Toronto Real Estate and Neighbourhoods Blog | Move Smartly

When a detached home is not a detached home

Bob Aaron in Legal, Home Selling

When you’re selling a house known as a link-semi, is it wrong to advertise it as a detached home?

The link house style was popular in Toronto in the 1970s and 1980s. The only physical attachment that joins two adjacent houses typically consists of one or two short rows of underground concrete block footings, at right angles to the foundation walls. They are entirely unnecessary for structural reasons.

Looking at the houses from the street, they are clearly detached, with a few feet separating them. It is impossible to tell that the houses are linked because the only physical attachment is the concrete blocks that are invisible above ground level. In fact, the only purpose of the attaching footings was to allow builders to construct what looked like detached houses on lots which were designated for semi-detached models.

One Toronto real estate agent found out the hard way that the Real Estate Council of Ontario (RECO), the industry regulator, takes a dim view of agents who advertise link houses as detached.

Back in May 2007, this selling agent listed a house for a client, describing it on the Multiple Listing Service (MLS) as “detached,” which from a street view, it was.
The property was listed at $320,000, sold for $329,000 through a buyer broker, and closed Aug. 31, 2007.

Manitoba Simplifies Seller Disclose Form

Bob Aaron in Legal, Home Selling, Real Estate Trends

The seller property disclosure statement remains a hot topic in the real estate community as Manitoba has now made them compulsory, while Britain has gone in the other direction to repeal the law requiring them in every transaction.

Effective Aug. 1, 2011, the Manitoba Securities Commission has mandated that its own version of the Property Disclosure Statement must be used by real estate agents when they prepare agreements of purchase and sale.

The major difference between the disclosure form created by the Manitoba Real Estate Association and the Ontario Real Estate Association version is their length and complexity. The Manitoba form has 19 questions, the basic Ontario form has 48.

I am a devout opponent of these forms, but given a choice, I would take the Manitoba form any day.

Monday Morning Interest Rate Update (July 11, 2011)

David Larock in Mortgages and Finance, Home Buying, Home Selling

All eyes were on last Friday’s employment report after our latest Consumer Price Index (for May) came in higher than expected at 3.7%. If rising prices are reinforced by strong job growth, it strengthens the case that inflation is picking up steam. So when the report showed 28,000 new jobs, which was about double what the street was expecting, why did five-year Government of Canada bond yields plummet by 10 basis points, instead of rise? 

Despite a strong headline number, the details in the jobs report weren’t impressive: only a quarter of the new jobs were for full-time employment, most of the net increase occurred in Alberta (six of ten provinces actually saw decline), almost all of the gains were in the service sector (where jobs tend to be lower-paying), and most of the increase was in the public sector (primarily involving temporary work on the 2011 census).

While hiring stats are important indicators of overall economic momentum, the real reason we watch the employment rate is to gauge whether labour is likely to become more expensive because this pervasive cost spreads throughout the economy and spurs broad-based price inflation. Our latest employment report showed average wages increasing by less than 2%, compared to an overall inflation rate of 3.7%. So the cost of labour is increasing more slowly than the general rise in prices, and workers (who are also consumers) have incomes that are not keeping pace with inflation.

Mortgage Secrets from an Independent Mortgage Planner

David Larock in Mortgages and Finance, Home Buying, Home Selling

If you are buying a house or refinancing your mortgage, the siren song emanating from your local bank branch can be mighty tempting. It’s just so darn convenient, and with all of those TV and radio ads featuring happy people reassuring you that your bank has only your best interests at heart - what’s not to like? Well…your available options for one…and certainly their terms and conditions…and maybe the rate – but hey, I hear that some branches are now giving away free donuts on Fridays, so at least there’s that.

Monday Morning Interest Rate Update (July 4, 2011)

David Larock in Mortgages and Finance, Home Buying, Home Selling

What a difference a week can make. Five-year Government of Canada bond yields snapped back by 30 basis points and what looked like rate-cut territory last Friday has turned into rate-hike terrain just one week later. Talk about volatility.

