Real Estate Today

Case Study: Disclosure of Leak and Remedies

A Leak was Discovered, Corrected and Disclosed

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After the deal was firm, the seller noticed a water leak in the basement. He then discovered a crack in the basement wall and had it corrected with a 25-year transferable warranty to the buyers. The insulation on half the height of the basement wall was partially removed and subsequently taped back once the correction to the wall was made. The seller now disclosed it to the buyers.

The Buyers Inspected; Seller Declined Request

On inspecting the remedial work the buyers noticed sweating on the insulation inside the vapor barrier. They became suspect and wanted the seller to remove all of the insulation on the damaged wall, to see whether other cracks existed. The seller declined the request and would not allow the buyers any further inspections. Though not agreed to in the contract, the seller felt they had already generously given the buyer a number additional inspections to measure the kitchen for a renovation quote, and to measure for flooring and other updating plans.

Extended Warranties are Unlikely

The seller said that once the deal closed and the buyers owned the property they could open it up themselves. If by chance other cracks were discovered, which they doubted, the seller suggested they could contact the concrete subcontractor that built the basement and/or the builder of the home. Typically, however, the basement subcontractor gives a 2-year warranty on the foundation and at this point the house is 10 years old. Though unlikely, if any such extended warranty existed, the seller should produce written evidence of its existence and transferability.

The Deal Closed with No Additional Problems

The buyers were instructed to talk to their lawyer. They, however, said that they didn’t want to complicate the matter with lawyers and wanted the sales representatives to help work it out. The respective sales reps, though, could do no more as the seller was firm on his position. On consulting with their lawyer, the buyers closed on the deal and subsequently no further problems were discovered.

Some Take-aways

The seller was forthright in making the buyer aware of the leak, the crack and the fix. As advised, the buyers were wise to close. Under our system, if additional cracks were found they could go after the seller, though the onus would be on them to prove the seller was aware of other cracks. If the buyers chose not to close they could be sued for breach.

Before Closing

Before closing lawyers typically ask if the buyers have performed a final viewing and whether they noticed any issues compared to when they initially saw the house. The buyers then tell about the crack and fix…as well as other concerns should they have any.

Some Possible Solutions:

  1. They can try to negotiate a holdback until they discover if other cracks are present.

  2. They might attempt a price reduction.

They could threaten not to close, leaving them open to legal action: a risky idea. Closing was the right approach.

Are Niagara Region House Prices Dropping?

It’s a Commonly Asked Question Today

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One of the questions homeowners continue to ask lately is, “Are prices dropping?” A legitimate question when they notice “New Price” and “Reduced” stickers on any number of for sale signs, not to mention homes lingering on the market, unsold compared to last year.

To date the answer is “no,” at least prices, that is to say, have not gone down overall. To the end of September, versus the same time last year, the number of sales is down by about 13% to 15%, yet average and median sale prices indicate positive numbers as follows:

  • The overall average price year-to-date for the Niagara Region is up by about 2.6%, and

  • The median price by and large is up by about 4%.

Of course average and median prices cannot determine how any one home or neighbourhood has performed. They do, however, point toward general market conditions and trends. As well, in certain districts within the region and in high-end properties average and median prices are down somewhat.

What has been going down are list prices

The hot seller’s market of 2017 brought about a sizable increase in sale prices. By the end of December 2017, the overall average sale price for the region was up by about 23.8% and the overall median price by 21.2%. Homeowners still have the benefit of this appreciation.

Yet in many cases, sellers this year have overextended their asking prices, possibly thinking that prices were going to continue to rise to a similar degree as last year. Such a strategy has not served them; hence the noticeable number of price reductions and listings that remain unsold. Market conditions change and experience has shown that there is often a delayed reaction to such shifts on the part of sellers.

Some of the following have contributed to this shift:

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  1. The mortgage stress test introduced in January of 2018 caused some buyers to opt out of the market;

  2. Home price increases contributed to reduced affordability;

  3. The number of out of town buyers coming to the region has dropped as sales of single family homes in and around Toronto have gone down as well as their average prices.

  4. Interest rates continue to inch up shrinking affordability and creating buyer concern.

In spite of this, and to reiterate, prices for the most part have gone up, and properly-priced homes continue to sell. Even during the hot seller market overpriced listing prices did not result in a sale. Today properties have to be priced to attract buyers and their representatives.

