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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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  • COVID-19 and Residential Real Estate Closings

    COVID-19 and Residential Real Estate Closings

    Will COVID-19 impact residential Real Estate closings?

    As the disruption caused by coronavirus (COVID-19) continues to spread, it may become increasingly essential to quarantine a large portion of the population to counter the spread of the virus as we’ve already seen happen in China, Italy, Iran and other countries.

    Given that we are in the midst of a very busy spring market, closing residential real estate transactions may face unexpected challenges that may cause ripple effects for buyers and sellers. 

    These challenges can range from not being able to attend a lawyer’s office to sign documents to disruption for professionals such as appraisers, lawyers and lenders.

    Am I Still Obligated To Close?

    Most residential real estate transactions in Ontario require the buyer or seller to close the transaction by a specific date.  Contrary to some commercial real estate contracts, residential transactions do not usually include a force majeure clause that could potentially excuse a party from performance if the failure to perform is due to an event beyond the party’s control.

    Therefore, in most cases, you will still be obligated to close your transaction despite any circumstances.  

    If you are considering buying or selling a home in the near future, a specific COVID-19 clause can be included in your agreement to allow for potential delays cause by potential disruption to lenders or the land registry.

    Can Closing Be Delayed As a Result of Quarantine?

    Closing can be delayed if an amendment to the agreement of purchase and sale (APS) is signed and agreed upon by all parties. If you foresee the need to postpone or change your closing date, the sooner amendments can be signed by both parties, the better.

    What If I Cannot Make It To Sign Documents?

    To close your transaction, you will have to attend a lawyer’s office to sign your closing documents. Some lawyers may offer at-home signing, which may not work in the case of a full quarantine.  

    At Deeded, we have implemented advanced video signing technology to allow you to sign closing documents from home. We will make this option available for free for qualified clients. Please contact us at hello@deeded.ca if we can help.

    What If The Land Registry Closes Down?

    Most title insurance policies include Gap Coverage that insures both purchasers and lenders against losses due to intervening registrations on title between the date of closing and the date of registration.

    This means that in the event that online registration is no longer available, or land registry offices experience delays or closures due to COVID-19, transactions can close on time and funds and keys can be released to the respective parties.

    What Else Should I Know About COVID-19 Impact Residential Real Estate Closings?

    The escalating situation with the spread of COVID-19 may impact other parts of your transaction such as your movers, utility companies or your condo property management. 

    It is best to be proactive in planning your closing and contacting the various parties involved to ensure contingency plans are in place should the closing be impacted by the COVID-19 disruption.

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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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