The market’s reaction was attributed to a number of factors. Canada’s latest Consumer Price Index (for May) came in higher than expected at 3.7%, the largest increase since March of 2003. Core inflation, which eliminates more volatile inputs like food and energy prices, also rose 1.8% (up from 1.6% in April). Internationally, the market seemed to like the Greek parliament’s passage of its latest austerity plan combined with the Eurozone’s most recent bailout proposal for that deeply troubled country. In the U.S. the latest ISM number (a key measure of business activity) surprised to the upside, and there was also a positive reaction to the latest Case-Schiller house price index numbers, which showed a slowing rate of house-price declines.     

Short-term volatility aside, the beauty (or lack thereof) in the above numbers is still in the eye of the beholder. Those who believe that interest rates will stay low over the long term would point out that the single biggest factor driving our latest CPI number was a 29.5% increase in gas prices, and short-term energy price spikes have not historically spurred broader-based inflation. They would also remind us that Mr. Carney expected a short-term inflation spike in the second quarter, and that he has also predicted that Canada’s second-quarter economic growth “could come in below 2%, in the 1 percent range”.

Meanwhile, Greece’s latest austerity plan was met with widespread street protests and their debt to GDP ratio, currently at 155%, is expected to grow to a staggering 170% by next year; the analysts I read still believe that the country’s eventual debt default is inevitable. In the U.S., while the ISM number is encouraging, it’s hard to believe that a slowing in the rate at which house prices are declining is cause for much celebration. Call me when the country has gone a full year without quantitative easing and when there is a credible plan to balance the budget, with the political courage to match.

With five-year Government of Canada bond yields now on an upward march, anyone thinking about a mortgage over the next several months should lock in immediately. It costs you nothing and will give some protection if you need to secure financing before the current upward trend in fixed-mortgage rates subsides. (Just be sure to do your due diligence on the terms and conditions offered by the lender where you obtain your pre-approval, because if rates go up you won’t want to move from that lender.)

Variable-rate mortgage borrowers should pay close attention to this Friday’s unemployment report. If we see more upside surprises in the numbers, expectations of rate hikes in the latter part of 2011 could resurface (although I remain unconvinced – for now.)

The bottom line: Last week was a reminder that interest rates can trend up as well as down. Given how important a mortgage is to most personal balance sheets, seek out a mortgage planner who will work with you to minimize short-term volatility with the right pre-approval strategy. Forewarned is forearmed.

David Larock is an independent mortgage planner and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David's posts appear weekly on this blog (movesmartly.com) and on his own blog integratedmortgageplanners.com/blog). Email Dave

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Use SPIS Forms at Your Own Peril

Bob Aaron in Home Selling, Legal

If there ever was any doubt about the risks to sellers and real estate agents of using the Seller Property Information Statement (SPIS), a decision of the Ontario Court of Appeal earlier this month would seem to have put them to rest once and for all.

In the case of Krawchuk v. Scherbak, the court of appeal reversed the trial decision and held the real estate agent and her employer equally liable with the sellers for negligent misstatement in filling out the form.

Back in 2004, Timothy and Cherese Scherbak listed their property in Sudbury with Wendy Weddell and Re/Max Sudbury Inc.

After Zoriana Krawchuk bought the house for $110,100, she discovered that the foundation walls were sinking into the ground, resulting in the failure of proper support for the floor joists and building above.

Bob Aaron: SPIS forms are ticking time bombs

Bob Aaron in Legal, Home Selling

Real estate boards and agents across the country continue to promote the use of the Seller Property Information Statement (SPIS), despite the fact that the disclosure form has resulted in an avalanche of litigation resulting from its widespread use and misuse.

Proof of the litigation explosion comes in the form of a detailed analysis of every Canadian case on the SPIS, which I have just completed for a presentation to real estate lawyers at a gathering of the Ontario Bar Association next month.

