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5 Things Every Buyer Should Know about Model Suites

The model suite is built and designed to entice the senses and ignite the imagination. Developers know that they only have a few seconds to grab a potential buyer’s attention and make them feel like they want to move into the condo immediately. In order to achieve this result, developers have long been using several ‘tricks of the trade’ to make their model suites appear as appealing as possible. Here are 5 things every buyer should know about model suites before walking into any condo sales centre:

1. Ceiling Height. Often model suites are in loft or commercial space where the ceiling heights are far higher than what you will actually receive. Side note, The Berczy’s model suite has 8′ ceilings whereas the suites will have a minimum of 9′ ceilings – first time I’ve actually seen this!
2. Doors. Many model suites don’t have doors between rooms, this creates the illusion of more space.
3. Upgrades. Every model suite has some sort of upgrade. Counter tops, appliances, hardwood in the bedrooms, the type of hardwood used, bathroom tiles used, etc. Ask yourself why is this? It can only mean that the standard finishes will not effectively ’sell’ the building which means you will likely be paying more for your unit than you originally planned to! Quick tip: if a sales person can’t tell you exactly what is an upgrade and what isn’t an upgrade in the model suite – RUN the other way!
4. Custom wood work. I’m seeing this more and more in model suites – custom mill work on walls, built-in storage, built-in desks, etc. This is a design trend that developers are adopting in their model suites but remember, when you move it it’s nothing but concrete and drywall painted in “Egg Shell White”!
5. Furniture and Lighting. The furniture and light fixtures being used in most sales centres are top of the line, high-end pieces.  The average person would be shocked to hear how much money was spent on the furniture and lighting in a typical model suite. Look past the $10,000 couch and $2,500 chandelier and see if you still fall in love with the unit itself before signing on the dotted line.

If you are thinking about buying a pre-construction condo, educate yourself first and never register with a developer without representation. Questions or comments? Contact me.

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Buy to Sell in a Buyer’s Market

While the title of this post may sound confusing at first, the meaning is simple: whenever you buy a condo, make sure it is a unit that would be easy to sell again in the future – even in a strong buyer’s market. This is advice I always tell my clients, especially investor clients. May seem like common sense, but it is worth exploring a little further.

Besides a brief 6-month window between October 2008 through April 2009, the Toronto market has basically been a seller’s market for the better part of the last decade. Anything sells in a seller’s market, and hopefully when it comes time for you to sell you reap the benefits of a strong seller’s market, but what if you sell and the market is slow? What if there are 10 listings for every buyer, instead of the other way around? Make sure you buy smart and buy a condo that will be easy to sell and sell quickly even in a buyer’s market.

Some more tips to consider when thinking about selling in a buyer’s market:

1. Always buy a property that a wide range of buyers would be interested in.
2. Avoid one-of-a-kind units. Cookie cutter condos are not always a bad thing when it comes to investment!
3. Be wary of units with special features like terraces, multiple parking spots, customized kitchens etc. Not all buyers appreciate these features and therefore they will not be willing to pay extra for them.
4. When in doubt, buy the smaller of two units. Smaller=Cheaper=More potential buyers
5. Go as high as possible. The 25th floor will sell before the 2nd floor in a slow market.

In a hot market like we are in, it is easy to lose sight of the fundamentals of real estate investing. Buyer’s often ’settle’ for a property that does not meet the above criteria just to get into the market. Don’t settle and always think about what if you had to sell during a buyer’s market.

Questions about buying investment condos in Toronto? Contact me directly or leave a comment here.

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10 Days is a Long Time To Think

When you buy a new condo in Ontario, you have 10 days after you receive your copy of the executed agreement of purchase and sale and the condominium documents to rescind on your agreement if you choose to do so. This can be for any reason whatsoever, technically you do not even have to provide a reason. You are released from your obligations and your deposit cheque(s) are returned to you.

I think this law is valuable and necessary and that it does what it is supposed to do – protect buyers from doing something they will regret. Unfortunately, some people are thinkers, and thinkers often think too much.  A lot what-ifs and worst-case scenarios can play out in your mind over the course of 10-days and the initial joy and excitement of buying a condo can be replaced by anxiety and fear over future events that may or not occur.

Typical rescission rates for most new condos is about 20%. That means out of every 5 purchasers, 1 will change their mind during the 10 days and will return their unit. By contrast, conditional deals in the resale market go firm about 95% of the time.

In my own experience, buyers who rescind on their agreements tend to do so because of one reason: risk. They just don’t have the stomach for the risk involved in buying pre-construction – and there is a lot of it! This has led me to believe that some people just should not buy a pre-construction condo. They are not cut out for it, and they would be far better off looking at lower risk investment opportunities in the resale market.