Fear Can Drive Many Buying Decisions

In a hot seller’s market buyers fear they might lose out. In a slower market buyers fear they might pay too much. They question whether their home purchase will maintain its value.

Niagara Region Residential Sales Prices and Statistics for October, 2018

Residential Sales, Average Sale Prices and Days to Sell for the Niagara Region

For the Niagara Region: 01-Oct-2018 to 31-Oct-2018 vs. Same Time Last Year*

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Residential Average Sale Prices for the City of Niagara Falls

For the Niagara Falls: Month to Month comparison for 2017 and 2018 to October 2018

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Residential Sales Average Days to Sell for the City of Niagara Falls

For the Niagara Falls: Month to Month comparison for 2017 and 2018 to October 2018

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*The above statistics are based in whole or in part on the MLS® System data owned by the Association.

Net Cost of Owning Versus Renting Your Home

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Mr. Will Dunning, Chief Economist for Mortgage Professionals of Canada, released an insightful report called, Owning Versus Renting a Home in Canada, release September 2018.

Increase in Home Prices vs. Renting:

  • According to the Canadian Real Estate Association, over the last twenty years, home prices in Canada have appreciated by an average of 6.2% per year.

  • According to CMHC, rents over the past twenty years have increased by an average of 2.7% per year.

Given the discrepancy, does home buying still make sense and are young people better off renting?

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Yet Home Ownership is at an All-Time High

Notwithstanding the perceived “deterioration in affordability” due to price increases, “Canadians remain highly interested in becoming homeowners, and they continue to succeed at buying homes.” Mr. Dunning reports that compared to renting, those able to invest in ownership would be better off in the long term as opposed renting. He agrees that upfront monthly costs for renting can be cheaper in most locations. However, the net cost of owning a home compared to the comparable rental cost is less and more cost effective over time. And that’s without considering a home’s appreciation.

The Net Cost of Owning Trumps Renting

Over time the cost of owning or renting will both rise. The net cost of owning, however, takes the following into account. The largest cost of ownership is the mortgage payment which typically becomes a fixed amount over the term of a mortgage contract, as in a five year term. During this period, and with each mortgage payment, a portion of the principal is paid down increasing the owner’s equity in the home. This savings effectively reduces cost resulting in a net cost savings.

Here is the Result On Average

According to Mr. Dunning, the result, based on a Canadian average price of $569,849, 20% down and a 3.25% over 25 years is as follows: On average, the cost of owning exceeds renting a similar home by about $541 per month. Yet once the “the principal repayment is considered, the net cost of owning is $449 less than the cost of renting.” Over 25 years or less, once the mortgage is paid off, he projects the cost of ownership at about $1,549 per month versus $4,655 for renting a corresponding dwellings.What’s more, because the lifetime costs of housing is lower than that of tenants, owners have a greater opportunity to accumulate more savings tend to be better off financially.

How Does This Pan Out in Niagara?

The regional overall average price year-to-date is about $470,000. Based on the same parameters as above, the net cost of owning exceeds the cost of renting by about $640. Minus the principal repayment, the net cost of owning is $380 less in the first month. Over year it’s about $6,400 less.

Other Housing Costs

Average annual increases for housing costs in Canada for the past 5 years: Property taxes 2.8%; Repairs: 1.9%; Home insurance: 5.4%; Utilities: 1.6%; Rents: 2.4%; Utilities: 1.6%; Rents: 2.4%. For full report, do an internet search on “Owning versus Renting in Canada-Mortgage Professionals.”

Abandoned Gas Wells and the Environment

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When an Abandoned Gas Well is Discovered?

The home purchased had an additional back piece of vacant land attached to the property. On viewing the home before buying, the buyer did not inspect the back parcel.  On searching title, the buyer’s lawyer obtained a copy of an old survey that indicated an abandoned oil well on a corner of the attached back parcel. With its discovery, the buyer inspected the back parcel found the well, visible from the surface and took a picture. He noted the smell of gas in and around the well. 

Disclosure of a Gas Well Should be Made

He was somewhat upset as he felt the gas well’s existence should have been disclosed. He discussed his concern with both his lawyer and real estate agent. His lawyer asked for a price reduction through the seller’s lawyer and some three days later still hadn’t received a response. The buyer now turned to his brokerage. He wanted the property but also wanted some resolution. Recognizing this as a problem, brokerage did some research and made some of the following discoveries.

