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  • 7 Questions to Ask a Real Estate Lawyer When Buying

    7 Questions to Ask a Real Estate Lawyer When Buying

    If you just firmed up your purchase or sale (Congrats!), you’ll likely need to choose a Real Estate lawyer to facilitate your closing. No matter which lawyer you choose, asking the right having the questions to ask a real estate lawyer before deciding who is going to handle your transaction can make, or break, the entire experience. 

    Here are some questions to ask a real estate lawyer considering them to represent you when buying or selling a house or condo:

    How Long Have You Been Practicing?

    Before hiring a real estate lawyer, it can be crucial to find out how much experience they have in the industry handling residential real estate transactions.  

    A good question to ask is how many transactions they have closed in the course of their practice.

    Although, it is not always necessary to find a seasoned professional with decades of legal work on their resume, finding a fairly experienced lawyer is extremely valuable.  Like any specialists, Real Estate lawyers who exclusively practice in Real Estate are more likely to have a wealth of knowledge and experience that will help with your transaction in comparison to someone who may be practicing in other legal disciplines. 

    What Do Your Closing Feed Include?

    Upon closing, the last thing you want is to be surprised at additional/unexpected closing costs. In addition to legal fees, there can be additional closing costs such as for title insurance, land transfer tax, disbursements and government fees. 

    While sometimes circumstances may lead to additional charges, make sure you know what your lawyer will charge you for legal fees and what they expect to charge on top of legal fees.  

    Things can get confusing as some lawyers may offer fixed fees which combine legal fees, disbursements and other charges into one overall bill, while some may advertise or quote their legal fees and will add additional fees and disbursements.  It is therefore important to ask and understand what an estimated final bill will look like, after legal fees, disbursements and government charges.

    While buying a home has most people strapped for cash as expenses can rack up quickly, the lowest price lawyer isn’t always the best choice.   What may look initially as saving a few hundred bucks can easily turn into thousands in potential additional costs if parts of the transaction aren’t done right.  Make sure to hire a professional who you feel comfortable with.

    Deeded offers transparent pricing so that you know exactly what is included in your legal fees and what to expect in terms of additional fees or disbursements.

    What Should I expect In Terms of Process?

    Buying or selling a home is a major transaction.  It is important to understand the closing process, especially when your lawyer’s office will be in contact, what information or documents they might need from you, and when you should expect to get updates on the progress of your transaction.

    Since every lawyer works in a slightly different manner, it is important to clarify and understand your role in the process in order to ensure a smooth closing.

    What is My Title Insurance Premium?

    Most purchase, sale and refinancing real estate transactions will include a title insurance policy in order to protect you and your lender from an array of issues that can occur after closing.  

    Title insurance costs vary depending on the price, location and type of property you are purchasing or refinancing and can range from a few hundred dollars to a few thousand,  so knowing what to budget in additional costs can save you from surprises down the road.  

    Our calculator estimates your title insurance premiums, but rates can vary greatly so please check with your lawyer to ensure you are getting the most accurate premiums for your transaction.

    How Much Land Transfer Tax Will I Pay?

    Land transfer tax applies if you’re purchasing a property.  The amount of taxes paid can be significant and vary depending on the price of your property, what municipality it is located in, and whether you’re eligible for rebates such as a first-time buyer rebate.   

    Land transfer taxes can be the most significant part of your closing costs, so it is important to know what to expect up-front.   

    Our land transfer tax calculator can estimate what you’ll be expected to pay, but it is important to verify any details with your lawyer and see if you’re eligible for any rebates.

    Are There Tax Implications For My Transaction?

    While your Real Estate lawyer likely doesn’t provide tax advice, your real estate transaction may trigger tax implications such as HST payable on a new construction home or an investment property, all the way to income taxes or capital gains taxes in certain cases.  There are also situations where you may be eligible for certain tax rebates to offset taxes payable.

    Nobody likes to be slapped with an unexpected tax bill or even worse, a re-assessment, so understanding what your transaction may trigger may be a question you’d want to ask your real estate lawyer or accountant.

    When and Where Will The Signing Take Place?

    Signing typically refers to having a meeting with your lawyer to sign the requirement documents for your Real Estate transaction.  Signing typically takes place a few days prior to closing and may involve all registered owners (whether you’re buying or selling), attending the signing appointment.

    Because life gets busy with work, travel and the occasional vacation, it is important to know when and where you're signing will take place.  If you won’t be in town or have other commitments that prevent you and other registered owners from attending a signing appointment (usually during business hours), your closing may be delayed.