Buying a pre-construction condo is a high-risk, high-reward scenario. If you tend to be a risk-averse person, understand the inherent risk involved and use the 10-day cooling off period to carefully consider whether you are comfortable proceeding.  Questions or comments? Contact me.

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Protect Yourself: Never ‘Register’ With a Developer

When you enter into a new condo sales office, the first thing the pretty girl behind the desk will say to you is “Have you been here before? / Can I get you to sign in? / Have you registered with us yet?”.  Hmmm…you’ve got to ask yourself why they are so quick and in-your-face to get your personal information when you’ve only just walked through the doors. The reason is simple but most people are shocked to hear it.

When you sign-in/register with a developer, you are giving up your right to be independently represented on any future purchase at that condo development. You are effectively saying, I am not working with an Agent, and I give up my right to have an agent represent me in the future.

NEVER REGISTER OR SIGN-IN WITH A DEVELOPER!

Even if you have absolutely no intention of working with a Realtor, or if you think you have absolutely no intention of actually purchasing a suite at the development whose sales office you are entering, don’t give up your right to be represented! Remember that the sales people in the sales offices are working exclusively for the developer – they have ZERO obligation to you and your interests.

Remember, it costs you nothing to be represented by an exclusive buyer’s agent. The developer pays the fee on your behalf! Be smart, protect yourself and always leave yourself the option to be represented.

So what should you do?

1. Never give up your personal information on a sign-in or ‘registration’ forms. Tell them you are working with a Realtor/you have an agent.
2. If they press you to fill out the form anyway, put down your agent’s name and contact info. Better yet, give them your agent’s business card with your name on the back of it. (If you don’t have an agent, feel free to use my name and contact info.)
3. If they give you a hard time, or refuse your agent’s name as registration, you’ve got to ask yourself if this is a developer you want to buy from.

If you are thinking about buying a new condo, click here to hire me as your exclusive buyer’s agent.

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Selling Your Condo: The Truth About Staging

Combined with cleaning your condo, staging it for sale is probably the most important thing you can do to prepare your condo for sale. Staging is simply the process of making your condo appear as attractive as possible to as many potential buyers as possible.

Condos that are staged properly sell faster and for more money than those that are not.  I am always baffled when I walk into a condo and discover that it has not been prepped for sale, or worse, is filthy and cluttered. Sometimes I can even see the vendor’s money flying out the windows…

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Selling Your Condo: The Truth About Open Houses

They don’t work. There, I said it.

Some of my fellow Realtors may not appreciate me posting this, but the truth is, open houses add little to no value to a successful marketing plan for selling a property.

What many agents tell their clients is open houses are a great way to ‘expose’ your property to the largest number of potential buyers and therefore help you get the highest possible selling price.  Some clients even insist that their agents do open houses. But statistics show only a small percentage of all properties are sold through open houses.

Who goes to open houses? Neighbours and people without agents. If you like the idea of having your neighbours and complete strangers off the street looking in your closets, then by all means, have an open house. But the serious buyers, those actively looking with intent to buy, are working with a Realtor. They will book an appointment to see your property through their agent because they want to buy your property, not to see what condiments are in your fridge.

Why do agents do open houses? Some agents are either dumb or naive and actually do think they sell properties, but most use them strictly as a prospecting and networking tool to meet potential new clients.  This is why you almost never see seasoned and successful agents hosting open houses. We have better things to do!

[The exception to this is perhaps in a down market where the number of agent-showings are dramatically reduced (as was the case from about Oct 2008-March 2009 most recently). In this type of market, an argument could be made that any potential increase in exposure could help sell your property and should be pursued.]

What are your thoughts? Leave me a comment or drop me an email.

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Deposit Structure and Mortgage Approval for Pre-Construction Condos

Not a very sexy post title I know, but just because you are buying a pre-construction condo in Toronto doesn’t mean that you can avoid the world of traditional mortgages.

Normally when you buy a pre-construction condo you have to put down a series of deposits to secure your suite with the developer. How much you pay and when you pay varies. Factors affecting the deposit structure include:

• The developer’s bank – what they require. Developers need to get mortgages too! The banks require them usually to get a 15% down payment as a minimum from purchasers.
• When you buy – when you purchase in the condo’s marketing life cycle. The earlier you buy, the less flexibility there generally is in the deposit structure. When a project has reached their benchmark amount of units sold to get their financing approvals and permits to begin construction, sometimes they ease up on the deposit structure and this is often a good time for purchasers to jump in again.
• The developer’s preferences and promotions. Some developers require more as a rule of thumb, some require less. Some offer promotions with flexible payment schemes, others do not.
• Who you are. Yes, developers have been known to practice deposit structure discrimination – that is, changing the deposit structure requirements based on who the purchaser is. Usually though this ‘discrimination’ is simply tied to whether or not the purchaser is a Canadian resident (often non-residents must pay significantly higher deposit amounts).

