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  • Why Skipping The Home Inspection Can Be a Bad Idea

    Why Skipping The Home Inspection Can Be a Bad Idea

    Your heart is beating fast.  You just submitted an offer to buy the home of your dreams.  You sign the offer, and your agent submits it.  Now the waiting game begins and your emotions are entering “rollercoaster mode”.

    Your agent calls you back 2 hours later with some bad news.  The property you made an offer on has 12 other registered offers and it is an all-out bidding war.  The seller agreed to review offers on Sunday night and will choose the best one.

    While one of the tactics to “sweeten up” your offer is to raise the amount of money you’re offering, it may also be tempting to waive certain (or sometimes all) conditions in order to provide the seller with more certainty.  If you haven’t negotiated for a home before, conditions are clauses that are inserted into an offer of purchase and sale that make the transaction conditional on certain terms or obligations that are to be fulfilled by either parties.

    Conditions on an Offer

    Some examples of most common conditions are financing (or the buyer’s ability to secure a mortgage), a home inspection or a lawyer’s review of the agreement. There are dozens of other conditions that may be inserted into an agreement and in theory, you can make your purchase contingent on anything you can imagine, however, the more conditions you have, the less likely the seller will have certainty that you are serious and will see the transaction through.  

    This is especially true if a seller is reviewing multiple offers. An offer with less (or without) conditions, will likely be seen as more attractive by a seller. As tempting as it may sound to go “all in” and waive all conditions when you’re competing to buy a property in a hot market, it can turn out to be a really bad idea.

    One key example is an inspection condition.  It is common to have a condition in the agreement of purchase and sale that allows the buyer to have the home or condo inspected by a professional home inspector within a few days of the seller accepting their offer. Depending on the inspector’s findings and report, buyers can identify potential issues with the home or at the very least, be made aware of existing and future issues.

    Waiving, or not including the home inspection condition essentially puts the risk on the buyer.  If the home has any issues after closing, the recourse against the seller may be very limited. 

    Do I Really Need an Inspection?

    While it may be tempting to skip the inspection in order to make your offer more competitive, keep in mind that no matter the property’s age and appearance, there may be underlying issues that were not visible during showings. 

    There have been situations where hundreds of thousands of dollars of repairs were needed in a property.  From remediating mold caused by previous leaks, all the way down to structural issues that needed serious repairs.  As a buyer, skipping on an inspection or not hiring a reputable home inspector, means taking a chance that can add up to huge liabilities down the road and turn your dream home into a nightmare.

    Keep in mind that pre-existing issues will likely not be covered by your home insurance or title insurance and proving that the seller knowingly hid defects or damages may be tough to explain in court given that you’ve knowingly waived the opportunity to have the property inspected.

    Do Home Inspections Need To Be Done By Professionals?

    As tempting as it may be to waive an inspection condition to have your offer accepted, it can turn into a very expensive gamble.  Just as important is hiring a qualified home inspector perform a detailed inspection and provide you with a comprehensive report of their findings. 

    While you may have an uncle who is a plumber, or maybe you consider yourself pretty handy, a professional home inspector will go through a very detailed checklist of all the structural, finishes and systems of a home. An inspection can cost $250 - $1000 depending on the property and area. It may be an additional expense, but it is a worthwhile investment.

    In addition to having an inspection condition and conducting the inspection, there may be a few weeks from the time you complete the inspection until you close and move in.  During that time period, appliances can break, and other damages may be caused while the seller still occupies the home.

    One way to reduce such risks is to request a reasonable amount of re-visits to the property prior to closing as one of your conditions.  Use your last allotted visit to the property to perform your own visual inspection a few days prior to closing, or if you choose, you may bring an inspector or professional with you to the final visit prior to closing.  

    Have a quick look for damages that you may not have noticed before inside and outside the home. Ask the seller if it is possible to turn on all the appliances (if they are included in the sale) to ensure they are in good working order. Turn on taps, showers and lights and note any issues.

