5 Tips for Buying a Home

Looking to buy a home? Here are five essential tips for making the process as smooth as possible.

Get your finances in order.

Start by getting a full picture of your credit. Obtain copies of your credit report. Make sure the facts are correct, and fix any problems you find. Next, find a suitable lender and get pre-approved for a loan. This will put you in a better position to make a serious offer when you do find the right house.

Find a house you can afford.

As with engagement rings, there’s a general rule of thumb when it comes to buying a home: two-and-a-half times your annual salary. There are also a number of tools and calculators online that can help you understand how your income, debt, and expenses affect what you can afford. Don’t forget, too, that there are lots of considerations beyond the sticker price, including property taxes, energy costs, etc.

Hire a professional.

While the Internet gives buyers unprecedented access to home listings and resources, many aspects of the buying process require a level of expertise you can’t pick up from surfing the web. That’s why you’re better off using a professional agent than going it alone. If possible, recruit an exclusive buyer agent, who will have your interests at heart and can help you with strategies during the bidding process.

Do your homework.

Before making a bid, do some research to determine the state of the market at large. Is it more favorable for sellers or buyers? Next, look at sales trends of similar homes in the area or neighbourhood. Look at prices for the last few months. Come up with an asking price that’s competitive, but also realistic. Otherwise, you may end up ticking off your seller.

Think long term.

Obviously, you shouldn’t buy unless you’re sure you’ll be staying put for at least a few years. Beyond that, you should buy in a neighbourhood with good schools. Whether you have children or not, this will have an impact on your new home’s resale value down the line. When it comes to the house itself, you should hire your own home inspector, who can point out potential problems that could require costly repairs in the future.

Basement Renovations

Looking for additional space in your home? Have you thought about renovating your basement? Many Canadians are choosing to renovate their basements over more costly options while keeping the layout of their home intact and still considerably increasing its resale value.

Here are some key points when thinking about renovating your basement:

Noise Reduction:
Overhead noise can be harsh – running, stomping, dropped objects, television, etc. To reduce unwanted sounds, you’ll need to soundproof either your ceiling, your floors, or both by:

  • Adding fiberglass insulation: Exposed joists in the basement offer the chance to install fiberglass. While you’re at it, add a layer of drywall. Acoustic drywall has two layers of gypsum separated by a soft polymer. It can cut perceived sound by half.
  • Adding mass-loaded vinyl sheeting, then drywall: Mass-loaded vinyl (MLV) absorbs and interrupts sound.
  • Attaching drywall on isolation clips: By fastening these clips to your ceiling joists, you can install a channel to support a second layer of drywall — a second skin for your ceiling. Rubber built into the clip halts sound vibration.

soundproofing ceilings

Damp/Water Problems:
Groundwater and rain that’s not properly routed away from your house can enter basements. Install French drains (trenches with gravel and perforated pipe) and a sump pump to make sure water doesn’t wreck your renovated basement. A dehumidifier in the finished basement will continually remove moisture from that underground air and prevent mold growth.

Lighting:
Make your basement nice and bright by adding windows if possible or, if you install a door, choose one with sidelights or divided light panes. Add LED pot lights and ensure to add enough outlets for floor and table lamps.

Flooring:
Install flooring that can stand up to an unfortunate inch of standing water. This means no hardwood floors. Carpet is not a good idea either, although you can wet-vac water out of carpet and dry it with a fan.

You can do fantastic things with concrete slab these days, polishing it to a high sheen and adding stains that make it look like stone. And tile will stand up to anything water has to offer. Vinyl will repel water, but sheets can peel up when water seeps beneath.

basement flooring

Extra bedrooms:
Adding an extra bedroom can add value to your home, so if there’s any way you can make it happen, we recommend going for it!

The basement is a great place for a bedroom as long as the windows are large enough to use as a fire escape. This stipulation is written in the building code in most Canadian cities and a good common sense safety guideline to adhere to. 

basement bedroom bathroom

Bathroom:
Bathrooms are a must in the basement. Keep it simple. A shower, sink and toilet is perfect. Many newer homes have already been fitted with a plumbing system in the basement, which will cut down on the overall cost of the renovation.

A finished basement is undoubtedly a great addition to any house. A properly finished basement does not only provide you with extra space that can be used either for storage or some extra room such as laundry or a recreation room, but it also ensures that the foundation of your house is not getting wet every spring or with every severe rainfall. 

The typical cost of a basement renovation tends to range between $35-$40 per square foot, but this can vary depending on your requirements. The return on this investments is somewhere around 77%.

Guide to Ontario Non-Resident (Foreign Buyer) Speculation Tax

What is the Non-Resident Speculation Tax?

The NRST is a 15% tax that the province of Ontario has imposed on certain foreign buyers of residential property in the Greater Golden Horseshoe area. With the average price of a detached home in Toronto in the $1.5 M range, foreign buyers may be required to pay over $200,000 in NRST.

Why is Ontario Imposing this tax?

In words of the Minister of Finance upon introducing the province’s Budget on April 27, 2017: “The government is concerned that non-resident investors – who are not planning on living in the province – have been purchasing Ontario homes primarily for speculation purposes.” Interestingly, the province has not cited any data or statistics to support introduction of the NRST.