Since the forms were first introduced around 1993, there have been 49 reported court decisions resulting from the use of the SPIS in Ontario, and a further 153 from the other provinces and territories, for a total of 202 cases. I cannot think of any other single document which has accounted for so much litigation in the same time period.

Typical of the cases taking up considerable court time lately is the 2010 decision of Small Claims Court Deputy Judge Jay State in the case of Smith v. Campanella.

David and Brenda Smith sued Salvatore and Maria Campanella for damages in the amount of $9,256.25 arising from their purchase of the Campanella house on Queenslea Dr. in Hamilton.

Disclosure Form is a Danger to Buyers and Sellers

Bob Aaron in Legal, Home Selling

Over the years, I have repeatedly criticized the Seller Property Information Statement (SPIS), a form published by the Ontario Real Estate Association.

Use of the form is a controversial issue in the real estate community. Some listing agents encourage sellers to complete the form and provide it to buyers to disclose various issues about a house being offered for sale.

In numerous columns, I have been critical of the form because it is complex, ambiguous, misleading and technical. Many court cases have resulted from the use and misuse of the document.

Not only does the SPIS present a risk of litigation to buyers and sellers, but it now appears that its use has repeatedly resulted in real estate agents getting disciplined by their regulatory body, the Real Estate Council of Ontario (RECO).

Recently, RECO added a search function to its website ( www.reco.on.ca), allowing the public to search 10 years of discipline decisions by the subject matter of the rules which an agent may have breached.

In no time at all, I was able to confirm that there are a dozen reported discipline decisions in which the agent involved was censured over the use of the SPIS, among other issues.

Honesty won't resolve disclosure form issues

Bob Aaron in Legal, Home Selling Tips

The Great SPIS Myth

It's time to reveal The Great SPIS Myth – the prevailing fiction about the Seller Property Information Statement (SPIS), a disclosure form published by the Ontario Real Estate Association (OREA).

Although its use is endorsed and encouraged by many OREA member boards, real estate agents remain sharply divided on whether the form is too dangerous to use, and whether it protects the public or the agents who try to get sellers to sign it.

I have been very critical of the form because it results in a great deal of litigation among sellers, unhappy buyers and the agents who are caught in the middle.

The official position of OREA and industry commentators who support it is that the problem with the SPIS is not the form itself, but that some sellers do not tell the truth.

The key to the successful use of the SPIS, OREA says, is honesty. In every one of the court cases I have written about in this column, OREA's view (set out in a letter to me last month) is that "it was not the SPIS form itself that caused legal difficulty for the sellers: rather it was the failure of the sellers to be forthright in their disclosures about the property."

This, in my view, is the fatal flaw in the OREA logic. I call it The Great SPIS Myth – the fiction that if sellers are honest they won't wind up in litigation over the SPIS form.

A careful analysis of the reported court decisions shows that this position is simply not accurate, and that is probably why OREA's president declined my request for an interview.

Consider some of the questions on the form:

Real estate agents are divided over disclosure form

Bob Aaron in Legal

One of the most controversial issues facing the real estate community is the use of the Seller Property Information Statement (SPIS), which is often provided by sellers to buyers to disclose various issues about a house being offered for sale.

In numerous columns, I have been critical of the form because it is complex, ambiguous, misleading and technical. I have written about some of the many court cases that have resulted from the use and misuse of the document.

Real estate agents tend to be sharply divided on the SPIS. Many have written and spoken to me to support my position, and others have strongly disagreed with my "crusade."

Recently I contacted Bob McLean, communications director at the Ontario Real Estate Association, which publishes the SPIS form. I asked him to arrange an interview for me with the association's president or legal counsel.

I was told that the association's point person was its president Pauline Aunger, and that she would provide me with a written statement on the subject. Aunger was very busy "chairing meetings," and was only willing to enter into an email dialogue. I declined the offer.