GST cuts spell good news for homebuyers and sellers

Finally some good news when it comes to Taxes.

When the 2006 Federal Budget was unveiled by the Conservatives, it turned out to be a ‘good news’ budget for most Canadians -- and home buyers and sellers were certainly no exception. A reduction in the GST from the present 7% down to 6% will kick in on Canada Day – July 1st – offering an immediate cost benefit to anyone buying or selling a home as of that date. Note that the cost reduction applies when the transaction actually closes, so even contracts signed before that day could potentially benefit from the tax cut, depending on their closing.
The tax cut will benefit homebuyers and sellers with savings on all professional services associated with a real estate transaction, where the GST would typically be charged. This includes fees paid to lawyers, appraisers and home inspectors as well as the real estate commission paid to your sales professional. Other relocation costs including movers, packing materials, storage or vehicle rentals will also be reduced thanks to the lower GST charge as of July 1, 2006.
The cost of home ownership and home improvements will also benefit from the reduction in GST. Major expenditures for renovations and the purchase of furniture and major appliances will suddenly become just a little bit more affordable. And those homeownership savings will continue long after the real estate transaction is completed.
Saving one percent on virtually every taxable expenditure will serve to increase the disposable incomes of both homeowners and prospective purchasers alike. And with a little more cash in hand, you can expect an increase in consumer confidence to follow. Those are both good indicators of a healthy real estate market. Even though rising home prices and interest rates are expected to cool the resale housing market in the future, recent predictions by the Canadian Real Estate Association (CREA) have been revised upwards to forecast another record-breaking real estate year in 2006. Housing demand is expected to remain very strong and will support further price increases in major markets across the country this year.
For more information on how these new tax reductions can impact your transaction and for insights on the continuing strength of the real estate market, contact me and get my expert advice.

Buying tips for a strong housing market

Very Good article regarding the Hot Real Estate Market and how Buyer's might be able to get their offer accepted instead of someone else's in a bidding war.

Canada 's housing market has been on a record-breaking pace and that's good news for home sellers. Buyers on the other hand, can find that their choices are limited in a market that has been so strong for such an extended period. In fact, when demand is so high for attractive, well-priced homes coming on the market, the result can even be “bidding wars” where more than one prospective buyer places competing offers for the same property. However, even in a hot market, there are several tried and true tactics that can help you acquire your dream home.

As a homebuyer, you can strengthen your negotiating position by getting your finances in order first. Before you reach the stage when you're ready to prepare an offer, get pre-approved for a mortgage. Your Real Estate Agent can put you in touch with a reputable lender who will offer you competitive rates and terms. Going into negotiations with a pre-approved mortgage lets you make an offer that is not conditional upon obtaining financing. Your representative will be presenting a ‘clean' offer with fewer conditions. The fact that you already have financing in place also demonstrates that you're a stable, dependable buyer. It all adds up to make your offer more appealing. Especially if your competition isn't so well prepared!

When making an offer in a hot market, where other prospective buyers might enter negotiations at any time, it's to your advantage to keep counter-offers to a minimum. Your sales representative can help you prepare an offer to purchase that accommodates the seller's terms as much as possible. Remember too, that other aspects of the offer may have value to the seller beyond just the purchase price. For example, if the seller specifies a closing date other than what you'd prefer, think twice before making a change. Measure the date's importance against the value of presenting a clean offer, with little in it for the seller to object to. What may be a minor consideration to you could have great importance to the seller. Also bear in mind that if any aspect of your offer is revised, then in effect, your entire offer is refused. That means everything can come back up for negotiation again, including the price. If you already own a home, a major step you can take to make your offer much more attractive is to eliminate the condition of selling your existing home first. You can do this either by selling your existing home before you buy, or by taking the more risky option of assuming it will sell quickly in the current market conditions. This latter option may end up costing you some additional money in terms of bridge financing if you don't sell as quickly as you think you will. That may be an acceptable risk to you, but make sure you have all your facts before you decide.

