Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Beware Sending a Real Estate Deal Off the Rails

Bob Aaron in Legal, Home Selling, Home Buying

An interesting decision from Toronto’s small claims court last December provides a useful lesson on the obligations of buyers, sellers and lawyers when a real estate transaction starts to go off the rails.

In his decision, Justice M. Donald Godfrey wrote that the case came to court because the parties and their lawyers were unable to work out a “reasonable compromise” on the closing of a transaction on Mould Ave., in Toronto.

Nuno Barbosa and Paula Boas agreed to buy the house for $516,000 from Helder and Maria Rodriguez, with a scheduled closing of October 30, 2009. Two days before closing, the buyers discovered that the property taxes were not $2,300 as indicated on the MLS listing but were in fact almost $4,600. The increase was the result of a re-assessment of taxes due to an addition to the property which was completed in early 2008.

The buyers requested a $10,000 price reduction. When the sellers declined the offer, the buyers refused to close even though their lawyer was holding enough trust funds to complete the transaction.

After receiving advice from another lawyer, the buyers changed their minds and told their lawyer that they were willing to close and sue later. But the request was not made until after the 6 p.m. closing deadline.

The sellers did not agree since they did not know what damages they were exposed to as a result of two “chain reaction” closings, which depended on the sale of their Mould Avenue house.

The buyers then sued the sellers for return of their $10,000 deposit, and the sellers sued the buyers for damages resulting from their refusal to close. 

After an unusually long three-day trial, Justice Godfrey ruled that the buyers should have closed the transaction on time since the breach of contract was “not material.” However, the judge also decided that the sellers were entitled to refuse to close 15 minutes after the 6 p.m. deadline because the contract stated that time was “of the essence.”

Should Murder or Suicide be Disclosed?

Bob Aaron in Legal, Home Selling, Home Buying

Shortly after Sidney and his wife bought their Toronto home last fall, a number of their new neighbours told them that there had been a suicide there just prior to their purchase.

The neighbours knew in great detail that the event occurred in the basement washroom, and was soon followed by a crime scene-like display of 10 police cars, fire trucks and an ambulance.

Sidney emailed me to report that the seller told them that her brother, the original owner, died of a heart attack.

The property was inherited by the owner’s sister, who sold the house right afterward.

At the time of the sale, the house was in its original condition except that the basement washroom had been gutted and renovated. The buyers were told that the reason for new basement washroom was due to “renovations they never ended up finishing.”

The new owners are very unhappy. They wanted to know whether the seller was required by law to reveal the truth about the suicide, and how this impacts them when they resell the house.

In Ontario, sellers and real estate agents have no legal obligation to disclose information about suicides, murders, or any other matters which might stigmatize the house.

Bizarre Form Warns Against Signing SPIS Form

Bob Aaron in Legal, Home Selling

In the wake of a flood of court cases involving the Seller Property Information Statement (SPIS) and its counterparts across Canada, the Ontario Real Estate Association (OREA) has introduced a strange new form designed to warn sellers about signing the SPIS.

Property disclosure forms consist of a complex series of questions that agents sometimes ask sellers to complete. Some agents believe — incorrectly — that the form shields them from liability for undisclosed defects in the house.

Since the form first appeared in 1997, it has been the subject of about 230 court cases across Canada — and new ones are appearing at the rate of about one a month. Indeed, it is difficult to think of any other single form — except perhaps the marriage certificate — which has spawned so much litigation and has produced so much money for litigation lawyers.

Rather than place the warnings about signing the SPIS form right on the form itself, the new form 225, entitled “Important Information for Sellers,” contains a caution for anyone about to sign the disclosure form.

In a huge understatement, the warning form states “care must be taken when the form is completed.”

Best Toronto Neighbourhoods 2013 - For Price Appreciation (Realosophy Top Ten)

Realosophy Team in Top Ten Neighbourhoods, Toronto Real Estate News, Home Buying, Home Selling

We're back with our annual Hottest Toronto Neighbourhoods list (Best Toronto Neighbourhoods for Price Appreciation). The Realosophy Analytics team is always happy to return to the dance that brought us here - our pioneering approach to tracking house trends and other analytical data at the neighbourhood level.

 

Want more analytics? Attend Our Next Realosophy Workshop: How School Quality Affects House Prices & Your Home Buying Strategy

 

Heat Map: Toronto Neighbourhoods by House Price Appreciation, 2011 to 2012

Map Instructions: On upper right hand side of map, click on green tab on box to hide legend. On upper right hand side of map, click on box to expend legend.

Central Toronto Houses Hot

Seven of our top ten neighbourhoods are in central Toronto (west of DVP and east of Dufferin). In one half of the tale of two cities (the other being the gossamer that is Toronto's condoland), strong demand from urban families, coupled with a finite number of houses in central Toronto, means higher prices.

And in neighbourhoods offering detached houses or top schools, the appreciation is significant. The neighbourhoods on this list have appreciated 21% to 27%, well above the citywide appreciation rate of approximately 6%.

