor in detail before signing a buyer’s representation agreement.

HOW DO I ENSURE I DON'T OVERPAY?

How Do I Ensure I Don’t Overpay?

This is one of the most common concerns from buyers and understandably so, especially in a market that moves with the velocity that Toronto’s. The first thing to understand is that when considering offering on a property, what is its market value and what is the property’s intrinsic value to you. Sometimes these prices are aligned, and sometimes they aren’t, which is fine. The key is to understand both and then knowing how to proceed from there.

Assessing market value is more of an art form rather than a science. Market valuations, especially in Toronto, are more of a range rather than a specific price. It is essential to work with an experienced and capable agent to understand and explain a property’s value. Most property valuations are assessed by looking at past recent sales of similar properties in a building or neighbourhood. Factors like location, condition, lot size, exposure, upgrades, room count, parking, date of sale and market appreciation can all play a role in comparisons. Note that comparables are properties that have sold firm and not properties currently on the market or for sale.

As a buyer, once you are comfortable with a property’s valuation and your realtor has walked you through the data, the next step is to ask yourself how much is the property worth to you. This is a far more esoteric part of the process, where you have to ask yourself, how much do you love the property? What is the likelihood of acquiring something of equal or greater value if this doesn’t work out? How will this improve your current life situation? How would you feel if you lost out on the property by 1,000 dollars? Armed with a market valuation, answering the questions above will ultimately lead you to your ultimate offer price and strategy.

If you are offering on a rare or unique property, sometimes you will need to overpay, but that can be a very subjective decision once you have thought your position through. With interest rates at historic lows, and property valuations continuing to rise in Toronto for the foreseeable future, it can be justifiable to overpay, as long as you know your reasons for doing so. The key is to have all of the information in front of you so that you can make the best long-term decision.

WHAT IS AN OFFER DATE?

What Is An Offer Date?

Toronto is a real estate market onto itself due to strong underlying fundamentals as demand far often outstrips supply, and sometimes by a lot. In a real estate market like Toronto’s, characterized as being in a deep seller market, sellers may choose to hold an offer date. Meaning the sellers are stating their intention not to look at offers until a specific date and time in the hopes of creating a bit of a frenzy and multiple offers or potentially even a bully offer scenario.

Essentially what this entails is that the property will go on the market for a prescribed time period; usually, 5-7 business days, allowing for the home to be marketed and viewed by interested parties. Generally speaking, the list price is below the property’s market value and the Seller’s sale price expectations. This is solely a marketing strategy to generate interest in the property and hopefully garner multiple offers.

This type of selling strategy can be highly effective, but not always. It is vital to decide your level of interest and determine the home’s market value based on your wants and needs as a buyer. Should you wish to offer on a property with an offer date, it’s essential to work with your buyer agent to get a good understanding of the process. Sometimes it takes a couple of times to fully grasp the hang of it, which is perfectly normal; however, a great realtor on your side can help speed up your learning curve and get you on the path to homeownership!

SHOULD I RENT OR SHOULD I BUY?

Should I Rent Or Should I Buy?

If you are a renter and renting, it might seem like the easier and more affordable choice. However, you are essentially robbing yourself of not leaping into homeownership at the first opportunity over the long term. While it’s true that Toronto is the most expensive real estate market in Canada, it is also the most expensive rental market.

Given its strong fundamentals over the last 20 years, the Toronto real estate market has seen appreciation on average of 5% compounded year over year. Once you add in the principles of leverage, the low cost of borrowing, inflation, and no taxable liability on the profit from the sale of your home, why would you want to pay your Landlord’s mortgage versus putting yourself on the path to financial freedom? Good question.

The biggest challenge will be putting together your down payment. If you commit to buying and make small sacrifices to save, you’ll be on your way in no time! And remember, the best time to plant a tree was 20 years ago. The second best time is now!

HOW MUCH ARE LAND TRANSFER TAXES?

How Much Are Land Transfer Taxes?

In Toronto, when purchasing a property, you are subject to the land transfer tax. Toronto is the only municipality in North America that has a double Land Transfer Tax. When purchasing a property in Toronto, a purchaser will be subject to paying both provincial and municipal taxes. The Land Transfer Taxes are calculated on a sliding scale and are paid at the time of closing. Generally, these costs need to be paid in cash and cannot be rolled into your mortgage. So it’s essential to be mindful of these costs in advance of the offering on a property.

A first-time home buyers rebate is available for all purchasers who have never formerly owned a property anywhere else in the world. First-timers can qualify for a refund up to a maximum of $4,000 for the Ontario portion of the tax. And up to $4,475 from the Toronto municipal land transfer tax.

When trying to calculate your potential land transfer tax liability on the purchase of the property, it’s always best to speak to your real estate lawyer. Below is a synopsis of the sliding scale works:

ONTARIO:

  • 0.5% of the value of the property up to and including $55,000
  • 1% of the value which exceeds $55,000 up to and including $250,000
  • 1.5% of the value which exceeds $250,000; and
  • 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single-family residences.

TORONTO:

  • 0.5% up to and including the first $55,000
  • 1% of the value which exceeds $55,000 up to and including $400,000
  • 2% of the value over $400,000

IS IT BETTER TO WORK WITH A BANK OR A MORTGAGE BROKER?

Is It Better To Work With A Bank Or A Mortgage Broker?

We typically recommend that it’s in your best interest to work with a capable and tenured mortgage broker. A mortgage broker can shop around to all schedule A and B-lenders to find you the right option that best suits your needs, while a bank has a much narrower scope by only having access to their products and services. A mortgage broker can hunt around to find you the best possible financing arrangement at no additional cost to the borrower, so there is no real downside.

Looking at mortgage options can be pretty overwhelming. When you have a capable broker advocating on your behalf, they are there to look after your own best interests, while when working with a bank, it can be a much different dynamic. Real estate, by nature, is a twenty-four-hour business, and a mortgage broker is self-employed and is someone who understands the importance of timely communication in a way that a bank employee may not.

Some great mortgage advisors work for chartered banks, but in our experience, our clients have greatly benefitted by working with an independent mortgage broker. When trying to put together your financing plan, it’s essential to know your options. If you have a long-standing relationship with your bank, it certainly would be worth exploring.

Remember, a considerable amount of fine print goes along with any mortgage commitment, and it’s essential to work with someone you trust who can walk you through the process and the pros and cons specific to various options.

DO I NEED A MORTGAGE PRE-APPROVAL?

Do I Need A Mortgage Pre-Approval

In Today’s Home Buying Environment, a Mortgage Pre-Approval is Essential (And Incredibly Easy to Get).

Getting a Mortgage Pre-Approval
A mortgage pre-approval lets you know the maximum mortgage amount the lender will lend you. It also demonstrates to a seller that you are a serious, willing and capable buyer. It goes a long way to provide the lender’s formal loan commitment once you have found the home you would like to buy.

Do I Go to My Bank or Mortgage Broker for My Pre-Approval?
You should see both. See what your bank can do for you. Interview a mortgage broker as well because they have access to many lenders. Mortgage brokers understand what qualifications each lender is looking for, to structure your application accordingly (and know where the bargains are).

How Much Can I Afford?
You can afford a house that costs as much as the mortgage amount for which you qualify, added to your total down payment.

How Much Can I Try to Get Pre-Approved For?
While your bank or mortgage broker will tell you the exact range you can be approved, you should also calculate what you feel comfortable spending. With the financial commitment, you are about to take, you may not want to commit to monthly mortgage payments as high as you qualify for.

Total Down Payment
Determine exactly how much money you have available to invest in your down payment and closing costs. This is the total amount of cash available. If you already own a home, you will need to estimate the amount of equity you have acquired in your house, so that you can add this calculation to your available savings for a down payment. This is your total down payment.

Closing Costs Estimation
Part of your available cash will have to be kept aside for expenses incurred to complete the sale. Even though you will not be able to establish the exact expense total at this time, you should be able to arrive at a very close approximation of your total costs through discussion with your lawyer.

WHEN DO I NEED TO PAY THE DEPOSIT?

When Do I Need To Pay The Deposit?

In Toronto, the real-estate deposit is paid ASAP!

However, the answer to this question can vary by local practice. There are subtle differences in the management of deposit cheques, depending on how competitive your marketplace is. In downtown Toronto, typically, the expectation is to provide the deposit cheque with the offer itself. This means working with your financial institution for the funds in advance of submitting your offer paperwork. Your realtor will present your bid on the property with the deposit “herewith,” as stated on the first page of your Agreement of Purchase and Sale. Your offer should also include a photograph of your certified deposit cheque confirming you have the physical funds available and ready to go!

Knowing that the deposit is an essential component to a successful offer, it’s vital to have access to cash-on-hand when searching for a home or condominium.

You will want the ability to withdraw funds for the deposit cheque at a moment’s notice. Many times, buyers are scrambling at the last minute to access funds from RRSPs or stocks and bonds, which isn’t always easy. Suppose you happen to bank with institutions like President’s Choice or Tangerine that do not have brick and mortar locations. In that case, you will have to work with their sister companies to pull together a deposit, which is often a more measured and slow process.

If you are not in a competitive offer scenario, it may not be necessary to submit your deposit cheque with your offer (“herewith”). If this is the case, the deposit cheque is typically due within 24-hours after accepting an offer. Generally, the Buyer and buyer agent’s responsibility is to collect the funds and deliver them to the listing brokerage within 24 hours.

However, it’s encouraged that Buyers submit their deposit cheques with their offers in today’s competitive marketplace. This good-faith gesture goes along with the Seller even when you’re not in a bidding war scenario.

In some cases, you can make alternate arrangements for the deposit. An international buyer is a good example. In this instance, the Buyer’s agent will write a surrogate clause into the Purchase and Sale Agreement to manage the transfer of funds. The deposit is likely wired to the Listing Brokerage, which is a slower and more cumbersome process.

HOW MUCH DOES MY REAL ESTATE DEPOSIT NEED TO BE?

How Much Does My Real Estate Deposit Need To Be?

What is considered a good deposit amount in Toronto? There isn’t a fixed rule as to what constitutes a sufficient amount to include in a deposit. However, the amount is a solid testimony to the intention of the purchaser. In Toronto, deposits are generally 5% of the offer price at a minimum. In a multiple offer scenario (a bidding war), we at Fox Marin encourage purchasers to bring a deposit cheque closer to 10%. If the Seller counters your initial offer price, it’s not typical to also counter your deposit amount. Don’t forget that your deposit cheque applies against your total down payment due on closing. These funds are not “over and above” costs.

WHERE DOES MY REAL ESTATE DEPOSIT GO?

Where Does My Real Estate Deposit Go?

The deposit holder is identified on the first page of the Agreement of Purchase and Sale. All deposit funds need to be made out to the holder’s name. Remember, it’s critical to ensure there are no spelling mistakes in the “payable to” section of your deposit cheque. Deposits are traditionally held by the statutory Real Estate Trust Account of the Seller’s brokerage. Then, the cheque remains in trust until closing and is applied against the purchaser’s downpayment. If interest is payable, it must be stated in the agreement. A real estate agent does not personally hold onto the deposit.

As per the Real Estate Council of Ontario, if the deposit funds are held in the listing brokerage Real Estate Trust Account (which they generally are), the funds are insured under the RECO Deposit Insurance Program. The insurance covers up to $100,000 per claim, subject to the policy’s terms and conditions. Consumer deposit insurance offers protection in the event of fraud, insolvency or misappropriation of funds by a real estate agent or their brokerage.

IS A REAL ESTATE DEPOSIT REFUNDABLE?

Is A Real Estate Deposit Refundable?

Often, a real estate deposit is returned to a buyer if there are conditions in the offer that are not satisfied.

For example, if you have made an offer that includes a Condition of Mortgage Financing, but the bank refuses your application during the conditional period.

If you’re unable to proceed with your purchase because the condition cannot be met, both the Buyer and Seller need to sign a Mutual Release Form before your certified deposit cheque is returned to you, the Buyer.

