Building in Oakville … Legally

I am very proud to be associated with two Registered builders in Ontario. The first one is our family business (Belsito Homes) and the second is affiliated with my brokerage (Stonemill Developments Inc.).  Both builders have zero conciliations and zero claims.

 

Being licensed and providing a Tarion Warranty isn’t optional. It’s the law! In Oakville, every legally built home has a Tarion enrolment number unless it was built by the homeowner, in which case there should be a Letter of Confirmation from Tarion (a new requirement for a building permit in Oakville).  Oakville is one of the following municipalities that is working with Tarion in a pilot project to help prevent illegal building. No Tarion enrolment or Letter of Confirmation = no building permit.

  • Barrie
  • Belleville
  • Collingwood
  • Greater Sudbury
  • Markham
  • Middlesex Centre
  • Midland
  • Newmarket
  • Niagara Falls
  • Oakville
  • Sarnia
  • Penetanguishene
  • Stratford

There are links to Tarion’s website below.

Builders who fail to register with Tarion can face legal action, resulting in possible convictions, heavy fines, and even jail sentences.

It’s not just the missing warranty that puts home buyers at risk. The Canada Revenue Agency will be looking for HST on a new build and there aren’t many ways to hide from the taxman, especially with easily traced documents on Real Estate Boards and Land Registry. CRA is currently targeting British Columbia’s illegal builders with audits and is hiring 85 extra staff to deal with the problem. It’s only a matter of time before the crackdown happens in Ontario. There’s a link to a CBC story about this below.

So it’s not the builder registration fee ($500) or the enrolment fee ($385 – $1,500) that the illegal builders are trying to save, it’s the underwriting and investigating that Tarion performs as part of the registration process AND it’s the 13% HST that they are trying to avoid paying along with income tax on the profit.  Being registered with Tarion would put these illegal Builders on the radar with CRA.

 

See links for more information below:

Requirements for Building Your Own Home

Building Your Own Home in Ontario FAQ

Letter of Confirmation Application Form

CBC’s story about CRA crackdown in BC20160512_094057

Multiple Offers/Bidding Wars – Fact and Fantasy

shutterstock_135232376I came across a draft blog post from nine months ago. I was planning to discuss the “new” 801 form because some people were under the impression that the new form would open up the process by providing the terms of all competing offers.

But holy! How things have changed.  Last year, we were worried about the ghost offer.  This year, it’s all about price!

Homes are listing at a price that was market value last week and then selling with multiple offers for 10% more or higher. Even a pre-emptive or bully offer will still draw other offers.  We saw a townhouse in River Oaks at 1 pm which was the first showing allowed at that listing.  Two others showed at the same time. Registered a pre-emptive offer offer at 3:00 pm. There was already an offer and another soon joined.  Our offer, which was way over list and firm, didn’t win.

What’s going on?  There are a lot of factors driving this market. In the news, we hear a lot about foreign investors, but that’s not who I see at showings and waiting outside of listings at offer presentations. These are Canadians who have sold their home and now need another place to live, or they are millennials just trying to get into the market.  It’s a simple supply and demand problem. Every listing that comes onto the market in the starter home price range has loads of interest … immediately. This last week of June has historically been a really slow week but not this year.

Why is supply so low?  The greenbelt has contributed to this.  Back when the greenbelt was a brand new concept, Pat and I attended a BILD meeting to learn about it. Experts in the land development and building field warned that the greenbelt would eventually drive prices up inside the greenbelt as we ran out of land to build on.  And prices are up. A 40 foot building lot is selling for about $600,000 now.  At $200 a square foot, the cost to build a 2,000 square foot home on that lot is $400,000.  We’re at $1,000,000 for a brand new home and still haven’t added the HST.  Net HST on that home would be $106,000.  So we’re actually at $1,106,000 for a brand new 2,000 square foot home.  And when new home prices rise, re-sale homes follow shortly thereafter.

So here’s what I was going to say about the multiple offer process:

Many people have  misconceptions when it comes to multiple offers.  Here is some Fantasy:

  1. All of the buyers will know what the other buyers are offering.
  2. We will always be given a chance to improve our offer price.
  3. As soon as we’ve looked at the house, the listing brokerage is bound by law to let us know when an offer is registered.

Here are the Facts:

  1. The terms of any offer will not be divulged to any party other than the Seller and the Seller’s representatives.
  2. The Seller’s representative is not required to notify agents who are showing the house that there is (already?) a registered offer.  The rep may notify others but it’s strictly a marketing decision between the rep and her clients.
  3. The new form 801 does not make the multiple offer process into an open bidding process.  The form simply deals with ghost offers, or what I call premature offers where a rep states that there is an offer but it hasn’t been signed and therefore doesn’t exist.

If you have any questions about this process, send me an email at heather@patbelsito.com.

 

Waterfalls are not far!

If you’re looking for an outdoor activity for March break, check out some of the local parks and hiking trails.  Pat and I wanted to hike somewhere different today.  We looked up the Waterfall hike in Ancaster and thought it would be fun. This is the link to the page:

http://www.waterfalls.hamilton.ca/default.asp?walk=2

We parked at the Inn and followed the trail as described on the site.  The first turn was a little bit confusing because there was a T intersection, but the “you are here” map at the site didn’t show a T.  But we met a nice couple who told us that the waterfalls were “that way”.  So we turned right and found Canterbury falls.  They’re not huge, but they’re quite nice.