According to the Niagara Peninsula Conservation Authority,

  • “An abandoned oil and gas well on your property is a hazard to the environment and your health and safety.”
  • They can also be obstacles to new development and “can be a financial liability to the landowner.”
  • So it’s important to report and plug abandoned wells.

Information from the Ministry of Natural Resources

We learned that the Ministry of Natural Resources and Forestry has what’s called the Abandoned Works Program to help “Ontarians properly plug wells on their property.”  They will:

  • Establish as to whether a well qualifies for the program,
  • Rank the well according to its “risk to public safety and potential for environmental damage to determine when it should be plugged…,
  • “Arrange for a certified well contractor to plug the well.’ 

If there is no gas well operator to be found, the landowner is responsible for plugging the well. In our search, we thought we located the well in the Oil, Gas & Salt Resources Library and reported our findings to the Ministry. As they could not find it in their database, they recommended the buyer hire a consultant. Apparently unlicensed and abandoned gas wells, not properly decommissioned, abound in southwestern Ontario.

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Cost to Plug the Well

The cost of plugging a well can range from as little as $2,500 to thousands. In one reported case the landowner ended up being on the hook for $20,000. By now some days had gone by and the closing date was fast approaching. The buyer hired a contractor who estimated a cost of $28,500 to properly plug the well. Armed with this quote, the parties negotiated a reduction in purchase price of $25,000, with the buyer agreeing to take responsibility to plug the well after closing.

More Pre-Listing Research by REALTORS Needed

This should have been disclosed before the buyer made an offer. Luckily it was discovered before the deal closed. REALTORS would be wise to walk the property prior to listing and have the seller fill out the “OREA Property Information Checklist" to uproot any required disclosures.

Why It Is Better To Buy Now Rather Than Later

Buy Now Or Later

It’s More Important Than Ever:

As you know, the internet can be a great source of information. Some buyers though are too anxious to start looking at homes without confirming what they can afford with a lender. And with today’s mortgage stress test, the need for a buyer to confirm their mortgage affordability is more critical than ever before.

Don’t Assume Affordability:

In one such case, a young couple assumed they could afford their desired price range in spite of the salesperson’s encouragement to obtain a pre-approval. So they viewed some ten homes and signed a purchase agreement conditional on obtaining a mortgage and a home inspection.

Stress Test Failure:

After meeting with their lender they were told they did not qualify for the price of the home they were buying. Though they did qualify based on the current mortgage rate, they failed the stress test. Such an occurrence affects about 18% of prospective buyers today. They would have to reduce their expectations by about $30,000 to buy or increase their downpayment.

Other Possible Measures by the Salesperson:

As well, the salesperson, against his better judgment, was influenced by their confidence, enthusiasm and motivation to buy. He also did not want to lose them as a client. He might have taken one more step though and suggested that, though he cannot pre-approve them, he can certainly run through the same exercise a lender uses to find out what buyers can qualify for based on their income and debts.

Opting to Wait and Improve Downpayment:

The couple was initially upset with the bank but mostly at themselves. They felt the salesperson had done a good job and admitted they should have followed his advice before proceeding. Because of their let down, they decided to put a hold on buying. They did not want to reduce their expectations on the home they wanted. They wanted to save a larger downpayment, about $20,000 more, which they determined would take about two years at a savings of $10,000 per year.

Why it is Better to Buy Now:

Yet buying a lower-priced home today might turn out to be the better strategy, and here’s why: According to the latest statistics, the average house price across Canada has risen by about 6.2% per year for the last 20 years. As an example, barring a downturn and if things remain equal, a $300,000 house today would potentially be worth around $338,000 in two years.

How Equity Can Increase:

If the buyers purchased a home at a lower price today of $270,000 to qualify, after their downpayment of $30,000 they would have a mortgage of $247,440 with CMHC insurance of 3.10% added. Given the 6.2% average annual increase, this home might be worth about $304,500 in two years. That’s a potential gain of $34,500. As well, if they paid down the mortgage by the $10,000 per year they planned to save, their equity would increase again by $32,738.

Their Total Equity:

They would then have the following equity: the original $30,000 down, the capital gain of $34,500, plus an additional $32,738 from reducing the mortgage principal. That’s a total of $97,238 allowing them to buy a better home in two years. It’s worth pursuing.