Should the Seller suspect you have not acted in good faith, they may refuse to sign the Mutual Release Form and hold back your deposit. If this is the case, the funds will remain in the named trust account, and the dispute between the Buyer and Seller would become a legal issue. A judge would eventually release the funds (to the Buyer or Seller) through a court order if not settled in advance.

WHAT HAPPENS TO MY DEPOSIT IF I DEFAULT ON CLOSING?

What Happens To My Deposit If I Default On Closing?

Many people assume that the Seller automatically gets to keep the deposit if the buyer defaults (cannot close). However, this is not always true. In fact, cases that involve deposits of $25,000 or less are decided in small claims court and significant deposits (typical to Toronto’s market) in the Superior Court of Justice. In most scenarios, if the Buyer defaults, the Buyer does not get their real estate deposit back. In addition, the Seller may sue the Buyer for damages, legal fees, and carrying costs. In short? If you’re serious about purchasing a home or condo, do your due diligence upfront and don’t assume anything! You want to ensure you’re in a good financial position to purchase a property before leaping in with both feet, only to realize that you cannot move forward with your purchase down the road. A home purchase is not as easy as a refund at Home Depot.

What Is A Bully Offer?

A bully offer is a pre-emptive offer. The purpose is to ‘bully’ other buyers out of the buying process. You do so by making an aggressive over-asking offer in advance of the prescribed offer date indicated in the Broker Remarks. This way, you can potentially avoid the competition by offering a “sweet deal” that the Seller cannot turn down.

The analogy we like to use when working with buyer clients is that it’s like going to a nightclub. There’s a lineup outside that runs down the street and around the corner. So, a nightclub goer who’s tired of being in the cold chooses to pay the doorman “a premium” to bypass the line. In the same way, many buyers fed up with being out in the preverbal Toronto real estate cold (after losing out on several properties in bidding wars) sees the long-term benefit of paying a premium for a property.

As a rule of thumb, a bully offer is generally significantly over the list or asking price. It’s almost always a firm offer, meaning no conditions. And it is presented with a sizable certified deposit cheque. For a bully offer to work, the offer price has to be so enticing to the Seller; they fear losing the opportunity to sell at a premium. There is often a misunderstanding that a bully offer means being the “first buyers to offer” on a home. This is inaccurate. Instead, a bully offer is an offer that the homeowner would have a tough time refusing!

What Is An Irrevocable, And Why Is It Important?

When you offer on a property, that offer has an expiration date and time, and for a good reason. When offering on a property, you don’t want a seller coming back three years from the time of submission long after you have moved on saying that they have accepted your offer. The expiration of your offer is known as you’re irrevocable. When submitting an offer as part of your offer strategy, you will need to decide how long of a period to give the Seller to consider your offer before it expires.

Many factors go into deciding how long your irrevocable period should be. The first consideration is that the longer your irrevocable period, the more time you are exposed to the open market and the greater the possibility of competing against other offers. Remember, it is the Selling agent’s job to drum up multiple bids once yours has been submitted. They will inform all parties that have seen or expressed interest in the property that an offer has been submitted. However, the flip side is that Toronto is perpetually in a seller’s market. You want to ensure that you give the sellers enough time to respond without making them feel unduly pressured or causing them to get their back up before you have even commenced negotiations.

Suppose you are offering on a prescribed offer night. In that case, an irrevocable is less of a consideration. Still, it starts to become very strategic when a property is taking offers at any time or if you are in the process of trying to negotiate a Bully offer. Deciding the length of how much time to give on your irrevocable is a bit of a dance, and it’s important to obtain solid guidance from your buyer agent. An experienced buyer agent will try to feel out the right strategy by communicating with the seller agent.

What Is A Status Certificate?

One of the most important documents you should pay attention to is the status certificate when buying a condominium. This document is a financial snapshot in time (good for 30 days only) of the current state of a condo corporation. It provides essential information and insights about the financial health of the building.

You can score a copy of the status certificate from the building’s property management. Typically, this is around $100.00. Under the Condominium Act, the certificate must be given to you within ten days from the order date. Most lenders will want to see a copy before releasing funds on close.

As a prospective buyer, it’s part of your due diligence to obtain and review the status certificate. The importance of this document cannot be overstressed enough, especially given that ill-informed buyers will often overlook this step in the condo purchasing process. Essentially, when purchasing a condo, you are not just buying a property. Instead, you are becoming a part-owner of the condo corporation. As such, you want to ensure that the corporation is in good financial health.

Furthermore, you should ensure this potential acquisition is the right fit for your lifestyle, budget, and long-term investment goals. For these reasons, it’s beneficial to have a lawyer review the status certificate – and then explain it to you in plain English! You want a lawyer who comes from experience with downtown Toronto condominiums. This action is one of the most critical first steps in doing your due diligence before purchasing a condo.

Generally, a status certificate is quite lengthy and far too complex for the average reader to digest without proper training and context. As real estate brokers with experience in the condo-buying process, we strongly recommend having a lawyer review the document before considering purchasing any condo. There are a lot of unknowns and unforeseeable outcomes when buying a condo. However, you can mitigate many of these risks with the simple act of having a competent and experienced real estate lawyer review the status certificate.

In working with sellers, we often secure a status certificate in advance before going to market. This way, we have all the information about the property and can confirm that the MLS is factual ahead of time. Remember, the status certificate can take up to 10 days to receive to be current and up-to-date from the property management. As listing agents, we don’t want to have any delays or possible unforeseen surprises come up in the sale of your property. That’s why it’s essential to keep these timelines and processes top of mind.

Do I Need To Pay The Buyer Agent Commission?

If you are working with a buying agent, you may be asked to sign a contract called a Buyer’s Representation Agreement (BRA) before you start looking at properties. You may sign one of these documents but are not in any way required to do so. Generally speaking, the buyer agent is compensated through the listing brokerage from the proceeds of the sale. So, the purchaser is not responsible for any commissions or associated fees.

Typically buyers are usually only accountable to directly compensate the buying Realtor if they purchase a property that has not been listed for sale on the MLS System. However, there are exceptions to this rule! As a buyer, you should review compensation with your realtor in detail before signing a buyer’s representation agreement.

How Do I Ensure I Don’t Overpay?

This is one of the most common concerns from buyers and understandably so, especially in a market that moves with the velocity that Toronto’s. The first thing to understand is that when considering offering on a property, what is its market value and what is the property’s intrinsic value to you. Sometimes these prices are aligned, and sometimes they aren’t, which is fine. The key is to understand both and then knowing how to proceed from there.

Assessing market value is more of an art form rather than a science. Market valuations, especially in Toronto, are more of a range rather than a specific price. It is essential to work with an experienced and capable agent to understand and explain a property’s value. Most property valuations are assessed by looking at past recent sales of similar properties in a building or neighbourhood. Factors like location, condition, lot size, exposure, upgrades, room count, parking, date of sale and market appreciation can all play a role in comparisons. Note that comparables are properties that have sold firm and not properties currently on the market or for sale.

As a buyer, once you are comfortable with a property’s valuation and your realtor has walked you through the data, the next step is to ask yourself how much is the property worth to you. This is a far more esoteric part of the process, where you have to ask yourself, how much do you love the property? What is the likelihood of acquiring something of equal or greater value if this doesn’t work out? How will this improve your current life situation? How would you feel if you lost out on the property by 1,000 dollars? Armed with a market valuation, answering the questions above will ultimately lead you to your ultimate offer price and strategy.

If you are offering on a rare or unique property, sometimes you will need to overpay, but that can be a very subjective decision once you have thought your position through. With interest rates at historic lows, and property valuations continuing to rise in Toronto for the foreseeable future, it can be justifiable to overpay, as long as you know your reasons for doing so. The key is to have all of the information in front of you so that you can make the best long-term decision.

What Is An Offer Date?

Toronto is a real estate market onto itself due to strong underlying fundamentals as demand far often outstrips supply, and sometimes by a lot. In a real estate market like Toronto’s, characterized as being in a deep seller market, sellers may choose to hold an offer date. Meaning the sellers are stating their intention not to look at offers until a specific date and time in the hopes of creating a bit of a frenzy and multiple offers or potentially even a bully offer scenario.

Essentially what this entails is that the property will go on the market for a prescribed time period; usually, 5-7 business days, allowing for the home to be marketed and viewed by interested parties. Generally speaking, the list price is below the property’s market value and the Seller’s sale price expectations. This is solely a marketing strategy to generate interest in the property and hopefully garner multiple offers.

This type of selling strategy can be highly effective, but not always. It is vital to decide your level of interest and determine the home’s market value based on your wants and needs as a buyer. Should you wish to offer on a property with an offer date, it’s essential to work with your buyer agent to get a good understanding of the process. Sometimes it takes a couple of times to fully grasp the hang of it, which is perfectly normal; however, a great realtor on your side can help speed up your learning curve and get you on the path to homeownership!

Should I Rent Or Should I Buy?

If you are a renter and renting, it might seem like the easier and more affordable choice. However, you are essentially robbing yourself of not leaping into homeownership at the first opportunity over the long term. While it’s true that Toronto is the most expensive real estate market in Canada, it is also the most expensive rental market.

Given its strong fundamentals over the last 20 years, the Toronto real estate market has seen appreciation on average of 5% compounded year over year. Once you add in the principles of leverage, the low cost of borrowing, inflation, and no taxable liability on the profit from the sale of your home, why would you want to pay your Landlord’s mortgage versus putting yourself on the path to financial freedom? Good question.

The biggest challenge will be putting together your down payment. If you commit to buying and make small sacrifices to save, you’ll be on your way in no time! And remember, the best time to plant a tree was 20 years ago. The second best time is now!

How Much Are Land Transfer Taxes?

In Toronto, when purchasing a property, you are subject to the land transfer tax. Toronto is the only municipality in North America that has a double Land Transfer Tax. When purchasing a property in Toronto, a purchaser will be subject to paying both provincial and municipal taxes. The Land Transfer Taxes are calculated on a sliding scale and are paid at the time of closing. Generally, these costs need to be paid in cash and cannot be rolled into your mortgage. So it’s essential to be mindful of these costs in advance of the offering on a property.

A first-time home buyers rebate is available for all purchasers who have never formerly owned a property anywhere else in the world. First-timers can qualify for a refund up to a maximum of $4,000 for the Ontario portion of the tax. And up to $4,475 from the Toronto municipal land transfer tax.

When trying to calculate your potential land transfer tax liability on the purchase of the property, it’s always best to speak to your real estate lawyer. Below is a synopsis of the sliding scale works:

ONTARIO:

  • 0.5% of the value of the property up to and including $55,000
  • 1% of the value which exceeds $55,000 up to and including $250,000
  • 1.5% of the value which exceeds $250,000; and
  • 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single-family residences.

TORONTO:

  • 0.5% up to and including the first $55,000
  • 1% of the value which exceeds $55,000 up to and including $400,000
  • 2% of the value over $400,000

Is It Better To Work With A Bank Or A Mortgage Broker?

We typically recommend that it’s in your best interest to work with a capable and tenured mortgage broker. A mortgage broker can shop around to all schedule A and B-lenders to find you the right option that best suits your needs, while a bank has a much narrower scope by only having access to their products and services. A mortgage broker can hunt around to find you the best possible financing arrangement at no additional cost to the borrower, so there is no real downside.

Looking at mortgage options can be pretty overwhelming. When you have a capable broker advocating on your behalf, they are there to look after your own best interests, while when working with a bank, it can be a much different dynamic. Real estate, by nature, is a twenty-four-hour business, and a mortgage broker is self-employed and is someone who understands the importance of timely communication in a way that a bank employee may not.

Some great mortgage advisors work for chartered banks, but in our experience, our clients have greatly benefitted by working with an independent mortgage broker. When trying to put together your financing plan, it’s essential to know your options. If you have a long-standing relationship with your bank, it certainly would be worth exploring.

Remember, a considerable amount of fine print goes along with any mortgage commitment, and it’s essential to work with someone you trust who can walk you through the process and the pros and cons specific to various options.

Do I Need A Mortgage Pre-Approval

In Today’s Home Buying Environment, a Mortgage Pre-Approval is Essential (And Incredibly Easy to Get).

