The True Costs of Home Ownership Series - Property Taxes

This is the 2nd installment in my series about the costs involved in owning a home.  You can read all about Utilities (heat, hydro, water) HERE & Insurance HERE

This can be a complex subject but you really only need a basic understanding of how things work since there's no way to change it...whether you rent or own, you're paying this tax...end of story. So consider this post to be  Property Taxes for Dummies, lol :)

What Are Property Taxes?
Municipalities collect taxes based on the value of your property to pay for local services, like firefighting, garbage collection, snow removal etc. Municipalities set that rate on a yearly basis based on how much money they think they will need to deliver these services. Properties are divided into classes & each class has a different tax rate. As always, my focus & the information I write about is geared towards residential properties. There are different tax rates for farms, industrial, commercial, multi-residential etc...

What Is The CVA
This is your Current Value Assessment & they are updated every 4 years & work on a phased-in system. MPAC is responsible for maintaining this valuation system (more on that below). Your tax bill is based on 3 components:
- MPAC's Assessed Value
- MPAC's Property Class
- Municipality's Tax Rate

What Is MPAC's Role?
MPAC is responsible for the classification & valuation of properties across the province. MPAC provides homeowners with their assessed value & also sends the information to Municipalities so that they can collect the taxes owed. There are 5 main categories that MPAC uses to establish value but there are up to 200 other criteria they may look at as well.
1. Location
2. Lot dimensions
3. Living area
4. Age of the structure, adjusted for any renovations or additions
5. Quality of construction

What Is The Municipality's Role?
Municipalities are not allowed to run a deficit so they set the tax rate based on their projected budget to pay for local services. They send out tax bills to homeowners based on the Assessment rolls they receive from MPAC  Assessed Value x Tax Rate (for your Property Class) = Property Taxes Payable They also remit the education portion of the tax rate to the provincial government based on whether you support public or separate education.

What Are The Local Tax Rates* In Durham?
*For Residential Properties
Whitby - 1.32%
Oshawa - 1.59%
Clarington - 1.36%

CVA & Market Price
More often than not, the value MPAC places on your home will differ dramatically from what you could sell it for on the open market & that assessed value is basically useless for anything else other than calculating your property taxes. You don't actually want it to be based on market price because then your taxes would most likely be higher...Now if MPAC is over-valuing your property you'll definitely want to deal with that!

How To Appeal Your CVA
I'm sure it comes as no surprise that if you're going to appeal anything, with anyone, that you'd better be prepared with as much supporting documentation as possible...basically everything + the kitchen sink!
You will be making your appeal directly to MPAC & a good start is to request a Comparables Market Report from them. Another would be to request a copy of your home appraisal from your lender as well as speaking to your REALTOR®  about getting a report of similar properties that have recently sold in your neighbourhood.  This article from the Toronto Star about someone who successfully appealed is an interesting read. For MPAC's step-by-step guide on the appeals process click HERE

How Property Taxes Are Paid
If you have a high-ratio mortgage (you put 5% down) then in most cases your lender will collect property taxes on your behalf to submit to the Municipality to ensure the taxes are being paid. You will probably find that they are actually collecting more money on a bi-weekly or monthly basis than seems warranted. The easy answer to this is they like to build up a surplus in your tax account. A quick Google search found this answer through TD HERE - check with YOUR lender to see what their policy is.

If you've got a conventional mortgage you're probably paying the taxes yourself & how often you pay can vary depending on where you're always going to have an interim bill & a final bill each year but Whitby, for example offers a pre-authorized monthly plan or you can just stick with 2 installment dates for your interim bill & 2 for your final bill.

Pre-Paid Taxes & Buying or Selling A Home
If you buy a house where the taxes have been pre-paid by the Seller or you sell a house where you, the Seller, have pre-paid the taxes or any utility payments...what happens? This is a great run-down of what a Statement of Adjustments (on closing) looks like HERE
Tax Relief & Tax Credits
Ontario Trillium Benefit HERE
Whitby Tax Relief Information HERE
Oshawa Tax Relief Information HERE
Interesting Articles & More In-Depth Explanations:

MPAC Property Assessment Guide HERE
Municipal Government Explained HERE
More On Claiming Tax Credits HERE
Everything You Ever Wanted To Know About Property Taxes HERE

Next up in the series...the exciting world of Insurance! Find it HERE :)

The Importance Of Pricing Your Home Right...The First Time!