    If anything is amiss on your final walk-through, document it and contact your lawyer as soon as possible.

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  • Interim Occupancy – What is it and What You Need To Know

    Interim Occupancy – What is it and What You Need To Know

    When you buy a pre-construction condo, it may take a few years before the building is ready and you get to move in.

    When it’s time to move in, you might be surprised to learn that you still might not actually own your condo unit (or at least not just yet).

    The period between the occupancy date (when you move in) and when the condo the condo’s ownership transfers to you, is known as the "interim occupancy period." During this time, you will pay the builder a fee known as the "interim occupancy fee."

    Why Is There an Interim Occupancy Period?

    When a condominium is built, ownership in the condo units can't transfer from the builder to the condo buyers until the building is registered with the local municipality.

    This process typically takes a while (The average is 6 months, but for some buildings it has taken up to 2 years). Also, since units on the lower floors will be completed months before units on the higher floors, if you are buying a unit on a lower floor, it may take time before the building is fully complete, thus making the waiting period longer for you.

    As the building nears completion, the developer will notify owners of the "interim occupancy date" for each unit. The lower the floor your unit is on, the earlier your date will be, and as a result, the longer your occupancy period will be.

    How Much is The Interim Occupancy Fee?

    The fee during the interim period is generally lower than your monthly costs would be after closing. However, if you are currently renting your home or will not be selling your current home, you will have to carry the cost of two homes.  This necessitates planning for your cashflow considerations.

    The interim occupancy fee will vary with every building and the type, size and price of the unit, but will generally be calculated using:

    • • Interest (calculated on a monthly basis) on the unpaid balance of the purchase price at the prescribed interest rate
    • • Estimated monthly municipal taxes for the unit
    • • Projected common expense fees for the unit.

    Will I Pay Fees Even if I choose Not to Move In Right Away?

    During the interim occupancy period, you'll need to pay the builder the fee regardless of whether you've actually already moved into the unit or not.

    Can I Rent My Unit To Someone During Interim Occupancy?

    During the interim occupancy period, you technically do not “own” the unit. Therefore, if you wish to lease during this stage, you’ll need authorization from your builder (in writing) to do so.

    If you are planning to rent your unit, the best time to negotiate the right to rent it during interim occupancy is when you’re first purchasing the condo.

    Permission to rent during can be included in your Agreement of Purchase and Sale, if your developer agrees.

    Does the Interim Occupancy Fee Count Towards Paying Down My Mortgage?

    No it doesn’t. You will only start paying down your mortgage after the interim occupancy period.

    Will I Incur Further Fees When Closing My New Construction Condo?

    Since new construction condos typically involve two closings (an interim closing and a final closing), your legal fees will likely increase due to the additional work required.  

    What Can I Do to Better Plan For Interim Closing?

    The best way to plan is to get educated (if you’ve read this far, you already met that goal!)

    Second, remember to set aside funds to cover your interim occupancy period.  While it is hard to predict how long the period will last, planning for at least 12-months of cash flow to cover interim occupancy expenses (especially if you cannot rent the unit), is ideal.

    Third, and most importantly, having your purchase and sale agreement reviewed by a lawyer prior to signing is always a good idea and can potentially save you thousands. Deeded offers a comprehensive review of purchase agreements with a quick turnaround. Contact our team to get started.

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  • The Ultimate Guide to Programs for First-Time Home Buyers

    The Ultimate Guide to Programs for First-Time Home Buyers

    As a first-time home buyer, you may qualify for several government programs that can help you offset the costs of buying your home and use your RRSP savings as part of your down payment.

    We’ve assembled information on the most relevant programs but as regulations and programs are subject to change, we recommend checking with us or your accountant when it comes to your eligibility for these programs.

    First-time Home Buyers Incentive

    The First-Time Home Buyers Incentive helps qualified first-time homebuyers reduce their monthly mortgage payments without adding to their financial burdens.