National Average Price Up 6.2% Per Year Since 1997

House Prices Up

In July 2018, the Mortgage Professionals Canada released their Report on Housing and Mortgage Market in Canada” authored by their Chief Economist, Mr. Will Dunning.

The following is a small but important indication of what is in the report.

1.     Adjusting the Purchase Price:

The report points out that 18% of buyers who could actually afford the home purchase of their choice would fail the stress test. It’s estimated these buyers would have to adjust their purchase by an average of $28, 750. They would also need to increase the amount of down payment. This affects about 120,000 buyers per year.

2.     Number of Resale’s:

To date this year, national resale home activity is down 12.5% compared to last year and 16.5% versus 2016. For the Niagara Region, the overall number of sales in resale homes is down by an average of 21% year-to-date to June 30, 2018.

3.     Average House Prices:

Since 1997 (2 decades) the national average price of resale homes has increased by 6.2% per year from $155,000 in 1997 to $510,000 in 2017.  To date for 2018, the average price of homes in Niagara varies from a low of $334,000 in Welland to a high of $755,000 in Niagara-on-the-Lake. The overall average lies at $471,000. The increase in average price to the end of June is up 1.7% compared to last year. Yet this varies: some cities are indicating an increase, others a decrease from last year.

4.     The Home Ownership Rate:

 In Canada the home ownership rate was at 67.8% in 2016 according to Census Canada. This is down from 69% in 2011. The report attributes this to first-time buyers taking longer to buy. Yet with the additional challenge of the stress test, Mr. Dunning expects that “will fall further during the 2016 to 2021 Census period, with the burden being borne, once again, disproportionately by young adults.”

5.     Sources of Down Between 2015 to 2018:

  • As the main source, 85% of down payments come from personal savings.
  • Another 39% derives from gifts from parents and other family members.
  • 25% is sourced from loans from parents and other family members.
  • Loans for a down payment sit at 43%.
  • From an employer, loans are at 8%.
  • Withdrawal from RRSPs through the Home Buyers Plan: 38%.
  • And finally down payments from other sources stands at 6%.

The total down payments are made up of a combination of any number of the sources mentioned above. The most prevalent source, personal savings accounts for about 50% of the total down payment for first time buyers.

During the 1990’s the average down payment for first-time purchases was about 22%. Between 2014 and 2017, the average has been 26%.

Repairs and Upgrades: How Much Will They Cost?

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During the process of buying or selling a home, your clients often learn about recommended or required repairs and upgrades. This can happen as a result of the home inspection as well as your expert knowledge of your market and comparable homes. Of course, the first thing homeowners want to know is, “How much will that cost?”

Pillar to Post is pleased to offer our popular Residential Construction and Remodeling Estimates cost guide, which provides estimated cost ranges for repair and/ or replacement of the major systems and components in a home. It also includes general guidelines for the life expectancies of those systems.

Request complimentary copies of the cost guide from your local Pillar To Post Home Inspector or download it at pillartopost.com/costguide.

 

Curious as to which upgrades will increase your home's value the most?  Which upgrades will get you the best return on investment?  Contact Barbara or Ashley today for the answers with their free, no obligation consultations.

Absorption Rate and Months of Inventory - June 2018

The DOM (Days on Market) indicates the market time of homes that have sold. It’s not necessarily reflective of a home’s actual market time though. In a number of cases and as a marketing tactic, when a home’s list price is reduced, the salesperson will relist the home to have it show up on MLS as a new listing. This distorts a home’s DOM: it may have sold within 30 days from the new listing date but could have been on the market for any number of days prior.

The Absorption Rate and Months of Inventory

The Absorption Rate helps resolve any distortion in the DOM. It indicates the following:

  •  How many homes are absorbed (or sold) in the market on a monthly basis within a given period, say 6 months,
  • How many months it will take to sell the current listing inventory,
  • How the seller might position their listing to improve its marketability.

Positioning the Listing:

So, for example, if a seller wants to sell in one month and the months of inventory is 3, the seller would need to position the home in front of the market by pricing it more aggressively than its competition. This helps the seller to set realistic expectations and improve a reasonable buyer’s perception of value.

The following chart shows the absorption rate or average number of sales per month and the months needed to sell existing inventory.

