'Tenanting' a vital skill for landlords

'Tenanting' a vital skill for landlords

by finance columnist Ellen Roseman

Real estate can yield good returns for investors. But success requires more than just a talent for buying low and selling high. You also need an ability to size up potential tenants, to decide if they will treat your property kindly and pay consistently. Experienced landlords say this is the hardest job of all — and requires skills that take a while to develop.

"I have three properties in Moore Park in Toronto," says Eamon Hoey, "and I've learned a lot in the five years since I've been in the rental market. After-tax returns on my properties, including any capital gains, are about 5.2 per cent a year. Most income funds will give you a better return," he says.

"Expect disasters", says Hoey. "The furnace in one property stopped working and caused $105,000 worth of damage. Unfortunately, the insurance didn't cover the damage" — since the home wasn't occupied by tenants at the time.

He makes it a rule not to rent to people with pets. His sister once had a tenant with a pet snake, which escaped and was spotted by another tenant.

"My sister got a major bill from the fire department and the exterminator, who had to search for and destroy the boa constrictor. This isn't an event my sister likes to talk about publicly."

Kathy Paliwoda is a consultant for residential landlords in Southwestern Ontario. She also teaches realtors about a landlord's rights and obligations. She says, one of the biggest causes of disputes between landlords and tenants is overpayment of utility bills. What happens if a tenant agrees to pay the bills for water, gas and electricity and later falls behind? Is the landlord liable? Can the utility put a lien on the property?

In a recent Ontario court case, Duong vs. Waterloo North, Justice Donald Gordon ruled landlords weren't responsible for a tenants' unpaid hydro bills.

Paliwoda says landlords may still be on the hook. Utilities often ask them to sign a contract, saying they're responsible when tenants don't pay utility bills on time. Her advice: If a utility threatens to shut off the power, pay the bills and sue in small claims court. Otherwise, you could have thousands of dollars in property damage that insurance won't cover.

Libby Telford is a first-time landlord. She says, "I think students are the best choice. They're not around much, they respect the rules of the house and they have provided me with post-dated cheques for the term of their lease."

However, she's not looking forward to finding tenants again. "I'm very picky and it's stressful for me, knowing I would consider only one out of every six prospective tenants."

Andrew Vitch is an experienced landlord. He owns seven rental properties with 31 units in St. Catharines, Ont. The worst tenants, he says, are those who bring in friends to sublet their places when they leave. "Invariably, these tenants are not as good as the ones we chose," he says. "When they eventually move, we're faced with significant cleaning and repair costs that probably wouldn't have occurred with the original tenant."

Vitch and his wife Sue do regular maintenance in their buildings. They deliver cards and candies to tenants at Christmas. "I believe the bottom line in selecting tenants is: Are they on the way up or the way down?" he says. "We've rented to several tenants who had recently been bankrupt. After thorough investigation, it became obvious they had bottomed out and were getting things back together."

He talks about "tenanting" as a learned skill. As you get better at screening, checking references, calling banks and employers and running credit checks, you tend to be more satisfied with your tenants — and your real estate investment.








Posted by Steven Porter, Real Estate Broker / Mortgage Advisor

First-Time Home Buyer? You Need to Understand These Lending Definitions

Purchasing a home is a life-changing investment. A big decision like buying a first home, combined with confusion about the process, can lead to a detrimental financial mistake. Take the time to understand some of the key lending industry jargon.

Mortgage Loan Underwriting: The underwriting process is used by lenders to determine the amount of risk a mortgage would be. Before approving a loan, an underwriter will evaluate your credit score and history, credit score of a spouse or partner in the purchase, bank accounts, employment history, current income, and current and projected debts and assets.

Loan Points: A point is equal to one percent of the amount borrowed, or principal, of your mortgage. Lenders charge points in both fixed-rate and variable-rate mortgages in order to increase the returns to the lender on the mortgage and to cover loan closing costs. Points are usually collected at closing and may be paid by the borrower, lender or or may be split between them. There are two types:

• Discount Points are paid to reduce the interest rate on a loan and are normally paid at closing.
• Origination Points are paid at closing. On a conventional loan, a loan that is not insured against mortgage default, the loan origination fee is the number of points a borrower pays to typically to a mortgage broker for arranging a mortgage.

Assumable mortgage: A home mortgage that allows the buyer to take over the seller’s mortgage. The buyer makes mortgage payments and complies with other terms of the original seller’s existing loan.

Balloon mortgage:A mortgage that is not fully paid off over the term of the loan, leaving a balance at the end. The borrower must either pay off the remaining mortgage or refinance the loan.

PITI: Abbreviation for the major expenses that make up a mortgage payment: principal, interest, property taxes and homeowners’ insurance.

Prepayment penalty: A charge imposed on a borrower who pays off a mortgage loan before its due date. Lenders impose prepayment penalties to encourage borrowers to hold a debt, and keep paying interest on it for the whole term of the mortgage.

Title report: The written examination of a real estate title search, including a property description, names of titleholders and how the title is held (joint tenancy, for example), mortgages and other charges, and liens. A title report is needed before a lender will agree to finance the purchase of the property. The report is typically prepared by a Lawyer.

