Archive | September, 2011

Agreement of Purchase and Sale – Inclusions/Exclusions

September 29, 2011

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A standard residential agreement of purchase and sale in the Province of Ontario includes a section that details the items in addition to the real property that are to be included in the offer, and others that are excluded from the agreement. The listing agreement will detail the items that the seller is willing to leave with the home and can include items such as a washer, dryer, fridge, stove, etc and essentially, these items can be considered as part of the total package of an agreement (freebies if you will).

Some items, such as those previously mentioned can be easily removed from the property and are often referred to as a “chattel“. Other items, which are usually considered to be more permanently fixed to the property are referred to as “fixtures”. Although this seems like a fairly cut and dry distinction, in the real world practice of negotiating offers, the lines can become blurred, especially when the buyer and/or seller make assumptions about whether an item is staying with the home, or going with the seller when they vacate. There is still great debate about what constitutes a fixture and when one can assume that an item such as a mirror, or window covering is staying with a house. We all know what happens as a result of ‘assuming’ and when it comes to real estate transactions; one can never be too sure.

Here’s the solution to avoid unnecessary arguments, closing delays, and even being sued!:

Along with your agent, compile a list of all of the items you could like to see stay with the home as part of the agreement (or take with you as the seller), and be as specific as possible – it is not overkill to be taking down brand names, model, serial number, color, etc of items that you would like and the more thorough you are, the less room you leave for discrepancy. Never, and I mean never make an assumption about whether something is coming or going, and when in doubt, include the item in the relevant inclusions or exclusions field (I.E – all window coverings, all light fixtures, carpet where laid, etc). It’s also worth pointing out that both of these fields in the offer can be used as a form of negotiation, for instance: if the seller does not include a lawn tractor in the listing agreement, but you would like to ask for it as part of the purchase, having your agent insert the tractor in the inclusions field is saying ‘here’s my offer and I also want your tractor as part of the deal’ (obviously, the seller has to agree).

I cannot stress the importance of being thorough and explicit with inclusions and exclusions in an agreement, clarity of all the terms is the only way to see to it that everyone wins. If you want to hear some funny anecdotal stories, ask any real estate agent or real estate lawyer, about a time when a purchase or sale didn’t close as a result of an argument over a master bedroom mirror, or a microwave! It happens all the time.

Brendan

Brendan Clemmens of Royal LePage First Contact Realty is a residential real estate agent in Barrie that provides value added service to all of his clients. Brendan can help you with all of your real estate needs but has a specific focus on helpin g young families and investors.

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What to do when your new house isn’t empty

September 28, 2011

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Here’s a situation that happens more often than you might think: your lawyer calls to say that your house is closed, you pick up the keys, you go to the house….and the old owners are still there.

If you are a first-time buyer, you are most likely staying in your rental for a few days beyond your purchase so that you have time to move everything over. Most repeat buyers, however, will buy and sell on the same day. In this situation, they need to sell their old home to have the money to buy their new home, but they can’t get into their new home for several hours after their old home closes, so there is often an overlap where they are still in their old house because they have nowhere else to go.

Technically, once the deal has closed, the vendors are required to vacate the property. If you arrive at your home and the sellers are still there, you can always call either your realtor or your lawyer, who can work with the vendor’s realtor or lawyer to encourage the vendors to finish their move. However, the best advice is to be patient and understand that moving day can be very stressful. And when you are buying and selling on the same day, talk to your mortgage agent about bridge financing to ease the stress on yourself.

Cesia

Cesia is a real estate lawyer at Wall-Armstrong and Green, a boutique law firm in Barrie focusing on real estate and estates. When she's not online, she can usually be found in her garden.

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Buying a Home as a New Canadian

September 27, 2011

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I got a phone call this week from someone who has recently moved to Canada and wanted to buy a home. Because the processes are so different in every country (and sometimes in each province!) it’s so important for new residents to discover their options.

Since I’ve never bought a home in another country, I can’t possibly know all the differences from how it works in Ontario. What I do know is that if you’re thinking about buying a home, there are a few easy first steps to take to see what’s possible!

  1. Get pre-approved for a mortgage. There are some lenders who have specialized mortgages for new Canadians. Talking to a mortgage professional will help you understand the financial aspect of buying a home in a new country. There are so many intricacies that you may not be used to, so asking someone in the industry will help you decide how much you want to – or can – spend, and the different kinds of terms that different lenders can offer you. Again, you can talk to a few different mortgage agents to decide which one will best suit your needs and help you get on your way to being a homeowner!
  2. Find your own REALTOR to act as your agent. In some countries, when you buy a house, you buy directly from the agent who is selling the house – or the listing agent. In Ontario, you have the opportunity to meet and talk with several REALTORs before you choose the one who will represent your interests. Feel free to call a few in your area, or maybe ask a friend, neighbour, family member, or someone in your church or community group to recommend someone; if someone you know likes and trusts a real estate professional, that’s usually a good sign that you’ll get the same great treatment!
  3. Decide where you want to live. This will probably be determined by your job, but proximity to work may not be the deciding factor for you. Maybe you want to live near public parks, shopping, in the suburbs or downtown, or maybe even in the country! This is certainly something your REALTOR can help you with. As real estate professionals, we know the parts of the city that will best suit your needs. Barrie has so many different options for you depending on what you like to do in your spare time. Even if you work in Toronto, Barrie is close enough that many of our residents commute there! One of the bonuses about living in Barrie – even if you work in Toronto – is that the home prices are much more affordable than our neighbours to the south. If you’ve never been here, come check us out!  You’ll probably like what you see :)