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Buyers Want to Know Up Front Not After

There are a number of searches a lawyer may carry out when working for a buyer on a real estate purchase.

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There was a time when lawyers, by way of a requisition letter, would make inquiries to the municipality concerning the property to discover any issues affecting the property. Clause 10 of the standard Agreement of Purchase even speaks to the Buyer being allowed to satisfy himself that there are not outstanding work orders or deficiency notices affecting the property, a responsibility that was carried out by the lawyer.

Resolution of Certain Issues by Title Insurance

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Though some still do make a requisition to the municipality, many don’t since Title Insurance came into prominence some years ago. It saves the buyer the additional cost of requisitioning the city. As well, if an issue is discovered after closing Title Insurance would attempt to resolve it depending on what it is.

Yet Buyers Prefer to Know Up Front

In our experience Buyers want to know of any issues up front, or at least before they close and take possession of the property. That’s why the preprinted portion of the Offer to Purchase has certain provisions or built-in conditions. An issue discovered after closing tends to upset Buyers.

Here is an Example of a Municipal Drain Bill

Recently we received a call from one of our buyers who purchased his rural property in the fall of 2016. He was quite upset at having received a bill from the municipality for $2,635. It was noted as a “Drainage Maintenance Billing”. Under provincial legislation a Municipal Drain is part of a municipality’s infrastructure. The cost of repair and maintenance on the drain is “assessed to the lands within the watershed of the municipal drain; in other words to the affected property owners. The maintenance was performed between January 2010 and December 2016 and all land owners were notified.

The Previous Owner Was Notified but….

When the municipality notified all affected owners, the property was still owned by the seller yet the issue was not disclosed. This could easily happen as he seller could have forgotten about the notification. Further, the city letter went on to say that if the amount due was not paid it would be added to the property taxes. Upset, the Buyer felt that he should have been told at the time of buying and felt his lawyer should have discovered the matter. What’s more, in talking to the municipality, the buyer was informed that had a requisition been made, the matter would have been disclosed. This only frustrated the buyer more. We suggested enquiring with their Title Insurance Company to see if they would cover the cost of the billing.

Title Insurance: First No and then Yes

On contacting a representative of the Insurance company, the request was initially denied. The representative disagreed with the decision and went to bat for the buyer. The Title Insurance company reversed its decision and approved the payment. A happy ending but a requisition to the city before closing would have brought the matter to light.

Mandatory Lease Agreement in Ontario

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As directed by the Rental Fairness Act 2017, the Ministry of Municipal Affairs and Housing created the mandatory residential lease with 5 reasons in mind:

  1. To use “easy to understand language to help
  2. Landlords and tenants understand their rights and responsibilities,”
  3. To reduce illegal provisions,
  4. To reduce misunderstandings caused by verbal agreements, and
  5. To reduce dispute resolutions with the Landlord and Tenant Board.

The Act also introduced additional protections.  Here are some highlights.

Landlord’s Personal Use: Due to abuse of the Landlord’s own use provision, the landlord must give 60 days’ notice before the end of the tenancy, and pay the tenant one month’s rent as a penalty. Alternatively the landlord can offer another unit acceptable to the tenant.

What if a buyer requires a rental unit? The payment penalty of one-month’s rent is not required in this case, but the property cannot have more than 3 unit rental. Once an offer becomes unconditional, and notice to terminate is given to the tenant, the landlord can apply to the Landlord Tenant Board to affect the termination. The Buyer must sign an affidavit stating that they or a member of their immediate family will occupy the unit on closing, and be required to attend any court hearing to confirm.

Added Statement in Agreement of Purchase and Sale: In the notice of termination clause in the Offer, it should additionally state that the buyer intends to occupy the property for at least one year and to indemnify the seller for any damages suffered because the buyer did not move in. This is important because there are a number of penalties that can be imposed, as well as an administrative fine of up to $25,000.

You Can Add Additional Clauses to the Agreement.

As the lease agreement states, “An additional term cannot take away a right or responsibility under the Residential Tenancies Act, 2006. Any conflicting term will be void and not binding.

Smoking

In the lease, the landlord and tenant can agree to allow or prohibit smoking in the unit and on the landlord’s property. Even if smoking is allowed, the landlord can apply to the Board if it substantially interferes with “reasonable enjoyment of the landlord or other tenants, causes undue damage, impairs safety, or substantially interferes with another lawful right, privilege or interest of the landlord.”

