Is the Bottom Going to Drop Out of the Real Estate Market?

January 8th, 2016

Happy New Year...

There are always a slew of predictions thrown around at the beginning of a new year and 2016 seems to be rife with prognostication of economic doom and gloom. I can understand that folks out in Alberta are a little concerned, the oilfields having already cut back to the bones. In fact, most of the gloom seems to emanate from that direction. Still, the IMF predicts modes growth for the Canadian economy overall.

So why do people keep suggesting the bottom is about to fall out of the real estate market? Sure, Alberta is bracing itself... but there's a market that grew like crazy over the past decade, alongside the boom in oil production. British Columbia's Business Council suggests that net interprovincial migration in the 18- to 44-year-old category (the primary working age) caused Alberta’s population to grow by 200,000... all of those extra people put a huge demand on property, causing prices to climb. Even with the slow down, there were 1200 more people that moved to Alberta than the number who moved away in the 3rd quarter of last year.

Here, in Ontario, we haven't had the same economic factors to cause a dramatic influx of people. Alberta's economy (and the price of housing) is directly linked to the ups and downs of the oil market. Most predictions here suggest that with the low interest rates, the weak Canadian dollar and transparency brought on by advances in technology will continue to entice overseas investors. & that means, there's always someone new coming along to purchase property.

How Close is the Universe to Understanding Consciousness?

December 24th, 2015

This morning, I watched a panel of scientists discuss consciousness in an online video recorded at SAND15 US. Here's the link, if you want to watch it too:

http://scienceandnonduality.com/?post_type=post&p=91385&utm_content=buffer1d342&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

It talks about the differences between science and consciousness. There's a lot of chat about science and spirituality. There's a lot of discussion around mathematics and science, experiments and empirical findings.

There is no definitive understanding of consciousness. Most of the scientists on this panel talk about consciousness as something that "does", it feels and perceives- in other words it's a function- the perception of experience. The moderator, who frequently speaks of the Indian Vedic teachings, speaks of consciousness as being what makes feeling, tasting and other perceptions and thoughts possible.

The most basic concept of physics is energy... which is an undefined term. This is articulated beautifully by one member of the panel (Stuart Hameroff) and I believe this is truly at the heart of the question. He goes on to say that science always talks about what energy does, rather than what energy is. He suggests that consciousness is possible without biology- that it's process on the edge between the quantum and classical worlds and that the edge is collapse. He believes that consciousness occurs in a self-collapse, when the brain organizes the universal consciousness- 40 times a millisecond or more.

Others believe the collapse occurs ubiquitously, meaning that it is simply present in the universe. Resonant energies give rise to consciousness and the brain organizes the collapses.

I've always thought that individual consciousness is an internal system that gives context to stimuli and when we are unconscious we simply have no context.

Of course, in the video the scientists go on to discuss platonic values... how we are programmed to seek pleasant experiences, which relates to survival. They discuss the possibility of mapping consciousness mathematically and how the pragmatic view of the quantum state of reality is mathematical, a practical set of rules that helps us to make useful predictions and allow us to choose what we are next going to probe. Then comes the argument for causality.

In the video they discuss whether the brain creates consciousness or not... and the difference between philosophical, theological and scientific views. Then on to our non-conscious absorption of information.

While watching, I keep thinking back to the powerful image of brain neurons and the universe that I first saw years ago:

Large Vacant Acreage Properties: a hot commodity

December 9th, 2015

There’s a growing demand for large parcels of vacant land and while purchasing rural property is an experience that is similar to buying property in a city, it’s important to take a clear look at how the property meets your current needs and explore its potential for your future plans. If you understand the differences between an urban and rural property, you can make informed decisions about what to expect from your rural property and what issues to consider. While Provincial and Federal regulations may affect the property, generally speaking, local municipalities are the best place to begin your investigation.