Getting a Mortgage Pre-Approval
A mortgage pre-approval lets you know the maximum mortgage amount the lender will lend you. It also demonstrates to a seller that you are a serious, willing and capable buyer. It goes a long way to provide the lender’s formal loan commitment once you have found the home you would like to buy.

Do I Go to My Bank or Mortgage Broker for My Pre-Approval?
You should see both. See what your bank can do for you. Interview a mortgage broker as well because they have access to many lenders. Mortgage brokers understand what qualifications each lender is looking for, to structure your application accordingly (and know where the bargains are).

How Much Can I Afford?
You can afford a house that costs as much as the mortgage amount for which you qualify, added to your total down payment.

How Much Can I Try to Get Pre-Approved For?
While your bank or mortgage broker will tell you the exact range you can be approved, you should also calculate what you feel comfortable spending. With the financial commitment, you are about to take, you may not want to commit to monthly mortgage payments as high as you qualify for.

Total Down Payment
Determine exactly how much money you have available to invest in your down payment and closing costs. This is the total amount of cash available. If you already own a home, you will need to estimate the amount of equity you have acquired in your house, so that you can add this calculation to your available savings for a down payment. This is your total down payment.

Closing Costs Estimation
Part of your available cash will have to be kept aside for expenses incurred to complete the sale. Even though you will not be able to establish the exact expense total at this time, you should be able to arrive at a very close approximation of your total costs through discussion with your lawyer.

When Do I Need To Pay The Deposit?

In Toronto, the real-estate deposit is paid ASAP!

However, the answer to this question can vary by local practice. There are subtle differences in the management of deposit cheques, depending on how competitive your marketplace is. In downtown Toronto, typically, the expectation is to provide the deposit cheque with the offer itself. This means working with your financial institution for the funds in advance of submitting your offer paperwork. Your realtor will present your bid on the property with the deposit “herewith,” as stated on the first page of your Agreement of Purchase and Sale. Your offer should also include a photograph of your certified deposit cheque confirming you have the physical funds available and ready to go!

Knowing that the deposit is an essential component to a successful offer, it’s vital to have access to cash-on-hand when searching for a home or condominium.

You will want the ability to withdraw funds for the deposit cheque at a moment’s notice. Many times, buyers are scrambling at the last minute to access funds from RRSPs or stocks and bonds, which isn’t always easy. Suppose you happen to bank with institutions like President’s Choice or Tangerine that do not have brick and mortar locations. In that case, you will have to work with their sister companies to pull together a deposit, which is often a more measured and slow process.

If you are not in a competitive offer scenario, it may not be necessary to submit your deposit cheque with your offer (“herewith”). If this is the case, the deposit cheque is typically due within 24-hours after accepting an offer. Generally, the Buyer and buyer agent’s responsibility is to collect the funds and deliver them to the listing brokerage within 24 hours.

However, it’s encouraged that Buyers submit their deposit cheques with their offers in today’s competitive marketplace. This good-faith gesture goes along with the Seller even when you’re not in a bidding war scenario.

In some cases, you can make alternate arrangements for the deposit. An international buyer is a good example. In this instance, the Buyer’s agent will write a surrogate clause into the Purchase and Sale Agreement to manage the transfer of funds. The deposit is likely wired to the Listing Brokerage, which is a slower and more cumbersome process.

How Much Does My Real Estate Deposit Need To Be?

What is considered a good deposit amount in Toronto? There isn’t a fixed rule as to what constitutes a sufficient amount to include in a deposit. However, the amount is a solid testimony to the intention of the purchaser. In Toronto, deposits are generally 5% of the offer price at a minimum. In a multiple offer scenario (a bidding war), we at Fox Marin encourage purchasers to bring a deposit cheque closer to 10%. If the Seller counters your initial offer price, it’s not typical to also counter your deposit amount. Don’t forget that your deposit cheque applies against your total down payment due on closing. These funds are not “over and above” costs.

Where Does My Real Estate Deposit Go?

The deposit holder is identified on the first page of the Agreement of Purchase and Sale. All deposit funds need to be made out to the holder’s name. Remember, it’s critical to ensure there are no spelling mistakes in the “payable to” section of your deposit cheque. Deposits are traditionally held by the statutory Real Estate Trust Account of the Seller’s brokerage. Then, the cheque remains in trust until closing and is applied against the purchaser’s downpayment. If interest is payable, it must be stated in the agreement. A real estate agent does not personally hold onto the deposit.

As per the Real Estate Council of Ontario, if the deposit funds are held in the listing brokerage Real Estate Trust Account (which they generally are), the funds are insured under the RECO Deposit Insurance Program. The insurance covers up to $100,000 per claim, subject to the policy’s terms and conditions. Consumer deposit insurance offers protection in the event of fraud, insolvency or misappropriation of funds by a real estate agent or their brokerage.

Is A Real Estate Deposit Refundable?

Often, a real estate deposit is returned to a buyer if there are conditions in the offer that are not satisfied.

For example, if you have made an offer that includes a Condition of Mortgage Financing, but the bank refuses your application during the conditional period.

If you’re unable to proceed with your purchase because the condition cannot be met, both the Buyer and Seller need to sign a Mutual Release Form before your certified deposit cheque is returned to you, the Buyer.

Should the Seller suspect you have not acted in good faith, they may refuse to sign the Mutual Release Form and hold back your deposit. If this is the case, the funds will remain in the named trust account, and the dispute between the Buyer and Seller would become a legal issue. A judge would eventually release the funds (to the Buyer or Seller) through a court order if not settled in advance.

What Happens To My Deposit If I Default On Closing?

Many people assume that the Seller automatically gets to keep the deposit if the buyer defaults (cannot close). However, this is not always true. In fact, cases that involve deposits of $25,000 or less are decided in small claims court and significant deposits (typical to Toronto’s market) in the Superior Court of Justice. In most scenarios, if the Buyer defaults, the Buyer does not get their real estate deposit back. In addition, the Seller may sue the Buyer for damages, legal fees, and carrying costs. In short? If you’re serious about purchasing a home or condo, do your due diligence upfront and don’t assume anything! You want to ensure you’re in a good financial position to purchase a property before leaping in with both feet, only to realize that you cannot move forward with your purchase down the road. A home purchase is not as easy as a refund at Home Depot.

Questions about buying

Pre-Construction

WHY SHOULD I BUY SOMETHING PRE-CONSTRUCTION?

Why Should I Buy Something Pre-Construction?

Toronto is a costly city. And it is only getting more expensive. Investing in pre-construction can be a great way to invest in the Toronto Real Estate Market passively (and more affordably). Here are some of the advantages of buying pre-construction versus resale.

1. AN EXTENDED DEPOSIT STRUCTURE
One of the most significant challenges to entering or investing in Toronto real estate is the required upfront deposit. The ability to spread out 20% deposits in increments of 2.5- 5% over 3-5 years can be far more palatable to first-time buyers and investors. For first-time buyers and investors alike, the extended deposit structure to building completion allows purchasers to save money. Many of our first-time home buyers and investors see it as a forced saving or investment strategy.

2. GENTRIFYING IS YOUR BEST BET
Historically, the long-term prices of residential homes have always gone up. For this reason, you can improve your odds of appreciation by acquiring properties in highly gentrifying neighbourhoods. Given that the property you are purchasing will not be available for 3-5 years, it makes sense to acquire a new home in an area on the rise. These neighbourhoods will have a lower purchase entry point and higher potential to outperform the overall market down the road.

3. HANDS OFF
While investing is exciting and lucrative, owning real estate in Toronto can also be a hands-on commitment. Managing tenants, repairs or issues are some examples. One of the advantages to buying pre-construction is the first 3 to 5 years (during which the construction period), your investment is entirely passive – no extra work!

4. A MORE CIVILIZED PROCESS
Often, when purchasing resale, the most desirable condos sell in heated bidding wars. However, when buying pre-construction, you have what’s known as the 10-day cooling-off period. During this time, you can review the purchase information with your lawyer, lender, realtor, and financial advisor. It is a far more measured process to evaluate an investment opportunity or future potential new home.

5. NEW IS BETTER
When it comes to the resale condo market, over time, buildings become outdated, maintenance fees start to rise, and warranty programs expire. However, if you purchase a new condo? In four years, you will have a brand spanking new property with higher rental demand!

HOW MUCH OF A DEPOSIT DO I NEED FOR PRE-CONSTRUCTION?

How Much Of A Deposit Do I Need For Pre-Construction?

One of the great advantages of buying pre-construction is that, unlike buying resale (an existing property), you do not have to come up with your entire deposit all at once. Instead, your payments are spread out over time. Although no two developers or projects are the same, a typical pre-construction deposit structure would look something like this:

  • $5,000 on signing
  • The balance ( less $,5000) of 5% in 30 days
  • 5% in 90 days
  • 5% in 365 days
  • 5% on occupancy

In a typical pre-construction agreement, a deposit structure will stretch over 3-4 years. While purchasing pre-construction affords you more time to come up with the deposit, given its spread-out payment structure, you still are putting significant skin in the game and entering into a 3-4 year contractual agreement. In committing contractually to a developer who has much more experience and deeper pockets than you do, it’s imperative to understand the full ramifications of your commitment.

WHAT IS THE 10-DAY COOLING-OFF PERIOD?

What Is The 10-Day Cooling-Off Period?

Now, if you’re thinking, “did I make the right decision” after signing and feeling Buyer’s remorse, don’t fret. You have the 10-day cooling-off period to make up your mind.

In Ontario, you have what is known as the 10-day cooling-off period as per Section 73 of the Condominium Act. During this time, a buyer can rescind their pre-construction Agreement of Purchase and Sale for any reason. Meaning the Buyer has ten calendar days from the date an executed copy of the agreement has been received to review all the documentation with their lawyer and double-check their financial circumstances. During this time, buyers want to ensure that they are confident and ready to move forward with the purchase. After the 10-days is up, a buyer no longer has the right to walk away from the sale without legal or financial ramifications.

DO YOU NEED A MORTGAGE WHEN PURCHASING PRE-CONSTRUCTION?

Do You Need A Mortgage When Purchasing Pre-Construction?

You do not need a mortgage, given that what you are buying does not exist and most likely will not for several years. You will, however, require a mortgage pre-approval that will satisfy a developer’s requirements. Most resale mortgage pre-approvals are only good for 90 days. When purchasing pre-construction, in the actual agreement, it will be agreed that the purchaser must provide a mortgage pre-approval as per the developer’s terms within a stated period. The developer requires approval to satisfy their lenders, which reduces the risk for defaults at the close. It is essential to know that you will qualify to get a mortgage pre-approval to buy a pre-construction property, and best to do this in advance of the 10 Day Recission Period.

WHAT IS A PLATINUM PRE-CONSTRUCTION AGENT?

What Is A Platinum Pre-Construction Agent?

An experienced platinum agent will be able to gain you access to development projects that will sell out long before they ever reach the public. To learn more about getting front-of-the-line access to development projects, we invite you to read our article about how to Get Into Pre-Construction Early. A platinum agent will also steer you towards suitable projects and developers and away from those to best avoided.

Buying pre-construction is a niche market that requires specialized knowledge to guide you through the process and empower you with the correct information to make the best investment decision. While developers have sales teams that sell their projects, it is always important to remain cognizant that they represent the developers’ best interest and are not concerned with yours.

HOW DO I CHOOSE THE RIGHT FLOORPLAN WHEN BUYING PRE CONSTRUCTION?

How Do I Choose The Right Floorplan When Buying Pre-Construction?

When buying pre-construction, it’s paramount that you choose a good floor plan. Your choice of the floor plan can be a make-or-break decision for your investment or future home. Especially as a pre-construction buyer, purchasing from a floor plan can be difficult. So, think about some of these considerations:

  • The best condos are the ones that have the most natural light.
  • Wide and shallow floor plans are superior to long and narrow ones, which often tend to be darker.
  • Does the master bedroom have a door?
  • How is closet space?
  • Are the ceilings stipple?
  • Is there a kitchen island or an option to have one available?
  • Is there some usable outdoor space?
  • Will you be able to hook up a gas BBQ?