What About Marijuana?

 “Landlords will be able to spell out a ban on smoking marijuana in rental units for new leases post-legalization — the same as they do for tobacco use,” this according to a Toronto Star article dated January 22, 2018 by Peter Goffin of the Canadian Press.

Author and Lawyer, Mark Weisleader, recommends a number of additional terms to include with the Lease Agreement. In it, he recommends a No Smoking/Marijuana Clause to disallow smoking of any kind including marijuana, as well as prohibiting the growth of cannabis in a unit.

The mandatory agreement does not apply to month-to-month rentals and lease agreements prior to April 30, 2018.

 

Canada Revenue Agency (CRA) Cracks Down on Real Estate

Tax Avoidance on Real Estate over $636 Million

To crack down on non-compliance on real estate transactions, the Canada Revenue Agency reviewed 30,000 files over the past 3 years in Ontario and B.C. They found $592.6 million in additional taxes resulting in over $43.7 million in penalties. The CRA news release dated May 17, 2018 also said, “Specifically in 2017-2018, the CRA assessed $102.6 million more in additional taxes than in 2016-2017. Penalties increased by $19.2 million from one year to the next.”

To uncover tax avoidance on real estate deals, CRA collaborates with provinces, territories and municipalities and continues to improve on tools to combat non-compliance.  One legal tool to uncover taxes and GST/HST on assignment sales is their unnamed persons requirement.

So What is the “Unnamed Person Requirement?” 

New homes, rental properties and substantially renovated properties are subject to HST. So Builders and Developers are required to remit the HST on selling, renting a new unit for the first time or on personally moving into one of the properties. Under the “unnamed persons requirement” issued to developers and builders, CRA can obtain the identity of any buyer who is not reporting properly for income tax and HST purposes.

As well, purchasers of new homes can apply for a new home HST rebate provided the home is used for their primary residence. In many cases, as the builder includes the HST in the price of the home and pays it on behalf of the buyer, the builder also applies for the rebate as it is taken off the price to benefit the buyer. If the buyer is not going to use the property as their primary residence, the rebate does not apply and must be paid to the builder on closing. This HST rebate provision can also get abused by some buyers.

Flipping Property

On flipping property, any profit must be reported as business income and not as capital gain. Buyers also cannot avoid compliance by pretending to use the property as their non-taxable primary residence.

CRA is also looking closely at “pre-construction assignment sales” in which a condo or home is sold to another buyer before completion of the home or unit. 

Re-assessments and Gross Negligence  

Failure to properly report can result in re-assessment of taxes owing and arrears interest. For “gross negligence” a penalty of 50% of the tax avoided would be imposed.  A Financial Post article dated May 25-18, by Jamie Golombek, CPA, mentions a case that involved a real estate salesperson and her granddaughter. In 2006, the salesperson purchased Unit 6 and the granddaughter purchases Unit 5. The deals both closed in June 2010 and were resold by the next month. No income relating to the condos was reported with their individual 2010 tax returns. CRA reassessed and established that the buyers failed to report business gain of $103,206 on Unit 6 and $106,025 on Unit 5. They failed to further report their profits and so CRA charged both with gross negligence. 

In court, after hearing arguments, the salesperson grandmother was found guilty of gross negligence. The granddaughter a 21-year old was relieved of gross negligence as she relied on her grandmother and father, both real estate agents, to tell her if reporting her income was necessary.

How Landscaping Increases Property Value

by Josh Fredman

If you want to make an investment that adds value to your home, consider landscaping, which covers practically everything on your property other than the house itself. Landscaping upgrades can involve things like patios and decks, flowerbeds, barbecue pits, watering systems and plants of all sorts. As you enter into a landscaping project, you have plenty of choices about what kinds of upgrades to make.

Economics

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It doesn’t take much to understand the economics of increasing property value through landscaping upgrades. A well-placed, properly sized tree, for example, can provide visual enjoyment simply by looking pretty. It can also smell good and sound peaceful in the breeze. It can shield your home from summer heat. It can provide recreation for your kids, or support for a hammock. A good tree provides pleasure and utility, and these things translate to increased property value. The same idea applies to all landscaping: If a given improvement offers something that prospective buyers want, then your property value will rise.  Also, as the tree grows, the value of replacing the tree grows as well.  Thus buyers will value larger and more established  trees and shrubs higher than those newly planted.