Contingency: A provision in a contract stating which terms of the contract will be altered or voided if a specific event occurs before the closing of the property. For example, a contingency in your home purchase contract might state that, if the buyer does not approve the inspection report of the physical condition of the property, the buyer does not have to complete the purchase, or an included contingency that the buyer be allowed a certain number of days to obtain his financing or to sell his house.

Mortgage Default insurance: Insurance that reimburses a mortgage lender if the buyer (borrower) defaults on the loan and the foreclosure sale price is less than the amount owed to the lender (the mortgage plus the costs of the sale). A home buyer who makes less than a 20 percent down payment will most likely have to purchase mortgage default insurance if dealing with a bank or first tier lender.

Closing costs: Closing costs are fees, charged by your lawyer, lenders, government and third parties, related to the purchase of the home. An estimated one and a half to five percent of the purchase price of the home. You will usually pay closing costs at the time you close on a mortgage. The cost can include a loan origination fee, processing fees, discount points, appraisal fee, title insurance and legal fees, Land Transfer Tax, and HST/GST

Deposit (Earnest) money: This is in the form of a deposit and tells the seller that you’re committed to your offer. Once the seller accepts your offer, the deposit money will go towards your down payment and closing costs.

Take this glossary with you to your lender meeting and you will feel much more comfortable throughout the home buying process.

 How to Secure the Best Financing Rates and Terms When Buying a Home. Best Financing, A Three-Point Plan

6 Ways to Avoid the Tenant From Hell

 While there’s tremendous success to be had in the world of investment properties, the unsightly truth is that one bad tenant can cause a monumental setback.
It’s hard enough to keep up with wear and tear on your investment property without having to deal with disgruntled residents causing willful and severe destruction to a home. From “Sharpie parties” — where tenants invite friends over to vandalize the home with markers — to “indoor swimming pools,” where renters flood the premises and take a dip, there’s no shortage to the devastation that tenants can create.

Of course it’s not always so dramatic, but the problem of trouble tenants is quite widespread. In a poll conducted by Vancouver-based newspaper The Province, 71 percent of landlords say that they’ve had problems evicting a renter despite justifiable grounds. Late rent payments, broken appliances, and disputes over damage deposits are some of the most common issues that landlords face. The costs involved with repairing damage left by a less-than-upstanding renter, not to mention the time and money that it takes to pursue an eviction, can be enough to strike terror into the heart of even the most seasoned property owner.

The good news is that an ounce of prevention is still worth a pound of cure. While you can’t always foresee issues with renters, there are steps that you can take to drastically reduce the chances of problem tenants gaining access to your rental in the first place.

Having an airtight tenant screening process is one of the best ways that you can protect yourself and your properties from potential devastation. Let’s look at a few tasks that can help you build a metaphoric hedge around your property that helps prevent unsavory tenants from getting in.

1. Require a Tenant Application

The right questions can help you to sift through unqualified tenants at the start. Draft an application form and have it ready for every prospective tenant. Ask each adult to provide basic information, such as name, date of birth, contact information, emergency contacts, and request similar information about any children who live with them.

In addition to asking the date they hope to move in, ask these questions:

• Do you have any pets?
• Do you smoke?
• Have you ever been evicted?
• Have you ever been convicted of a felony?

Be sure to request references, employment information, and a way to contact their previous landlord. Consider asking an attorney look over your form, to ensure both that you’ve covered your bases and that you haven’t asked any questions that could be considered discriminatory or cause legal issues.

2. Start Interviewing

The interview is vital. This is your chance to screen prospective tenants and find out whether or not they’re an ideal match for your property. Good questions to ask include:

• Is your income the same every month, or does it vary?
• Why are you moving?
• Describe your perfect rental space.
• What’s your favorite or least favorite thing about the place you’re living in now?

The interview should give you a good idea about whether or not the prospective tenant will be able to afford the rent and abide by the terms of your rental. This About.Money article, “Ten Questions for Prospective Tenants,” provides a fairly comprehensive list well worth considering for the tenant interview process.

3. Conduct Diligent Research

Always follow through with a check of potential tenants’ references, credit, and possible criminal background. Verify important information that the tenant provides, particularly current employment and previous rental history.

When contacting references, ask how long each person has known the prospective tenant and for their opinion on the reliability and character of the tenant. It’s especially important to get in touch with previous landlords, who may be more likely to paint an accurate picture for you. Current landlords might be desperate for a problem tenant to leave and may gloss over the truth in an effort to get the tenant to move faster.

4. Watch for Warning Signs

Look out for red flags that can alert you to a potential problem tenant. If the applicant makes you feel nervous or seems desperate to move in as quickly as possible, that could be a warning sign.

And watch out for candidates who question every aspect of your rental application process, as this may be an indicator of someone who will be unwilling to abide by your rules when renting. Legitimate candidates understand that it’s important for you to conduct credit and background checks, and most will appreciate the care you take in selecting tenants.

Be sure to compare the application and your notes from the interview to what comes up on the background check. Be extremely wary of any discrepancies.

5. Keep It Legal

Of course, as important as it is to have a solid tenant screening process, it’s also important to ensure that your process complies with the law. While you should watch out for warning signs, never screen tenants based on feelings alone. Be careful to use the same qualifying procedure for all applicants, and treat all candidates equally to prevent accusations of discrimination.