WHAT LAWYER SHOULD I USE FOR PRE-CONSTRUCTION?

What Lawyer Should I Use For Pre-Construction?

A new home Purchase and Sale Agreement is a very thick and intimidating document that can often span hundreds of pages. While reasonably standard, developers’ lawyers have written these agreements and can be somewhat one-sided to favour the developer. It cannot be stressed enough how important it is to have a real estate lawyer – one that specializes in this line of work – to review the documents for you during the 10-day rescission period. An expert lawyer will know what to look for, search for discrepancies and understand what’s up for negotiation!

Furthermore, lawyers specializing in pre-construction agreements have the experience to guide a pre-construction buyer in the right direction. They will be able to walk you through the document and outline your commitments and closing costs. The closing costs – including developer charges and taxes – can be upwards of $75,000. And, since you can’t roll these costs into a mortgage, it’s essential to be aware of what’s coming down the pipeline in 3 to 5 years, should you decide to move forward.

WHAT IS THE HST REBATE?

What Is The HST Rebate?

The HST rebate is not always clearly explained at the time of purchase. Often, there is a lot of confusion surrounding HST, especially for first-time buyers and investors. So, it is crucial to understand that HST (unlike residential resale) applies to all new home and condo purchases.

As a pre-construction buyer, if you are an end-user (meaning, you will live in the home or condo as your principal residence), the developer will pay HST and will, in turn, have the right to apply for the rebate.

If you declared yourself as an investor, you would have to pay the HST owing and with the option to apply for the rebate independently. In most instances, you will be eligible to get most (if not all your money) back within 3-6 months from the date you remit for your rebate with the CRA. It would be wise to speak with your lawyer about this before firming up so you’re clear about the financial ramifications at closing.

WHAT ARE THE CLOSING COSTS FOR PRE-CONSTRUCTION?

What Are The Closing Costs For Pre-Construction?

There are a lot of costs to consider as a pre-construction buyer. Specifically, these are costs that are due on close and which are not on the developer’s price list or disclosed in their marketing material. You must have a qualified lawyer review all these costs to properly evaluate the opportunity. What’s more, is that you’re not taken off guard when the property closes 3 to 5 years from now. The average closing costs can range from 8 to 10% of the total purchase price. These costs include, but are not limited to:

  • Development charges
  • Land transfer taxes
  • Utility connection fees
  • Education levies
  • Park levies
  • Reserve contributions
    …and, the list goes on.

The moral of the story is, don’t get caught off guard! Know your costs and what can be capped at the time of purchase.

WHAT IS A TARION WARRANTY?

What Is A Tarion Warranty?

Formerly known as the Ontario New Home Warranty Program, Tarion is a private corporation that oversees and regulates the new home industry. The governing body licenses all new home builders in Ontario under the Ontario New Home Warranties Act. Specifically, its mandate is to protect the rights of new home purchasers.

To serve new home buyers and owners, the corporation has registration requirements. That being said, all new home builders and new home sellers (known as “vendors”) must register and renew annually.

Every new home and condo build must enroll in the program. Because of this, all new homes built by a Tarion builder have coverage under the warranty program. The program gives a purchaser the peace of mind they could never get when buying a resale property.

The warranty status stays with the property for the entire term, even in the event of a sale. Should a property sale occur, the new owner will assume whatever is left on the warranty coverage. Moreover, when purchasing a home that is less than seven years old, new purchasers should contact Tarion to inform the change in ownership.

Here’s a Coles Notes breakdown of the coverage that you have during the 7-year term.

  • A one-Year Warranty requires the home to be fit for habitation and protects against building code violations beginning at the home’s date of possession.
  • A two-Year Warranty protects against water penetration issues, defects in materials, problems with electrical, plumbing & heating and displacement or deterioration of exterior cladding.
  • A seven-Year Warranty covers any issues relating to structural defects.

For all Agreements of Purchase and Sale signed on or after February 1, 2021, these new warranty limits are in place:

  • The maximum statutory warranty coverage available for freehold homes and condominium units is $300,000.
  • The maximum coverage for condo common elements is $100,000 times the number of units, up to a maximum of $3.5 million.
  • The maximum combined coverage for a condominium project (units and common elements) is $50 million.
  • There is a maximum of $50,000 for warranted damage caused by environmentally harmful substances or hazards.

The Tarion website is chock-full of great information should you wish to take a deeper dive!

Why Should I Buy Something Pre-Construction?

Toronto is a costly city. And it is only getting more expensive. Investing in pre-construction can be a great way to invest in the Toronto Real Estate Market passively (and more affordably). Here are some of the advantages of buying pre-construction versus resale.

1. AN EXTENDED DEPOSIT STRUCTURE
One of the most significant challenges to entering or investing in Toronto real estate is the required upfront deposit. The ability to spread out 20% deposits in increments of 2.5- 5% over 3-5 years can be far more palatable to first-time buyers and investors. For first-time buyers and investors alike, the extended deposit structure to building completion allows purchasers to save money. Many of our first-time home buyers and investors see it as a forced saving or investment strategy.

2. GENTRIFYING IS YOUR BEST BET
Historically, the long-term prices of residential homes have always gone up. For this reason, you can improve your odds of appreciation by acquiring properties in highly gentrifying neighbourhoods. Given that the property you are purchasing will not be available for 3-5 years, it makes sense to acquire a new home in an area on the rise. These neighbourhoods will have a lower purchase entry point and higher potential to outperform the overall market down the road.

3. HANDS OFF
While investing is exciting and lucrative, owning real estate in Toronto can also be a hands-on commitment. Managing tenants, repairs or issues are some examples. One of the advantages to buying pre-construction is the first 3 to 5 years (during which the construction period), your investment is entirely passive – no extra work!

4. A MORE CIVILIZED PROCESS
Often, when purchasing resale, the most desirable condos sell in heated bidding wars. However, when buying pre-construction, you have what’s known as the 10-day cooling-off period. During this time, you can review the purchase information with your lawyer, lender, realtor, and financial advisor. It is a far more measured process to evaluate an investment opportunity or future potential new home.

5. NEW IS BETTER
When it comes to the resale condo market, over time, buildings become outdated, maintenance fees start to rise, and warranty programs expire. However, if you purchase a new condo? In four years, you will have a brand spanking new property with higher rental demand!

How Much Of A Deposit Do I Need For Pre-Construction?

One of the great advantages of buying pre-construction is that, unlike buying resale (an existing property), you do not have to come up with your entire deposit all at once. Instead, your payments are spread out over time. Although no two developers or projects are the same, a typical pre-construction deposit structure would look something like this:

  • $5,000 on signing
  • The balance ( less $,5000) of 5% in 30 days
  • 5% in 90 days
  • 5% in 365 days
  • 5% on occupancy

In a typical pre-construction agreement, a deposit structure will stretch over 3-4 years. While purchasing pre-construction affords you more time to come up with the deposit, given its spread-out payment structure, you still are putting significant skin in the game and entering into a 3-4 year contractual agreement. In committing contractually to a developer who has much more experience and deeper pockets than you do, it’s imperative to understand the full ramifications of your commitment.

What Is The 10-Day Cooling-Off Period?

Now, if you’re thinking, “did I make the right decision” after signing and feeling Buyer’s remorse, don’t fret. You have the 10-day cooling-off period to make up your mind.

In Ontario, you have what is known as the 10-day cooling-off period as per Section 73 of the Condominium Act. During this time, a buyer can rescind their pre-construction Agreement of Purchase and Sale for any reason. Meaning the Buyer has ten calendar days from the date an executed copy of the agreement has been received to review all the documentation with their lawyer and double-check their financial circumstances. During this time, buyers want to ensure that they are confident and ready to move forward with the purchase. After the 10-days is up, a buyer no longer has the right to walk away from the sale without legal or financial ramifications.

Do You Need A Mortgage When Purchasing Pre-Construction?

You do not need a mortgage, given that what you are buying does not exist and most likely will not for several years. You will, however, require a mortgage pre-approval that will satisfy a developer’s requirements. Most resale mortgage pre-approvals are only good for 90 days. When purchasing pre-construction, in the actual agreement, it will be agreed that the purchaser must provide a mortgage pre-approval as per the developer’s terms within a stated period. The developer requires approval to satisfy their lenders, which reduces the risk for defaults at the close. It is essential to know that you will qualify to get a mortgage pre-approval to buy a pre-construction property, and best to do this in advance of the 10 Day Recission Period.

What Is A Platinum Pre-Construction Agent?

An experienced platinum agent will be able to gain you access to development projects that will sell out long before they ever reach the public. To learn more about getting front-of-the-line access to development projects, we invite you to read our article about how to Get Into Pre-Construction Early. A platinum agent will also steer you towards suitable projects and developers and away from those to best avoided.

Buying pre-construction is a niche market that requires specialized knowledge to guide you through the process and empower you with the correct information to make the best investment decision. While developers have sales teams that sell their projects, it is always important to remain cognizant that they represent the developers’ best interest and are not concerned with yours.

How Do I Choose The Right Floorplan When Buying Pre-Construction?

When buying pre-construction, it’s paramount that you choose a good floor plan. Your choice of the floor plan can be a make-or-break decision for your investment or future home. Especially as a pre-construction buyer, purchasing from a floor plan can be difficult. So, think about some of these considerations:

  • The best condos are the ones that have the most natural light.
  • Wide and shallow floor plans are superior to long and narrow ones, which often tend to be darker.
  • Does the master bedroom have a door?
  • How is closet space?
  • Are the ceilings stipple?
  • Is there a kitchen island or an option to have one available?
  • Is there some usable outdoor space?
  • Will you be able to hook up a gas BBQ?

What Lawyer Should I Use For Pre-Construction?

A new home Purchase and Sale Agreement is a very thick and intimidating document that can often span hundreds of pages. While reasonably standard, developers’ lawyers have written these agreements and can be somewhat one-sided to favour the developer. It cannot be stressed enough how important it is to have a real estate lawyer – one that specializes in this line of work – to review the documents for you during the 10-day rescission period. An expert lawyer will know what to look for, search for discrepancies and understand what’s up for negotiation!

Furthermore, lawyers specializing in pre-construction agreements have the experience to guide a pre-construction buyer in the right direction. They will be able to walk you through the document and outline your commitments and closing costs. The closing costs – including developer charges and taxes – can be upwards of $75,000. And, since you can’t roll these costs into a mortgage, it’s essential to be aware of what’s coming down the pipeline in 3 to 5 years, should you decide to move forward.

What Is The HST Rebate?

The HST rebate is not always clearly explained at the time of purchase. Often, there is a lot of confusion surrounding HST, especially for first-time buyers and investors. So, it is crucial to understand that HST (unlike residential resale) applies to all new home and condo purchases.

As a pre-construction buyer, if you are an end-user (meaning, you will live in the home or condo as your principal residence), the developer will pay HST and will, in turn, have the right to apply for the rebate.

If you declared yourself as an investor, you would have to pay the HST owing and with the option to apply for the rebate independently. In most instances, you will be eligible to get most (if not all your money) back within 3-6 months from the date you remit for your rebate with the CRA. It would be wise to speak with your lawyer about this before firming up so you’re clear about the financial ramifications at closing.

What Are The Closing Costs For Pre-Construction?

There are a lot of costs to consider as a pre-construction buyer. Specifically, these are costs that are due on close and which are not on the developer’s price list or disclosed in their marketing material. You must have a qualified lawyer review all these costs to properly evaluate the opportunity. What’s more, is that you’re not taken off guard when the property closes 3 to 5 years from now. The average closing costs can range from 8 to 10% of the total purchase price. These costs include, but are not limited to:

  • Development charges
  • Land transfer taxes
  • Utility connection fees
  • Education levies
  • Park levies
  • Reserve contributions
    …and, the list goes on.

The moral of the story is, don’t get caught off guard! Know your costs and what can be capped at the time of purchase.

What Is A Tarion Warranty?

Formerly known as the Ontario New Home Warranty Program, Tarion is a private corporation that oversees and regulates the new home industry. The governing body licenses all new home builders in Ontario under the Ontario New Home Warranties Act. Specifically, its mandate is to protect the rights of new home purchasers.

