2023 Short-Term Rental Program
** Effective May 8, 2023 the Short-Term Rental Moratorium will be lifted at 8:30 a.m, EDT **
At the Regular Council meeting held on April 24, 2023, Council passed a resolution to lift the Short-Term Rental (STR) Licencing moratorium effective May 8, 2023.
On Monday, May 8, 2023 starting at 8:30 a.m. EDT, new applications will be received, with the applicable documents, online only. (CLICK ON LINK FOR MORE INFORMATION)
Short-Term Rentals for Operators
Fort Erie is home to many great tourist attractions. To help ensure the safety of our visitors, all Short-Term Rental owners who operate rentals such as Airbnbs are required to obtain an operating licence.
Operating a Short-Term Rental without a licence may result in a $1,500 administrative penalty and a two (2) year prohibition on applying for a licence from the date on which the first Penalty Notice is issued. In the event a Short-Term Rental continues to operate without a licence, the administrative penalty will increase to $2,000 for each subsequent infraction and the prohibition can be extended up to five (5) years.
For More Information or too Apply Online go to:
REALTOR® Cooperation Benefits All
Have You Heard of This?
In April delegates for the Canadian Real Estate Association voted by a resounding 82% to add a “Duty of Cooperation” to the REALTOR® Code regarding residential properties with a requirement for members to comply by January 2024.
Some Background
The MLS system is a cooperative marketing system that gives buyers access to the broadest number of listings, provides sellers with the greatest exposure for their listings and gives agents the cooperation needed to provide comprehensive service that is in the best interests of their clients. This vote is a recommitment for members to cooperate for the benefit of all.
Why a Recommitment?
Over the last couple of years or so, in spite of the REALTORS®’s obligation under their code of conduct to cooperate with all its members, the concept of “Coming Soon” was born. This approach continues to be used and is meant to create buzz for a listing that will soon be coming to the open market. Mr. Cliff Stevenson, the immediate past president of CREA explained best when he said, “When somebody says ‘coming soon,’ they mean it’s coming soon to the MLS system, it’s coming soon to Realtor.ca.” Yet some agents used it as an opportunity to sell the property before placing it on the open market depriving frustrated buyers of greater choice because they missed out on homes that sold off market. Sellers too received limited visibility, decreasing their chances of maximum exposure for their listing and potentially leaving money on the table.
The Requirement
Under the new policy, “REALTORS® must place the listing on an MLS® System for cooperation with other REALTORS®” within 3 days of public marketing. In short public marketing includes but is not limited to flyers, yard signs, digital and social media marketing, onsite brokerage promotion, email blasts, newsletters, as well as all applications available to the general public.
Can a Seller Decline Public Marketing?
Sellers may decline to place their residential listing on MLS. This provided that they have been informed that this may reduce exposure to the largest pool of buyers, may reduce the number of offers received, and may limit the seller’s ability to receive the most favourable offers. Sellers must provide written and specific confirmation not to engage in public marketing. The instruction must include their acknowledgement of being informed of the advantages of public marketing and the disadvantages of reduced exposure.
Listings Exempt from this Policy
a) “Commercial property listings (i.e., business proper-ties, agricultural properties);
b) “New construction listings in developments with mul-tiple properties or units (i.e., residential development projects, condo development projects); and
c) “Rental property listings.”
Niagara’s Spring Market is Looking Good
You might ask, “How is Niagara real estate fairing with the arrival of the spring market?”
As of this writing, we have monthly statistics to the end of March. So as you’ll notice from the chart below, all municipalities in the region have shown price increases except two: Grimsby with a slight reduction from the previous month of -.34% and Lincoln at
-1.1%. In all other markets increases range from as little as .4% to as high as 6.9%; the two highest increases being in Port Colborne with 6.9% and Fort Erie with 6.8%. This is reflective of these municipalities having the lowest benchmark price of $515,800 and $521,300 respectively. See chart below.
What about number of sales?
Here too the majority of municipalities saw increases in the number of sales that were modest (under 20) to noticeable from the month before. St. Catharines reigned supreme in this category with 61 additional sales in March compared to February. The exceptions were only three: Niagara Falls had about 6 fewer sales in March, Thorold too had about 6 fewer sales, and West Lincoln had approximately 1 less in March vs. February.
Peak Prices vs. 12 Months Later
How does this stack up to benchmark prices compared to peak which occurred around March of 2022. Interestingly, the overall average decrease for Niagara from peak, 12 months ago, stands at around -21.7%; that’s the difference between a regional peak price of $820,100 in March ’22 to $641,600 in March ’23.
