About 70% of all deals will run into a snag.

These all could be deal breakers if not handled properly. The solution to these “situations” is dedication, research and a lot of plea bargaining and negotiating. These “situations” could be anything from declined financing, irregularities on the certificate of location, timelines not being met, fighting among buyers and sellers, municipal assessments not done properly, building inspections gone bad and many more.

For example: My client bought an apartment building that came with a house as part of the title. He renovated the house, legally divided the two properties and now wanted to list the house to sell. Between the two properties was a shared driveway to their garages. Because this is now a new division, the city hadn’t assessed the house for the taxes. Now we have an accepted promise to purchase in which one of the conditions is to accept the taxes.

After many phone calls to the city, we were told that the driveway is called a “indivise horizontal”, like a duplex gone co-coop (indivise vertical), similar to a condo building that is shared which comes with rules and regulations and owner percentages. We asked the city how this should be done. They didn’t have the answers even though this was a policy that they put into place. They had to call a specialised city notary who had to research it. The land surveyor and the city were consulted and it took over two weeks to get the right directions for the seller’s notary to prepare the supporting documents. Once that was done, a city appraiser would have to assess the property to calculate the new tax bill. However, there was a 3 month backlog.

What saved the deal was that the city appraiser gave us some clues on how to find comparables and do an average to find out an approximate cost of the taxes. I was online looking at all the buildings and land that I could find in the allotted area and came up with an approximate average of tax prices that I could present to the buyer. Luckily the buyer accepted. Our deadline to sign was in 3 days. We made our signing deadline and everyone was happy.

Without the persistence of my vendor, the helpfulness of his notary and my research this deal may have been lost. Another great reason to be surrounded with dedicated professionals.

Hi I’m Jennifer Walker, the author and Real Estate Broker. For more info call me (514) 402-8444 or EMAIL ME!

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1. Paying off your mortgage. If you own your home free and clear, congratulations, go to step #2. For the rest of you, contact your financial institution and ask them the balance. Also, very important, ask them the cost to you for early discharge. Try and get this in writing because I’ve seen incidents where I hear and see two different amounts.

2. Costs for discharging your mortgage. If you have an “open” mortgage, congratulations and go to step #3. For those who have a “closed” mortgage, the usually fees goes like this: Whichever is higher: 3 months interest or calculating the interest rate you have now, minus today’s rate and multiply by the amount of months left. I’ve heard of some amounting to $55,000 with the second calculation. (make note: the calculations differ from bank to bank)

3. Transferring your mortgage. Sometimes banks have a policy where you can transfer your existing mortgage to a new home and get a second 1rst ranking to cover the rest. This might be something to consider as a feature before you chose your financial institution. This feature is of great benefit and will save you much money.

4. Assuming your mortgage. This might be something to consider if the banks will allow it. It might be worth selling your house at a lower price to have someone take over your mortgage if you have extremely high penalty fees.

5. Did you find a home while still owning another? Your mortgage lender could do “bridge financing” for you. Which means that the bank will charge you a fee during the intern of owning your new home and selling your old.

6. Capital gains tax. If your home is your primary residence, you will not have to pay any capital gains. If it’s all revenue, be prepared to pay 50%. If you are renting out a portion of it, you will have to pay capital gains on the % of the home that is being rented out. If you are selling a vacation property, you may also owe on that as well. If you deduct a portion of your home for business, you might have to pay a portion on that as well. Talk with your accountant.

7. Your Realtor. Commission. Plus realtor fees are subject to GST & PST

8. Notary costs. Fee to notary for paperwork to discharge mortgage. Ask your notary for exact cost. Also, there will be adjustments for the municipal & school taxes and possibly for an oil tank, rents, condo fees, etc.

9. Home cleaning, tweaking and repair. This is sometimes overlooked by sellers. This is what I strongly suggest: Get a professional cleaner in or do it yourself getting it 100% clean, including things like mouldings, windows, grass cut, etc. Replacing or fix any broken elements. Fix and paint stains, past leaks, damaged walls, floors, etc.

10. Certificate of Location.

Normally if your certificate is newer, it’s not necessary. Please ask your notary if it is acceptable. Even if you haven’t done any changes to your property, the bylaws in your neighbourhood may have changed, and in that case you would need a new one.

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The first guest was representing CMHC. He talked about Real Estate sales statistics, what type of market we are in and forecasted what will be happening in 2011.

The second presentation was from Dave Richardson, VP of Global Financial Services. He talked about the Canadian market, our current situation and gave his predictions for 2011.

WHERE TO FIND OWNERS

REPOSSESSION
I’ve seen well over 100 of them and these are my thoughts:

There is not a lot on market. As of today, March 8, 2011 for the whole island of Montreal:
REVENUE: 18 repos out of 2056
HOMES: 7 repos out of 2573
CONDOS: 15 repos out of 5915 (.00254%)

HOT AREA – FINDING THE TRENDS

Watch the areas: Growth and decline (vacancy for both businesses and apartments), construction, new businesses, new development, new transportation. (Watch out for new condo development!!!, only because one building is going up, doesn’t mean that the promoters did any marketing research)

Look for the next frontier: Is there a town that is on the outskirts and still at low prices? Keep your eyes on that, people won’t mind driving that extra 5-10 minutes to save $30K-$50K on housing prices.

Look for areas surrounded by big growth: For example, a couple of years ago you could buy a 3 bedroom bungalow in CSL West for under $300K, in a matter of 6 months, most of that area went up about $60K. Why? Because it was the only place left to find those prices in a nice residential area that was still close to town.