You should also use the same process each time you deny someone, regardless of the reason for denial. A simple e-mail highlighting the reason is sufficient. Doing this properly and in writing can help to prevent any accusations of discrimination. As another legal side note: Be sure to check local laws before collecting application fees or a deposit, as this practice may not be legal in all areas.

6. Get It in Writing

Finally, once you have found a tenant for your property, it’s important to make sure you have a rental agreement in place. This document should contain clear guidelines and will help ensure that you and the tenant are both on the same page, preventing problems from arising later on due to miscommunication. The agreement should include the names of all the residents, occupancy limits, and rental terms, including late fees, acceptable payment methods, and charges if a rent check fails to clear.

While many landlords are hesitant to implement a tenant screening procedure because it’s time-consuming, in the end a solid screening procedure can save time and prevent a world of hassle. You’ll be able to weed out problem renters and save yourself from costly evictions and extensive repairs down the road. Finding a tenant that’s a great match for your property is more than worth the time and effort it takes. You’ll thank yourself later, and your wallet will too. 

by BRENTON HAYDEN, REPRINT

How much you need to earn to buy a house in every major Canadian city

Many say property is the best investment you can make. Bursting housing bubbles and mortgage scandals aside, they’re usually right.

The price of making that investment varies widely in Canada, depending on where you live. We looked at how much you need to earn to buy a house in every major Canadian city.

To get these numbers, we consulted Adrian Williams. He explained that to calculate the income required you need to know the purchase price, down payment, rate, utilities – mortgage qualifying must include a minimum of $100 a month for heating costs – and taxes.

We got the average purchase price per city from the Canadian Real Estate Association, and Williams provided the property tax rates. At his suggestion we used a 2.99% interest rate, which is the average qualifying rate for a 5-year fixed term. We used a down payment of 10% of the purchase price and calculated $100 a month for utilities.

According to Williams, “Other factors that will be included with mortgage qualification are the total monthly payment obligations from credit card, LOC’s, personal and car loans, car lease and other types of credit that require a monthly payment.”

Here is what you need to earn to buy a house in every major Canadian market. (Numbers are rounded to the nearest dollar.)

Toronto

Average price: $587,505

Monthly mortgage payment: $2,560

Property tax: $354

Income required: $113,009

Vancouver

Average price: $819,336

Monthly mortgage payment: $3,570

Property tax: $251

Income required: $147,023

Calgary

Average price: $465,047

Mortgage mortgage payment: $2,026

Property taxes: $236

Income required: $88,578

Edmonton

Average price: $365,520

Mortgage payment: $1,592

Property tax: $244

Salary required: $72,617

Regina

Average price: $331,161

Monthly mortgage payment: $1,443

Property tax: $378

Income required: $72,028

Saskatoon

Average price: $349,322

Monthly mortgage payment: $1,522

Property tax: $366

Income required: $74,546

Winnipeg

Average price: $270,605

Monthly mortgage payment: $1,179

Property tax: $274

Income required: $58,235

Ottawa

Average price: $357,887

Monthly mortgage payment: $1,559

Property tax: $336

Income required: $74,820.28

Montreal

Average price: $344,273

Monthly mortgage payment: $1,500

Property tax: $237

Income required: $68,884

Halifax

Average price: $264,447

Monthly mortgage payment: $1,152

Property tax: $266

Income required: $56,929

by  Elizabeth Bromstein

Protect yourself against condo insurance deductible

 There is a lot of confusion out there by buyers and real estate salespeople as to what insurance is required when buying a condominium. The mistake is thinking that the insurance policy for the building will always cover your situation. In most cases, the buyer will still have to pay for part of the damages, even if they have done nothing wrong.

Here's why:

Condominium buildings do have an insurance policy that insures the building and the units. However, it will not cover any improvements to the unit made by the owners or the owners' contents, should damage occur, whether by water leakage, fire or smoke damage. In addition, if someone you invite into your unit gets hurt, they can sue the owner personally for liability. As a result, most condominium buyers purchase a policy that provides coverage for their contents, any upgrades that they do to their unit and liability insurance to protect them if someone gets hurt visiting their unit.

What is confusing to most buyers is that just about every condominium insurance policy has deductibles, which become the owner's responsibility should any damage occur, even if it is not the owner's fault. The deductibles are usually $5,000 but I have seen many policies that have $10,000 deductibles. What this means is that let's say you leave the bathtub overflowing and water damages the unit below you. You are responsible to pay the deductible, and the condominium will pay for any damage above the deductible. This will also be the case if you are responsible for the HVAC equipment in your unit and any malfunction causes damages to the building or to other units.

Let's say the pipes in the wall burst, your unit was damaged and you did nothing wrong. Although the pipes may be the responsibility of the condominium corporation, you will still have to pay the deductible before the condominium pays anything extra to repair the damages. The only way to fight this is if you could prove that the condominium corporation was negligent in conducting repairs and should have known that the damage could occur. In my experience, you will pay more in legal fees to fight this than the deductible, so it is just preferable to have the proper insurance instead.