What properties does the tax apply to?

The tax applies to purchases of land containing between one and six single-family residences, including detached houses, semi-detached houses, townhouses and condos. It does not apply to multi-residential rental apartment buildings with more than six units, or agricultural, commercial or industrial land.

 Who does the tax apply to?

The tax applies to buyers who are not Canadian citizens or permanent residents, non-Canadian corporations and taxable trustees for purchases of residential property in the Greater Golden Horseshoe area. That area includes the Greater Toronto Area, and surrounding regions such as Niagara, Waterloo, the counties of Haldimand, Brant, Wellington, Dufferin, Simcoe, Peterborough, Northumberland and the Kawartha Lakes area.

Non-Canadian corporations are defined as those: not incorporated in Canada; incorporated in the country but controlled by a foreign national or corporation and with no shares listed on a Canadian stock exchange; or controlled directly or indirectly by a foreign entity.

Taxable trustees are defined as either a foreign entity holding a title in trust for beneficiaries or a Canadian citizen, or a permanent resident, or a corporation holding a title in trust for foreign beneficiaries.

Who gets an exception?

The tax will not apply to:

  • Refugees
  • The principal residence for a foreign national under the Ontario Immigrant Nominee Program, which is designed to help employers having trouble finding qualified workers in Ontario.
  • A joint purchase by a foreign national if their spouse is a Canadian citizen, permanent resident, refugee or exempt under the Ontario Immigrant Nominee Program.
  • Purchases by a trustee of a mutual fund trust, real estate investment trust or specified investment flow-through trust.

Who gets a rebate?

Rebates (with interest) will be granted to the following people if they either exclusively hold the property or hold it jointly with their spouse and it has been used as their principal residence:

  •  A foreign national who becomes a citizen or permanent resident within four years of the purchase.
  •  A foreign student who has been enrolled full-time for at least two years after the purchase
  •  A foreign national who has legally and continuously worked full-time in Ontario for a year from the date of purchase.

Insurance Coverage Rules When Going On Vacation

While you are away, your home is going to be empty. With nobody around, potential issues can spring up and if left untreated until you return home, could do serious damage. Extreme weather is becoming more commonplace: high winds, freezing rain and floods to name a few. Hot water tanks could break down or your air conditioning could malfunction causing water damage. Unfortunately, burglaries are also common when criminals know the house will be empty for an extended period of time.

It is not necessary to tell your insurer every time you go on vacation or leave your property empty for a period of time, but there are some important steps to take to ensure your coverage is valid when you are away from your home for more than four days.

During the usual heating season you must do one of the following, otherwise you will not be covered for water damage due to your water pipes freezing and bursting.

  • Have a trusted friend or neighbour check your residence every day to ensure that it is being properly heated, or better still ask a trusted friend to house sit
  • Shut off the water supply and drain the pipes
  • Install a water flow alarm system that is centrally monitored by an alarm company

If you are a property owner whose rented house remains vacant for more than a month, your insurance company can deny coverage for any losses such as fire or water damage. Owners can obtain a vacancy permit from their insurer so the coverage never ceases after the occupants have moved out. However, this add-on and often has some restrictions.

The primary difference between a “vacant” and an “unoccupied” property is whether furniture is inside, indicating the owner intends to return. Snowbirds, for instance, could still leave for months at a time, and their homes would be considered unoccupied.

The best way to protect your home, and ensure that your coverage can not be voided if you do have a claim, is contact your insurance company or broker to find out exactly what steps are required to maintain coverage under your policy.  Each insurance company differs. Your home insurer will let you know what is needed to keep your policy in force.

Things you need to know about Timeshares

For some people, timeshares are a good option. Timeshares can guarantee you vacation time since they often come with fixed annual dates for right-of-use. On top of that, timeshare resorts typically offer larger accommodations (often two bedrooms or more) and more in-room amenities, such as kitchens and washing machines, than a hotel room. Timeshare owners can also “exchange” their shares for accommodations at other resorts around the world.

The image of timeshare owners as elderly seniors has changed too, with timeshare owners becoming younger and more ethnically diverse with a median age of 39 for owners, and more than 40% of U.S. owners either African-American or Hispanic. Nearly three-quarters of owners have college degrees and 23% have graduate degrees, and have a median income of $100,000.

Here are some things experts say to keep in mind before you buy a timeshare:

Don’t pay full price

Like most real-estate transactions, the price is usually negotiable. The timeshare industry likes to point out that over a 20-year period, a family of four could save over $25,000 on accommodations by staying in a timeshare compared with what they would pay for hotel stays. Nevertheless, considering how many options you have when it comes to vacations, you’ve got the leverage when it comes to price.

The “hard-sell” approach from some timeshare companies can be very unsettling and often the reason why timeshares continually get mocked is the way they get sold. People don’t go out and say ‘I want to buy a timeshare today’, it’s sold as a heavy impulse buy.