Quantifying Value

Though experts agree that landscaping improvements usually raise a property’s value, it can be extremely difficult to predict exactly what kind of gains a specific homeowner will see in her individual circumstances. Thornton Landscape president Rick Doesburg uses 15 percent as a ballpark figure when advising clients, but he stresses that estimates vary by home and notes that the lasting effect of landscaping requires ongoing maintenance. Virginia Tech horticulturist Alex Niemiera arrived at a similar figure -- 12.7 percent -- in his research. In extreme cases, property values can more than double, and they can actually decrease if the landscaping contains undesired features that the local market doesn’t support.

Costs

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When considering the property value increase of a landscaping upgrade at your home, you must take into consideration the cost of actually installing the new landscaping, as well as the cost of continually maintaining it. If your primary intent is to increase your home’s value rather than derive added enjoyment from your yard, treat these costs as investments and make them cost-effective. Professional landscapers can discuss the options with you. For example, perennials and bulbs can add color and style to your property all year long. Other cost-effective improvements include aesthetically pleasing architectural improvements, such as stone walkways and terracing that require little or no maintenance.

Other Considerations

Landscaping upgrades have a number of variables that go into the property value equation, some of which you cannot control. For example, according to Mark Henry of Clemson University, the quality of landscaping on your neighbors’ lots also affects your home’s value. Even the general quality of landscaping in your whole neighborhood has an impact. If one of your adjacent neighbors has a particularly bad yard, you might want to talk with him to see if he would be willing to make any improvements.

Another important factor to consider is the contractors who do your landscaping upgrades. Many companies vie for this kind of business, and choosing the right contractor can make a lot of difference. Find a contractor with whom you are comfortable, who is honest and patient, and who can show you a good track record. Lastly, pay attention to the details. Michigan State University horticulturist Bridget Behe notes that a subtle, small change, such as curving the edges of your flowerbeds, by itself can increase your home value by 1 percent.

No Deposit Can Equal No Deal

Three Ways to Submit a Deposit

An agreement of purchase and sale provides for a deposit to be submitted by the buyer. The agreement makes following three options available:

  1. “Herewith” or at the time of presenting the offer;
  2. “Upon acceptance”, defined as 24 hours from acceptance in the preprinted portion of the agreement, and
  3. “As otherwise provided.” This allows the parties to agree to a longer period to deliver the deposit, and can be a better choice for out of town buyers.  

It Should be an Amount the Buyer Doesn’t Want to Lose

Regardless of how it’s submitted, a deposit secures the agreement in a number of ways. The buyer has “skin in the game”, money he stands to lose if he doesn’t follow through with his promises under the contract. To that end the deposit should be meaningful. That is, it needs to be an amount that the buyer would not want to lose. It commits the buyer to act in good faith in striving to meet any conditions (such as obtaining mortgage financing, a home inspection for instance) and to complete the purchase.

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What Happens When No Deposit is delivered?

The purchase agreement clearly states that “time is of the essence.” So meeting any obligation under the contract has to be adhered to within the time period stated, including delivery of the deposit. Otherwise the seller can take the view that the offer has been repudiated, hence the buyer is in breach of contract.

So What Can the Seller do?

The seller can choose from two courses of action:

  1. Write a letter to the buyer stating that if the deposit is not received within say twenty-four hours from the date the letter was communicated, the seller will declare the contract terminated.
  2. The seller can also pronounce the offer null and void immediately after the time for receiving the deposit expires.

When There’s More than one Buyer

The issue becomes even more important when other interested buyers are waiting in the wings. As an example, recently a second offer for more money was accepted by the seller as a back-up offer, conditional on the seller being released from the first offer. The first buyer not only failed to deliver their deposit within the twenty-four hours stated, the seller still had not received it by the end of the fourth day. On day five, and due to the breach, the seller declared the first offer null and void.

Releases Not Necessary But a Precaution

The seller’s lawyer agreed with the seller’s decision and felt any challenge by the rejected buyer would be an assured win for the seller. Yet to avoid such a possibility, the lawyer asked for signed releases if possible. The buyer signed releases without a problem and likely to his benefit as well. If he were to legally challenge the seller’s repudiation of the offer, the seller could still be awarded the deposit in spite of the fact that the seller did not receive it or lose any money.