We kept going and about 3.5 kms in we missed a turn and ended up going up some stairs. We were still on the Bruce trail – but we weren’t on the waterfall trail that we had planned.  At the top of the stairs there was a valley and deer!  There were probably 10 of them when we first discovered them and some left immediately and then some came back.  They were pretty curious about us.

We decided to check the GPS and see where we were.  The white blazes from the Bruce trail were nowhere to be found.  We could see roads and houses, so we weren’t lost, but we were no longer on the trail.

We backtracked and made it back to the car easily.  The missed turn was well worth it!

If you do this trail, be prepared for hills and some rugged terrain. It’s not as challenging as Yellow and Orange at Crawford and Nemo, but it was a lot of work.

Landlord or Detective

You’ve really got to be a bit of both to make sure you get a great tenant.  A great tenant is easy to approve.

  • DetectiveCredit score is over 720
  • No aliases.
  • Employment letter with a name that’s easy to  confirm on LinkedIn.
  • Better yet, the tenant is on LinkedIn and actually works at the company shown on the employment letter.
  • Current Landlord actually owns the building where the tenant says she lives.

The easiest check for me to do is to verify that the Landlord name as listed on the rental application actually owns the building that the tenant says they are renting.  This isn’t as easy to verify when the tenant is currently renting through a large corporation, but it is easy enough to verify over the phone.  Rather than phone the number on the application, I look up the person who signed the letter on-line and phone the number that’s listed for the company.  But if the tenant is renting a house from a private owner, I look up the owner’s name. It’s easy for me to do this because my membership with several real estate boards gives me access to the Land Registry system.  I can easily find out who owns the house.

Last week, while checking a tenant’s application, I found that the name on the application did not match the owner of the home.  I found the owner’s number and left a message.  I also phoned the “landlord” that was listed on the application. She phoned me back the next day.  I asked her if she owned the house.  She said yes.  I told her that her name wasn’t on land registry.  Her story changed then. She said that she was sub-leasing to the applicant that I was phoning about.  We didn’t rent to this couple.

In our 25 years experience in renting out homes, we’ve made some mistakes.  The one that has cost the most was renting to people who would eventually stop paying rent or who would pay later and later each month. Each situation can be traced back to when I was reviewing an application and found red flags.  An inaccuracy on an application is one of the best reasons for turning away a prospective tenant.  So now, rather than call and ask the tenant about the false information, I do my own detective work and then sometimes I just say no.  An extra month vacant is less expensive than missing a few months rent and then having to go to the tribunal for an eviction order.  I like to start with great tenants.  Some may run into difficulties at some point, but they all start out as great tenants!

 

Shadow Flipping is not always a Bad thing.

Shadow flipping has been in the news recently with Agreements of Purchase and Sale being assigned to a new buyer two or even three times before closing.

This does happen in the GTA with some new home or condo purchases, but only if the builder’s original Agreement allows for it and several do not.  There’s a potential incremental HST cost to each purchaser and the rebate may be forfeited because the original purchaser who signed the builder’s Agreement and agreed that the home would be a principal residence will not be moving into the home.  It’s very confusing for buyers and sellers and their Realtors.  Pat and I took a course about this topic that was taught by a local Real Estate lawyer and the consensus at the end of the course was that the tax calculations were too complicated and we should all stay away from assignments of new builds.

But, an assignment isn’t always bad. It can be used when something happens and the original buyer cannot close the transaction.

We had a case where the buyers had two dogs.  The condo they purchased only allowed one dog.  We all missed it.  We asked about the pets policy at the concierge desk but not at the management office.  The lawyer was the buyer’s lawyer who did their wills and did not have real estate experience so he missed this vital part of the status certificate.  So when the buyers asked, afterJase Belsito waiving the status certificate review condition and firming up the purchase, how they should register their dogs, they were told they could only move one dog in.  They were heartbroken.  We suggested that we help them get someone to take over their agreement of purchase and sale.

Rather than list the unit for sale on MLS, which would cost the buyers commission, we helped them write an ad on one of the free sites.  We showed the condo during a revisit (with the Seller’s blessing because he knew what had happened), and helped the non-real estate lawyer with the assignment agreement.  I actually sent the sample agreement that we used in class.  The original purchase didn’t register on title, but the assignment did.  This saved the original buyer from having to pay land transfer tax.  The purchase price was the same so capital gains tax was not an issue.

The takeaway from this story is that assignments are sometimes necessary and more importantly, be wary of pet restrictions in condos.  Disclaimer:  The dog in the photo is Jase Belsito and is not the dog from the story.

 

 

So you want to be a Landlord?

If you’ve got some money that you want to invest, real estate may be a great option for you.  Someone else pays your mortgage and once the mortgage is paid off, you have extra income.

Get help with this early on.  What type of property is the best investment?  Where should you buy?  Who will screen tenants for you?  How much should you put down?   You need a real estate Broker with rental property experience and knowledge.  Pat and I own some rental property.  We also manage several properties and we help our clients buy and then rent their investment properties.  You need a mortgage professional who understands investment property.  You’ll need an accountant when it’s time to sell to help you understand any Capital Gains or HST implications. And you need a real estate lawyer.

I’ve found that a 35% down payment will result in positive cash flow in most cases and lots of lenders prefer a 35% down payment when it’s not your principal residence.

If you’d like to chat with us about this possibility, give me a call or text message at 905-466-7992 and we’ll show you how you can become a Landlord!

Heather Belsito, Broker, Stonemill Realty Inc., Brokerage

http://www.teambelsito.com