What About Competing Offers?
Homes that are market priced are again attracting competing offers, especially home prices that are somewhat in keeping with benchmark prices for their respective cities.
Soon: Sellers to Choose Open or Closed Bidding
Dealing with Competing Offer Now
Though significant changes to how real estate is conducted in Ontario have been delayed, a very significant change will soon be a seller option.
Currently, under the Real Estate and Business Brokers Act, competing offers are conducted on a closed bid basis. That is, the content of buyers’ offers cannot be shared with other buyers and until such time as an alternative is allowed, this regulation remains in place.
Soon Sellers Can Direct to Share Content
Under TRESA, the Trust in Real Estate Services Act, when this new regulation is rolled out, if the seller client directs, the listing agent “will be permitted to share the content of competing written offers with every person who is making one of the offers. The seller may also direct that only parts of the offers be shared.” In that case, the listing agent cannot disclose the substance of any other part of the offers restricted by the seller. As well, any sharing of information must not include any personal information of the person making the offer or any other information that would identify the person making the offer.
Seller Will Be Able to Change Instructions
The sellers too will have the option of changing their instructions. So even though a seller may instruct their agent to share information, at any time later the seller may change their mind about information sharing.
Buyer Needs to Be Advised
Before a buyer makes an offer, the buyer should be advised by their agent that the seller may or may not decide to share information in their offers. What’s more, the seller may change their mind on whether or not to allow information to be shared.
So Sellers Will Have a Choice
So once this portion of TRESA comes into force, sellers will continue to work under a closed bid situation or opt, by way of a written direction, for the open bid and sharing of offer information. With both options the listing brokerage shall communicate the number of competing offers to every person who is making one of the offers.
An Open Offer System on Realtor.ca
Realtor.ca is about to roll out an open offer system on listings in which the seller consents to displaying offer details for provinces that allow this. It should be available for Ontario listings once the TRESA rules take effect.
Foreign Buyer Ban Improved in 4 Ways
As of March 27, 2023, the Federal Government amended some of the foreign buyer restrictions regarding the Foreign Buyer Ban, known as The Prohibition on the Purchase of Residential Property by Non-Canadians Act.
Four Keys Amendments
1. Vacant Land: The prohibition no longer applies to vacant land zoned for residential or mixed use.
2. Temporary Residents with Work Permits: Temporary residents are now exempt if they meet the following requirements. They have a valid work permit or are authorized to work in Canada, have 183 days or more left on their work permit at the time of purchase, and have not previously purchased a residential property in Canada.
3. Purchase of Residential Property for Development Purposes is now an exemption from the Act. This is “provided it is a true development or redevelopment, as opposed to mere repairs, renovations, remodeling or other similar modifications” as defined by CMHC. To constitute a development, it must include the applicable review and approval process of the municipality. As well, the alteration or improvement results in a change in use in commercial, industrial, residential or other “recognized and permitted land uses.” CMHC also provides a detailed response to what is not considered development, such as purchasing for rental purposes, or to undertake repairs and maintenance.
4. Non-Canadian and Foreign Controlled Corps: Prior to March 27, Non-Canadian and foreign-controlled corporations were not allowed to purchase residential property in Canada if a non-Canadian owned or controls 3% of the corporation. This threshold has now been raised to 10% given criticism that the 3% would hamper new housing developments.
Who is Responsible for Eligibility?
CMHC further clarifies that “Non-Canadian buyers themselves are responsible to ensure they are eligible to purchase a residential property….” Industry professionals should manage compliance. Professionals are required to manage compliance with their respective circumstances.
Tax Reporting on Sale of Principal Residence
In Canada, we are very fortunate. Why? Because when we sell our principal residence, any profitable gain we realize is exempt from Capital Gains tax.
What to Report as of When
From 2016 and beyond, as a friendly reminder, the sale of one’s principle residence must be reported to CRA in order to qualify for the exemption. This is the case if you are eligible for every year you owned the home. The date of acquisition, proceeds of sale and property description are required on your income tax and benefit return to qualify.
Why the Change?
The intent of this mandatory reporting is to: “improve tax fairness for Canadian homeowners,”improve compliance with administration of the tax system” and to prevent investors from flipping homes and fraudulently taking advantage of the capital gains exemption.
Reporting the sale of investment property and payment of capital gains tax has always been required. What’s more, because some non-residents have evaded their tax obligations, all sales, including those of Canadian residents are now required to be reported, including one’s tax-free principal home.