Life in the country is different than in the city. Life in rural Ontario involves a much closer relationship with the natural environment and while that includes viewing wildlife and enjoying the peaceful tranquility of the countryside, it also means that the natural environment has a much more direct impact on you and your property. Life in a rural area brings many unique responsibilities. As a landowner, you may be solely responsible for securing a source for safe drinking water, maintaining a septic system to deal with waste, taking your household garbage to a disposal site, maintaining private access roads and trails and, in some cases, flood and fire risk management. In addition to asking about the well and septic, you can ask for the well record and the septic use permit. If the Seller doesn't have these items, you might be able to order them from the local health authority. You might also include inspections of these systems, as a condition in the Agreement for Purchase and Sale.

It's important to remember that having an acreage is a bit of a romantic notion. There is work involved in maintaining vacant property. Mother nature can be harsh and it takes effort to keep trails open. Coming from a busy urban centre, people often think they want to totally get away from it all... but ultimately experience culture shock. People in small towns tend to give others a great deal more space and even a small property can feel a great deal more isolated than life in a big city. You might find it's better to be a little out of the way, rather than really remote.

Other items you might want to in investigate include:

Finding out about the actual property:

Ask what the property is zoned and what uses that particular zoning will allow. In some cases, you will need a specific zoning for agricultural pursuits and in other cases, use is fairly wide open. Remember, parts of the property that are unstable- either boggy or subject to flooding- may have been identified as environmentally protected. This has been instituted in order to protect sensitive landscapes, the municipality may have rules about setbacks, in order to prevent further damage or erosion.

Find out if there are any special zoning regulations or restrictions. Ensure that the all existing development conforms to local zoning rules. You should verify this information with the local municipality. It’s a good idea to get a copy of the survey, if one is available, and it’s preferable to have all buildings shown on the survey. You want to make sure that any structures included are fully within the property boundaries. It's a good idea to have the Seller flag the corners of the property, as well.

Ask about prior uses, for instance, lands previously farmed may have abandoned wells, old household dump sites or derelict field-drainage systems. If the Seller doesn't know, you can check with the municipality or stop in and ask the neighbours. This gives you an opportunity to meet the owners of adjoining properties.

Investigate the bundle of rights included in the sale. Are timber rights included? Mineral Rights? Surface rights? Mining Rights? This might mean a trip to the local ministry offices or your solicitor, but it is important information. You might want to ask your lawyer about the implications and check into obtaining these rights.

Financing options:

It’s important to keep in mind that mortgage institutions and banks are not particularly interested in financing raw land. If you don't have the funds to pay for the purchase, you should make your offer conditional upon obtaining suitable financing. Do you have a line of credit that you can use? Is the seller willing to hold a mortgage?

Know the neighbourhood:

Check out the neighbouring properties. What are the current uses of the adjacent properties? You will want to make sure that you are comfortable being next door to a target range, a paint-ball establishment, campground or pig farm.

Stop by and meet the neighbours, you may find yourself calling upon them at some point and you will want to know what you are dealing with. It’s not a bad idea to stop into local yard sales, talk to the people, tell them you are thinking of relocating- but be totally honest and mostly listen… in small towns, people can see right through a story and you will want to have a positive impression.

Incidentally, if you were born and raised in the city, you will need to learn new social rules… you must understand that when you relocate to a rural area you will be welcomed as a new member of the community, however, you will never be equal to those who have generations of family established or buried there. Many people who move from the city try to introduce change to the community, this is particularly disastrous- most locals have the attitude that if you don't join ‘em, go back to where you came from.

Price:

This is a case where you really want to find a good local Realtor to represent you. Ask them to provide you with all the comparable sales data from the multiple-listing service. While there might be ballpark prices per acre, there is generally a range. Value can be affected by the proportion of buildable land, severance potential, streams/creeks/ponds, accessibility, availability of utilities, known timber value and a number of other possibilities. Your Realtor should be able to help you discern how the value can be justified. If your Realtor can't find any really good comparisons, you can make an offer contingent upon obtaining a satisfactory appraisal- in this case, you will have to pay to have the price evaluated. If the appraisal comes in lower than your offer, you have a basis with which to renegotiate the contract... if it comes in higher, you just might have found yourself a bargain and you can check with your Realtor and the appraiser to see if they might know why the property is selling below value.