So deposit structure on new condos varies, but usually you can find something like 15% to be paid out in 3 or 4 installments over the course of 6-9 months after initially signing the agreement of purchase and sale. Then an additional 5-10% also is usually required at occupancy (not to be confused with condo registration date).

So you have manged to scrape together the money you need for your deposits and you are ready to go ahead with your purchase. Are you finished? By no means. The developer will gladly take your 15-25%, but they also require mortgage approval for the remaining amount. Here’s an example: say you buy a 1 bedroom and den condo for $300,000. You must pay out 20% in deposits over the next 3 years. 20% of $300,000 is $60,000. That leaves $240,000 in unaccounted for funds for which you need to get a mortgage pre-approval.

Sometimes buyers have the funds for the deposits, but for various reasons, getting a mortgage approval can be tricky. If you fit into this category, tune in the blog tomorrow for some tips on how to get around this dilemma.

If you have any questions about deposit structures and mortage approvals, feel free to drop me an email any time.

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Selling Your Toronto Condo

Thinking of selling your Toronto Condo? Contact me now to discuss your options and learn more about my services, or just to find out how much your condo might be worth should you decide to put it on the market. I handle both traditional resale properties and assignment sales.

Selling your condo can be a stressful experience, especially if it is your first time selling property. The dollars and cents seem to take on a whole different meaning when you are selling compared to when you are buying. Getting that extra $5000 or $10,000 when you are selling can make a huge difference while an extra $5000 or $10,000 on a mortgage doesn’t seem like much.

Here are just a few things to consider when selling your condo:

1. Hire an agent or go it alone? The vast majority of sellers in Canada use a real estate agent to sell their home. But that doesn’t mean that you must use an agent. Technically you don’t even need a lawyer to handle a real estate transaction-if you are up for the challenge of negotiating the land registry system on your own. Some sellers would rather do it without an agent and there are many options available to them if they do. Of course I would never advocate selling your property without an agent [this is what I do for a living, after all ], but I certainly understand why many people do try to go it alone. Reality is though, that most sellers who try to sell without an agent eventually do hire an agent.

2. Price it low and hope for multiple offers or price it higher and wait for an offer? Pricing your property is never an exact science. My philosophy when it comes to pricing is: provide my clients with the absolute best information available, and allow them to make the decision. My underlying assumption is that my clients are intelligent, thoughtful people who will make great decisions when given great information. Pricing your property low and hoping for multiple offers can be a great strategy, but it can also backfire if you don’t get any offers and you are stuck at that price or you increase the price. Pricing your property too high at the start can also be shooting yourself in the foot. Before settling on a price, ask yourself, would you be happy to accept this price, and also, if you were a buyer, would you be willing to pay this price? If there is any hesitation on either front, you may have to rethink your pricing strategy.

3. Hire your friend or hire an expert? Many sellers often hire the agent that they bought their property with, or that they have some personal relationship with. While working with someone you already know and trust isn’t necessarily a bad thing, your home is often the largest single investment that you own, so make sure you handle it with expert care. If the person you have used before or your friend is not an expert in your condo building or neighbourhood, consider hiring someone who is. Many a friendship has been lost through a negative experience in a real estate transaction.

If you have any questions about selling your Toronto condo or home, feel free to contact me any time.

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Details on the new Toronto Land Transfer Tax

Happy New Year! 2007 was a banner year for the Toronto real estate market. A lot of my clients made a lot of money on their investments last year. Here’s to a great 2008!

Now that the holiday season is over and ‘08 is here, many buyers are once again wondering about the new City of Toronto land transfer tax and how it will affect them. To answer the many questions I have compiled a FAQ for the many of the questions I have received from my clients and readers of my website. If you have a question that is not answered here, please feel free to contact me directly.

TORONTO LAND TRANSFER TAX FAQ:

What was approved by City Council?