To serve new home buyers and owners, the corporation has registration requirements. That being said, all new home builders and new home sellers (known as “vendors”) must register and renew annually.

Every new home and condo build must enroll in the program. Because of this, all new homes built by a Tarion builder have coverage under the warranty program. The program gives a purchaser the peace of mind they could never get when buying a resale property.

The warranty status stays with the property for the entire term, even in the event of a sale. Should a property sale occur, the new owner will assume whatever is left on the warranty coverage. Moreover, when purchasing a home that is less than seven years old, new purchasers should contact Tarion to inform the change in ownership.

Here’s a Coles Notes breakdown of the coverage that you have during the 7-year term.

  • A one-Year Warranty requires the home to be fit for habitation and protects against building code violations beginning at the home’s date of possession.
  • A two-Year Warranty protects against water penetration issues, defects in materials, problems with electrical, plumbing & heating and displacement or deterioration of exterior cladding.
  • A seven-Year Warranty covers any issues relating to structural defects.

For all Agreements of Purchase and Sale signed on or after February 1, 2021, these new warranty limits are in place:

  • The maximum statutory warranty coverage available for freehold homes and condominium units is $300,000.
  • The maximum coverage for condo common elements is $100,000 times the number of units, up to a maximum of $3.5 million.
  • The maximum combined coverage for a condominium project (units and common elements) is $50 million.
  • There is a maximum of $50,000 for warranted damage caused by environmentally harmful substances or hazards.

The Tarion website is chock-full of great information should you wish to take a deeper dive!

Investment

WHAT IS A CAP RATE?

What Is A Cap Rate?

The cap rate is a quick and effective tool for an investor to evaluate a property. The methodology to calculating the cap rate is as follows; The cap rate is determined by dividing the net operating income of a property [Revenues – Operating Costs] into the purchase price. The formula does not include mortgage payments, as every investor handles debt differently.

The assumption is that a buyer will acquire property without debt, making it easier for an investor to compare apples to apples.

The cap rate does not take into account factors like location or the condition of a property. Most cities work off their individual cap rate, which becomes a standard baseline to evaluate all properties within an area or geographic region.

The standard cap rate in Toronto ranges from 3-4%. If an investor can achieve more than 4%, they are doing very well, and it indicates that the property potentially outperforms other similar type assets.

One of the significant considerations for any investors is how to add value to a property to increase its potential cap rate or property value over time, and at what cost?

HOW MUCH IS CAPITAL GAINS TAX?

How Much Is Capital Gains Tax?

This is a question asked by many investors, as the tax treatment of selling an investment property is different from selling your principal residence. When selling your principal residence, there is no tax liability on the proceeds from the sale; however, when an investment property, the profit is considered taxable by the CRA. Fifty percent of the profit realized from the sale would be tax-free, while the remaining fifty percent would be considered as income and would be taxed at your current income tax rate. For example, if you bought a property for $500,000 and sold it for $1,000,000, you would have realized a profit of $500,000, $250,000 would be tax-free, and the other $250,000 would be taxed as income at your current tax rate.

WHAT IS THE GREENBELT?

What Is The Greenbelt?

In 2005 the Liberal Government of Ontario passed legislation to create protected farmlands and environmentally sensitive areas from development. In addition to protecting farmers and the environment, the bill was also explicitly intended to restrict and contain urban sprawl. Today, the Greenbelt runs from Pickering to Hamilton, literally forming a non-developable belt around Toronto; Lake Ontario to the South has virtually made Toronto a huge island.

One of the intended effects of making Toronto an island was to concentrate future development “to grow up and not out.” The legislation causes many positive outcomes by encouraging density over sprawl. In turn, it has enabled the creation of walkable neighbourhoods and has stopped Toronto from becoming an endless sprawl. However, this policy has come at a price, as developable land in the GTA is finite and dwindling.

In conjunction with limited land supply, Toronto’s population trajectory will cause real estate prices in Toronto to appreciate at a rapid rate over the last two decades. This paradigm will continue to propel prices upward into the foreseeable future.

WHAT FACTORS MAKE A GOOD TORONTO REAL ESTATE INVESTMENT?

What Factors Make A Good Toronto Real Estate Investment?

Investing in real estate can be very lucrative, especially in a market like Toronto’s. That being said, not all real estate investment opportunities are equal. There are many factors involved in determining how well an investment could perform and if the opportunity is the right type of investment for a specific investor.

You know the saying – three rules of real estate are; Location, Location, and Location. While it’s true that location is the most important determinant when looking at making a real estate investment, there are many considerations involved when looking at a location from an investment lens, for example. At the same time, you might pay a premium for a desirable spot! It could make more sense to invest in a less expensive but gentrifying location, where the entry point is lower. The potential to see appreciation over the long term may be significantly higher in the gentrifying area. Are there any future upcoming improvements, like transit, parks or schools in the works? How easy would it be to attract qualified tenants?

Other factors involved with making a good real estate investment would be looking at the cap rate and knowing how it compares to the area’s benchmark cap rate. Having a clear understanding of what the cash flow looks like on a pro forma with debt—researching the covenant of the tenants and the current status of their leases?

In addition to location and finances, it is essential to look at the property’s overall condition. What would be the potential to add value over time? The ability to add laneway housing or additional rental units are great examples of this.

Finding a suitable investment is different for everyone and can change with market conditions. Having an expert realtor in your corner is a great asset when looking to make an intelligent investment in Toronto real estate.

SHOULD I INVEST OUTSIDE OF THE CITY?

Should I Invest Outside Of The City?

Investing in real estate in downtown or central Toronto is like buying blue-chip stock. Owning Toronto real estate is like holding an asset with an excellent track record that will always be in demand. A high entry point relative to other markets is the price you have to pay for the type of security.

Properties entice some investors outside of the GTA as they are seduced by the lower price points and barriers to entry. Properties in the outskirts of the GTA are far more prone to being negatively affected during market corrections or downturns, and finding quality tenants can also be a significant challenge in outlying areas compared to the city centre. While it is true that no two investment opportunities are the same, real estate investment opportunities should not be judged solely by price.

As “you get what you pay for” applies as much to real estate as it does with anything else!

SHOULD I HIRE A PROPERTY MANAGER?

Should I Hire A Property Manager?

The answer to this question is, it depends. Every investor is different, as is every investment scenario. In most instances, a condo investor can manage their properties and tenant relationships with the help of a competent rental realtor. For the most part, other than leasing out the property, condos generally don’t require too much work or upkeep from the Landlord’s perspective. If you are a busy professional who wants to be completely hands-off, then a property manager could be a great solution. The general going rate is 10% of gross rent per month.

For investors who own multi-family properties, the amount of time, energy and resources required can be significant. While some investors like to be hands-on, that can often result in a considerable time commitment, which may take away from other investment opportunities. Over time as the number of units and doors continue to increase, factoring in the economy of scale, it would make sense to hire a competent and professional property management company, allowing the portfolio to run passively.

HOW DO I PROTECT MYSELF FROM BAD TENANTS?

How Do I Protect Myself From Bad Tenants?

It is no secret that the Provincial rental laws and the Landlord and Tenant Board’s governance are biased in favour of tenants’ rights at the expense of landlords. The news is filled with horror stories about tenants not paying rent or causing damage to properties, with landlords having very little recourse. In an environment where it can be tough to evict a delinquent or reckless tenant, the stakes are very high for landlords to get it right the first time when they rent out their properties.

The first piece of advice? Don’t go it alone, and make sure that you hire a professional realtor who has seen and done it all. While a landlord needs to focus on rental rates, they should also evaluate the quality of the Tenant from day one. Often a lower rental rate to a great tenant can pay huge dividends over the long term.

An experienced rental agent can help you ensure that all the correct documentation is in place and can do the proper due diligence to ensure that the information provided is accurate and acceptable. Furthermore, an in-depth social media scan or Google search can be very effective.

As a landlord, if you feel you have a strong candidate, but their application is lacking, in some regard, adding a parent or guarantor could provide additional assurances. Also, a quick interview can help put a face to a name. Sometimes seeing the whites of someone’s eyes and asking direct questions can help affirm that a Tenant is the right fit.

Be mindful that tens of thousands of apartments are rented out annually across the GTA without issue! The key as a landlord is to ensure that you don’t get burned! Work with experienced professionals and keep your focus where it belongs – the quality and the covenant of your prospective new Tenant.

IS THE TORONTO REAL ESTATE MARKET A GOOD LONG-TERM INVESTMENT?

Is The Toronto Real Estate Market A Good Long-Term Investment?

Over the last twenty years, the Toronto Real Estate Market has appreciated at a rate of five percent per annum year-over-year and has withstood the subprime crisis and the Covid 19 pandemic without issue! Over the last few decades, the Toronto Real estate market has been one of the strongest appreciating and most stable real estate markets globally. Currently, there are more cranes in Toronto than anywhere else in North America. The key to understanding the Toronto Real estate Markets’ futures is understanding the strong fundamentals that have spurned its growth and how that may impact its future.

Without overcomplicating things, the Toronto Real Estate market, like most markets, is driven by two factors: supply and demand. Due to the Greenbelt and failures in short-sighted and un-coordinated levels of government policy, new home supply in Toronto has been curtailed. Due to the Green belt and the scarcity of land, the cost to build houses has become price prohibitive, and as a result, most new homes built are mid and high-rise buildings. The GTA, just to keep with demand, requires around 50,000 new units per year and every year, Toronto is falling short of coming close to hitting this number.

Toronto’s population due to solid immigration has been increasing by over 100,000 inhabitants per year in the face of limited supply. It is estimated that over the next three years, that number will rise dramatically. Population growth will only further continue to put further pressure on pricing.

In addition, millennials (comprising one-third of the Canadian population) are about to become first-time buyers. The average age of a first-time buyer is 35 years old. A forecasted “millennial tsunami” is expected to hit Toronto over the next decade! The Toronto Real Estate Board estimates that there will be 700,000 purchases from millennial first-time buyers over the next decade.

The Toronto Real Estate market has been a story of anemic supply in the face of continued strong demand, causing prices to appreciate year over year, decade over decade. During the last few decades, the Toronto market has proven to be resilient and durable in the face of global economic downturns. While no one has a crystal ball for the foreseeable future, we expect more of the same. The net-net? Strong long-term appreciation.

HOW CAN I LEVERAGE THE EQUITY I HAVE IN MY PROPERTY?

How Can I Leverage The Equity I Have In My Property

One of the best ways to grow a real estate portfolio is to leverage the existing equity you have on a property, either through a refinance or a line of credit. It’s best to speak with a lender or mortgage broker on how to capitalize on this potential.

If you have owned property or properties in Toronto for several years, the chances you have built up a significant amount of home equity are great.

If you can pull that money out of an investment property, that money is tax-free until the time of sale. And, if you’re leveraging funds from your primary residence, tax is a non-issue.

You can then use that money as a down payment towards a second or third investment property. When you factor in the tax benefits, the power of leverage and long-term appreciation, maximizing your equity to build your portfolio makes a lot of financial sense.

What Is A Cap Rate?

The cap rate is a quick and effective tool for an investor to evaluate a property. The methodology to calculating the cap rate is as follows; The cap rate is determined by dividing the net operating income of a property [Revenues – Operating Costs] into the purchase price. The formula does not include mortgage payments, as every investor handles debt differently.

The assumption is that a buyer will acquire property without debt, making it easier for an investor to compare apples to apples.

The cap rate does not take into account factors like location or the condition of a property. Most cities work off their individual cap rate, which becomes a standard baseline to evaluate all properties within an area or geographic region.

The standard cap rate in Toronto ranges from 3-4%. If an investor can achieve more than 4%, they are doing very well, and it indicates that the property potentially outperforms other similar type assets.

One of the significant considerations for any investors is how to add value to a property to increase its potential cap rate or property value over time, and at what cost?

How Much Is Capital Gains Tax?