    The First-Time Home Buyers Incentive is a shared-equity mortgage with the Government of Canada where the government has a shared investment in the home.  It offers:

    • • 5% or 10% for a first-time buyer’s purchase of a newly constructed home
    • • 5% for a first-time buyer’s purchase of a resale (existing) home
    • • 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home
    • • If you participate in this program, the government, as an equity owner, shares in both the upside and downside of the property value.

    You will have to repay the incentive based on the property’s fair market value at the time of repayment. If a homebuyer received a 10% incentive, they would repay 10% of the home’s value at the time of repayment.

    For example, you purchased a home at $350K and received $35K from the program.  If you sell it a few years down the road for $500K, you would repay the government $50K for their equity stake. 

    The homebuyer must repay the incentive after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the incentive in full any time before, without a pre-payment penalty.

    Eligibility For The First-time Home Buyers Incentive

    These are the few criteria to determine if you are eligible for the First-Time Home Buyer Incentive:

    • • Your total annual qualifying income doesn’t exceed $120,000
    • • Your total borrowing is no more than 4 times your qualifying income
    • • You or your partner are a first-time homebuyer
    • • You are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
    • • You meet the minimum down payment requirements with traditional funds (savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a non-repayable financial gift from a relative/immediate family member)

    First-time Home Buyer Tax Credit

    The Government of Canada provides a tax credit for first-time home buyers.  After you purchase your first home and submit your tax return, you can access this tax credit.  If you are an eligible homebuyer, you can apply for the First-Time Home Buyer’s Tax Credit, which equates to a total tax rebate of approximately $750.  

    Eligibility For The First-time Home Buyer Tax Credit

    To be eligible for the Home Buyers’ Tax Credit, you must meet both of these criteria:

    • • You or your spouse or common-law partner purchased a qualifying home.
    • • You are a first-time home buyer, which means that you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.

    A qualifying home is almost any type of home as long as it is located in Canada and registered in your or your spouse or common-law partner’s name. This includes existing homes and homes under construction.

    If you are eligible, you can claim a tax credit of $5000 on line 31270 of your tax return, however, we highly encourage speaking with your accountant to ensure you meet all qualification criteria.

    RRSP Home Buyers' Plan

    One great source of funding for your mortgage down payment is a Registered Retirement Savings Plan (RRSP). The Canadian government's Home Buyers' Plan (HBP) allows first time home buyers to borrow up to $35,000 from your RRSP for a down payment, tax-free.

    If you're purchasing with someone who is also a first-time homebuyer, you can both access up to $35,000 from your RRSP for a combined total of up to $70,000. Think of the HBP as a tax-free loan to yourself to fund your down payment.  The only catch is that it must be repaid within 15 years.   Repayment is as simple as designating an HBP repayment amount on your annual tax return, but please beware that there will be a minimum amount required to be repaid each year, so budget accordingly.

    Eligibility For The RRSP Home Buyers' Plan

    In order to be eligible for the HBP as a first-time homebuyer, you must meet the following criteria:

    • • You must be considered a first-time home buyer.  You are considered a first-time home buyer if, in the four-year period (that begins on January 1st of the fourth year before the year you withdraw the funds) , you did not occupy a home that you or your current spouse or common-law partner owned.
    • • You must have a written agreement to buy or build a qualifying home, either for yourself or for a related person with a disability
    • • You intend to live in the home within one year of purchase as your primary residence
    • • The RRSP funds you borrow must have been in your registered (RRSP) account for at least 90 days prior to withdrawal
    • • You must make the withdrawal from your RRSP within 30 days of taking title of the home
    • • You must be a Canadian resident

    Land Transfer Tax Rebate for First-time homebuyers

    Land transfer taxes are paid to the government at closing. To calculate what you may owe on closing, click here for our calculator.

    First-time homebuyers in Ontario can qualify for a rebate equal to the full amount of their land transfer tax, up to a maximum of $4,000.