In every condominium status certificate, there is a summary given of the insurance policy for the building, including any deductibles. One way to protect yourself is to send this certificate to your own insurance company and tell them that you wish to buy extra coverage for the deductibles noted on the policy.

A better idea, in my opinion, is to use the same insurance company that your building is using for your own insurance package. This company likely understands the deductibles better than anyone and will make sure that your package covers any gap that may exist in the building insurance policy.

If you are buying a condominium as an investment, you still need to make sure that you have this type of insurance protection. Most tenants purchase insurance for their belongings and to cover liability. If you want the tenant to also pay for insurance for the deductibles, you need to say so in your lease agreement and make sure that the tenant provides proof that they have obtained all required insurance coverage before you give them the keys to the unit.

When you understand the insurance you need before you move into a condominium unit, you will be prepared should anything occur later.

By Mark Weisleder, Toronto real estate lawyer. mark@markweisleder.com

Renewing your mortgage? Here’s why you should pick up the phone

I am one of those debt loving people who believe I can do more with my money by carrying a big debt at 3%, than by paying off my house and using up all that cheap capital – but that financial idea is a story for another column.

So, even though my mortgage comes due in October, I decided to lock in a rate four months earlier at a different institution at 2.79% for 5 years fixed. I was thrilled to have another five years of cheap money.

Even though I had already locked in elsewhere, I was interested in what my current mortgage lender would provide. I waited and I waited. Just four weeks before it was due for renewal they sent me a mortgage renewal notice. They could have sent it to me two or three months before my mortgage came due, but they may prefer to leave consumers less time to shop around and more inclined to just renew.

Here is where it gets interesting. “Please indicate which option you are accepting by signing your initials in the appropriate area indicated and return your signed agreement,” the letter stated.

I could just initial the 5-year fixed rate — for the princely rate of 4.79%.

Further on in the letter under a section called “Get the best rate,” it offered to extend to you our special interest rate hold guarantee provided if I signed by my renewal date. But all this says is that if the rate went down between now and about three weeks from now, I would get the lower rate.

This is a full 2% higher than what I am actually going to get somewhere else. If I had a $500,000 mortgage, this would cost me $47,600 more over 5 years by ‘just signing here’ vs. going to a mortgage broker three months in advance.

Just to be sure that I wasn’t missing something I called to make sure that I had the correct instructions and rate on my renewal. An interesting thing happened when I called. In about 30 seconds they said “I can actually get you a rate of 2.99% for 5 years.” I asked why my rate was 4.79%, and they said that this is the standard rate, but I can get this better special rate.

Doing the math, that phone call, using the same $500,000 example, would have saved me $42,800 over 5 years. That was a pretty valuable phone call.

I asked the kind sir on the phone how often people just sign the renewal form, and he said ‘quite a few.’

If a bank gets 5,000 people in the same $500,000 example to sign the renewal, that adds $42.8-million in profit to their bottom line each year.

Please do not automatically sign the friendly mortgage renewal form. At a minimum call to negotiate or call a mortgage lender to get the best deal for you. If you feel some sort of loyalty to your current mortgage provider, then be sure to see someone in person and ask for the very best rate that they give their very best customer. Your future net worth will be glad that you did.

By Ted Rechtshaffen, president and wealth advisor at TriDelta Financial

How Cash Back Mortgages Work

 When buying a home, some homeowners might want to buy all new furniture, complete a home renovation or two, or simply have a safety net of cash for the first few months of homeownership. For many, though, the thought of having extra cash when purchasing a home is nothing more than a dream. Fortunately for those people, some lenders offer something called a “cash back mortgage” which can help make that dream a reality.

With a cash back mortgage, you receive a lump sum cash rebate when your mortgage closes, commonly around the 5% mark – though it can be anywhere from 1.00% to 7.00%, depending on which lender you choose. The rebate is tax-free and can be used for almost any purpose, such as to pay for closing costs, complete renovations, buy furniture or pay down other high-interest debts. Some lenders even let you use the cash back as part, or all of, your down payment.

To see how a cash back mortgage works, here’s a simple example. You purchase a home for $350,000 and put down 20% ($70,000) to avoid CMHC insurance, which means you need to borrow $280,000 via a mortgage loan from the bank. If the lender you chose offers a 1.00% cash back mortgage product, you could get a $2,800 ($280,000 x 1.00%) cash back rebate when your mortgage closes and use that money for whatever you want.

The one downside of cash back mortgage products it that they always come with a fixed mortgage rate, and the interest rate is slightly higher than what’s available for standard (non-cash back) mortgage products; this means you’ll pay more interest, over the life of your mortgage, to compensate the lender for letting you borrow extra money from them.

If we continue with the same example above, because you chose the cash back mortgage product with a rate of 3.79% vs. your lender’s standard 5-year fixed mortgage product at 3.25%, you would pay your lender an additional $4,378 over 5 years – and that’s after you deduct the $2,800 cash back rebate you received from them.

Additionally, if you need to refinance your mortgage or break your mortgage term early, you may be on the hook for a portion of your cash back rebate (a pro-rated amount based on how many months you have left in your term). Some lenders even require you to pay back the amount in full.