Know what you are actually buying

It’s also important to know what kind of real estate interest you actually own when you purchase a timeshare. In about 95% of timeshare sales in the U.S. you get a deed to a property, called a “timeshare estate” under state law, which often means you can rent the share out, sell it or exchange it, and pass it on to your heirs. You do have to pay the maintenance fees each year, just like property taxes and beware, if you don’t make your payments, the timeshare company can foreclose.

If you are buying a timeshare in an unfinished property, the Federal Trade Commission recommends that money should be placed in an escrow account registered to a local bank until the property is completed, and include a “non-performance” clause in the sales contract. That way, the timeshare developer goes bankrupt or defaults before the property and unit are finished, you can get your money back, the FTC says.

Because timeshare companies know that you can likely find cheaper options from existing buyers, they usually offer closing incentives and other perks. But those perks don’t usually recoup the money you would save from buying from an existing owner. Websites such as Timeshare Users Group and RedWeek.com, are great sites to visit if you are seriously thinking about buying a timeshare.

Know your state’s right of refusal on timeshare contracts

Because of many documented cases of abuse on timeshare sales and resales, most states have put in fairly generous opt-out clauses for consumers, known as the “right of rescission.” Typically consumers can have up to a week to rescind a sales contract for a timeshare, for any reason. In Florida, for example, where nearly 25% of U.S. timeshares are located, it is 10 days, and money must be refunded back to the consumer within 20 days after receiving a cancellation notice.

Be wary of any company that requires you to sign the contract documents in a different state than where you plan to buy as you may be entering into a contract in a state that has fewer protections.

If you opt out, the FTC recommends you send a letter via certified mail or hand-delivered with a signed receipt. In addition, be sure to keep records of any correspondence and who you talked with, the FTC says.

Beware of scams

Some dissatisfied timeshare owners may encounter a scheme where they’re cold-called and offered a “buyer” for their timeshare, typically for an inflated price over the price they originally paid. “If someone calls you up to buy something from you that you haven’t advertised, you should hang up,” says Gary Prado of Red Week.

It isn’t a real-estate investment

Nusbaum, ARDA’s president, cautions that timeshare properties aren’t for those who are looking to make money on real estate but for planning future vacations. In addition, he says, to get the most out of a timeshare, you have to use it.

You could call these a notoriously lousy investment if you could call them an investment at all, but you can’t because what real investment is guaranteed to lose 30% to 70% right off the bat?

That is, unless you buy used. There’s a huge number of folks who caved into three hours of hard sell and are now desperate to dump their shares.

Exception: Some of the higher-end properties in exclusive resorts don’t lose much value, and may offer benefits like frequent-flyer miles that could be worth the extra money if you buy from the developer. Before you buy, though, check resale values online; don’t take an agent’s word for how much depreciation to expect. Also, a relatively new type of expensive time share, called a fractional interest, may actually gain in value over time.

Dealing with Financing

As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can take down that “for sale” sign on your new home.

Get pre-approved

Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford. By getting pre-approved as a buyer, you can save yourself the grief of looking at houses you can’t afford. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.

Choose your mortgage carefully

Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it’s better to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time—and given the current real estate market, you should—taking the points will save you money.

Do your homework before bidding

Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood with sites like Zillow. Consider especially sales of similar homes in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.

Get a survey even if your agent says no

Only a survey prepared by an Ontario land surveyor can confirm that a property is situated inside the appropriate land boundaries.

lf a building is sitting on land owned by the Crown, or a local municipality, or a neighbour, the otherwise proud owner is going to be extremely unhappy and will soon be seeing a litigation lawyer.

For example, it is dangerous to assume that any cottage is built exactly where it should be located. Only a survey prepared by an Ontario land surveyor can confirm that the cottage is situated inside the appropriate land boundaries, that the land it sits on is where it should be and is the correct size, and, if appropriate, the lot has private lake frontage.

Barry Lebow, a veteran realtor, wrote a post about a Toronto buyer who paid $2 million for a house in Toronto. His agent (not Lebow) told him that a survey was a waste of money. It turned out that the driveway was actually a wide city sidewalk and it was illegal to park there. He sued and settled with the title insurer, but still has nowhere to park his Mercedes.

On his Facebook post, Lebow wrote, “A survey is one of the single most important documents a homeowner can have – period. Title insurance does not replace a survey. It may pay for a mistake but it will not give you a driveway you thought you had, or move fence lines.”

A sobering 1989 court decision about a cottage and its property remains one of the best reminders: Dorothy Holmes paid $170,000 for a cottage on Georgian Bay. There was no survey. The cottage was built in the 1930s, but unfortunately more than 95 per cent of the building was sitting on the 66-foot shoreline road allowance owned by the township. She had no title to the land underneath most of the building and was unable to purchase it. She sued and lost at trial and at the Court of Appeal.

There are many court cases involving a swimming pool or septic bed built on the land next door; where the new house was constructed on the wrong lot; where a buyer had to pay $12,000 to get a right-of-way to the property; and where fences and retaining walls were built some distance from the actual lot boundary.

The moral of the story: if your real estate agent says you don’t need a survey – get one anyway. Or get another agent.

If you buy without a survey, make sure you understand the huge risks you are taking.

Bob Aaron is a Toronto real estate lawyer