A second land transfer tax, on top of the provincial land transfer tax, at the following rates:

Residential: (An easy-to-use residential calculator is available here):

• 0.5% of the amount of the purchase price up to and including $55,000, plus

• 1% of the amount of the purchase price between $55,000 and $400,000, plus

• 2% of the amount of the purchase price above $400,000

Commercial / Industrial / Etc.:

• 0.5% of the amount of the purchase price up to and including $55,000, plus

• 1% of the amount of the purchase price between $55,000 and $400,000, plus

• 1.5% of the amount between $400,000 and $40 million, plus

• 1% of the amount above $40 million

When does this take effect?

February 1, 2008.

Are existing transactions grandfathered?

Yes. Any transactions where the purchaser and vendor have entered into an Agreement of Purchase and Sale for the property on or before December 31, 2007, and closing after the TLTT takes effect on February 1, 2008, will be REBATED the full amount of the Toronto land transfer tax, regardless of how long after February 1, 2008 the closing date is. (Note: Media reports that closings must occur by Feb. 1, 2008 are inaccurate.) Agreements closing before February 1, 2008 do not pay the tax. Teranet will be collecting the Toronto land transfer tax for the City of Toronto. Once the City’s rebate policies are reflected in Teranet’s collection system, the rebate-eligible amount will be exempt at the time of registration. The City previously indicated that these arrangements would not be made until the “spring of 2008”, but has now indicated that changes will be made by February 1, 2008, when the Toronto land transfer tax takes effect. According to the City, purchasers who are eligible for a FULL rebate of the Toronto land transfer tax will not have to pay the tax (meaning that they do not have to pay the tax upfront and be rebated later). This means that purchasers involved in grandfathered transactions (Agreements of Purchase and Sale signed on or before December 31, 2007, closing on or after February 1, 2008) will not have to pay the Toronto land transfer tax. If your clients have concerns, they should check with their lawyer.

What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates before February 1, 2008?

Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing before February 1, 2008 will not be required to pay the Toronto Land Transfer tax.

What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates on or after February 1, 2008?

Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing on or after February 1, 2008 will be required to pay the full Toronto Land Transfer tax.

Where does this apply?

The Toronto land transfer tax only applies to transactions within the City of Toronto. This does NOT apply to property transactions outside of the City of Toronto.

 

 

Are first time home buyers affected?

First time home buyers of new AND re-sale homes will receive a rebate of the Toronto land transfer tax of up to $3,725 (this equals a 100% rebate on homes purchased for up to $400,000). Teranet will be collecting the Toronto land transfer tax for the City of Toronto. Once the City’s rebate policies are reflected in Teranet’s collection system, the rebate-eligible amount will be exempt at the time of registration. The City previously indicated that these arrangements would not be made until the “spring of 2008”, but has now indicated that changes will be made by February 1, 2008, when the Toronto land transfer tax takes effect. According to the City, purchasers who are eligible for a FULL rebate of the Toronto land transfer tax will not have to pay the tax (meaning that they do not have to pay the tax upfront and be rebated later). This means that first-time home buyers where the total Toronto land transfer tax is $3,725 (the Toronto land transfer tax payable on a home purchased for $400,000) or less, will not pay Toronto land transfer tax (see exception noted below).

Who qualifies as a first-time home buyer?

According to the City of Toronto, eligibility rules for the Toronto Land Transfer Tax first-time buyer rebate will mirror provincial rules, as follows:

• The purchaser must be at least 18 years of age.
• The purchaser must occupy the home as his or her principal residence no later than nine months after the date of the conveyance or disposition.
• The purchaser cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time.
• If the purchaser has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world while he or she was the purchaser’s spouse. If this is the case, NO refund is available to either spouse. Note: If a purchaser’s spouse owned an interest in a home BEFORE becoming the purchaser’s spouse, but not while the purchaser’s spouse, the purchaser may be eligible for some rebate.

Are Toronto Land Transfer Tax Rebates in addition to Provincial Land Transfer Tax Rebates?

Yes. The provincial government also provides a rebate of the provincial land transfer tax for first-time buyers. See details of provincial land transfer tax rebate.

How can I get more information? If you have questions, contact the City of Toronto at Access Toronto at 416-338-0338. Some information from the City is available here.

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Provincial Land Transfer Tax Rebate for First Time Buyers in Ontario

The province just announced a new tax rebate for first time buyers in Ontario. Well, it is not exactly new, because the program previously existed for new homes and condos, but now the program will apply to resale homes and condos as well. The province will rebate up to $2000 for all first time buyers on the provincial land transfer tax portion of the purchase. Great news for first time buyers and another great reason to get into the market in Toronto if you are not already.

See my post about this subject at blogTO.com or please contact me if you would like more information or call the provincial government’s hotline at 1-800-263-7965.

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