If we continue with the example above, let’s say you had to break your mortgage 3 years into your 5-year term. Your lender originally gave you a 1.00% cash back rebate amounting to $2,800, which they now want a pro-rated amount of returned, in addition to any prepayment penalty.

With 2 years (24 months) left in your 5-year (60 month) term, you would need to pay back 40% (24 / 60) of the cash back amount you received; that’s $1,120.

While a cash back mortgage might not be an ideal choice for everyone, it can be a great option for a buyer who needs a little extra money while making such a large financial transaction. If you don’t mind the higher interest rate that comes with it, a cash back mortgage can help you pay for any number of things or simply boost your cash flow during the first few months of homeownership.

Alyssa Richard

Founder; RateHub

More landlords refuse to rent to social assistance recipients

 An increasing number of landlords are reportedly not accepting people on social assistance until they receive the proper support system from provincial government.

Provincial governments will pay a heavy price for not having a fair system in place to support private landlords that house those on social assistance.

That is the view of many landlords who are now refusing to accept those on social assistance. “In Cambridge, we have 3,100 families waiting for non-profit housing and yet there are only a few hundred units being built,” says Kayla Andrade from Ontario Landlords Watch. “Investors are shying away until there are better systems in place.”

She says that landlords want a “three strikes and out system” in place. “They should have to pay their rent with social assistance money or their payment gets cut off,” she says. ‘Every landlord I know wants the three strikes and you are out system.”

While recognizing the frustrations of landlords dealing with non-paying tenants, the Federation of Rental-Housing Providers of Ontario (FRPO)  advises landlord not to refuse a rental to someone just because they are on social assistance support.

"To do so would be a serious violation of section 2.(1) in Ontario’s Human Rights Code (likely also in other provinces) and would certainly result in heavy fines and penalties against the landlord (up to $25,000). Landlords should conduct credit checks, income checks and reference checks, but should never consider social assistance support as a ground for refusal. Landlords can also better protect themselves by requiring guarantors and conducting criminal background checks on rental applicants."

Many landlords have cited the growing number of “professional” tenants taking advantage of loopholes in the system and more sophisticated methods to deceive the landlord.

“We are seeing more tenants bring their own credit checks, which are often fake, to landlords that do not cop on that they are false,” she says. “Work papers are also being forged. There are many places now to get these false papers and so it’s easier for them.”
Written by  Grainne Burns

Steven Porter, Broker - REMAX Aboutowne Realty Corp., Brokerage

How to win a bidding war on a home

In many hot housing markets, bidding wars have been breaking out on a regular basis -- and some house hunters are getting beaten out time and again.

But it's not always about who has the most money. Sellers will accept lower offers if it means less hassle.

What sellers really don't want to do is waste time. That means getting pre-approved for a mortgage and having all your paperwork -- your pre-approval, proof of income, work history and bank statements -- in hand. It also helps to have your lender at the ready so you can act fast.

Related: Fast online mortgage preapproval

But first you have to beat out all of those other bidders.

Here's how you can win over a seller and get the house you want:

Pay with cash. The best way to get a seller's attention is with cold hard cash. That is, if you can afford it. In fact, all-cash sales have become extremely common, representing more than 40% of recent sales. Ever since the US housing meltdown, getting a mortgage has become a longer and more arduous process.

With all-cash offers, sellers are sure the buyer is qualified. And they won't have to wait through the loan approval process.

Depending on the market and the seller's situation, they may even accept a lower offer just because it's in all cash.

Get your mortgage ready in advance. Don't have a ton of cash to put on the table? Try pre-underwriting a mortgage instead.

With pre-underwriting, lenders take the pre-approval process a step further by reviewing all of the income and asset documentation that they would typically need to approve a mortgage.

Related: A foolproof plan to secure the best financing rates

Sellers look favorably on pre-underwritten offers because they don't have to worry that the buyer's mortgage application will be rejected. All that needs to be done after the contract is signed is to complete an appraisal.

Be flexible (but not foolish) with contingencies. Contingencies are clauses that allow buyers to back out of deals if specified conditions are not met. A bidder will sign a contract to buy a home contingent on the appraisal coming in at or over the selling price, for example.

Another common contingency clause is the right to back out if you can't find a buyer for your home. In hot markets, buyers often waive this right because they figure it should be easy to sell their old home quickly. In less heated markets, you could get stuck paying two mortgages.

Related: Housing Market Newbies BEWARE

One contingency you should think twice about before waiving is the home inspection. Should the inspector discover a major problem, such as widespread insect damage or a badly cracked foundation, it could cost far too much to fix. You want to know that before making a commitment you can't back out of.

Related: 11 Home Inspection Pitfalls

Be first. See the home as soon as it comes on the market. That way, you can get your bid in early and preempt later offers.

Real estate agent Steven Porter, has a new service that can help. Its a VIP House Hunter service that enables buyers to receive notification of new listings the moment signal that they're put up for sale allowing buyers to beat out the competition. Homebuyers can find these potential properties by neighbourhood, price, type or city.

Agree to outbid everyone. Do you really want the place? You can outmatch every other bidder by creating a contract with a so-called "escalation clause?"

The clause basically states that you will pay $1,000 or $10,000 more than whatever the highest bidder offers.