    Deeded offers at-home signing appointments as part of our service.  This means we come to your home at a convenient time (including evenings and weekends) so you don’t have to take time off work or travel to a lawyer’s office to attend your signing appointment.

    In summary, choosing your Real Estate lawyer with care and asking the right questions up-front can prepare you for a smoother home closing, reducing surprises, and get you into your home faster.

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  • Mortgage Refinancing – What is it and What’s The Process?

    Mortgage Refinancing – What is it and What’s The Process?

    Mortgage refinancing is the process of paying off an existing loan and replacing it with a new loan with different terms than your original mortgage.

    There are many reasons why home owners choose to refinance a mortgage. The most popular reasons being converting from a variable rate mortgage to a fixed rate one (or vice-versa in some cases), consolidating debt from higher interest loans or credit cards or accessing some of the equity in the home to finance larger purchases such as renovations, a new vehicle, or a down payment on an investment property. 

    Refinancing is often confused for having a second mortgage, but in reality, the two are very different.  A second mortgage is in addition to your first and does not replace it as a refinancing would.  Mortgage refinancing gives the borrower new money that can be used to pay off the original mortgage, ideally with better terms.

    Should I Refinance?

    The decision on whether or not to refinance should be based on your financial goals. For example, if you’re looking to improve your monthly cash flow, take advantage of lower interest rates to reduce your payment or consolidate debt, refinancing may be a viable option.

    Unfortunately, every situation is unique so consulting with a mortgage professional who can calculate potential costs, penalties and legal fees for your refinance is always a smart decision before proceeding.

    I’ve Decided To Go Ahead, What’s The Process To Refinance?

    If you decide to take advantage of refinancing, your mortgage professional or current lender will need to process an application, similar to the one you did when you first got your mortgage.

    This means you'll need to be prepared with documents, paperwork, and an appraisal that supports your application.   

    1. 1. Depending on your credit and other variables, your mortgage professional will likely ask for proof of income, such as pay stubs, T4 slips and employment letters.  
    2. 2. You will likely need to have an appraisal done on your property to determine the current value and thus what you’ll be able to borrow.  Your mortgage professional can order an appraisal on your behalf, but you may be on the hook for costs of the appraisal
    3. 3. You’ll need to hire a lawyer to put together required documentation, title insurance and arrange for signing the new mortgage documents.  

    Deeded can help with your mortgage refinancing and make closing your refinancing a breeze.

    How Can Deeded Help?

    When it comes to refinancing your mortgage, our team at Deeded makes the process as easy as possible so you can "close" and access your money quicker.    

    Our team helps you understand your obligations, can expedite the process and help you navigate the legal documents that needs to be signed before funds are released to you. 

    With Deeded you’ll never need to leave your home to close your mortgage refinancing deal. We’ll come to your home and office, making it convenient and stress-free.

    We also made our fees for refinancing your mortgage clear and transparent so we can avoid surprises at closing and leave more money in your pocket.

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  • Hello New Home, Hello New Property Taxes.

    Hello New Home, Hello New Property Taxes.

    Buying a home is exciting.  Taxes are not. While this is the topic that everyone loves to ignore, buying or selling a home in Ontario does come with quite a few tax implications.  The more you know about them, the less stressed you’ll be down the road. 

    In this blog, we’ll dive into:

    • • Land transfer taxes
    • • Property taxes
    • • HST (Harmonized Sales Tax)
    • • Capital gains taxes
    • • Income tax implications

    Land Transfer Taxes

    In Ontario, the buyer is on the hook for a land transfer tax payment that is due on closing.  Given the average property price in your market, this can be a significant amount that you’ll need to plan for.  Here’s how it’s calculated.

    Ontario Land Transfer Tax:

    • • 0.5% of the value of the property up to and including $55,000
    • • 1% of the value which exceeds $55,000 up to and including $250,000
    • • 1.5% of the value which exceeds $250,000 up to and including $400,000
    • • 2% of the value between $400,000 and $2,000,000
    • • 2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences

    If you’re buying in the city of Toronto, you’ll also be paying a second land transfer tax .

    Toronto Land Transfer Tax

    • • 0.5% up to and including the first $55,000
    • • 1% of the value which exceeds $55,000 up to and including $250,000
    • • 1.5% of the value between $250,000 and $400,000
    • • 2% of the value between $400,000 and $2,000,000
    • • 2.5% of the value over $2,000,000

    Before you start creating excel spreadsheets and dusting off your calculator, our land transfer tax calculator will help you figure out what you will owe. 