How and What to Report
On the sale of your home, if it was your principal residence for every year you owned it, you are required to complete Schedule 3 and file it with your Income Tax Return for the taxation year in which the residence has sold. Of course you must own the home, you and your family must ordinarily inhabit it and you must designate it as your principal residence. Understand that you can have only one principal residence in a particular year.
Any Portion That May Have a Commercial Application
It is likely that requiring the home’s description helps determine its use as a residence and any portion that may have an investment or commercial application. You also have to complete page 1 of Form T2091 (or Form T1255) if the property was your principal residence for all the years or for all but one year, that you owned it.
Penalties for Failing to Report
CRA will only allow the tax exemption if you report the sale and its designation as your principal residence in your tax returns.
So what if you forget to Report the Sale? You must ask CRA to amend your return but a penalty may apply. The penalty is the lesser of $8,000 or $100 for each complete month from the original due date to the date your request was made in a form satisfactory to the CRA. So report and designate to receive the tax exemption.
Ontario Housing Report to Increase & Speed Housing Supply
Some 55 Recommendations Stir Municipal Mayors
It didn’t take long for mayors to voice their concerns about the Ontario Task Force Housing Report. Though they support many of the goals in the report, they want provincial leaders to directly consult municipalities before acting on the report’s recommendations. The Housing Report has 55 recommendations to modernize the municipal housing approval process. We will focus on some of the more dramatic proposals in this article as follows.
Allow 4 units on a Single Residential Lot Plus
One of the most drastic proposals is to reduce exclusionary municipal zoning bylaws “through binding provincial action.” That would allow up to “four units and up to four stories on a single residential lot. Modernization of the building code is also called for to remove barriers to affordable construction. As examples the report mentions “single-staircase construction for up to four stories” and “single egress.” The report also wants to permit “multi-tenant housing (renting rooms within a dwelling) province-wide”, as well as permitting “secondary suites, garden suites, and laneway houses province-wide.” The phrase “as of right” is used in each of the proposals. As of right would allow development of density in single family zonings with case-by-case approvals.
Remove Not In My Back Yard (NIMBY) Resistance
The report discusses the “not-in-my-back-yard” resistance to providing a greater housing supply. The resistance is politicized as municipal councilors get in step with community opposition from the people who elect them. Rather than “take the political heat” some feel that it is better to let the Ontario Land Tribunal approve development on appeal. Yet this only causes long delays and large cost increases. To disallow opposition and politicization the task force “emphasizes the need for a more permissive land use, planning, and approvals system.”
The Cost of Appeal to the OLT and Punitive Damages
Currently it costs $400 to appeal a project to the Ontario Land Tribunal. Even a single individual can appeal. This can tie up new housing for years creating abuse of the process and contributing to an existing glut of over 1,000 cases. The Task Force suggests $10,000 as a filing fee to appeal. They also want “to weed out or prevent appeals aimed purely at delaying projects. What’s more they want full costs to the successful party in an appeal made by a third party or a municipal council that overrides a staff approval. A municipality can also be made to pay for punitive damages if it refuses an application to avoid an approval. The proposals aim to reduce appeals and fix the system.
Recommendation No. 12: Override Municipal Policies
In their 12th recommendation, some of the suggestions are as follows:
• “Repeal or override municipal policies, zoning, or plans that prioritize the preservation of physical character of neighbour-hood,
• “Exempt from site plan approval and public consultation all projects of 10 units or less that conform to the Official Plan and require only minor variances,
• Establish province-wide zoning standards
The report further argues that Heritage protections of neighbourhoods prevent more homes being built, limiting supply.
For full report Google Housing Affordability Task Force Report.
What are the Major Exemptions in the Foreign Buying Ban
The following is a list of exemptions within the Foreign Buyer Ban regarding the purchase of residential properties in Canada.
Who is exempt?
1. International students who have filed tax returns for the past five years and have spent the majority of the past five years in Canada are excluded. In addition, the purchase price of the residential property must not exceed $500,000.; and they have not purchased more than one residential property.
2. Those that hold a work permit may also be excluded. They must have worked in Canada for a minimum of three years within the four years preceding the purchase and filed tax returns for at least three of the four years. They have not purchased more than one residential property.
3. A non-Canadian who purchases residential property in Canada with their spouse or common-law partner if the spouse or common law-partner is a Canadian citizen.
