Buying under a power of sale

house-saleWhen the housing market shifts, whether from loss of value or from increased interest rates, an unfortunate consequence is often an increase in properties that are sold under power of sale, or sold by the mortgage lender in order to pay back the mortgage. This consequence can be an opportunity for the right buyer, but you should keep in mind that the person selling to you hasn’t been living there. They don’t know anything about the physical nature of the house, so they completely limit their liability for anything that could go wrong. This will be written right into the offer, so if something happens after closing, you will be out of luck. Do your due diligence up front. Get a home inspection, and get in inspectors for any specialized items on the property (well, septic system, wood stove or fireplace, fuel oil tank, etc.).

Buying under power of sale can give you a financial break. Be sure it doesn’t become a money pit.

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Selling when you aren’t a Canadian resident

canada-1If you are not a Canadian resident, or will not be on the day of closing, budget for getting a lot less money on the day of closing. Tax laws in Canada may require that you pay capital gains tax, and so your lawyer could have to hold back up to 25% of the sale price to cover the possible taxes. There are some exemptions, and you can speak to an accountant about getting approved for one before closing, but you may need to pay it. Especially if you have a mortgage, or need to use those funds right away, you should look into this as soon as you have an offer to minimize the effect on you.

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First-time buyer rebates on Land Transfer Tax

sale-2I get asked a lot about rebates for first-time buyers. The rules can be a bit complex, which is why it happens fairly regularly that someone thinks they qualify when they don’t. Here are the basic rules:

  1. You have never owned property anywhere in the world. That means never, anywhere. Not “not in the past five years.” Not “I owned a property in another country.” Not even “I went on title to my parents’ condo in Florida.” You can’t ever have been on title to any property, anywhere.
  2. You do not, or did not, have a spouse who has owned property at any point while you were spouses. The key point to remember here is that Ontario’s Family Law Act has two definitions of the term “spouse” – one is that you are legally married, and one that is expanded to include two people who have been living together for at least three years or have a child together. For Land Transfer Tax, the broader definition is used, which means that if you have been living for at least three years with your partner in a house that they own, you are no longer eligible for the rebate. Even if you break up, you lost the right to the rebate during your relationship and cannot get it back.

It’s really important to be aware of the rules, and to be sure that you fit into them, before assuming that you’re going to get the full rebate. If you’re not sure, ask your lawyer at the beginning so that you aren’t budgeting for money you won’t get.

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Reverse Mortgages

reverseBecause of Remembrance Day tomorrow, I’m posting about real estate today.

You see these commercials once in a while: happy older couple who are able to stay in their home because of the magic of a reverse mortgage. But what is a reverse mortgage?

Basically, it’s a mortgage that you don’t pay until you die or sell your home….but that you can’t refinance either. These mortgages can be extremely restrictive, and so it is particularly important that you read through the fine print to ensure that you are comfortable with the terms. You could end up in a mortgage with fairly high interest compared to the average market rates that you can’t pay out as long as you’re staying in your home. They can be beneficial to a person who has very low cash flow because of a fixed income, but significant equity in a home that has recently increased drastically in value. However, it is critical that you read all of the details. If you are going ahead, you need to go ahead with full knowledge.

Some quick advice when buying from an estate

tombstoneIt comes down to one point: ask if the executor has gotten their probate order back yet. If they haven’t, there is always a chance that the closing could be delayed, because the seller cannot sell until that order has been returned by the court. If they have it, it’s smooth sailing.

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Renting to own

for-rent-4These are becoming increasingly popular as a way for purchasers to get into the housing market before they have a down payment ready. The danger, however, is getting financing down the road when it’s time to close the actual purchase.

Many lenders are very hesitant to loan money to purchase these properties, so it is crucial that you talk to a mortgage broker at the beginning of the deal, and keep in touch with the broker as the years pass. It would be heartbreaking to get to the end of the term, have paid all your money, and not be able to get a mortgage.

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Are you ready for communal living?

Condo 7I have many people who buy condos because they are affordable. A very important consideration, however, is whether you can handle the condo lifestyle.

I have a client who recently put an offer on a condo. Fortunately, he had me review the status certificate and related documents before his offer became firm, because in with all of the rules and regulations was a ban on dogs – cats were permitted, but no dogs. He has a dog, so this was a major problem. Because we found it early, he was able to make a decision about whether to go ahead with the purchase without losing any money if he decided to back out.

Condos have some very particular rules. If you’re okay with them, they can be a great option, but it’s critical to be sure that you can live within the rules before you go ahead and buy.

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How do you get to your home?

Road 2For most of us who live in cities, the answer is, well, I pull up to my driveway from the city street. This isn’t always, the case though; some city dwellers have different access, and many rural properties do.

There are different ways that you could access your property. If you have an island, then obviously you are looking at water access, but even land access can be complicated. You could have a shared laneway with your neighbour, so that you both own the laneway and you use it to pull into a parking space at the back of your house. You could have a registered easement or right-of-way over your neighbour’s property in order to access your landlocked property. Or you could have an unregistered right-of-way over a roadway that has been used for decades but was never formalized.

How you access your property will dictate what types of searches we need to do when you buy, and what types of documents we need to obtain to protect that right of access. Because the worst case scenario is that you can’t get to that house, and that you don’t find out until after you buy.

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If you’re looking to buy on the water, be sure you really are

WaterfrontBarrie is the gateway to one of the most popular cottage areas in Ontario, which means that there are a lot of people driving through my city every Friday on their way to their vacation home. Sometimes, those cottages are a short walk from a lake or river; sometimes, they are right on the water. Or are they?

It’s extremely important if you are thinking of buying a waterfront property to be sure that you are actually on the water. Sometimes, it can appear that you own right up to the water’s edge, when in fact you don’t.

The most important thing you can do if you are buying a cottage is to have a proper search done before your offer is firm, and to insist on a survey. These will show, for example, whether there is a shore road allowance between you and the water, or whether the municipal or provincial government owns the water’s edge.

A cottage can be a little slice of paradise. But you have to check to make sure.

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Time for a walkthrough

Walk 2It’s quite common when you buy to have the right for a few more visits to the house before closing. One of the best times to do one of those visits is the day before or day of closing.

It’s not uncommon for me to get a call from a client the day after they move in about something that is damaged, or that they got to the house and there is a huge amount of junk left. Going close to the closing lets you see where the seller is at with packing up, so that you can have a sense of whether the house is likely to be empty by the next day.

If you get the chance, a close-to-closing walkthrough is great protection.

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