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June 30th – The Busiest Closing Day Ever?

Today is June 30th, 2010 which means that tomorrow is July 1st, 2010 – the day the earth will stand still as the dreaded HST era begins in Ontario.Today is quite possibly the busiest closing day in the history of Toronto.

The last week of June is traditionally the busiest of the year for closings as this marks the official start to summer as well as the end of the school year. People want to be in their new homes for the summer months and parents don’t want to move until their kids are finished school. Over the past several months, a huge percentage of the resale transactions that have taken place have been set to close this week, and in particular this day – June 30th.

There is still a great deal of misinformation about the HST. I had a client ask me just this week who purchased a resale home that is closing in September if they would have to pay HST in addition to the sale price! Can you imagine-adding a surprise 13% to the purchase price of a home! Of course HST does not apply to the sale price of a resale home whatsoever, I reassured my client but it goes to show that the general public does not know how this HST will be affecting them. I suppose like anything, you have to live with it for a while before you can tell what it feels like.

We’ve been hearing about it for months, that there would be a rush to get in before the HST, and it has definitely played out this way. I suspect many lawyers will be taking next week off as just about no one will be doing any closings this week.Now the question is, what happens next? Will the market drop off in July? Probably not. Buyers will keep buying and sellers will keep selling. Questions or comments? Contact me.

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HST Rush Is On

The long predicted rush to beat the HST seems to be in full effect. Developers who have nearly finished buildings are rushing to get their remaining inventory over $400K sold and closed (building registered) before June 30th. For example, Empire Communities has School House Lofts in the Annex – a boutique collection of high-end condominium residences, all priced over $629K, and they are trying to get these units sold and the building registered by June 30th. If they do not, they will either have to absorb a MASSIVE hit from the inclusion of the 8% extra HST, or they will have to raise prices on all units significantly.

On the resale side, buyers and sellers alike are trying to get their closings in before June 30th even though the impact will not be nearly as great as on the new build side. Let’s just say that all the real estate lawyers in the city will be VERY busy the last week of June and completely bored the first week of July!

Here’s what the actual impact of the HST will look like for both buyers and sellers of a typical $400K transaction

For Sellers, closing before July 1st will save you 8% on your real estate fees (assuming fees at 5%, that’s $1600). Legal fees on a typical sale will be about $1000 (HST would be $80 extra here).

For Buyers, closing before July 1st will save you 8% on your legal fees (assuming fees at $1500, that’s $120).

Other miscellaneous expenses to think about that will cost more come July 1st include home inspections and moving expenses.

Tip For Buyers: If you are buying a condo, check the status certificate to ensure that the budget includes an accounting for the HST and the impact it will have on the services the condo uses regularly. If the condo board has not planned for the increase, this is not a good sign!

Tip For Buyers and Sellers: Secure your lawyer early to handle your closing as many will be ‘booked up’ for the last week of June and may refuse you service.

Questions or comments? Feel free to contact me.

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New Details on The HST

The provincial government is proposing to harmonize the GST with the PST. This new tax will be known as the HST. This would underlying principle is to increase efficiencies by having just a single tax, however, some goods (like housing) that have never been subject to the PST, suddenly would be.

This has many people inside and outside the Real Estate industry very concerned. The cost of a new condo or home in the GTA could jump overnight by tens of thousands if this new tax was implemented with no concessions. (Resale properties are not subject to the GST or PST).

The province just announced some new proposed changes to be made to how the HST is implemented as it pertains to new housing. Continue reading for the full press release from TREB.

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Assignment Advantages For Buyers

Continuing the Toronto Condo Assignment series, let’s take a look at the key advantages for buyers of assignment listings.

• Lower purchase price. Buying an assignment is sort of like having a time machine and being able to go back in time to purchase a condo today, at yesterday’s prices. Sellers know they have to price their units for less than what the developer would sell a similar unit at today. Savings can be in the tens of thousands compared to buying through the developer, and in some cases the price paid is even lower than what is available on the resale market.
• Lower taxes. If you buy an assignment contract that was originally signed prior to the new Toronto Land Transfer tax kicked in (January 1, 2008), you can save yourself a few thousand dollars in closing costs by not having to pay them even though the closing date is after Jan 1, 2008. Also, with the McGuinty government recently announcing a new Harmonized Sales Tax (HST), buying an ‘old’ contract is a great way to avoid the tax man!
• New condo without the wait. Usually when  you buy pre-sale you are looking at a very long wait to move into your new condo. When you buy an assignment, you don’t have the usual 3-4 year lag time, often occupancy is only months away.
• Tarion Warranty. Since you are buying a new condo, you do qualify for Tarion’s 7-year warranty that comes with all new homes and condos in Ontario.
• Inherit VIP incentives. Many sellers of assignments are investors who purchased during the initial ‘VIP’ stage of the sales process, when prices were lowest and often many upgrades were thrown in by the developer for free that if  you bought today from the developer directly you would have to pay extra for.
• Negotiate from a position of strength. Many sellers are selling because they cannot wait until occupancy or final closing -they need to get their money out now. Negotiating with someone in this position can be advantageous. 

Questions? Leave a comment or contact me.

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