Planning for hidden costs of home ownership

This is an interesting article as I find it somewhat surprising that it is needed. When I work with all of my clients, I give them an information package stating what all of the closing costs are. A good rule of thumb is to have 1.25% of the purchase price saved for closing costs. Your Real Estate Agent should have you fully prepared for any additional costs that you are to pay on top of the purchase price of the house!!!

Contingency fund a wise way to start Real estate rookies often not prepared

Jul. 3, 2006. 01:00 AM
RITA TRICHUR
CANADIAN PRESS


First-time homebuyers should give themselves a plush financial cushion to avoid being sideswiped by hidden costs like taxes, title searches and legal bills that can often add tens of thousands in charges before the final deal is done, experts say.

Myron Knodel, a chartered accountant and manager of tax and estate planning with Investors Group, says real estate rookies are most often caught off guard by the land transfer tax which is assessed when a title is re-registered from one owner to another.

"There's five provinces in Canada that assess that — B.C., Manitoba, Nova Scotia, Ontario and Quebec," he said.

"And it's (calculated) on a graduated basis, meaning that the rate will start sometimes as low as a half a per cent, graduate up to 1.5 per cent to the extent that the cost of the home is $200,000 or less. But then in most provinces, other than Ontario, as soon as you hit $200,000, it goes up to 2 per cent."

In Ontario, the 2 per cent does not apply until the home's value exceeds $400,000. But even under those more lenient rules, land transfer taxes can be quite hefty. For example, Ontario's levy for a $300,000 home still amounts to $2,975.

There's also an adjustment for property taxes depending on the time of the year the property is acquired, leaving buyers to assume their portion for the year.

"It's just something that oftentimes isn't factored in, and then arrangements have to be made to pay that at closing," Knodel said.

Other unforeseen costs can arise after the home is purchased. Maintenance costs and insurance can creep up on homebuyers who have only budgeted for their monthly mortgage payments.

"If you're buying an older home, even though you get the engineer's certificates and such, that can be quite significant," he said.

"You look at your mortgage costs ... I'd say 10 to 20 per cent should almost be kind of a contingency reserve. It's not going to happen every month but then all of a sudden you're going to run into a situation where your roof needs replacing."

In order to manage that emergency stash, buyers should be realistic about what they can afford — particularly at a time when housing prices are skyrocketing across the country.

Despite the fact that new home construction is slipping, Statistics Canada says prices remain astronomical, especially in Alberta's booming oilpatch economy.

Late last month, the federal agency reported the new housing price index rose 1.2 per cent in April to 138.2, the biggest month-to-month jump in 17 years.

Calgary and Edmonton ranked first and second in terms of price increases that month, but Regina, Montreal and Vancouver also saw significant mark-ups as rising demand, higher material and labour costs and escalating land values combined to push up prices.

Financial planners generally recommend that no more than 40 per cent of a household's income should go toward total debt service including interest, property taxes, heat, payments and other bills.

Kathleen Waters, a trained real estate lawyer and vice-president of TitlePLUS insurance, said consumers also need to ensure they get their money's worth out of legal fees.

It is important to understand that legal costs can be quoted in different ways. In some cases, lawyers give an estimate of legal fees before disbursements, which are essentially the firm's out-of-pockets costs. Others give a more "all-inclusive" assessment.

She said another key item to review with the lawyer is title insurance, which is a one-time premium paid at the time of purchase. While prices vary, in Ontario it costs about $200 for a $500,000 home.

Title insurance is an inexpensive way to guard against complications including disputes over a vendor's right to sell, building code violations, outstanding liens and outright fraud, Waters noted.

Additionally, if the home buyer obtains title insurance, a real estate lawyer can often reduce the number of searches and investigations, thus saving the buyer out-of-pocket costs on their overall legal bill.

"That's where your real estate lawyer becomes an invaluable resource: he or she navigates you through the major legal implications of home purchase, and can help prevent a dream home from turning into a nightmare," she said.