    To qualify for the Ontario Land Transfer Tax Refund for First-Time Homebuyers, you must meet the following criteria:

    • • You must be a Canadian citizen or permanent resident of Canada,
    • • You must be 18 years of age or older,
    • • You must live in the home within 9 months of purchasing it,
    • • You cannot have owned/had a financial interest in a home before, and
    • • If you have a spouse, they cannot have owned a home during the time they have been your spouse.

    Based on the Ontario land transfer tax rates, the rebate will cover the full tax amount up to a maximum home purchase price of $368,333.  For homes with purchase prices over $368,333, homebuyers will qualify for the maximum rebate, but will still owe the remainder of their land transfer tax. If you are buying your home with your spouse, but only one of you qualifies for this rebate, you can still receive 50% of the rebate.

    If you qualify, Deeded can help you file the necessary paperwork to get the rebate. Contact our team and we can help you get started on the process to claim you're rebates immediately.

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  • How to Scan Documents With a Cell Phone Like a Pro

    How to Scan Documents With a Cell Phone Like a Pro

    During the closing process, a variety of documents must be exchanged between you and several other parties such as your Lawyer, Realtor, Lender or Mortgage Broker. Some of these documents may already be in digital format (also known as "soft copies"), while some documents may still be in paper formats.

    Scanning documents the traditional way has always been a cumbersome experience that requires scanning equipment, specialized software and know-how (not to mention paper jams!)

    Thankfully, the mobile phone has become the modern day Swiss Army knife for most of us. With advanced cameras on most mobile devices, you can take pictures of documents and upload them in minutes.

    To successfully scan documents with a cell phone, you need to know the best way to photograph different types of documents.

    Here are the Deeded tips to scan documents a phone:

    Camera Settings

    • • Check your camera phone settings. If possible, select the "macro" or "document" mode. Also make sure that the camera's autofocus setting is on. Macro/document mode is particularly important for scanning smaller documents like letter-size pieces of paper or business cards.
    • • If you don't have macro/document mode, make sure the camera is set to its highest resolution. This'll generate the largest image.
    • • Turn off your flash. Flashes tend to reflect harshly off of white surfaces like paper. The result is a washed-out image.

    Lighting

    • • Find the best lighting. Since you can't use a flash, the document needs to have ample natural light. Position the document near a window or directly under a lamp. Use brightdirect lighting on your document. Shadows and indirect light may cause certain parts of the document to be unreadable after scanning.

    Positioning

    • • Hold the device directly above the document to avoid distorting the scan. Try to fill the camera frame with as much of the document as possible so that it is not cut-off. If you're photographing a business card, you'll need to get in nice and close so that the card fills almost the entire screen.
    • • For letter-size pieces of paper and business cards, you may want to rotate your camera 90 degrees so that the document fills even more of the screen.
    • • Hold the camera phone with both hands to keep it steady. Slight movements can produce a blurry image, especially in low-light situations.
    • • Most importantly, preview your picture on your screen to ensure it is legible and in focus prior to sharing it. Will the person receiving the document be able to read it? If not, it is best to take the photo again.

    The Deeded Team is dedicated to making real estate closing as simple and efficient as possible. With the technology and resources available closing a transaction and sharing documents has never been easier. For any further questions feel free to contact our team and we'll show you why we're the best in the business.

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  • Should You Consider Taking Advantage of the Home Buyers’ Plan (HBP)?

    Should You Consider Taking Advantage of the Home Buyers’ Plan (HBP)?

    Are you actively contributing to a Registered Retirement Savings Plan (RRSP)? If so, the Home Buyers’ Plan (HBP) can help you increase your down payment amount and purchase the home you want. The HBP allows you to withdraw from your RRSP account so you can build or buy a home for yourself or someone with a disability that's related to you (by marriage, common-law, blood, etc.)

    As of March 2019, the Canadian HBP withdrawal limit is $35,000. That can go a long way toward buying or building your home. That said, it’s important to fully understand how the HBP works before you decide if it’s right for you.