4. A person registered as an Indian under the Indian Act,
5. A permanent resident
6. A temporary resident that meets the requirements of the Immigration and Refugee Protection Act and Regulations, satisfying prescribed conditions to enter or remain in Canada. Only foreign nationals physically in Canada hold temporary resident status. This can include visitors, students, workers and temporary resident permit holders.
7. A person of a prescribed class, such as a refugee as defined under the Geneva Convention (referred to as a convention refugee).
8. A foreign state purchasing residential property for diplomatic or consular purposes.
9. A protected refugee whose claim or application has not been rejected.
A foreign buyer would likely have to provide evidence of exemption.
Housing Benefits from Federal Government
The Foreign Buyer Ban
As of January 30, 2023, the Federal Government instituted a Ban of Foreign Buying through the Prohibition on the Purchase of Residential Property by Non-Canadians Act.
Purpose
This according to the government is to “ensure that houses are used by Canadians to live in—and not as financial assets for foreign investors.” The hope is that such a ban will assist in having more homes for Canadians to purchase, as well as limiting pricing escalation. We have an entire article devoted to this topic in our January 2023 Newsletter.
One Percent Annual Vacancy Tax: this tax is on foreign-owned underused housing. The government’s thinking is that this will “help free up homes for Canadians to live in,” and “to ensure that foreign, non-resident owners of Canadian housing pay their fair share of” taxes to Canada.
Cracking Down on New Home Speculation with HST
The government is now applying GST/HST “to all assignment sales of newly constructed or substantially renovated residential housing.” This came into effect May 7, 2022, again, with the idea that speculation contributes to higher home prices. An assignment new construction sale occurs when a house is resold before the home construction is completed and/or has not closed. One is essentially buying the contract between the builder and the first buyer.
A Crackdown on House Flipping within 12 months of Ownership
As of 2023, investors who flip a home held for less than 12 months will be fully taxed on any profits as opposed to paying a 50% tax on any net profit as with capital gains tax. Certain exceptions for unexpected life events apply, such as death or divorce. Again this measure is put in place to help lower housing prices.
The Tax-Free First Home Savings Account
This allows first-time buyers to save up to $40,000 each tax-free for the purchase of their first home. Each individual is allowed to save a maximum of $8000 per year in their tax-free account and deduct this amount from their annual income. It further allows them to receive a yearly tax refund of $1,640.
First-Time Buyer Tax Credit
This tax credit started in 2022 to help first-time buyers with increasing closing costs in buying a home. This tax credit provides up to $1,500 as direct support to first-time home buyers.
New, Refundable Multigenerational Home Renovation Tax Credit
This refundable tax credit will “provide up to $7,500 in support for constructing a secondary suite” for a senior family member or a disabled adult and will apply in 2023 and subsequent taxation years. Expenses must be paid after December 31, 2022 in respect of services performed or goods acquired after that date.
Were No. of Sales Normal vs. Other Recent Years
What do the Numbers Say?
Is the number of pending and closed MLS sales in Niagara back to what might be considered normal? This is a sentiment that has been heard from some people lately.
As of this writing, the number of sales for December 31, 2022 is not available. So this article shows the number of pending and closed sales on MLS for the previous 12 months to November 30, 2022. Due to space constraints we have gone to the 12-month period in 2018, 5 years ago. That’s the year in which some Niagara municipalities show more sales in 2022 vs. 2018. Sales in 2022 are down compared to 2019, 2020 and 2021.
There are fewer sales in 2022 compared to 2018 in the following municipalities.
- Fort Erie -13%; 2. Niagara Falls -13.7%; 3. St. Catharines -10% and 4. Thorold -8.3%.
There is a greater no. of sales in all 8 other municipalities for 2022 vs. 2018.
Yet overall, the number of sales for the region is down by -5% versus 2018. In other words, one has to go back five years to find any semblance of what one might consider normal.
For other years in between and the year before 2018, here is how it shakes out overall:
- 2022 vs. 2021: sales are down by -34%,
- 2022 vs. 2020: sales are down by -21%,
- 2022 vs. 2019: sales are down by -12.6%.
- 2022 vs. 2017: sales are down by -15%.
As You May Know: Interest rate increases have had a significant downward effect on both sales and prices in the last 8 months. If you wish to know how much prices have been affected peak to trough in your Niagara city, please contact one of our agents. Sales will improve.
Foreign Buyer Ban on as of January 1, 2023
The Federal Government’s Prohibition on the Purchase of Residential Property by Non-Canadians Act will be in effect as of January 1, 2023.