So if the seller gets an offer for $200,000, your bid will automatically jump to $201,000 if you have an escalation clause.

Related: How to negotiate a better price

The danger with escalation clauses is twofold. You never really know if the other offer is real. Sellers can ask someone to submit an offer just to get the buyer to raise their bid.

The second problem is that the final home price may be a lot higher than the appraised value of the home. That could jeopardize the mortgage or force you to come up with a lot of cash to make up for the shortfall.

One way to prevent that from happening is to place a cap on the bid, offering to pay no more than 10% or 20% above the original asking price.

Using a cap means, however, that you may not end up with the home in the end. 

Find homes for sale.

Based on a editorial by Les Christie, CNN Money

Steven Porter, Broker, Buyer Rep. - REMAX Aboutowne Realty Corp. Brokerage

HOME PRICES UP 0.8% IN MAY

In May the Teranet-National Bank National Composite House Price Index™ was up 0.8% from the previous month. This increase, though substantial in itself, was the fifth smallest for May in the 16 years covered by the index. The countrywide composite index rose to an all-time high, but only three of the 11 metropolitan markets surveyed did the same. Prices were up from the previous month in seven markets and by more than the national average in five. The 3.1% monthly gain in Halifax was the largest in the history of that market. Prices rose 2.0% in Hamilton, 1.6% in Quebec City, 1.3% in Toronto, 1.1% in Calgary, 0.6% in Edmonton and 0.5% in Montreal. Calgary's advance was the fourth in a row exceeding 1%, taking prices to a new high. New records were also reached in Hamilton and Toronto. Prices were unchanged from the month before in Ottawa-Gatineau and Vancouver. The reading for Vancouver ended 12 consecutive months of rising prices. Prices were down from the previous month in Victoria (−0.1%) and Winnipeg (−0.3%).

Since in May 2013 the monthly rise of the composite index was 1.1%, this May's 0.8% rise meant that 12 month home price inflation decelerated 0.3 percentage points to 4.6%, where it was in March. For the third month in a row, prices were down from a year earlier in all four markets east of Toronto: Quebec City (−1.6%), Ottawa-Gatineau (−1.4%), Montreal (−1.2%) and Halifax (−0.4%). In Victoria prices were flat from a year earlier. The 12-month rise trailed the countrywide average in Winnipeg (+1.0%) and Edmonton (+2.6%) and led it in Hamilton (+5.9%), Toronto (+6.0%), Vancouver (+8.2%) and Calgary (+8.7%). The softness of prices east of Toronto is consistent with the excess supply prevailing in the resale markets of these metropolitan areas. That being said, market conditions are generally balanced elsewhere, and are even tight in Calgary.

Source Terranet National Housing Bank Price Index

Steven Porter, Broker - REMAX Aboutowne Realty Corp

CMHC drops some mortgage insurance products

 Jun 2, 2014
Canada Mortgage and Housing Corp. has discontinued the Second Home and Self-Employed Without 3rd Party Income Validation mortgage insurance products. Self-employed Canadians can still qualify for CMHC-insured financing through CMHC homeowner products with a validation of their income using traditional methods.

The federal housing agency says the two programs combined account for less than three per cent of CMHC’s insured business volumes in units. “Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market,” says the agency.

CMHC introduced its Self Employed Without Traditional 3rd Party Validation of Income product in 2007. The product allowed self-employed borrowers who were unable to provide traditional sources of income validation to access CMHC-insured financing for a one or two-unit owner-occupied property.

CMHC introduced the Second Home product in 2005. It offered borrowers more financing options when purchasing an owner-occupied second home in Canada.

CMHC says it will limit the availability of homeowner mortgage loan insurance to only one property (one to four units) per borrower/co-borrower at any given time.

Posted by Steven Porter, Broker, REMAX Aboutowne Realty Corp.

House prices to increase as new home builds slow, CMHC says

 Housing agency expects housing starts to slow down a little this year and next

Canada's national housing agency says it expects fewer homes to be built this year and next as the market absorbs a flood of new condominiums already underway.

The Canada Mortgage and Housing Corporation revised its forecast for housing starts lower for 2014 and 2015, saying it expects there to be between 160,600 and 203,600 construction starts next year.

Those come on the heels of the between 172,300 and 189,900 it expects to be built this year.

In 2013, 187,923 new Canadian homes were built. That was lower than the 214,000 starts the year before.

Growth slowing

"Builders are expected to continue to manage their starts activity in order to ensure that demand from buyers seeking new condominium units is first channelled toward unsold completed units or unsold units that are currently under construction," CMHC economist Mathieu Laberge said.

On the price side, the housing agency expects activity to slow down, but still remain in growth territory. Its point forecast for the average price for 2014 as a whole is up by 3.5 per cent to $396,000 before ticking up another 1.6 per cent next year to $402,200.

Data from the Canadian Real Estate Association released last week showed the average price of a Canadian home hit $409,708 last month, up 7.6 per cent in the last 12 months.

In terms of sales, CMHC also sees activity slowing down. The housing agency expects about 457,900 homes to be sold in Canada this year, up only marginally from 457,338 in 2013. In 2015, the sales forecast picks up a little to 471,100 units.