    How Does The RRSP Home Buyer’s Plan Work?

    To withdraw from your RRSP account for the Home Buyers’ Plan, you’ll have to inform the Canada Revenue Agency and apply through your financial institution. As mentioned, if you qualify, you can extract up to $35,000 tax-free to use as a down payment for the purchase or construction of a home. Here’s what you’ll have to do to get started:

    • Contribute to an RRSP - You can only qualify for the HBP if you have enough money in an active RRSP account, for at least 90 days prior to withdrawal. While you normally cannot withdraw from this type of account (penalty-free) until you’re of retirement age, the CRA makes an exception for qualified homebuyers.

    • Be a Canadian first-time homebuyer - Only permanent residents who are buying or building their primary residence (or doing so for a disabled person) can qualify. If you’ve already used the HBP for yourself and want to do the same for someone else, you must have a zero balance on your original account.

    • Submit the right forms - You must also visit the CRA website, fill out Section 1 of Form T1036 and bring it to the financial institution that holds your RRSP account. They will then complete Section 2 and, if you qualify, will send you the form T4RSP, which confirms how much you have borrowed from the account.

    • Buy the home and withdraw - Once you meet all the criteria, you must withdraw the appropriate funds within 30 days of purchasing the home’s title, using a loan from your financial institution. If you wait more than 30 days, you will no longer qualify for the HBP and any money you withdraw will be subject to tax.

    Declaring Your HBP Withdrawal and Repaying Your Debt

    Once you’ve purchased your home, you must declare your T4RSP form on your income tax return for the same year the withdrawal was made from your RRSP account. Afterward, your annual CRA Notice of Assessment will display the amount you have repaid, what you have left to pay, and how much your next payment will be.

    You will then have 2 years before you must start paying back what you’ve borrowed. Typically, this is done in yearly installments to your RRSP through your financial institution, over a maximum period of 15 years. Each payment must be made within the same year it’s due or within the first 60 days of the following year.

    Other Requirements to Qualify for the Home Buyers’ Plan

    • • You cannot have owned another home within the 4 calendar years prior to applying for the HBP
    • • You must first enter a written agreement to purchase or construct the home
    • • You have to start living in the home within 1-year of its purchase
    • • If you’re buying a home with common-law partner or spouse who isn’t a first-time homebuyer, you can’t have lived in their primary residence for more than 4 years

    Benefits and Drawbacks of The Home Buyer’s Plan

    Now that you know what the RRSP Home Buyer’s Plan is and how you can withdraw from it, here’s a list of some of the main pros and cons of the process:

    Benefits

    • • The loan will be tax and interest-free
    • • Your taxable income will decrease when you claim your RRSP contributions
    • • Two first-time homebuyers can combine their plans for a total of $70,000
    • • A larger downpayment means you’ll need to borrow less
    • • You only have to start paying it back after 2 years (total of 17 years to repay)

    Drawbacks

    • • You won’t gain any interest on your funds like you would if they were invested
    • • Contributions you pay back from your HBP won’t count toward your deductions
    • • Being a homeowner with other expenses can make it difficult to repay your debt
    • • You must declare any missed RRSP payments on your taxes (and pay for them)

    Do I Still Need a Down Payment If I Take Advantage of the HBP?

    These days, it’s nearly impossible to find a home that doesn’t require a down payment. In fact, if your home costs $500,000 or under, your mortgage provider will require a minimum down payment of 5% of the home’s asking price. If your home is between $500,000 and $1,000,000, you can expect to pay at least 15% down (5% on the first $500,000 and 10% on anything over that, up to $1,000,000).

    So, if the money you withdraw from your RRSP Home Buyers’ Plan doesn’t sufficiently cover your minimum down payment, you may not qualify for a mortgage and the rest of the funds will have to come from your own pocket.

    Can You Purchase a Second Home Using The Home Buyers’ Plan?