Almost one in four properties in Toronto sold for "over the asking price" in 2012 - a striking number as this is an indirect way to assess multiple offer activity. Half of the neighbourhoods on our list rated above the city average with 37-52% of properties selling "over asking."

Inner Burbs Rise

A handy catch-all, the “urban family” actual encompasses several profiles. The New Urban (Nuburban?) family wants to ditch the commute, but not the detached house, larger lot and green lawns. This family sacrifices space, which they prize, and could buy more of in the outer suburbs, to gain time. These preferences are driving up prices in some inner burb (Etobicoke, North York, East York) neighbourhoods - see Islington Village, Parkwoods and Victoria Park Village on our list.

Luxury Redefined

The Established Urban family drives demand in upper-end neighbourhoods like Allenby, Caribou Park, Rathnelly and Casa Loma on our list. They value the pedigree of the neighbourhood, larger houses and local schools, rather than their urban features per se, but do appreciate excellent subway access and top quality main streets.

Long-standing luxury neighbourhoods - Forest Hill, Bridle Path and Teddington Park - start on higher ground so it's rare to see them on "best appreciation" lists - so while Forest Hill makes our list, it's important to note that a handful of super luxury sales can skew the average.

Urban Beauties

Core Urban families value the "urban" in urban living - diversity, access to bike lanes and public transit and walkable main streets. These preferences lead them to lead boldly in less economically established areas in very downtown locations, unfazed by the prospect of shared walls - think Dufferin Grove and Trinity Bellwoods on our list. These consumer preferences are at the core of Toronto’s urban revitalization trend of the past 10 years and counting, a period which may one day be seen as seminal in our city's history.

Understanding the Data

• Yellow Circle - Year over year change in average house prices from 2010 to 2011, calculated by Realosophy Analytics, based on Toronto Real Estate Board (TREB) Data
• Avg. Price - Average house prices in 2010 and 2011, calculated by Realosophy, based on TREB data
• Multiple Offer Activity - Indirect measure based on percentage of houses sold over the asking price in 2012, calculated by Realosophy, based on TREB data
• Housing Breakdown - Sales by type of House in 2012, calculated by Realosophy, based on TREB data
• Walkability - As calculated by Walk Score
• Top Schools - Area public schools with "A" ranking in 2012-2013; Average scores of 90 and above calculated by Realosophy Analytics, based on Education Quality and Accountability Office (EQAO) test scores as reported by the Ontario Ministry of Education (Note: Our averages include all test scores with the exception of High School Math for which Academic Math is included but Applied Math is not)

 

1. Allenby (Central) See Current Houses for Sale in Allenby

Avg. Price 2012: $1,074,630

Avg. Price 2011: $846,534

Multiple Offer Activity: 52%

Housing Breakdown: 100% Detached

Walkability: 72/100

Popularity Points:

• Good elementary and high schools
• Detached houses
• Walking distance to great shops and restaurants on Eglinton
• Short walk to the subway

 

Top Elementary Schools:

• Allenby Junior Public School
• North Preparatory Junior Public School
• Oriole Park Junior Public School

Top High Schools:

• Forest Hill Collegiate Institute
• Marshall McLuhan Catholic Secondary School

Full Neighbourhood Profile for Allenby

 

Disclosure Statement Meant Buyers Recovered Damages, but Listing Agent Escaped Liability

Bob Aaron in Legal, Home Selling

A Saskatoon real estate agent and his brokerage have escaped liability to the purchasers of a home with a wet basement in a misrepresentation lawsuit. Although they recovered their damages from the sellers, the unhappy buyers were ordered to pay the agent’s costs out of their own pocket.

Back in 2007, Carol and Donald Jacobucci bought a house in an upscale Saskatoon neighbourhood from Marleen and Patrick Prediger. The agreement of purchase and sale made it a condition of the deal that the sellers complete and deliver a Property Condition Disclosure Statement (PCDS), known in Ontario as a Seller Property Information Statement (SPIS).

The Predigers purchased the house in 2000 and lived in it until its sale to the Jacobuccis in 2007. The Saskatoon real estate market was very active when the property was listed for sale; the sellers’ real estate agent described it as “chaotic,” and one where offers above asking price were common.

At the time the house was listed, the Predigers signed a PCDS at the request of their agent. It was a standard form in use at the time, although it was revised the following year. Unlike in Ontario, the form was mandatory for real estate agents to use.

Monday Morning Interest Rate Update (September 17, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

We started last week just hoping to dodge a German constitutional bullet but by the time it was over, markets everywhere were surging after U.S. Fed Chairman Ben Bernanke (or Ben BernanQE as he is now more cleverly known) backed his liquidity truck up to the American low-rate punch bowl and filled it to the rim.

On Wednesday,Germany’s constitutional court ruled that its government does in fact have the legal authority to participate in the European Stability Mechanism (ESM) and to join the European Union’s fiscal compact.

Whew. While investors expected a favourable ruling on both fronts, if the court had ruled the other way, Europe’s bailout programs would have been turned on their heads and financial markets everywhere would have descended into chaos. Bullet dodged.