Who Does it Prohibit
Foreign Individuals: The Act prohibits non-Canadians from buying for two years. So if an individual is not a Canadian citizen, is not a permanent resident or is not registered under the Indian Act they are prohibited from buying.
Foreign Corporations: The Act also prohibits the following foreign corporations from buying directly or indirectly.
- Corps based in Canada that are privately held,
- Corps not listed on a Canadian stock exchange,
- Corps that are controlled by someone who is a non-Canadian,
- Entities formed under Canadian or provincial laws controlled by a non-Canadian,
- Entities not formed under Canadian or provincial laws.
A non-Canadian or a foreign controlled corp. is defined as an entity in which a con-Canadian owns 3% or more or has 3% or more voting rights.
What is Prohibited
The law bars the purchase directly or indirectly of residential buildings with 3 units or less, as well as single family, a semi-detached or a condo unit The prohibition also applies to vacant land without a “habitable dwelling” zoned for residential or mixed use.
Indirect purchases include purchases made through partnerships, trusts or other entities seeking to avoid the prohibition.
Exemptions
- Acquiring an interest due to a divorce, separation, gift or death,
- A unit is rented to a tenant who will occupy the unit,
- The transfer results from a secured right by a secured creditor.
What also seem to be exempt from the ban are homes outside of areas that meet certain population thresholds based on census analysis. That may include some recreational properties but not all. Recreational properties in the Niagara Region are not exempt.
Additional Exemptions
- Besides refugees, students who have filed tax returns for the past 5 years and lived in Canada for most of the 5 years are limited to one purchase of $500,000 or less,
- Persons with a work permit, have worked in Canada for a minimum of 3 years within the 4 years preceding the purchase, filed tax returns for 3 of the 4 years, and have not purchased more than one residential property.
- An individual purchasing with a spouse or common-law partner who is not subject to the ban.
Penalties for Non-Compliance
Non-Canadians violating the prohibition, or any person or entity that knowingly helps, can be fined up to $10,000.
A Sales Agreement Signed in violation of the law will be valid and be required to close. Subsequently, the government would, by court order, require the property be sold. It can’t sell for more than what was paid as the buyer would not be allowed to profit from the sale.
How Months’ Supply of Listings Affects Sales & Prices
Here is a different look at Niagara’s Market conditions, using months’ supply of active listings.
It’s defined as the number of months it would take for the current inventory to sell.
How this method categorizes market conditions:
Over 9 Months Supply = an Extreme Buyer's Market
7 to 9 Months Supply = a Buyer’s Market
5 to 6 Months Supply = a Balanced Market
Under 5 Months Supply = a Seller's Market
Revisiting January 2022
In January all cities in Niagara had less than one month’s supply of inventory, ranging from .2 to .6 months. This created an extreme seller’s market that translated into competing offers and rising prices.
Rate Increases, Fewer Sales and Rising Inventory
The Bank of Canada started increasing interest rates in March 2022, and continues to do so. Today the Bank rate is 3.75% with another increase scheduled for December. The result: steadily declining sale prices from the peak in March, a dramatic increase in months of inventory and days on the market. Here is how months’ of inventory differs from January vs. October.
With dramatically higher months’ supply, it’s taking longer to sell a home now in spite of reducing prices. Seller resistance to changing conditions further contributes.
Sale Price As Percent of List Price: Interestingly, of the homes that are selling today, the median sale price ranges from 93.7% to 97.3% of list price with an overall average of 95%, similar to traditional markets.
No matter which way one looks at it, getting to the sweet spot on pricing, patience and a strong motivation to sell are keys to a successful sale in today’s market.
Market Conditions in Niagara vs. GTA
Market Conditions and the Sales-to-New Listings Ratio
In a recent article by Alex Arsenych of CTV News, he discussed a recent report by Zoocasa on various markets and how competitive they are. The report focused on market conditions using the sales-to-new listings ratios for October for 34 cities and regions.
The SNLR is a recognized method for gauging a market’s condition. It determines if a given area has a buyer’s, balanced or seller’s market within a given period of time.
How SNLR is Determined
Basically the sales-to-new listings ratio is determined by dividing the number of sales by the number of new listings. It breaks down in the following manner:
- Buyer's Market: less than 40% of the new listings have sold,
- Balanced Market: 41% to 59% of the new listings have sold,
- Seller's Market: 60% or more of the listings have sold.
According to the report, “all 19 cities in the Greater Toronto Area (GTA) are reported as having balanced markets; meaning the demand and supply are balanced.” Toronto’s SNLR is at 54%. According to the report “only six places are not in balanced market territory.”