CMHC economist Laberge says he sees no catalysts that would result in a hard crash in the market as some have predicted because fundamentals, particularly population, employment and economic growth, low interest rates and the pool of first-time buyers all support the market.

"When we set house prices against those fundamentals, we do see some modest level of over-evaluation, but it's within historical norms."

CIBC housing analyst Benjamin Tal agrees with the CMHC view, saying a crash would require a "trigger," such as sharply rising mortgage rates, but there is no sign of that happening. The Bank of Canada under Stephen Poloz has taken a dovish stance on rates and many don't expect any hikes until the spring of 2016, and even then that the increases will be small.

Reposted by: Steven Porter, Broker - REMAX Aboutowne Realty Corp.

Municipal land transfer tax threatens local economies

 Our government affects our lives in many ways through policy, including what they tax and how. It is a price to pay for living in a great democratic society, but something we must keep an eye on so that negatives do not outweigh benefits.
In particular, taxes affect the real estate market and home ownership. One obvious tax that home buyers and owners regularly consider is property tax, by which the city pays for many important services. And of course, we’re especially sensitive to property tax rates in an election year.
Cities like Hamilton get criticized for having high tax rates. Without going into a detailed analysis, I would suggest that there are always opportunities for improvement in a budget, but a direct comparison of one city’s tax rates to another’s is not always “apples to apples” – there are many things to take into consideration such as property values and differences in the tax base.
There are other taxes that impact the real estate market, too, affecting people’s buying ability.
New homes are subject to HST and all real estate transactions in Ontario require payment of the provincial Land Transfer Tax (LTT). There are limited relief programs for first-time buyers, but if you are paying these taxes they are upfront expenses on top of your down payment.
While these taxes are all well-established, there is also a new threat on the horizon: the municipal land transfer tax (MLTT). An MLTT is in addition to the provincial LTT, adding to the expense of purchasing your next home. Currently, Toronto is the only city allowed an MLTT, but politicians from other areas are lobbying for this tax power as well.
The problem with MLTTs is that they reduce homebuyers’ purchasing power, sometimes forcing them to delay buying indefinitely. This impacts on local economies, where every home purchase leads to an average of $53,000 in economic spin-off, from professional fees, renovations, appliances and so on. Where houses are not bought, this doesn’t happen.
It is estimated that Toronto’s MLTT cost its economy $2.3 billion in the short time it has existed, while only raising $1.6 billion in revenue.
There are other negative consequences of an MLTT and I would urge you to visit the Ontario Real Estate Association’s informative website at http://donttaxmydream.ca. Learn about it and ask your provincial candidates what their stance is on the MLTT for other municipalities.
by Jeff Bonner

Posted by Steven Porter, RE/MAX Aboutowne Realty Corp.

Mortgage rates in Canada just fell below 2% from lenders

 If you thought mortgage rates could not go any lower, you were wrong. Investors Group is rocking the mortgage world with what appears to be the deepest discount in Canadian history on a floating rate loan, offering a deal that takes an effective mortgage rate down to 1.99%.
Full article –http://tinyurl.com/l9zureb

Why variable mortgages are the way to go this spring

Video

Rob Carrick, Globe & Mail talks to David Larock, a mortgage broker with Integrated Mortgage Planners, about why homeowners may want to consider variate-rate mortgages as we head into the spring buying season. http://fw.to/UEHEk9c 

Reposted by Steven Porter, REMAX Aboutowne Realty Corp.

5 Questions to ask before ever breaking your mortgage.

  So you're looking to "trade-up" or break your mortgage to enjoy these record low interest rates.? Not so fast, it could cost you  $1,000's more than any anticipated savings.

The KEY question is: How much will it cost YOU?

Get the answers to these questions from your current lender before you ever commit to trading up to a new home or breaking your mortgage:

1. You need to know what the penalties will be if you break or port your mortgage to another home. Know this before you ever sign a mortgage.
2. Can I port the mortgage to another home? Let’s say you have to sell your home, can that mortgage be transferred to the next property you buy?
3. Are you tied to the lender you signed your mortgage with forever? Some mortgages cannot be broken unless you sell your home.
4. What are the prepayment privileges on your mortgage? Large prepayment privileges will allow you to mitigate large penalties by making lump sum payments thereby lowering any penalty for breaking the mortgage prior to the end of its term.
5. How is the interest rate differential penalty calculated? This may be the most important factor. If the bank uses the qualifying rate or posted rate to calculate any penalty, it could cost you a bundle.

Steven Porter - REMAX Aboutowne Realty Corp.

HOME PRICES FLAT IN MARCH

  In March the Teranet-National Bank National Composite House Price Index™ was essentially unchanged from the previous month. Except for the recession year 2009, this is the first time in 15 years of index data collection that home prices for Canada as a whole have failed to advance in March. However, the story varied widely from east to west. In all five metropolitan markets west of Ontario, prices were up from the month before: Calgary (1.4%), Vancouver (0.6%), Edmonton and Victoria (0.4%) and Winnipeg (0.2%). Prices were also up in Halifax (0.8%), though not enough to make up the pronounced declines of the previous three months. In Toronto and Quebec City prices were flat. In the remaining markets prices were down from February: 1.8% in Montreal, 0.7% in Hamilton and 0.6% in Ottawa-Gatineau. For this last market it was the seventh consecutive monthly decrease, for a cumulative decline of 3.5%. Prices have fallen in four of the last six months in Hamilton (cumulative decline of 2.0% over the period) and in six of the last eight months in Montreal (cumulative decline 3.0%) and Quebec City (cumulative decline 3.4%). Halifax home prices were down 4.9% from nine months ago.