    If you’re a first time buyer, you’re in luck (pending some conditions, of course,  you may be eligible to receive a refund for all or part of the land-transfer tax – click here for details of the Land Transfer Tax Refund Program.  Our calculator factors in any first-time buyer rebates, so once again, no need for number crunching on your part.

    Property Taxes

    Your property taxes will vary based on your municipality.  

    If your property is in the city of Toronto, you can check how much property taxes are by using the City of Toronto property tax calculator..  Other municipalities may offer similar calculators on their website. 

    The amount of your property tax is calculated on the phased-in property assessment value of your property, determined by MPAC (Municipal Property Assessment Corporation). You can read all about how MPAC determines the value of your property here.

    MPAC property assessments are usually lower than current market value so if paid $1,000,000 for your house, MPAC’s assessment probably has you paying taxes on a much lower assessed value.

    Depending on what you sign up for, property taxes are due in either two instalments (March and July); 6 instalments (March, April, May, July, August and September); or in 11 instalments (due every month except January). 

    Increases In Property Values Will Impact Your Property Taxes

    Do you plan to finish the basement or do a significant renovation, like an addition to your home?  You will likely be re-assessed for tax purposes and your taxes will increase.

    New Construction Homes

    MPAC usually assesses newly built homes within 6 months.  In the meantime, you may be responsible for paying the taxes on the land value of your property.  The most important thing to remember is that once the MPAC assessment is completed, the city will bill you for property taxes owed from the date of possession.   For most people, it’s a shock when they get their first property tax bill that is a lot larger than what they had expected. A good tip is to always set money aside to cover your first property tax bill.

    HST

    To say the HST is confusing is an understatement.  Here’s how we boil it down.

    Resale Homes

    • • HST is NOT payable on resale properties in Ontario
    • • If a residential property is used partially as commercial, HST would be payable on the percentage that was used as commercial
    • • HST may be payable on a highly renovated home (but rebates may apply)

    Vacant Land

    • • HST is not payable on vacant land (personal use only)

    Newly Constructed Houses and Condos

    • • HST applies to new construction homes
    • • Federal and provincial rebates are available in some cases
    • • Most builders will factor the HST and the HST rebate into the purchase price of the home, though some will not, so if you’re buying pre-construction, make sure to ask and have your lawyer review the agreement.
    • • To qualify for the rebate from the builder, the home must be the primary residence of the purchaser or one of their immediate blood-relatives and you’ll be required to submit proof if an audit ever occurs.
    • • If you are buying a property as an investor, you don’t qualify for the rebate automatically. Plan to pay the builder the full amount of the HST on closing and you can apply for a rebate after you’ve signed a one-year lease agreement with a tenant.  This basically means that you may be fronting the HST for a few months until the rebate is processed and approved.

    Commercial Properties

    • • HST is payable on commercial properties

    REALTOR Commissions and Legal Fees

    • • All REALTOR commissions are subject to HST
    • • HST is payable on real estate legal fees

    When closing your purchase or sale with Deeded, we apply the appropriate taxes to your closing and can help guide you through complex processes such as filling for an HST tax rebate or refund.

    Capital Gains Tax

    When you earn money on an investment, you’re subject to a capital gains tax on the amount you’ve profited.  

    The good news is that if your home is your principal residence (the home you live in), you won’t have to pay capital gains taxes.  You can only have one principal residence and may be asked to provide proof that you live in the house if audited.

    If you’re selling an investment property, even if a part of it has been rented in the past, you may be on the hook for capital gains tax that will be paid on 50% of the gain.  For example, if you bought a condo at $500K, rented it out for a couple of years and later sold it for $750K, you will pay taxes on $125K (50% of the $250K you made, less selling expenses).   

    Your taxes will be calculated after the capital gains have been added to your income for the year so if make $100K and followed our example, another $125K in income will be added to your overall income, putting you at a higher tax bracket.

    It is important to involve your accountant or financial planner before buying or selling an investment property to account for the tax implications according to the latest rules from the CRA>

    Income Tax

    If you are flipping your home or if that’s your full-time job, you’ll be taxed on the full income you make between what you bought and sold the property for, less your expenses.

    If you’re going to be a landlord and rent your property out, the rents you collect will be added to your income, less expenses that are associated with the rental property (like property taxes, interest on your mortgage, advertising, renovations, etc.)

    If you’re in the business of flipping houses, the CRA will want a piece of the action in the form of income tax. If flipping is your main gig or forms a substantial part of your income, the CRA will consider it active income and you’ll be taxed at the usual income tax rates.