So how does Niagara Compare
Looking at the October numbers, Niagara cities breakdown as follows:
Niagara has five buyer’s markets to varying degrees. At 40% two are at the very low end of balanced and just over the buyer’s market threshold. Four are balanced at 46 to 49%.
All in all, Niagara’s market conditions fall short of the percentages given for most of the Greater Toronto Area.
Conditional Offers: They’re Back
Many buyer offers today are back to including conditions such as financing, home inspection and the sale of the buyer’s property. It is sound due diligence that should be taken.
But Here is What is Puzzling
A buyer makes an offer on condition that they are approved for mortgage financing. Yet the seller, the seller’s agent or both counter the offer back to the buyer deleting the financing condition. This turns the offer into a cash sale. Yet if the buyer included a financing condition, would that not suggest that the buyer requires approval for a mortgage to close the sale?
What Could be the Consequences?
With a cash sale, the agreement becomes firm and binding and, if unable to close, consequences can follow.
- The buyer would be in breach of contract and would lose their deposit. As well, if the seller resells to another buyer for less, the buyer could be directed through a court order to pay to the seller the difference between the original purchase price and the subsequent sale price.
- The seller is left with the property unsold. If they are depending on their sale to close in order to complete the purchase of another home they in turn could be in breach on the home they are buying.
Neither of these outcomes serves anyone. In fact they cause a lot of emotional consternation for all parties.
Financing Approval Drives the Sale
Accepting an offer conditional on the buyer confirming they have the money can avoid the problems. If the buyer does not get approved, the parties release each other, the buyer’s deposit is returned and the seller can continue to actively market his property. There is no waiting till a few days before closing to learn that the transaction won’t close. With interest rates rising, passing the stress test and the more stringent screening by lenders has become challenging.
What About the Need to Sell the Buyer’s Home
In a competitive situation, though chancy, a buyer can choose to exclude a condition to sell their home. Alternatively the seller might counter offer back to the buyer with the condition stricken out. In either case the buyer risks not selling his home. Consequently the money won’t be there to close the deal. As well, given the current market, the buyer may turn down a lower offer on their sale, though reflective of today’s market conditions and again is left with no sale. The results are the same: not good and penalizing to both parties.
The Seller Can Continue to Sell
With a condition of sale for an agreed number of days, the seller should express in an offer that he can continue to market the property. Should another buyer come along, the first buyer is notified and is typically given 48 hours to remove his conditions or opt out of the sale. This would allow the second buyer to complete the purchase. Outside of a few emotional bruises no one gets hurt financially.
The market has reverted back to this traditional and sound approach to buying and selling. Buyer conditions for the most part are again the normt.
Finally, the risks of excluding a home inspection condition in a buyer’s offer can at times prove to be costly
Market Disparity with Listings vs. Sale Prices
What a Difference a Few Months Makes
As most people know by now, real estate sale prices have taken a tumble. Over the last 6 to 7 months, the prospect of buyers competing for the same property has substantially decreased and is now down to a trickle if at all. As well, during the recent market period when competing was the norm, the sale price tended to be well above list price with many sold listings. Sale prices ranged from 100% of list to 110% and higher, an unsustainable circumstance.
What’s the Current Sale Price to List Price Percentage
Traditionally in a balanced or normal market the sale price to list price percentage has tended to hover around 95% and even 97%. In September of 2022, of the homes sold, the percentage of sale price to list price for Niagara has dropped to about 95.9% overall. Of course this varies depending on the municipality, but it tends to range between 95.5% and 95.8% for most municipalities. To date this is somewhat indicative of traditional stable markets.
Important Points of Interest
Here, however, are some interesting pieces of market information. In September the average listing price of all active listing inventory compared to the sale price varied considerably, somewhere around 32% to 35% above average sold prices, with some municipalities being even higher. So the question this disparity elicits is as follows:
If the few homes that sold indicated a sale price of around 95% of list price, what chance would many of the homes for sale have of selling with such a drastic variance as above?
What about Months of Inventory?
During the February peak the market indicated a ballpark listing supply of less than a month. In September listing inventory increased substantially: Overall just under 4 months supply, with a low of 2.7 months in St. Catharines to about 6.3 months in Fort Erie, all others being in between. Selling within one week is virtually no longer there.
So What Are the Takeaways?
- First and foremost, why are you selling? You need a good reason to sell. This can best be discovered through a needs analysis with your REALTOR®. Without a strong reason for selling, the list price can typically be reflective of wishful thinking.