This is a question asked by many investors, as the tax treatment of selling an investment property is different from selling your principal residence. When selling your principal residence, there is no tax liability on the proceeds from the sale; however, when an investment property, the profit is considered taxable by the CRA. Fifty percent of the profit realized from the sale would be tax-free, while the remaining fifty percent would be considered as income and would be taxed at your current income tax rate. For example, if you bought a property for $500,000 and sold it for $1,000,000, you would have realized a profit of $500,000, $250,000 would be tax-free, and the other $250,000 would be taxed as income at your current tax rate.

What Is The Greenbelt?

In 2005 the Liberal Government of Ontario passed legislation to create protected farmlands and environmentally sensitive areas from development. In addition to protecting farmers and the environment, the bill was also explicitly intended to restrict and contain urban sprawl. Today, the Greenbelt runs from Pickering to Hamilton, literally forming a non-developable belt around Toronto; Lake Ontario to the South has virtually made Toronto a huge island.

One of the intended effects of making Toronto an island was to concentrate future development “to grow up and not out.” The legislation causes many positive outcomes by encouraging density over sprawl. In turn, it has enabled the creation of walkable neighbourhoods and has stopped Toronto from becoming an endless sprawl. However, this policy has come at a price, as developable land in the GTA is finite and dwindling.

In conjunction with limited land supply, Toronto’s population trajectory will cause real estate prices in Toronto to appreciate at a rapid rate over the last two decades. This paradigm will continue to propel prices upward into the foreseeable future.

What Factors Make A Good Toronto Real Estate Investment?

Investing in real estate can be very lucrative, especially in a market like Toronto’s. That being said, not all real estate investment opportunities are equal. There are many factors involved in determining how well an investment could perform and if the opportunity is the right type of investment for a specific investor.

You know the saying – three rules of real estate are; Location, Location, and Location. While it’s true that location is the most important determinant when looking at making a real estate investment, there are many considerations involved when looking at a location from an investment lens, for example. At the same time, you might pay a premium for a desirable spot! It could make more sense to invest in a less expensive but gentrifying location, where the entry point is lower. The potential to see appreciation over the long term may be significantly higher in the gentrifying area. Are there any future upcoming improvements, like transit, parks or schools in the works? How easy would it be to attract qualified tenants?

Other factors involved with making a good real estate investment would be looking at the cap rate and knowing how it compares to the area’s benchmark cap rate. Having a clear understanding of what the cash flow looks like on a pro forma with debt—researching the covenant of the tenants and the current status of their leases?

In addition to location and finances, it is essential to look at the property’s overall condition. What would be the potential to add value over time? The ability to add laneway housing or additional rental units are great examples of this.

Finding a suitable investment is different for everyone and can change with market conditions. Having an expert realtor in your corner is a great asset when looking to make an intelligent investment in Toronto real estate.

Should I Invest Outside Of The City?

Investing in real estate in downtown or central Toronto is like buying blue-chip stock. Owning Toronto real estate is like holding an asset with an excellent track record that will always be in demand. A high entry point relative to other markets is the price you have to pay for the type of security.

Properties entice some investors outside of the GTA as they are seduced by the lower price points and barriers to entry. Properties in the outskirts of the GTA are far more prone to being negatively affected during market corrections or downturns, and finding quality tenants can also be a significant challenge in outlying areas compared to the city centre. While it is true that no two investment opportunities are the same, real estate investment opportunities should not be judged solely by price.

As “you get what you pay for” applies as much to real estate as it does with anything else!

Should I Hire A Property Manager?

The answer to this question is, it depends. Every investor is different, as is every investment scenario. In most instances, a condo investor can manage their properties and tenant relationships with the help of a competent rental realtor. For the most part, other than leasing out the property, condos generally don’t require too much work or upkeep from the Landlord’s perspective. If you are a busy professional who wants to be completely hands-off, then a property manager could be a great solution. The general going rate is 10% of gross rent per month.

For investors who own multi-family properties, the amount of time, energy and resources required can be significant. While some investors like to be hands-on, that can often result in a considerable time commitment, which may take away from other investment opportunities. Over time as the number of units and doors continue to increase, factoring in the economy of scale, it would make sense to hire a competent and professional property management company, allowing the portfolio to run passively.

How Do I Protect Myself From Bad Tenants?

It is no secret that the Provincial rental laws and the Landlord and Tenant Board’s governance are biased in favour of tenants’ rights at the expense of landlords. The news is filled with horror stories about tenants not paying rent or causing damage to properties, with landlords having very little recourse. In an environment where it can be tough to evict a delinquent or reckless tenant, the stakes are very high for landlords to get it right the first time when they rent out their properties.

The first piece of advice? Don’t go it alone, and make sure that you hire a professional realtor who has seen and done it all. While a landlord needs to focus on rental rates, they should also evaluate the quality of the Tenant from day one. Often a lower rental rate to a great tenant can pay huge dividends over the long term.

An experienced rental agent can help you ensure that all the correct documentation is in place and can do the proper due diligence to ensure that the information provided is accurate and acceptable. Furthermore, an in-depth social media scan or Google search can be very effective.

As a landlord, if you feel you have a strong candidate, but their application is lacking, in some regard, adding a parent or guarantor could provide additional assurances. Also, a quick interview can help put a face to a name. Sometimes seeing the whites of someone’s eyes and asking direct questions can help affirm that a Tenant is the right fit.

Be mindful that tens of thousands of apartments are rented out annually across the GTA without issue! The key as a landlord is to ensure that you don’t get burned! Work with experienced professionals and keep your focus where it belongs – the quality and the covenant of your prospective new Tenant.

Is The Toronto Real Estate Market A Good Long-Term Investment?

Over the last twenty years, the Toronto Real Estate Market has appreciated at a rate of five percent per annum year-over-year and has withstood the subprime crisis and the Covid 19 pandemic without issue! Over the last few decades, the Toronto Real estate market has been one of the strongest appreciating and most stable real estate markets globally. Currently, there are more cranes in Toronto than anywhere else in North America. The key to understanding the Toronto Real estate Markets’ futures is understanding the strong fundamentals that have spurned its growth and how that may impact its future.

Without overcomplicating things, the Toronto Real Estate market, like most markets, is driven by two factors: supply and demand. Due to the Greenbelt and failures in short-sighted and un-coordinated levels of government policy, new home supply in Toronto has been curtailed. Due to the Green belt and the scarcity of land, the cost to build houses has become price prohibitive, and as a result, most new homes built are mid and high-rise buildings. The GTA, just to keep with demand, requires around 50,000 new units per year and every year, Toronto is falling short of coming close to hitting this number.

Toronto’s population due to solid immigration has been increasing by over 100,000 inhabitants per year in the face of limited supply. It is estimated that over the next three years, that number will rise dramatically. Population growth will only further continue to put further pressure on pricing.

In addition, millennials (comprising one-third of the Canadian population) are about to become first-time buyers. The average age of a first-time buyer is 35 years old. A forecasted “millennial tsunami” is expected to hit Toronto over the next decade! The Toronto Real Estate Board estimates that there will be 700,000 purchases from millennial first-time buyers over the next decade.

The Toronto Real Estate market has been a story of anemic supply in the face of continued strong demand, causing prices to appreciate year over year, decade over decade. During the last few decades, the Toronto market has proven to be resilient and durable in the face of global economic downturns. While no one has a crystal ball for the foreseeable future, we expect more of the same. The net-net? Strong long-term appreciation.

How Can I Leverage The Equity I Have In My Property

One of the best ways to grow a real estate portfolio is to leverage the existing equity you have on a property, either through a refinance or a line of credit. It’s best to speak with a lender or mortgage broker on how to capitalize on this potential.

If you have owned property or properties in Toronto for several years, the chances you have built up a significant amount of home equity are great.

If you can pull that money out of an investment property, that money is tax-free until the time of sale. And, if you’re leveraging funds from your primary residence, tax is a non-issue.

You can then use that money as a down payment towards a second or third investment property. When you factor in the tax benefits, the power of leverage and long-term appreciation, maximizing your equity to build your portfolio makes a lot of financial sense.

Tenant

DO I NEED TO PAY A REALTOR?

Do I Need To Pay A Realtor?

The best part about partnering with a rental agent in Toronto (other than finding an awesome new place), is that you can do so at no additional cost to you! Services (normally a percentage of the monthly rental rate) are 100% covered by the Landlord.

Once the deal is finalized and you’re all moved into your new home, the listing (Landlord’s) brokerage issues the co-operating (Tenant’s) brokerage a cheque, and everyone walks away happy.

WHAT PAPERWORK DO I NEED TO PREPARE?

What Paperwork Do I Need To Prepare?

Preparing an offer to lease in the city can feel like an extremely daunting task. Often, there can be multiple tenants striving for the same property- and it’s not always the case that it goes to the highest bidder. It’s best to do all the heavy lifting upfront to ensure that you are set up for success, and that includes having your supporting documentation ready to go before we even set foot in a rental property. The following documents should do the trick:

  1. Letter of Employment- make sure your employer includes a start date, job title, income, and a phone number they can be reached at with any questions.
  2. Full Credit Score and Report- Equifax and Transunion are the two most reputable providers. And yes – most banking apps provide a snapshot of your credit but unfortunately, you cannot use them in this situation.
  3. Government Issued Photo ID- A driver’s license or passport will do the trick. Please, no health cards!
  4. Residential Rental Application- This is used to outline your interest in the property, as well as providing the Landlord or listing agent with some personal, professional, and Landlord references, which they will certainly call prior to considering your application.

WHAT ARE THE BENEFITS OF A RENTAL AGENT?

What Are The Benefits Of A Rental Agent?

As a prospective tenant, you will have the benefit of using a full-service realtor to guide you through the process to include:

  • Understanding your wants and needs – for example, what are your locations, parking requirements, pets, bedroom count, etc.?
  • Sourcing potential properties that meet your requirements
  • Booking appointments to view homes or condos that are of interest
  • Flagging the pros and cons of various features when previewing
  • Narrowing down your search quickly as the Toronto rental market moves quickly
  • Organizing your rental package in advance of offering on a space – for example, letter of employment, credit score etc.
  • Looking out for your best interests as a tenant when reviewing and signing your Rental Agreement
  • Explaining the terms and conditions of your Rental Agreement, so you understand what your responsibilities are

  • Ensuring that your deposit, monthly rental cheques, tenant insurance, utilities and the key exchange are organized in advance of possession
  • Walking through the property on the closing date to ensure your new home is in good condition and any damage is documented in advance
  • Coordinating an introduction with your future landlord so you know who to reach out to
  • Staying in touch with you through your rental term to ensure you are content and that things are running smoothly

WHAT HAPPENS IF THE OWNER SELLS THE PROPERTY?

What Happens If The Owner Sells The Property?

If your Landlord happens to sell during your lease term, this isn’t always cause of concern! If you’re in the first twelve months of your agreement, then all parties are locked in, and the absolute earliest you could be asked to vacate would be at the end of that term. Once the year is up, it can get a bit trickier, and you may be on the hunt for a new rental – this all depends on who the new owner is!

However, there are particular circumstances in which a new owner can require you to leave, and they all require a minimum of 60 days written notice:

  1. They are the end-user and plan on moving into the property themselves
  2. An immediate family member or caregiver is going to be moving into the property
  3. A major renovation that requires a building permit is going to take place

Please note that if you lease a property in a dwelling with four or more self-contained units (not a condo), then the new owner is not permitted to evict you for their own use of the property.

CAN MY LANDLORD INCREASE THE RENT?

Can My Landlord Increase The Rent?

If you have signed a 12-month lease agreement and are living in a rent-controlled building, your Landlord is permitted to increase based on the guidelines set out by the guidelines set by the Ontario government through the Landlord and Tenant Board. Due to COVID-19, there was a rental freeze in 2020; however, it was recently announced that the rent increase guideline for 2021 is 1.2%.

If you are not currently living in a rent-controlled building, your Landlord is still permitted to increase your rent once every 12 months; however, they are not required to follow the rent increase guideline and request an increase to what they deem to be fair market value.

What is the difference between a rent-controlled building and a non-rent-controlled building?

In Ontario, a rent-controlled building is any property that was first occupied prior to November 15, 2018. Landlords in these buildings are required to follow the annual rent increase guideline.