    Our final take is this. Taxes can be complicated and every situation is different.  The best you can do is become aware of tax implications and plan ahead for them. There’s no worse situation than having to come up with an extra $50K at closing because there’s something you missed or were not told along the way.   

    It is always worth a brief conversation with your lawyer and accountant before you buy or sell a property to understand your obligations and tax liabilities.  You’d be amazed by how much a 10 minute conversation can save you.

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  • My Buyer Won’t Close. Now What Do I Do?

    My Buyer Won’t Close. Now What Do I Do?

    You’re two weeks from your move date and a dreaded phone call comes in from your lawyer.  Your buyer refuses to close. As you catch your breath and try to understand what’s going on, reality begins to set in.   

    You’ve already committed to buying a new home, the moving trucks have been booked, and in your mind, you’re imagining total financial ruin. How in the world can you get through this situation? 

    Although the majority of real estate transactions do close, there’s always a small percentage that may fall through.  Although a firm agreement is a binding contract to which each side is expected to fulfill on its terms, a lot can happen as the deal marches to a close.

    Although there isn’t a particular reason why a buyer would walk away, we’ve seen reasons such as losing their job, a drastic change in home values (between signing and closing), the inability to sell their home, or even a family dispute as some of the reasons why a buyer would walk away.

    What Are Your Rights As a Seller?

    Aside from being a very stressful situation, here is what can happen next and your rights.

    First, a firm agreement of purchase and sale is a binding contract. When a buyer won't close or does not complete an agreement without cause the buyer will be responsible for making the seller “whole”. 

    This means that the seller is entitled to be put in the same position as the seller would have been had the buyer completed the transaction as scheduled. The buyer is liable to the seller for the difference between the original contract price and the price that the seller will ultimately sell the home for, or, if the seller does not sell the home, the market value of the home at the time of the breach of the agreement by the buyer, plus any related costs incurred by the seller, such as legal, carrying, moving or accommodation costs etc.. 

    As a seller, your damages must be reasonable and foreseeable and you must do your best to mitigate the amount of damages suffered (staying at Four Seasons, is not your best option).  As soon as you sense the buyer will walk away, speak to your lawyer and Realtor to discuss your options as there may still be a way to get the deal done.

    But My Buyer Put Down a Deposit, What Happens To it?

    Buyers are generally not entitled to a return of their deposit, nor is their liability limited to the amount of they put down as a deposit. In general, as long as the deposit is not out of all proportion to the damages suffered, the seller is entitled to the deposit. 

    Getting your hands on the deposit is not just a matter of asking your real estate agent to send it to you.  In fact, it may require you to go to court. The (real estate) Broker who is holding the deposit, in trust, can only pay out the deposit on the mutual direction of the seller and the buyer, or by court order. 

    This means a buyer who fails to complete a transaction can refuse to direct the release of the deposit by the Broker and force the seller through the expense and time of going to Court for an order compelling payment of the deposit. However, the seller does not have to wait for a Mutual Release to re-list the property and in fact may be obliged to do so in order to mitigate, or lower, the damages.

    Having a deal fall apart can be a tough situation for both the buyer and the seller and the ultimate outcome is to have the deal close smoothly for both parties, avoiding the stress and uncertainty that comes with this ordeal.  But before you let your emotions run high, it is important to understand the buyer’s situation and what can be done to get the deal back on track.

    This is a time where having the right professionals working for you becomes critical. Your real estate agent and lawyer can establish a line of communication to your buyers to better understand their intentions and come up with a course of action.  In many situations expensive litigation can be avoided by understanding the interests of both sides and figuring out a way to move forward.

    If all sides are cooperating, then there is a good chance you might be able to reach a compromise solving the issue quickly and seamlessly. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can.

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  • Title Insurance.  What is it and Why You Need It.

    Title Insurance. What is it and Why You Need It.

    When purchasing a new property, you may be looking to save money wherever you can. One of the costs you may come across is for title insurance. You’re probably thinking “heck, another unexpected cost!”.   For the few hundred dollars that title insurance costs, we think it’s a “no brainer” and will let you sleep at night knowing that you’re not on the hook for some big expenses should things go sideways with the title to your property.

    Title?  What’s that? (in English please)

    Your property’s title is legal proof that you are its owner. It describes your rights to the land and any limitations like giving your local phone and power companies legal right to construct, repair, replace and operate wires on a section of your property.

    Your title lists the legal owners, any registered mortgages and/or liens, describes any easements (someone like the cable company that may need access to your land) , and provides many other important details. 