- Second, in a tight market pricing is critical. The list price has to have the ability to attract buyer attention. This means a well prepared valuation by the agent and the seller’s flexibility and cooperation to price the listing aggressively.
- Third, one needs to exercise patience and adjust the price if needed. A successful sale is a team effort between you and your REALTOR®. Pricing is the first essential marketing step.
Home-Buying Rules if Separating and Buying Made Easy
A Flexible HBP for Separated People
The rules defining a first-time buyer for separated or divorced couples are quite relaxed thanks to a technical interpretation letter from the Canada Revenue Agency. As a result, some separated or divorced individuals, whether married or living common-law, may qualify to buy a home as a first-time buyer under the Home Buyer Plan (HBP). Read on.
Typical First-Time Buyer Qualification
Typically, and according to CRA, an individual can be considered a first-time buyer if in the prior four-year period, they did not own or occupy a home that “they or their current spouse or common-law partner owned.” With the Home Buyer Program (HBP) one can withdraw up to $35,000 from their RRSP to purchase a home as a first-time buyer through the HBP program. “The HBP allows you to pay back the withdrawn funds within a 15-year period.”
The 90-Day Rule for Separated People
CRA’s special rules allow a separated or divorced person, as well as an individual in a common-law breakdown, to be considered a first-time buyer if separated and living separate and apart for 90 days before withdrawing their RRSP through the Home Buyer Plan. Obviously, there is an immense difference between 90 days and 4 years to qualify.
Example 1: Common-Law But Separated and Under One Roof
In an article published by Mr. Jamie Golombek on July 28, 2022, he chronicles the following recent, specific interpretation by CRA. A couple has been living common-law for the past six years. The male is the sole owner of the family home. Though the two decided to separate they continue to live in the same home. They, however, consider themselves separated for about the past month. As a result they do not identify themselves as a couple, they do not socialize together and they have separate rooms to sleep in. Their arrangement helps financially while the lady is actively looking to buy a home for use as her primary residence.
According to CRA, the lady is eligible for the HBP as she has an accepted offer on a home scheduled to close more than 90 days after the date of separation. In her case the separation date is June 1 and the closing date is in September.
If the home was co-owned CRA also verified that the lady could buy out her partner’s share or buy another home under the HBP.
Example 2: Still Married, Separated and Under One Roof
CRA also confirmed that a married couple not divorced but no longer considers themselves a couple can live under one roof and still qualify for the HBP.
Qualifying Conditions
Besides being considered a first-time buyer, to be eligible one must be a Canadian resident, have a written Agreement of Purchase and Sale and occupy the home within one year after buying or building it.
Google: Jamie Golombek CRA Separated Couples for full article.
What’s the Best Way to Sell? You Decide
The Handwritten We Buy Houses Letter at Your Door
Have you ever received a handwritten letter that says, “We Buy Houses?”The writer buys houses directly and if you’re selling you are asked to call them. Yet how do you know whether you received your best market price?
Example of Selling Direct vs. Open Market
A few months back when the market was red hot, one of our agents received a call from a lady who stated that she and her husband sold their home and needed help to buy. Let’s call them the Browns. They sold directly by responding to a “We Buy Houses” letter. Mrs. Brown told our REALTOR® what they sold their home for and asked if the sale price was in line with market value. On reviewing comparable sales, they realized their home had sold for some $80,000 less.
They Now Wanted Out of the Deal But…
…As they had a firm deal their lawyer advised them of their legal obligation to close. Then on the day of closing the lawyer for “We Buy Houses” asked for a closing extension. The financing apparently was not available to close the deal on the scheduled day. The sellers’ lawyer denied any extension, so the buyer breached the contract and no closing took place. The Brown’s now listed their home on MLS and within two weeks received an accepted offer that was $86,000 more than the “We Buy Homes” offer.
FTC Investigates a Direct Online Buyer
Over the last year or more selling directly through online home-buying companies became somewhat popular. It was reported that around 10% of sales in the U.S. took place through online home-buying companies. It started appearing in Canada as well. One of these companies is iBuyer which also operates in Ontario. iBuyer is owned by a parent company known as OpenDoor Labs. They were investigated by the FTC (Federal Trade Commission) in the U.S.
FTC Fines $62M and Ordered to Stop Deceptive Practice
On August 1, 2022 the FTC sent out a report with the following headline: “FTC Takes Action to Stop Online Home Buying Firm OpenDoor Labs, Inc. from Cheating Potential Sellers with Misleading Claims about its Home-Buying Service.” As a result, OpenDoor will have to pay $62,000,000 and “stop its deceptive tactics.” According to the FTC, people lost thousands and could have made more money selling on the open market.