A non-rent-controlled building is any property that was first occupied after November 15, 2018. Landlords in these buildings are not required to follow the annual rent increase guideline.

CAN I ASK MY LANDLORD TO PAINT OR DO UPGRADES BEFORE I MOVE IN?

Can I Ask My Landlord To Paint Or Do Upgrades Before I Move In?

You can, but they are under no obligation to do anything that was not written out in
detail in your lease agreement. Landlord obligations are listed on the CMHC website as follows:

Landlords must:

  • Maintain the Tenant’s home in a good state of repair and fit for habitation and comply with health, safety, housing, and maintenance standards at the Landlord’s expense.
  • Always ensure a reasonable supply of fuel, electricity, hot and cold water and other utility services (cable, Internet) unless the Tenant has agreed to obtain and pay for these services.
  • Not interfere with the reasonable enjoyment of the premises by the Tenant and the members of their household, or their guests.
  • Not seize, without legal process, a tenant’s property for rent default or for the break of any other obligation of the Tenant.
  • Not harass, obstruct, coerce, threaten or interfere with the Tenant.

There is no requirement for them to make any alterations for you. Any cosmetic changes you would like as a tenant should be itemized in your lease agreement if you are still negotiating a lease with the Landlord and their agent.

If you are already on the leased premises and would like to request changes, you will have to request and negotiate those changes with the Landlord yourself to see if you can come to an arrangement.

CAN I OFFER ON MULTIPLE PROPERTIES AT ONCE?

Can I Offer On Multiple Properties At Once?

Technically you can, but you should not. If you are working with a good agent, they will likely not permit it!

Why? Suppose two or more of your offers are accepted simultaneously. In that case, you may find yourself contractually obligated to lease more than one property for the same period, which can lead to a potential legal mess.

Offer only on one property at a time. If there are two you like, offer on the better one first with a (reasonably) short irrevocable time (expiry date/time for your offer), and if they turn you down, you can immediately turn your attention to the other one.

CAN I MAKE CHANGES TO THE PROPERTY?

Can I Make Changes To The Property?

Usually, not without the Landlord’s express written consent. Your lease agreement will likely be outlined that the Landlord requests no changes be made to the unit.

If you are living in the unit already and would like changes, even a simple paint job, ask the landlord/management/owners for permission in writing first.

HOW CAN I GET OUT OF MY LEASE?

How Can I Get Out Of My Lease?

When a landlord and Tenant initially sign a lease agreement, both parties are obligated to honour that entire term of the lease while providing a minimum of 60 days written notice using the appropriate Government-issued forms to terminate. From the Tenant’s perspective, a tenant does not need to provide a reason to terminate the lease but should ensure the termination date does not conflict with the initial lease term agreed upon in their lease.

Conversely, if a landlord wishes to terminate a tenancy and their Tenant is in good standing, then the reasons for termination must fall under one of three categories as set out by the Landlord and Tenant Board, and served to a tenant using the N12 form:

  1. The Landlord or their immediate family member wishes to move into the property and live there for at least one year.
  2. The Landlord has signed an Agreement of Purchase and Sale, and the new owner wishes to move in and live there for at least one year.

In both of these scenarios, the termination date must not be conflicting with the initial lease term, and a minimum of 60 days’ notice must be provided.

A landlord may also end a tenancy using the N13 form, which is used when an owner is conducting an extensive renovation where the unit must be vacant to complete the work. In this instance, the Tenant is given the first right of refusal to move back in once the repairs or renovations are complete.

In the absence of any further written agreements, a lease will auto-renew on a month-to-month basis until either party provides the minimum required notice as set out by the Landlord and Tenant Board. *For additional information on ending a lease in Ontario, please visit https://tribunalsontario.ca/ltb/

WHY IS A LEASING AGENT IMPORTANT?

Why Is A Leasing Agent Important?

In a large city like Toronto, where we are dealing with a market that operates at such a high velocity, paired with an unprecedented level of government policy changes, it is prudent for any individual considering renting in the city to partner with an informed and trustworthy agent.

A good agent updates them on market trends to set the appropriate expectations when searching for a property and to inform them of their rights under the Act, so they aren’t being taken advantage of.

It does not cost a tenant anything to work with an agent as remuneration is covered by the Landlord, and so tenants can get the benefit of having an expert in their corner who can fight for their rights while helping them navigate through a convoluted market.

DO I NEED TO PAY FIRST AND LAST MONTH’S RENT?

Do I Need To Pay First And Last Month’s Rent?

A landlord does have the legal authority to collect a first and last month’s rent deposit from a tenant at the time a lease agreement has been signed; however, the amount must be equal to the rental rate agreed upon in the lease.

For more information on the first and last month’s rent deposits, please refer to section 106 of the Residential Tenancies Act.

Do I Need To Pay A Realtor?

The best part about partnering with a rental agent in Toronto (other than finding an awesome new place), is that you can do so at no additional cost to you! Services (normally a percentage of the monthly rental rate) are 100% covered by the Landlord.

Once the deal is finalized and you’re all moved into your new home, the listing (Landlord’s) brokerage issues the co-operating (Tenant’s) brokerage a cheque, and everyone walks away happy.

What Paperwork Do I Need To Prepare?

Preparing an offer to lease in the city can feel like an extremely daunting task. Often, there can be multiple tenants striving for the same property- and it’s not always the case that it goes to the highest bidder. It’s best to do all the heavy lifting upfront to ensure that you are set up for success, and that includes having your supporting documentation ready to go before we even set foot in a rental property. The following documents should do the trick:

  1. Letter of Employment- make sure your employer includes a start date, job title, income, and a phone number they can be reached at with any questions.
  2. Full Credit Score and Report- Equifax and Transunion are the two most reputable providers. And yes – most banking apps provide a snapshot of your credit but unfortunately, you cannot use them in this situation.
  3. Government Issued Photo ID- A driver’s license or passport will do the trick. Please, no health cards!
  4. Residential Rental Application- This is used to outline your interest in the property, as well as providing the Landlord or listing agent with some personal, professional, and Landlord references, which they will certainly call prior to considering your application.

What Are The Benefits Of A Rental Agent?

As a prospective tenant, you will have the benefit of using a full-service realtor to guide you through the process to include:

  • Understanding your wants and needs – for example, what are your locations, parking requirements, pets, bedroom count, etc.?
  • Sourcing potential properties that meet your requirements
  • Booking appointments to view homes or condos that are of interest
  • Flagging the pros and cons of various features when previewing
  • Narrowing down your search quickly as the Toronto rental market moves quickly
  • Organizing your rental package in advance of offering on a space – for example, letter of employment, credit score etc.
  • Looking out for your best interests as a tenant when reviewing and signing your Rental Agreement
  • Explaining the terms and conditions of your Rental Agreement, so you understand what your responsibilities are

  • Ensuring that your deposit, monthly rental cheques, tenant insurance, utilities and the key exchange are organized in advance of possession
  • Walking through the property on the closing date to ensure your new home is in good condition and any damage is documented in advance
  • Coordinating an introduction with your future landlord so you know who to reach out to
  • Staying in touch with you through your rental term to ensure you are content and that things are running smoothly

What Happens If The Owner Sells The Property?

If your Landlord happens to sell during your lease term, this isn’t always cause of concern! If you’re in the first twelve months of your agreement, then all parties are locked in, and the absolute earliest you could be asked to vacate would be at the end of that term. Once the year is up, it can get a bit trickier, and you may be on the hunt for a new rental – this all depends on who the new owner is!

However, there are particular circumstances in which a new owner can require you to leave, and they all require a minimum of 60 days written notice:

  1. They are the end-user and plan on moving into the property themselves
  2. An immediate family member or caregiver is going to be moving into the property
  3. A major renovation that requires a building permit is going to take place

Please note that if you lease a property in a dwelling with four or more self-contained units (not a condo), then the new owner is not permitted to evict you for their own use of the property.

Can My Landlord Increase The Rent?

If you have signed a 12-month lease agreement and are living in a rent-controlled building, your Landlord is permitted to increase based on the guidelines set out by the guidelines set by the Ontario government through the Landlord and Tenant Board. Due to COVID-19, there was a rental freeze in 2020; however, it was recently announced that the rent increase guideline for 2021 is 1.2%.

If you are not currently living in a rent-controlled building, your Landlord is still permitted to increase your rent once every 12 months; however, they are not required to follow the rent increase guideline and request an increase to what they deem to be fair market value.

What is the difference between a rent-controlled building and a non-rent-controlled building?

In Ontario, a rent-controlled building is any property that was first occupied prior to November 15, 2018. Landlords in these buildings are required to follow the annual rent increase guideline.

A non-rent-controlled building is any property that was first occupied after November 15, 2018. Landlords in these buildings are not required to follow the annual rent increase guideline.

Can I Ask My Landlord To Paint Or Do Upgrades Before I Move In?

You can, but they are under no obligation to do anything that was not written out in
detail in your lease agreement. Landlord obligations are listed on the CMHC website as follows:

Landlords must:

  • Maintain the Tenant’s home in a good state of repair and fit for habitation and comply with health, safety, housing, and maintenance standards at the Landlord’s expense.
  • Always ensure a reasonable supply of fuel, electricity, hot and cold water and other utility services (cable, Internet) unless the Tenant has agreed to obtain and pay for these services.
  • Not interfere with the reasonable enjoyment of the premises by the Tenant and the members of their household, or their guests.
  • Not seize, without legal process, a tenant’s property for rent default or for the break of any other obligation of the Tenant.
  • Not harass, obstruct, coerce, threaten or interfere with the Tenant.

There is no requirement for them to make any alterations for you. Any cosmetic changes you would like as a tenant should be itemized in your lease agreement if you are still negotiating a lease with the Landlord and their agent.

If you are already on the leased premises and would like to request changes, you will have to request and negotiate those changes with the Landlord yourself to see if you can come to an arrangement.

Can I Offer On Multiple Properties At Once?

Technically you can, but you should not. If you are working with a good agent, they will likely not permit it!

Why? Suppose two or more of your offers are accepted simultaneously. In that case, you may find yourself contractually obligated to lease more than one property for the same period, which can lead to a potential legal mess.

Offer only on one property at a time. If there are two you like, offer on the better one first with a (reasonably) short irrevocable time (expiry date/time for your offer), and if they turn you down, you can immediately turn your attention to the other one.

Can I Make Changes To The Property?

Usually, not without the Landlord’s express written consent. Your lease agreement will likely be outlined that the Landlord requests no changes be made to the unit.

If you are living in the unit already and would like changes, even a simple paint job, ask the landlord/management/owners for permission in writing first.

How Can I Get Out Of My Lease?

When a landlord and Tenant initially sign a lease agreement, both parties are obligated to honour that entire term of the lease while providing a minimum of 60 days written notice using the appropriate Government-issued forms to terminate. From the Tenant’s perspective, a tenant does not need to provide a reason to terminate the lease but should ensure the termination date does not conflict with the initial lease term agreed upon in their lease.

Conversely, if a landlord wishes to terminate a tenancy and their Tenant is in good standing, then the reasons for termination must fall under one of three categories as set out by the Landlord and Tenant Board, and served to a tenant using the N12 form:

  1. The Landlord or their immediate family member wishes to move into the property and live there for at least one year.
  2. The Landlord has signed an Agreement of Purchase and Sale, and the new owner wishes to move in and live there for at least one year.

In both of these scenarios, the termination date must not be conflicting with the initial lease term, and a minimum of 60 days’ notice must be provided.

A landlord may also end a tenancy using the N13 form, which is used when an owner is conducting an extensive renovation where the unit must be vacant to complete the work. In this instance, the Tenant is given the first right of refusal to move back in once the repairs or renovations are complete.

In the absence of any further written agreements, a lease will auto-renew on a month-to-month basis until either party provides the minimum required notice as set out by the Landlord and Tenant Board. *For additional information on ending a lease in Ontario, please visit https://tribunalsontario.ca/ltb/

Why Is A Leasing Agent Important?

In a large city like Toronto, where we are dealing with a market that operates at such a high velocity, paired with an unprecedented level of government policy changes, it is prudent for any individual considering renting in the city to partner with an informed and trustworthy agent.