    So What’s Title Insurance?

    While this sounds straightforward, your home’s title can be subject to issues that can arise.   What sort of issues? For example, what if the previous owner built a shed that sits on the neighbour’s property which now needs to be torn down.  That’s covered by title insurance. 

    What if the previous owner didn’t pay his contractor and ended up with a lien on the house?  That’s covered too.  

    Discover that someone has fraudulently gotten access to your title and took out a mortgage?  Title insurance has you covered.

    What Else Does Title Insurance Cover?

    We always recommend checking your specific policy for the details, but in general, here’s what you are covered for when you take out a title insurance policy:

    • • Unknown title defects (title issues that prevent you from having clear ownership of the property);
    • • Existing liens against the property’s title (e.g. the previous owner had unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property);
    • • Encroachment issues (e.g. a structure on your property needs to be removed because it is on your neighbour’s property);
    • • Title fraud;
    • • Errors in surveys and public records
    • • Other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future.

    Do I Have To Pay An Ongoing Premium?

    Actually, title insurance is quite the “bargain” in that there are no ongoing premiums, just a one-time premium that covers you for as long as you own the property. Most residential title insurance policies extend coverage to your heirs through a will, to a spouse in the event of a divorce, or to children when the property is transferred from parents to children for nominal consideration. 

    How Much Can I Expect To Pay?

    A one-time premium cost about $350 for a $500,000 home and goes up based on the price and type of property.  The peace of mind that knowing your greatest asset is protected is probably well worth the money.

    How Do I Get a Policy?

    Your lawyer will typically apply for, and include a title insurance policy as part of your purchase or refinancing, so there’s little to nothing you need to do. When you get the closing documents from your lawyer, your policy documents should be included within the package.

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  • Buying Real Estate With Friends? Use a Co-Living Agreement

    Buying Real Estate With Friends? Use a Co-Living Agreement

    If affording Real Estate in Toronto is out of the question for you, there may be a light at the end of the tunnel.

    With prices of Toronto and Vancouver Real Estate skyrocketing, co-living is starting to become an increasingly popular way for people to get into the market. According to a report by RE/MAX realtors, more than 40% of Canadians overall would think about buying with a friend or relative.

    So, what is co-living?  Co-living (or co-housing as it’s sometimes called) is where residents share living space and a set of interests, values, and/or intentions.  It’s a new take on an old idea, inspired by the sharing economy.

    Essentially, it involves buyers sharing occupancy and ownership costs of buying a home.   It could be with friends, family members, or in a growing amount of cases, strangers. Sharing the costs of the down payment, mortgage payments, utilities and property taxes opens up a new door to home ownership, but what are the risks?

    No matter if it’s family, your best friend or a stranger, it is important to consider that priorities can change and things can always be unpredictable.  While owning even a part of a home is an asset, it may not be as easy to pull out your money and walk away should things not work out.

    Therefore, having an airtight and binding arrangement is essential before agreeing to a co-living agreement or co-investment situations.  Here are some of the elements we suggest discussing with (and eventually agreeing on) with your co-living partner(s):

    Budgets

    • • Understand initial outlays such as deposits, closing costs
    • • Calculate operating costs such as property taxes, utilities, repairs, maintenance fees, etc.

    Financing and Deposits

    • • Did all parties pre-qualify for their portion of the required financing?  
    • • Does everyone have access the needed deposits or down payments, plus closing costs?

    Equity and Ownership 

    • • What percentage of ownership does each party get on title?
    • • How will you divide ongoing expenses such as repairs and insurance?

    Liquidity 

    • • What happens when all parties agree to sell?  
    • • What happens when one or more of the parties do not agree to the sale of the property?   
    • • How is risk/reward shared in a market where a property may appreciate (or depreciate)
    • • What process will be used to value the home should there be a sale

    Management and Rules of the House

    • • Dividing up common chores such as, for example, cutting the lawn
    • • What would happen if one person becomes unemployed or ill and can’t afford to pay his or her share of the mortgage
    • • If one of the co-owners falls behind on mortgage and tax payments, how does the other owner recover his or her share of the arrears?

    Even though some of these items may lead to a naturally uncomfortable discussion, it is critical to have an agreement in place that ensures not only the smooth operation of the property, but a fair division of ownership and a fair way to unwind the partnerships should things go in a different direction.

    Consulting an experienced lawyer is an essential part of ensuring a fair, binding and enforceable co-living agreement.  It is a worthwhile expense, even if things are looking rosy at the moment.

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