Buying a home can be stressful in the best of situations. For someone like you, who is new to Canada and Ontario, buying a home can seem almost impossible. Rest assured, real estate professionals in your area will help you prepare for the process. Even if you have to wait a year to become established here, at least you’ll have the best information possible. Keeping informed and educated in the real estate marketplace gives you peace of mind to help you buy that house!

Welcome to Canada, and best of luck in your future here!

Laura

Laura Keller of Century 21 B.J. Roth Realty is a real estate agent with a business philosophy of nurturing relationships with her clients. She will walk you through the process of buying, selling, or investing step-by-step so there are no surprises at the end of your transaction.

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What is an IRD (Interest Rate Differential)?

September 26, 2011

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The world of mortgages and real estate is filled with an excessive amount of acronyms.  If you were to overhear some of our conversations, you would swear we were speaking a different language – LTV and PMI this, and IRD and ARM that, API, BPS, and it goes on and on.  While most people don’t really need to bother to learn what most of these mean, if you currently have a mortgage, one of the acronyms you should know  is IRD (Interest Rate Differential).  This is the charge that may apply if you pay off your mortgage prior to the maturity date, or pay the mortgage principle down beyond what you’ve set up as a pre-payment privilege.

Basically, if you’re going to break your mortgage early, the IRD more or less represents the profit the lender was going to make on your mortgage had you not broken it early – and it’s what you’re going to pay them so that you can break it early.  This penalty can be tens of thousands of dollars, so before you break your mortgage (whether it’s to refinance, to get a lower rate, or to buy a new house), you need to make sure you know what your IRD is ahead of time.

The IRD is calculated based on the amount you are pre-paying and an interest rate that equals the difference between the interest rate on your current mortgage, and a comparison interest rate that the lender would charge today to re-lend the funds out for the remaining term of your mortgage.  So if you have 3 years left on your mortgage, that comparison rate would be the interest rate the lender currently has for their 3-year term, or if you have 10 months left on your mortgage, they would usually round up to what their current 1-year term rate is.  Of course, just to keep it interesting for all involved, each lender has its own formula for calculating penalties (some round up, some round down, some seem pretty close to random), so the best way to find out what your current IRD is, is to simply call up your lender and ask.

While most variable-rate mortgages do not have IRD penalties (since a variable-rate mortgage is, well, variable, it always adjusts to current market conditions), most closed, fixed-rate mortgages have a pre-payment penalty that is the higher of 3-months interest or the IRD.

Wo what’s the best way to find out if it’s worthwhile to break your current mortgage for better rates or for a refinance?  Call your current lender and ask them what your IRD would be if you broke your mortgage today (they’re the ones who are going to charge the penalty – they’re the best ones to ask what that penalty will be), then call your favorite mortgage broker and let them figure the rest out for you.  ;)  Once we know what your IRD is, we can let you know if it’s worth your while to break your mortgage right now, or wait until your IRD gets a little smaller.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Breaking up is hard to do

September 21, 2011

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What happens when one joint tenant (or tenant in common) wants out of a property and the other says no?

There is a piece of legislation in Ontario called the Partition Act that governs the concept of partition and sale, when a court can order that property be apportioned according to interests and one or more portions sold. Any person with an interest in the land can make an application for partition and sale, but judges have the right to refuse to order this remedy, particularly when the party asking for partition has acted dishonestly or maliciously in attempting to sell his or her portion. There is also no right by the person holding on to his or her share to be allowed to purchase the share being sold, with the end result that two strangers could become tenants in common on a piece of property.

Where this is best used is in a situation where one person legitimately wants out of a property and the other person cannot afford to buy him or her out, but won’t sell. A judge can order that the property be sold and the proceeds split between the owners. A common situation might be a divorce, or an inheritance where two people who do not know each other, or perhaps do not like each other, have become joint owners of a property.

This is a remedy that is not commonly ordered, but can be done in exceptional circumstances where it is necessary for a person to get out of ownership of a property.

Cesia

Cesia is a real estate lawyer at Wall-Armstrong and Green, a boutique law firm in Barrie focusing on real estate and estates. When she's not online, she can usually be found in her garden.

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