Thanks to www.buildersdirect.ca
Many purchasers of new condominiums may be surprised to find out that their closing is a two-step process, one for interim occupancy and one for final closing. Typically, a condominium project will first have what is called an interim occupancy. During the interim occupancy period, the purchaser must “occupy” the unit and pay the developer a monthly amount comprised of the monthly common expense, interest on the deferred purchase price and an estimate of the apportioned realty taxes (apportioned monthly). Occupancy will take place as soon as the municipal authority issues the developer permission to begin occupancy. The occupancy fees paid to the developer during the occupancy period are not credited to the final purchase and the only way to avoid paying interest on the deferred amount of the purchase price is by electing to pay the full amount of the purchase price on interim occupancy. It is important to note that a mortgage cannot be secured on the occupancy date; therefore, a purchaser wishing to pay off the balance of the purchase price must do so without a mortgage secured on that condominium unit. The final closing will occur once the developer is ready to register the condominium declaration and transfer title to the individual unit purchasers. This date can occur at any time after interim occupancy. It is not uncommon for the interim occupancy to be anywhere from as short three (3) months to as long as eighteen (18) months, all depending on the prescribed Ontario New Home Warranty Plan’s schedule of occupancy and final closing provided to the purchaser upon signing the agreement of purchase and sale. Only upon final closing will a purchaser be able to secure a mortgage on title because that is when title will be delivered to the purchaser.
Thanks to buildersdirect.ca
What is a statement of adjustments? The Statement of Adjustments often catches many homebuyers off guard. Put simply, the Statement of Adjustments sets out any items that need to be added or subtracted from the purchase price, and shows the total amount of money that the purchaser will have to pay to the builder on closing day. The items that will be adjusted on closing are set out in the Agreement of Purchase and Sale. These items may be negotiable with the builder BEFORE the Agreement of Purchase and Sale is signed. Very rarely is the purchase price set out in the Agreement of Purchase and Sale the same amount that will be transferred on closing, as there are a number of items that need to be adjusted for, including:
Deposit paid - A deposit on signing is standard practice in any real estate transaction, and can be a set amount ($500 used to be standard in St. John’s, but it is quickly increasing to $1,000) or a percentage of the purchase price. The purchaser gets to deduct this deposit off the purchase price, as it has already been paid. New construction extras and credits - When the home being bought is a new construction, it’s very common to see changes made to the materials used or the allowances for things such as flooring, light fixtures, cabinets, and so on, or changes to the floor plan and construction methods. These are all adjusted at closing as extras or credits.
Taxes - Used residential housing isn’t generally subject to GST/HST in Canada, but new homes are. If the Agreement of Purchase and Sale doesn’t deal with this otherwise, the applicable tax will be added to the purchase price. However, it is quite common to see the agreed purchase price include all taxes, with the proviso that the purchaser assigns the GST/HST Rebate to the vendor. The details of how this rebate works are too boring to go into in this post.
Rebates - In some transactions, the Vendor will rebate money to the purchaser for problems that arise after the agreement is signed. For example, if the sale is subject to a home inspection and the inspection reveals an electrical panel that needs replacing, the vendor and purchaser may negotiate a rebate to reflect the cost of fixing this problem, rather than having the panel actually replaced. Similarly, if damage occurs as the Vendor is moving out, there may be a rebate for repairs.
Municipal taxes - In many cases, the homeowner has prepaid taxes to the end of the year or, in some cases, end of the month or quarter. The vendor is usually entitled to a credit for the portion of taxes that have been prepaid for the rest of the year. For example, if annual property taxes are $2,000 per year, and the house sale closes on October 1st, the vendor will get a credit of $500. The same goes for water taxes, if these are calculated separately and paid in advance.
Oil or fuel adjustments - If the home has oil heating or propane tanks, the purchase price will usually be adjusted to reflect the value of fuel remaining in the tank. The tanks will be measured on closing day (or sometimes the day before), and the vendor will get a credit for the amount of fuel that is left. For example, if an oil tank is half full (or half empty!) on closing day, and the value of half a tank of oil is $450, this would be credited to the vendor.