They promised to revolutionize the real estate industry but…As stated by Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, “There is nothing innovative about cheating consumers.” According to the complaint consumers lost thousands selling to OpenDoor compared to selling on the traditional market based on below market offers and costs higher than what consumers typically pay a traditional realtor. For full report Google: FTC Takes Action to Stop Online Home Buying Firm OpenDoor ...
August Average Prices for last 3 Years, Niagara
Where Average Prices Hardest Hit
Average prices indicate a trend in how home values might be affected. And from the peak of increases back in February and March of 2022 onward, average prices overall have been declining in Niagara, as in many other parts of Ontario. So it would seem that the hardest hit by such declines are purchases made from around December 2021 onward.
Has There Been a Net Gain Over Last 3 Years?
But how have average prices fared over the last three Augusts, that is, from August ’20, ’21 and ’22, given that for a little over two of these years prices were appreciating at a rapid pace? Take a look at the chart below to see how the average price in your city in Niagara has performed. To help understand the chart, let’s take Niagara Falls as an example.
Understanding the Chart Below
In Niagara Falls the average prices and their percentage changes were as follows: Aug-20: $525,865; Aug-21 $667,839. That’s an increase of 23.95% from one year to the next. We now compare Aug-21: $667,839 to Aug-22: $652,495. That’s a decrease of -2.30%. That’s still a net gain of 21.65% since August 2021.
Most Net Gains in Double Digits
So to August 2022, each of our municipalities indicates a net increase that ranges from a low of 6% in Niagara-on-the-Lake to a high of 49% in Wet Lincoln. What’s noteworthy? With the exception of Niagara-on-the-Lake, all others have a percentage net gain in the double digits.
Declining prices should still reflect a net gain in the near future given the history of dramatic price increases for some time, until now. September numbers not out at time of this writing.
When Best to Confirm Legality of Rental Units
The Search Period for a Property’s Legal Use
The title search provision in the Agreement of Purchase and Sale gives the buyer time prior to closing to search title and, among other things, confirm “that its present use _____________ may be lawfully continued....” This period is typically between 5 to 15 days preceding the closing date. In the blank space above, the buyer’s agent would insert the property’s existing use, such as duplex, triplex, 4-unit apartment, etc. With this the buyer’s lawyer will check with the municipality, within the search time, on whether the property legally complies with the mentioned usage. Keep in mind though that the time period for this investigation is days before closing.
When Might it be Best to Confirm the Legal Usage?
Would it not be more effective to have the legal usage checked out at the beginning, before an offer is submitted? Alternatively, would it not also be more effective to make the offer conditional on the buyer satisfying himself with the legal usage of the property within say 5 or 10 days from Offer acceptance? This would do away with discovering whether the property’s usage is illegal just prior to closing.
Example of Discovering Wrongful Use at the Back End
We recently had one multi-million dollar purchase that did address the need to examine the legal multi-unit usage of the property. This was in the title search provision of the offer as mentioned above. The buyer’s lawyer discovered that one of the units was illegal. The buyer had the legal right to opt out of the purchase but wanted the property. What’s more, the buyer was committed to paying the lender a sizable fee whether or not the deal closed.
Finalizing the Deal Became Very Complex
After a number of contentious negotiations the seller agreed to reduce the purchase price to reflect the illegality of one apartment. The lender agreed to a mortgage commitment at the reduced amount and further agreed to have the seller holding a small 2nd mortgage to reduce the lender’s risk. The lender also wanted the buyer to proceed with legalizing the unit after closing, and before advancing any additional funds to payout the seller 2nd mortgage.
What if the Usage Were Confirmed at the Front End
In retrospect had the offer been conditional on confirming the legality of the units up front many of the complications and additional costs could have been avoided. The seller and listing agent had a responsibility to disclose the correct usage but somehow failed to do so. This happens all too often when sales reps either assume legality based on the physical number of units or take the seller’s word for it without verifying. It’s always best to practice due diligence by both sides to reduce the emotional strain and financial impact.
The OREA Agreement of Purchase and Sale is a well produced document used by many. Yet simply following it to the letter may not always serve everyone’s best interest.
CENTURY 21 Today Realty Ltd. Brokerage
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CENTURY 21 Today Realty Ltd. Brokerage
225 Garrison Road, Fort Erie, ON L2A1M8
(905) 871-2121
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