Typical Closings Costs for a Buyer

December 2nd, 2015

Aside from the deposit and down payment, there are out of pocket expenses that a Buyer needs to be prepared to pay.

1. Land Transfer Tax

When you buy land or an interest in land in Ontario, you pay Ontario's land transfer tax. Land includes any buildings, buildings to be constructed, and fixtures (such as light fixtures, built-in appliances and cabinetry).

The land transfer tax rate is the same for residents and non-residents of Canada. The amount of Land Transfer Tax is calculated using the following formula:

-Residential property: land that contains one or two single family residences
-VC: Value of the consideration for the conveyance or disposition
-LTT: Land transfer tax payable

Formula

up to and including $55,000 LTT = VC × 0.005
above $55,000 and up to $250,000 LTT = (VC × 0.01) - $275
above $250,000, for property other than residential LTT = (VC × 0.015) - $1,525
above $250,000 up to $400,000, for residential property LTT = (VC × 0.015) - $1,525
for residential property above $400,000 LTT = (VC × 0.02) - $3,525

Ontario's land transfer tax is payable when the transfer is registered. If you are a first-time homebuyer, you may be eligible for a refund of all or part of the land transfer tax. Refund requests must be made within 18 months after the date of the transfer.

Some person(s) do not pay land transfer tax on certain transfers of land. The exemptions include:
-certain transfers between spouses
-certain transfers from an individual to his or her family business corporation
-certain transfers of farmed land between family members
-certain transfers of a life lease from a non-profit organization or a charity.

2. Harmonized Sales Tax (HST)

This tax applies only to newly constructed homes or substantially renovated homes. It does not apply to resale homes. Buyers of new homes may receive a rebate of up to $24,000 of the provincial portion (8%) of the HST. If you have any questions about the HST rebate you can contact the Canada Revenue Agency at 1 800 959-1953.

3. Mortgage Fees

Most banks don't charge fees to set up a mortgage, although some do. Always ask your financial institution if they charge a fee. Some will pass along the costs of the mortgage appraisal, which is generally somewhere between $250 and $500.

Remember, if your down payment is less than 20% of the purchase price, you will be taking out a high-ratio mortgage and you will be expected to pay for default insurance. Canada Mortgage Housing Corporation and Genworth (the two major default insurance providers) charge fees on the basis of a sliding scale:

Mortgage amount Cost of insurance

80% to 85% of purchase price 1.80% of mortgage

85% to 90% of purchase price 2.40% of mortgage

90% to 95% of purchase price 3.60% of mortgage

over 95% 3.85% of purchase price

These fees are subject to Provincial Sales Tax.

4. Insurance

Your mortgage company will want to be sure that you have enough fire and casualty insurance on the property. Costs vary and you will need to shop around. Plan on spending close to $1000.

5. Title Insurance

Title insurance isn't required. Title insurance protects your financial interest in real property against loss due to title defects, liens or other matters that might not be caught by the searcher performed by your lawyer. Title insurance typically costs about $300.

6. Legal Fees

Your lawyer will conduct a number of searches and provide you with an opinion of title for the property you are buying. This ensures that the sale is legal and binding and that there are no liens against the property. In addition to fees for their time, lawyers will charge buyers for the cost of the searches, faxes, postage and other sundry expenses. You can call ahead and ask a lawyer for a quote on anticipated closing costs. Fees vary but you can expect to pay between $750 and $1500.