    Fortunately, you can be eligible for the Home Buyers’ Plan a second time, as long as you haven’t owned a home within the past 4 years. So, if you want to sell your first home and live in an apartment to save money, you can reapply as a “new” homebuyer 4 years later.

    As mentioned, whatever balance remains on your previous HBP account must also be fully repaid before you can qualify a second time. The same sort of rules apply if you’re buying a home for a disabled relative.

    What If My Spouse Owned a House Less Than 4 Years Ago?

    If you’re purchasing a home with a spouse who owned a house less than 4 years ago, but you did not live in that house with them, you are still eligible to use the HBP. Just keep in mind that only you will be able to withdraw $35,000 from your RRSP, not your spouse.

    How to Decide if The Home Buyers’ Plan is Right For You

    Although the RRSP Home Buyers’ Plan can be the perfect solution for first-time homebuyers, it can also be an expensive and lengthy debt to take on, particularly when you consider all the other costs that come with being a homeowner in Canada. In fact, there are cases where you should and shouldn’t take advantage of the HBP:

    The Home Buyers’ Plan Could Be Right For You When…

    • • You’re a first-time homebuyer or haven’t owned a home in at least 4 years
    • • You and your spouse/partner can combine your HBP funds
    • • You’re trying to purchase a home for someone with a disability
    • • You have automatic RRSP contributions set up with your financial institution
    • • You still have enough money in your RRSP to keep your retirement on track
    • • You don’t have enough for a 20% down payment (which would help you avoid having to pay mortgage default insurance)

    The Home Buyers’ Plan Could Be Wrong For You When…

    • • You have owned a home within the past 4 years
    • • You already have enough for a 20% down payment
    • • Your retirement would be greatly delayed due to your withdrawal
    • • You would be withdrawing all of your RRSP funds (no interest gained)
    • • Would not be able to afford your annual payments
    • • You have an unsteady income, bad credit, or a lot of existing debt

     This is a Guest Post from our friends at Loanscanada.ca.  

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  • Title Search – What is it and Why Do You Need It.

    Title Search – What is it and Why Do You Need It.

    Before we explain what a title search is, it is important to understand what title means.

    Title is a legal term that means registered owner of a property

    Records associated with the title of a particular property are usually kept in a land registry office, which is responsible for record keeping.  These records include deeds, court records, property and name indexes, and other documents related to the property.

    Before you purchase a property, your lawyer conducts a title search to examine the property’s title history and ensure that the seller has the legal right to sell the property, and that there are no other encumbrances (such as liens, title claims, judgements, mortgages etc.) or property line issues that could prevent the buyer from taking full possession.

    What Does a Title Search Show?

    A title search clarifies the legal owner(s) of the property, any existing easements, leases, or restrictions that affect the property, any mortgages, judgements against the property, liens, or unpaid rental contracts (such as hot water tanks) that will need to be dealt with before the property can be sold to a buyer.

    What if There Are Issues Found With The Title?

    If title issues arise with the property you are purchasing, your lawyer will work with your seller’s lawyer to try to resolve.  Often times, issues can be corrected prior to closing

    What if There Are Issues Found With The Title?

    If title issues arise with the property you are purchasing, your lawyer will work with your seller’s lawyer to try to resolve.  Often times, issues can be corrected prior to closing.

    What If a Title Issue is Discovered After Closing?

    In case an issue is discovered on your title after you have closed your transaction, title insurance covers several situations and is meant to protect you against the unforeseen. For more information on title insurance, click here.

    How Much Does a Title Search Cost?

    Our transparent fees include a title search for purchases and refinances of properties.  Depending on the extent of the searches required, you may incur some disbursements for service fees incurred for the searching the land registry.

    I’m Refinancing, Why Do I Need a Title Search?

    Your lender will likely require a new title search as a condition of refinancing.  Lenders typically will need to see if there are any issues standing in the way of your property being fit to sell when approving refinancing transactions.  

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