Rent and damage deposits - If the property is being used as a rental property and has tenants in place, the purchaser usually gets a prorated credit for the rent for the rest of the month. Similarly, if a damage deposit has been paid by the tenants, this whole amount gets transferred to the purchaser, as he or she will ultimately be responsible for returning in when the tenant eventually leaves. The physical deposit usually doesn’t change hands, it is just given as a credit towards the purchase price. The Statement of Adjustments is generally prepared by vendor’s lawyer well in advance of closing and sent to the purchaser’s lawyer for review. There may be some finagling of the numbers and negotiation between the two sides, but generally it’s pretty straightforward. The best advice is to review your Statement of Adjustments early and don’t be afraid to ask questions. And then ask them again!
By Mark Weisleder
Many economists predicted a local real estate crash this year, with prices falling by up to 25 per cent. I didn’t see that prediction coming true and it didn’t. Nor will do I believe it will happen in 2013.
1. Homes are more affordable
In 1990, the average GTA home cost half of what it does today. But interest rates were 12 per cent for a five-year term at the time. So if a two- bedroom condo cost $250,000 in 1990 and you had a 20-per-cent down payment, your monthly carrying costs, including interest, taxes and common expenses, were about $2,500. The average rental for a two-bedroom condo at the time was $1,100, according to the Housing New Canadians research group. So the economics of ownership made no sense.
Today, even with a price of $500,000, if you have a 20-per-cent down payment, with current interest rates at 3 per cent, the total monthly payment is what it was in 1990. It is still $2,500 per month, including common expenses and taxes. But in downtown Toronto, the average rent paid for a two-bedroom unit is now close to $2,500 per month.
Most tenants who can afford $2,500 a month or more in rent can probably afford to buy a home now, if they have 10 per cent down payment or more.
2. The lesson from 2012
Toronto Real Estate Board statistics up until Nov. 30 show 82,200 units had sold in the GTA so far this year. In 2011, it was 84,900, and in 2010 it was 81,900. The average price on Nov. 30 was 2 per cent higher than a year ago. If anything, the market has remained very stable for the past three years.
3. Impact of mortgage rule changes is minor
The mortgage rule changes imposed in early July lowered the amortization period to 25 years if you were putting less than 20 per cent down and lowered the percentage of your income that could be used for borrowing from 44 per cent to 39 per cent. The result was that buyers who would have purchased in late summer or fall moved up their purchasing decision to the spring. By fall, this meant many would-be first-time buyers were looking to rent instead of buy. This contributed to low vacancy rates.
4. 2013 will be fine
Despite the doom and gloom, Toronto condo rental vacancy rates are 1.7 per cent. This means that for those people who cannot sell their condos, there are plenty of renters who can cover the monthly costs.
5. Debt-to-income ratio not relevant
As our American friends like to say, “that dog won’t hunt.” Every month we are told that because the ratio of household debt to household income continues to rise — and is now at 164 per cent — there is a danger of a real estate collapse.
What this really means is that the average Canadian household has an income of $100,000 and total debt of $164,000 (of which their real estate debt constitutes-two thirds). Again, as stated earlier, with interest rates at 3 per cent, this is not a dangerous problem.
If interest rates were 12 per cent, as they were in 1990, or if all your debt was on your credit cards (with interest rates averaging 18 per cent), then this would be a serious problem.
Note to readers: pay down or eliminate your credit card debt in 2013.
Note to government: with mortgage interest rates at 3 per cent, it is almost criminal for lenders to be able to charge 18 per cent on consumer credit cards.
6. Interest rates may not rise until 2015
The U.S. Federal Reserve is now saying it won’t raise rates until 2015. Our rates can’t differ much from theirs without harming our economy with a strong dollar and slower growth.
These are all things to keep in mind in the coming year. Somebody has been predicting a Canadian real estate market collapse for the past 12 years. It hasn’t happened yet and won’t happen in 2013.
More columns by Mark Weisleder
Mark Weisleder is a Toronto real estate lawyer. Contact him at firstname.lastname@example.org
Closing Costs-thanks to RateHub
Closing costs, ranging from 1.5 to 4%1 of selling price, are the legal and administrative costs you will need to pay when your house closes. In addition to closing costs, there are other expenses and/or events that may require a cash outlay before, on or after your house closes. We will outline these in detail to ensure these often unexpected costs do not sneak up on you.
Cash outlays required before your mortgage closes
On closing date, the following events will take place:
 Canada Mortgage and Housing Corporation (CMHC)