7. Adjustments

When you buy a property, you need to advise the utility companies that provide service and set up your own accounts for things like electricity. Meters are read on the day that the property changes hands. Adjustments are calculated by the lawyers in the transaction, to ensure that any costs due up to the day of closing are charged to the Seller and any after, are charged to the Buyer. If the Seller has prepaid expenses, the portion that applies to the time after closing will be reimbursed. Property tax is a charge that is often paid a few months in advance and, as such, will typically appear on a statement of adjustments.

Seller Property Information Statements (SPIS)

November 30th, 2015

Last month, the matter of Ménard. v. Parsons was ruled upon by the Ontario Superior Court of Justice. The trial lasted three days and the decision nicely illustrates the difficulties with the standard information forms used by Realtors in Ontario.

Citation: Ménard v. Parsons, 2015 ONSC 4123
COURT FILE NO.: SR 782-2012
DATE: 2015/10/19
L’Orignal, Ontario

This court case was the result of a failed real estate transaction. At the core of the litigation was whether or not the Seller had provided the Buyer with adequate disclosure of the fact that the home had been built on top of a discontinued landfill.

In 1996, the Seller acquired a property, in Enbrun, Ontario, from his father. An environmental assessment conducted at that time concluded that if certain precautionary measures were undertaken to the north half of the property it could be developed for residential use. It then listed several preventative measures that should form part of the development process. The most significant of the measures was to “install a clay barrier which would prevent the migration of suspected contaminants from the landfill material on to the north half of the property were residential development would take place.

In March of 1997, the Seller (and his father) installed the recommended barrier and he began to build on the property. The home was completed in four months. In the summer of 2011, the Sellers decided to sell. They tried selling it privately, at first, then listed it with a Realtor. The Sellers submit that they told the listing Realtor about the old landfill on the site. That Realtor passed away and the listing was passed over to another Realtor, in the same office on August 19, 2011. The new Realtor was not aware of the discontinued landfill.
On November 7, 2011, the Buyers entered into an agreement of purchase and sale with the Seller, to buy the property. The transaction was scheduled to close on March 9, 2012.

Schedule A to the agreement of purchase and sale included a list of conditions including that the seller provide a “seller property information statement” (SPIS) that was in their possession.

At page 2 of the SPIS there is a paragraph entitled Environmental: (provide applicable additional comments). Question 1 under that paragraph stipulates: “Are you aware of possible environmental problems or soil contamination of any kind on the property or in the immediate area? e.g.: radon gas, toxic waste, underground gasoline or fuel tanks etc.” to which the seller indicated “unknown”.

Question 2 under that heading stipulates: “Are there any existing or proposed waste dumps, disposal sites or landfills in the immediate area?” to which the seller indicated “yes”.

In 2011 there was a notorious battle in Embrun and the surrounding area concerning the prospect of a chemical disposal site being constructed and the issue was constantly in the local news. They Buyers had assumed this was the reason for the “yes” on the SPIS.

On November 17, 2011, a test of the well water located on the property indicated significant evidence of bacterial contamination of the water, making it unsafe to drink. This was resolved by installing a water filtration system.

On February 21, 2012, the Buyers were contacted by their real estate lawyer who advised them that part of the lot was built on top of a discontinued landfill site. After seeing several letters and an engineering report that confirmed the contamination, the Buyers advised their lawyer not to complete the transaction.

The Seller later sold the property for $100K less and sued the original Buyers for breach of contract, wanting them to pay the difference.

In the ruling, the judge mentions a whole bunch of legal precedents, concluding that:

On the facts of this case negligent representation has been made out. The duty of care existed between the plaintiff and defendants based upon the preparation and providing of an SPIS in the context of a real estate transaction. He was required to “speak truthfully and completely about the matters raised in the unambiguous questions” (Krawchuck at para. 77). He did not.

The defendants relied on these representations by going forward with the transaction and incurred special damages as a result.

In this case, the court awarded the Buyers counter-suit and the Seller had to pay the Buyer:

$508.50 for the home inspection
$565 for the inspection report
$904 for the water inspection report
$2,042.88 in lawyer’s fees for the failed real estate transaction