Then on Thursday, Ben Bernanke spoke the words that investors had been waiting for, and then some.

First, he said the U.S. Fed would now embark on a third round of quantitative easing whereby it will effectively print new money to purchase $40 billion in mortgage-backed securities each month, while also continuing Operation Twist until the end of the year. (Reminder: Operation Twist is a Fed program that sells short-term Treasuries and uses the proceeds to buy long-term Treasuries in an effort to drive down long-term borrowing costs). In total, the Fed will purchase $85 billion worth of assets each month for the remainder of this year.

Second, just to make sure that the animal spirits of investors would be sufficiently whipped up, Mr. Bernanke also extended the Fed’s timeline for raising its near 0% policy rate from late 2014 to mid-2015.

Here were the key points made by the experts I read following the Fed announcement:

Why the SPIS Can Cause More Grief Than it Spares

Bob Aaron in Legal, Home Selling

As a result of its promotion by the Ontario Real Estate Association (OREA), the seller’s property information statement (SPIS) continues to be a source of never-ending business for litigation lawyers and endless grief for unlucky buyers and sellers who are being swept into the bottomless pit of lawsuits because they used it.

It’s time to debunk some of the myths surrounding the form, many of them promoted by OREA and its industry apologists. Here they are:

 • Myth: Commonplace advice for sellers signing the form is Liars Beware. Nothing could be further from the truth. The real reason sellers often get sued is not because they lie but because the SPIS is complicated, highly technical, misleading and highly ambiguous. It is impossible to complete the form fully and accurately without expert advice from industry professionals. And judging from more than 200 Canadian lawsuits, even the professionals get it wrong sometimes.

Monday Morning Interest Rate Update (July 30, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

When Spanish bond yields spiked to euro-zone record highs last week I wasn’t surprised to hear the president of the European Central Bank (ECB), Mario Draghi, offering reassurances to the market.

What did surprise me was the rally that followed.

It didn’t even take the usual announcement of new emergency measures with to-be-determined details. Apparently all the market needed to hear from Mr. Draghi was:

1. “The euro is irreversible.”
2. “The ECB will do whatever it takes to preserve the euro and, believe me, it will be enough.”

Really?

Last I checked the Troika (The ECB, the IMF and the European Commission) had just arrived in Greece this weekend to confirm that its government had implemented the additional $11.5 billion euros in budget cuts that are tied to Greece’s next bailout payment. Despite this mandate, Greece’s finance minister presented a plan to the Greek coalition government’s leaders to cut only $7.5 billion euros, and in advance of his meetings with the Troika, Greek Prime Minster Antonis Samaras said that “some recessionary elements in the bailout must change if we are to meet those goals.”

But Greece is not exactly in a strong negotiating position these days and the pay masters who control the $240 billion euros set aside for the country’s rescue package aren’t budging on their demands. In particular, Germany has been adamant that Greece must comply with its bailout conditions at all costs and there is widespread speculation that Germany is now resigned to a Greek exit from the euro zone.

While it is tempting, not to mention politically expedient, for the euro zone’s leaders to whisper that contagion from a Grexit can be contained, we’ve already seen this play out in similar circumstances. To cite some recent examples: the U.S. sub-prime meltdown was also supposed to be contained and Spain’s bailout was to be limited to its banks (stay tuned on that one).

I think hindsight will ultimately show that Mr. Draghi should have more accurately said, “The euro is irreversible … until it isn’t.”

Basement Apartments are a Minefield for the Uninformed

Bob Aaron in Legal, Home Buying, Home Selling

My column on basement apartments earlier this month seems to have touched a nerve among homeowners and real estate agents, many of whom sent me emails. The message in the column was that simply using the term “retrofit” to signify whether an apartment was legal or not was misleading and dangerous.

Bill Johnston, past president of the Toronto Real Estate Board (TREB), wrote: “Thank you for your excellent article on basement units in the Saturday Star. They can be a minefield for the uninformed.”

Current TREB president Richard Silver agreed, saying: “It certainly is a minefield for consumers and agents unless we get some clarification.”

Brian Edwards, of Westbrook Building Inspection Services, pointed out: “I have lectured to agents over 80 times on this topic and it never ceases to amaze me how devious efforts are to hide the fact that the unit is illegal.”

Bill Owen, of Re/Max Realty Services, told me there are “thousands of illegal (units) out there, especially in Mississauga and Brampton. I see them every day.”

In fact, the minefield is even more complicated in light of provincial legislation, which came into effect at the beginning of this year.

Basement Apartments Must Comply with Zoning, Fire, Building and Electric Codes

Bob Aaron in Legal, Home Selling, Home Buying

When real estate agents prepare offers for a house with a basement apartment, they typically insert a clause stating that “seller does not warrant retrofit status.”

This results in the purchaser taking the risk of getting caught by city inspectors and having to vacate the unit and forfeit rental income.

Agents and sellers seem to think they are sheltered from liability if they do not “warrant” the basement’s so-called retrofit status.

This practice could end in the light of a recent letter to local real estate agents by Toronto Real Estate Board president Richard Silver.