A good agent updates them on market trends to set the appropriate expectations when searching for a property and to inform them of their rights under the Act, so they aren’t being taken advantage of.

It does not cost a tenant anything to work with an agent as remuneration is covered by the Landlord, and so tenants can get the benefit of having an expert in their corner who can fight for their rights while helping them navigate through a convoluted market.

Do I Need To Pay First And Last Month’s Rent?

A landlord does have the legal authority to collect a first and last month’s rent deposit from a tenant at the time a lease agreement has been signed; however, the amount must be equal to the rental rate agreed upon in the lease.

For more information on the first and last month’s rent deposits, please refer to section 106 of the Residential Tenancies Act.

Landlord

WHY IS THE APPLICANT OFFERING SEVERAL MONTHS UPFRONT?

Why Is The Applicant Offering Several Months Upfront?

There are several reasons why an applicant could offer several months or a year of rental payments upfront:

  1. They are protective of their financial information and wish to keep their supporting documents private (employment letter, income verification, credit report).
  2. Their income is insufficient, or their credit is low, and they are offering upfront payment as a gesture of good faith that they will be able to make their rental payments.
  3. They do not want the responsibility of remembering to make their rental payments on the first of every month.

While a landlord is not permitted to require this additional deposit, a tenant can agree to provide as much as they would like to aid in securing a particular property.

HOW MUCH CAN I INCREASE THE RENT?

How Much Can I Increase The Rent?

In Ontario, rental increase guidelines are based on the Ontario Consumer Price Index, a Statistics Canada tool that measures inflation and economic conditions over a year. Each summer, the Government sets the rate for the following year, and if you want to increase your Tenant’s rent during that period, you must give them a minimum of 90 days’ notice.

If you own a first-occupied property prior to November 15, 2018, you must follow these guidelines and are only permitted to increase the rent by the designated amount. While the percentage increase has varied over the past 20 years (from 0% to 3.9%), the average permissible increase since 2000 has been 2%. For 2022, the rental increase guideline was set at 1.2%.

However, if you own a property that was first occupied after November 15, 2018, you are not required to follow this guideline and are able to increase the rent to whatever you deem to be fair market value.

In both these instances, you are only permitted to increase your Tenant’s rent once every 12 months.

CAN I REQUEST RENT TO BE PAID WITH POST-DATED CHEQUES?

Can I Request Rent To Be Paid With Post-Dated Cheques?

While many landlords and tenants believe that the only way rent can be paid is by way of cheque (what year are we in?), a landlord cannot demand that rent be paid in one particular fashion – even if agreed to in writing.

While post-dated cheques are an acceptable form of payment, so long as rent is paid on the first day of each rental period, a tenant can submit these payments in any manner they choose.

CAN I SHOW THE PROPERTY IF MY TENANT GIVES NOTICE TO VACATE?

Can I Show The Property If My Tenant Gives Notice To Vacate

Once your Tenant has given notice, you or an authorized representative has the right to show the property under the following conditions:

  1. Provide your Tenant with 24 hours notice
  2. State the date and time you will need access to the property (between the hours of 8 AM and 8 PM)
  3. State the reason for entering the property

WHAT LEGAL WAYS CAN I EVICT A TENANT?

What Legal Ways Can I Evict A Tenant?

There are only a handful of ways legally to do this! In all scenarios, you should contact a paralegal or lawyer who is well versed in landlord and tenants rights and will be able to advise on the situation and properly file the paperwork with the Landlord and Tenant Board.

Some of these situations include:

  1. Due cause – the Tenant fails to pay rent, causes damage to the property, disturbs other tenants, or conducts illegal activity on the premises. And, in these instances, it’s not an easy process. There are no guarantees.
  2. You would like to occupy the property yourself or have an immediate family member (spouse, child, parent) or caregiver move in at the end of the Tenant’s lease term.
  3. You are going to conduct a major renovation that requires a building permit at the end of the Tenant’s lease term.

CAN I EVICT MY TENANTS WHEN I SELL?

Can I Evict My Tenants When I Sell?

In brief, no. From the Government of Ontario website:

“Your Landlord can only evict you in specific situations and must give you written notice using the proper form provided by the Landlord and Tenant Board. The form must give the reason for eviction.

Even if your Landlord gives you written notice, you don’t have to move out. Your Landlord must first apply for and receive an eviction order from the Landlord and Tenant Board (also known as the board). You have the right to go to a hearing and explain why you should not be evicted.”

Generally, selling is not a legal reason to be able to evict your tenants. As a landlord/owner, you can still legally sell the property, but the Tenant has the right to stay, have their rent amount stay the same, and become the Tenant of the new owner in the event of a successful sale.

Evicting a tenant properly and for legitimate legal reasons is a complicated process that requires careful, legally acceptable execution. The advice of a lawyer and/or The Landlord and Tenant Board before proceeding is strongly recommended.

WHAT IS THE LANDLORD AND TENANT BOARD?

What Is The Landlord And Tenant Board?

The Landlord and Tenant Board was created by the Residential Tenancies Act on January 31, 2007, to give residential landlords and tenants rights and responsibilities, and sets out a process for enforcing them. The LTB resolves disputes between landlords and tenants through mediation or adjudication; they resolve eviction applications from co-ops and provide information to landlords and tenants about their rights and responsibilities.

DO I CHOOSE HIGHER RENT OR A BETTER TENANT?

Do I Choose Higher Rent Or A Better Tenant?

It depends on circumstances, but in most instances, it is better to retain a tenant at the earliest opportunity, provided they are of a suitable calibre than wait out for the highest bidder.

A bird in the hand is more valuable than two in the bush and landlords that turn away tenants solely in the hopes that another candidate will come along willing to pay more often get bit in the behind in the form of the property sitting vacant for longer than expected – ultimately costing them more in lost revenue than the rental differential – and when a new candidate does come along, there’s no guarantee that they will not offer the same low ball price, especially if the property has a longer than average days on the market and has developed a stigma.

Your highest priority should be securing a AAA candidate who will be reliable and not cause any headaches and the rental price comes after that. Not many individuals realize that the first week you are on the market is the most important as this is when you tend to receive the highest and best offers and from the best candidates while the listing is still new and shiny and creates urgency—hoping for better candidates to come along after that period becomes less likely. So, we recommend trying to work with any high-quality candidates you have in hand at the first opportunity.

WHAT ARE MY RIGHTS IF A TENANT DAMAGED MY PROPERTY?

What Are My Rights If A Tenant Damaged My Property?

If the damage falls outside of reasonable wear and tear, then a landlord first needs to identify and record the damage and assess the amount required for repair. A landlord should then try to resolve the matter directly with the Tenant by requesting financial repayment, and if the Tenant refuses, the Landlord should go through the proper channels via the Landlord and Tenant board or small claims court.

Why Is The Applicant Offering Several Months Upfront?

There are several reasons why an applicant could offer several months or a year of rental payments upfront:

  1. They are protective of their financial information and wish to keep their supporting documents private (employment letter, income verification, credit report).
  2. Their income is insufficient, or their credit is low, and they are offering upfront payment as a gesture of good faith that they will be able to make their rental payments.
  3. They do not want the responsibility of remembering to make their rental payments on the first of every month.

While a landlord is not permitted to require this additional deposit, a tenant can agree to provide as much as they would like to aid in securing a particular property.

How Much Can I Increase The Rent?

In Ontario, rental increase guidelines are based on the Ontario Consumer Price Index, a Statistics Canada tool that measures inflation and economic conditions over a year. Each summer, the Government sets the rate for the following year, and if you want to increase your Tenant’s rent during that period, you must give them a minimum of 90 days’ notice.

If you own a first-occupied property prior to November 15, 2018, you must follow these guidelines and are only permitted to increase the rent by the designated amount. While the percentage increase has varied over the past 20 years (from 0% to 3.9%), the average permissible increase since 2000 has been 2%. For 2022, the rental increase guideline was set at 1.2%.

However, if you own a property that was first occupied after November 15, 2018, you are not required to follow this guideline and are able to increase the rent to whatever you deem to be fair market value.

In both these instances, you are only permitted to increase your Tenant’s rent once every 12 months.

Can I Request Rent To Be Paid With Post-Dated Cheques?

While many landlords and tenants believe that the only way rent can be paid is by way of cheque (what year are we in?), a landlord cannot demand that rent be paid in one particular fashion – even if agreed to in writing.

While post-dated cheques are an acceptable form of payment, so long as rent is paid on the first day of each rental period, a tenant can submit these payments in any manner they choose.

Can I Show The Property If My Tenant Gives Notice To Vacate

Once your Tenant has given notice, you or an authorized representative has the right to show the property under the following conditions:

  1. Provide your Tenant with 24 hours notice
  2. State the date and time you will need access to the property (between the hours of 8 AM and 8 PM)
  3. State the reason for entering the property

What Legal Ways Can I Evict A Tenant?

There are only a handful of ways legally to do this! In all scenarios, you should contact a paralegal or lawyer who is well versed in landlord and tenants rights and will be able to advise on the situation and properly file the paperwork with the Landlord and Tenant Board.

Some of these situations include:

  1. Due cause – the Tenant fails to pay rent, causes damage to the property, disturbs other tenants, or conducts illegal activity on the premises. And, in these instances, it’s not an easy process. There are no guarantees.
  2. You would like to occupy the property yourself or have an immediate family member (spouse, child, parent) or caregiver move in at the end of the Tenant’s lease term.
  3. You are going to conduct a major renovation that requires a building permit at the end of the Tenant’s lease term.

Can I Evict My Tenants When I Sell?

In brief, no. From the Government of Ontario website:

“Your Landlord can only evict you in specific situations and must give you written notice using the proper form provided by the Landlord and Tenant Board. The form must give the reason for eviction.

Even if your Landlord gives you written notice, you don’t have to move out. Your Landlord must first apply for and receive an eviction order from the Landlord and Tenant Board (also known as the board). You have the right to go to a hearing and explain why you should not be evicted.”

Generally, selling is not a legal reason to be able to evict your tenants. As a landlord/owner, you can still legally sell the property, but the Tenant has the right to stay, have their rent amount stay the same, and become the Tenant of the new owner in the event of a successful sale.

Evicting a tenant properly and for legitimate legal reasons is a complicated process that requires careful, legally acceptable execution. The advice of a lawyer and/or The Landlord and Tenant Board before proceeding is strongly recommended.

What Is The Landlord And Tenant Board?

The Landlord and Tenant Board was created by the Residential Tenancies Act on January 31, 2007, to give residential landlords and tenants rights and responsibilities, and sets out a process for enforcing them. The LTB resolves disputes between landlords and tenants through mediation or adjudication; they resolve eviction applications from co-ops and provide information to landlords and tenants about their rights and responsibilities.

Do I Choose Higher Rent Or A Better Tenant?

It depends on circumstances, but in most instances, it is better to retain a tenant at the earliest opportunity, provided they are of a suitable calibre than wait out for the highest bidder.

A bird in the hand is more valuable than two in the bush and landlords that turn away tenants solely in the hopes that another candidate will come along willing to pay more often get bit in the behind in the form of the property sitting vacant for longer than expected – ultimately costing them more in lost revenue than the rental differential – and when a new candidate does come along, there’s no guarantee that they will not offer the same low ball price, especially if the property has a longer than average days on the market and has developed a stigma.

Your highest priority should be securing a AAA candidate who will be reliable and not cause any headaches and the rental price comes after that. Not many individuals realize that the first week you are on the market is the most important as this is when you tend to receive the highest and best offers and from the best candidates while the listing is still new and shiny and creates urgency—hoping for better candidates to come along after that period becomes less likely. So, we recommend trying to work with any high-quality candidates you have in hand at the first opportunity.

What Are My Rights If A Tenant Damaged My Property?

If the damage falls outside of reasonable wear and tear, then a landlord first needs to identify and record the damage and assess the amount required for repair. A landlord should then try to resolve the matter directly with the Tenant by requesting financial repayment, and if the Tenant refuses, the Landlord should go through the proper channels via the Landlord and Tenant board or small claims court.