Since in March 2013 the index was up from the month before, the flat reading of March 2014 resulted in a deceleration of 12 month home price inflation, to 4.6% from 5.0%. It was the first time in nine months that 12-month inflation has slowed. The gain from a year earlier was higher than the cross-country average in Calgary (9.7%), Vancouver (7.6%), Toronto (5.8%), Hamilton (5.2%) and Edmonton (4.7%). It was below the average in Winnipeg (3.4%) and Victoria (0.2%). For Victoria it was the first time in 13 months that home prices were up from a year earlier. Meanwhile, all the markets east of Toronto surveyed for the index were down from a year earlier, Montreal (−0.7%) for the first time since November 1996, Quebec City (−2.4%) for a second straight month, and Ottawa-Gatineau (−1.2%) and Halifax (−4.2%) for a third straight month.
Source - Teranet – National Bank House Price Index™

Posted by - Steven Porter, REMAX Aboutowne Realty Corp.

Time for law changes, says landlords

  Landlords across the country are calling for a bad tenant registry and changes in legislation to protect them against rogue renters
More renters are taking advantage of legal loopholes and tenant-friendly municipalities, and leaving landlords with unpaid bills and lost revenue.
A B.C. couple made national headlines this week for failing to pay for rent for almost two years, and cheating six landlords out of rent.
Landlords in the province are calling on the Residential Tenancy Branch to keep a record of all bad tenants and to provide this information to potential landlords, but they are arguing that privacy laws make this registry an impossible task.
Speaking to CREW, Kalya Andrade from Ontario Landlords Watch says every legislative act should be reviewed as, at the moment, it is lies very much in favour of the tenant.
“There are a lot more tenants who are targeting landlords that they can take advantage and use the legal loopholes to get away with it. We are coming across more and more cases like this and something needs to be done. Unfortunately, the politicians simply do not want to help the landlords,” says Andrade.
As reported by CREW this week, condo tenants are calling for help against demanding management boards and landlords.
Canadian Real Estate Wealth - Jamie Henry

Posted by Steven Porter - REMAX Aboutowne Realty Corp.

Reverse Mortgages – A mortgage option for Retirees

 What exactly is a Reverse Mortgage?

A Reverse Mortgage is a loan available only to homeowners 55 or older. The amount you can borrow is based upon several factors including your age and the value of your home.

What's the difference between a Reverse Mortgage and a traditional loan?

There are two main differences. First, unlike a traditional loan, you can get a Reverse Mortgage regardless of your income or credit rating.

Second, you are not required to make any payments on a Reverse Mortgage until you choose to move or sell your home. (However, you can make payments on the loan if you choose to do so. You’ll even get a discount on the interest rate if you do.)

When you do decide to move or sell, the loan is repaid from the proceeds of the sale of the home. After the loan is repaid, all remaining money belongs to you and your estate.

How much equity (money) will be left in my home after I repay the loan?

On average, homeowners have well over 50% of the value of their home left to enjoy after repaying the loan. This money belongs to you. The exact amount will depend upon several factors, including: the amount of your loan, the value of your home, and the amount of time passed since you took out the loan.

Repost by Steven Porter, REMAX Aboutowne Realty Corp.

More Canadian real estate being scooped up by foreign investors

Foreign investment proved to be one of the main drivers in the hotel sector last year, says a new report.

According to Colliers International, investors from outside the country bought $857-million worth of hotels in 2013 — the highest level for foreign investment in the sector since 2007.

The foreign investment figure was driven by one of the largest transactions of the year, the five-property Westin Canadian hotel portfolio which was responsible for 89% of all foreign purchases in the year. The winning bid was from an affiliate of U.S.-based Starwood Capital Group and backed by Middle East investors.

“This transaction had a significant impact on overall pricing and metrics for the year given its size and scope,” said Colliers, in its report.

Overall, it was a pretty good year for hotel investment with the $2.02-billion activity doubling the annual average of $1-billion over the past five years. There has been $16-billion in activity over the past decade.

“Much of this increased liquidity entering the hotel market is due to the entry of private equity vehicles, bringing with them massive amounts of capital and legitimizing the hotel asset class within the Canadian commercial real estate realm,” Colliers said in its report.

Institutional buyers have been net buyers of $2.9-billion of real estate over the past decade, the largest change in the structure of ownership. Public companies have been net sellers of $2.4-billion in real estate over the same period.

The price of a hotel room also continues to rise. The average hotel room sold for $133,000 last year, a 59% increase from a year earlier. Even removing some of the larger strategic deals, the average price still grew by 28% to $106,900.

G. Marr, Financial Post

Repost by Steven Porter, Broker - RE/MAX Aboutowne Realty Corp., Brokerage