KNOW IF THE MARKET IS NEW, HOT OR PAST
Examples:

Lachine Canal:
#1. new dev area,
#2. Lachine market 18th ave hot,
#3. still growing

NDG New Hospital:
#1. new project, (will bring in lots of weekly renters),
#2. not hot yet

Monkland Village:
#1. new duplexes turning to condos, trendy biz move to street,
#2. hot prices more than doubled from 2001-2004. 2001: low $71K- high$473K, 2004: low$170K- high$656K (2010 to present low $260K- high$925K
#3. still growing

The bank can finance a building as a residential property this is a 6 plex and sometimes exceptions for 7-8 plex depending on the property and bank. The property must be 100% residential without a commercial business. As soon as the building occupies a business, it’s considered commercial and the lending factors change completely.

The bank cannot issue a pre-approval like you would get for buying a home, HOWEVER, I strongly suggest developing a relationship with your bank. It will insure fast action when you do need a mortgage, it will help the broker plea his case to the one who makes the finale decision, and also they may be able to freeze an interest rate for you for a period of time. It’s also very handy if you need a quick opinion about a listing where you have the type of relationship where you can email them the details.

A mortgage for a residential that you are planning on living in is based upon the purchase price, otherwise it is based on income. From my experience it’s much easier to get a mortgage based on comparables and not on income.

Minimum down payment for a residential investment property is always 20%+ unless you are planning on occupying the property. For an investment the bank will expect as a down payment of:

Duplex: 5%
Triplex- Fouplex: 10%

Make note that if you are planning on occupying it and the bank feels necessary, they will ask for a sworn affidavit that you are indeed going to be legally occupying.

If you are planning on putting down 20% you will avoid CMHC (insurance) costs which is about 3-3% of the purchase price and is accumulated into your mortgage.

Appraisal is required for 100% of non-occupying properties or any property worth $600K or more. The bank will usually pay for this appraisal. I say usually because if you’ve tried several times to get a mortgage on a property without avail, then bank may ask you to pay for the appraisal. All within reason.

Your financial situation
For buildings that you will not be occupying, RBC will require that you make at least $55K (salary + passive income) to purchase one property. They will require you to make $75K to purchase more than one. These numbers can also include if you are buying with a partner or spouse. The bank would look at your total income.

The bank also requires that you have at least $100K of liquid assets after down payment is made.

This could include 50% of your RRSP, GIC, unregistered stocks and equity in a property or line of credit.

If you are planning on going the CMHC route, the bank will only consider 50% of the net rental income, where if you are planning on putting minimum 20% down, they will consider 100% of the rental income.

There isn’t a maximum of doors that you can own to be considered for a mortgage. It used to be 10, until it was recently changed to 2 million worth of properties.

The bank will always take a snapshot of the property and your finances. The potential of a property will not be considered. Meaning if 2 out of 4 apartments are vacant, you better have enough money to cover the difference in your calculations.

The bank will always make sure that there is sufficient cashflow from the property to cover the expenses and mortgage. If not, you will have to come up with the difference out of your pocket.

For example:
4plex value @ $600K
25% down @ $150K
Gross Rental Income (GRI) is $43,000
The bank will subtract
5% vacancy debt allowance
Taxes, insurance, janitor, heat, electricity
$400 per door per apartment annually
3% maintenance costs
$80 for fridge and stove

The Net Operating Income (NOI) is $25,000, which means that when the math is done, the ratio is 92%, meaning that the buyer will have to come up with the 25% + the extra 8%.

The bank would also like to see that if you have a permanent job and that you have been there for at least 6 months or until after probation.

For any other questions please contact me or Marc-André Rocher | Mortgage Specialist | Montreal South-West | RBC Royal Bank | T. 514-591-3815 I F. 514-300-2060 | http://mortgage.rbc.com/marc-andre.rocher

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Going over market value, ie: sold comparisons
I understand the emotional buy for a home. To spend an extra $5000-$20,000 for what you want to live in is really nothing in the long run. What I don’t understand is why buyers are spending more for a revenue property. If the numbers don’t add up, why are people still buying?

My theory is that buyers that are overspending, are anticipating that they can either fix up their property and gain that way and/or relying on the property values going up. Buyers are panicking and willing to spend more because of lack of product and competition with multiple offers.

They want to buy now and are willing to play the game.

Average days on market
Homes: Aug 2009 – 79 days / 2010 – 69 days
Condos: Aug 2009 – 90 days / 2010 – 79 days
Plex: Aug 2009 – 91 days / 2010 – 62 days

Homes: Price increase of 7%
Condos: Price increase of 9%
Plex: Price increase of 14%

According to the stats, the sales have gone down across the board for the month of August, which tells me that there isn’t enough product out there right now to balance the market.

The month of Aug 2009 compared to Aug 2010:
Homes: Sales decrease of -16%
Condos: Sales decrease of -13%
Plex: Sales decrease of -22%

Year to date though, sales are up 8%

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The Act respecting duties on transfers of immovables allows Ville de Montréal, by by-law, to raise its taxation rate for immovables with a value of more than $500,000.
Every municipality must collect duties on the transfer of any immovable situated within its territory. These land transfer duties are better known as the “Welcome Tax” ( Put in place by M.

Bienvenu). The buyer’s are liable for paying such tax.

The buyer pays the greatest of the following amounts:

After establishing the first step, the following must be calculated:

Example:
A property is sold for $265,000. The value of the property entered on the property assessment roll is $260,000 and the comparative factor is 1.02.

The basis of imposition is therefore established at $265,200, i.e. the highest of the sale price ($265,000) and the market value of the property (Value of the property entered on the property assessment roll multiplied by the comparative factor: $260,000 x 1.02 = $265,200)

The transfer duties payable to the municipality will total $2,478, i.e.:

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