As a REALTOR® pricing is the key to everything, whether we're helping to buy or sell a home, it all comes down to what our opinions of value are. We can do our research for what homes have sold for in the recent past, we can factor in current trends or specific issues that can affect the value, but this is sometimes just a starting's often more art than science & even in today's Sellers market, it's still the Buyers who determine the value! 

If your home ends up in multiple offers then you know you've got something special, whether it's features or location or just simply a case of supply & demand...whatever it is, Congrats!  But it's not these homes I want to talk's when your home isn't getting showings & not getting offers within that all-important first couple of weeks on the market that you need to look at where things went wrong!

As I mentioned above, pricing is the key to everything. My Broker always says "Do you want to be ON the market or IN the market?" In most cases pricing can account for the condition of a home (think: dirty, out-dated or poorly maintained), an undesirable location or a stigmatized property (think: crime or environmental) If a home is priced according to both its features & its shortcomings then you're golden...and if not, WHY wasn't it?

Dazzled By The Dollars

Agents Over-Pricing
An agent throwing out a high, unrealistic & often unattainable price is called "buying the listing" in our industry. The thinking behind this is to get the listing by distracting the Sellers with dollar signs & then keep asking for price reductions until it sells.  It can also happen when you've got an inexperienced agent or simply be a mistake. Because, yes, sometimes, even the best agents make mistakes! 

When an experienced agent uses this strategy deliberately to "win" listings, the only one "winning" is them. I say winning because they're going to get paid regardless of what the Seller nets from the sale. If the true value is far less than what was promised then the Seller certainly isn't winning, because they're not ever going to realize that extra money. 

As part of our fiduciary duties when we enter into a client relationship with a Seller, everything is supposed to be done in the best interests of that Seller client.  Over-pricing can mean that the home takes longer to sell, or sells for less than it should have and sometimes it doesn't sell at all....Clearly, over-pricing a home is not in our clients' best interests! I also think it's damaging to our industry as a whole, after all WE are supposed to be the experts, right?

I was involved in a situation like this earlier this year....but with a happy ending. I was up against another REALTOR® for a new listing & they suggested a much higher listing price than I did. I was lucky in that I got the opportunity to go back to the Sellers & show them that no matter how much I analyzed the data, that I could not even get close to the other agent's number. I'm pleased to report that I sold the property within the range I had suggested, and with enough time on the market that we all felt comfortable about the final selling price.

On the other hand, I've also been the REALTOR® who suggested the higher list price...but only when I've had the stats to back it up! I've got a handy-dandy chart that shows that my listings this year have sold for more than their competition during the same time-frame... I'm quite proud of my record & I include it as part of my listing presentation :)

#ProTip...When you're interviewing agents get them to explain the rationale around their suggested listing price, and make sure it makes sense!

Sellers Over-Pricing
This is a tough one! While we can offer our professional opinions on value, the client (homeowner) has the final say on what the listing price will be. Sometimes that price is what they NEED to sell it for rather than what it's actually worth. When these 2 figures don't match up then it ends up wasting everybody's time...Buyers who want to purchase the property (at a fair market price), the listing agent who spends a whole bunch of money preparing & marketing the property & finally the Seller themselves because having your home on the market is very disruptive to your regular life & you run the risk of not getting the property sold at all!

I tried to help some clients buy one such home this summer, sadly for them it did not work out! The home was over-priced by at least $15k to start with & it came out in negotiations that the Sellers' bottom line was completely unrealistic (it seemed to come as a big surprise to the listing agent as well!) & the home just sat & sat until it was taken off the market.

#ProTip...When you hire a professional, listen to them! That & get them to back up their analysis...if what you need & what it's worth are not the same then maybe it's not the right time to sell!

Know When To Hold'em (& When To Fold'em)

The flip side of this is that the price IS right & you have to know when to stay the course! I've been on the listing side of this scenario a few times & it can be nerve-wracking...but sometimes you just need to wait for your Buyer! It could be a timing issue or (frustratingly) for no apparent reason at all...if you've picked the right agent then rely on their expertise to guide you.

I've also been on the buying side, where I've known without the shadow of a doubt what a property SHOULD have sold for but multiple offers have skewed the in point: a home my Buyer clients were interested in sat on the market for waaaaay longer than it should have, given the market conditions & location, in my opinion because of the price. However, the Sellers held out & ended up with multiple offers that sold their home for the asking price (after 60+ days on the market)...multiple offers got them between $5-10k more than I recommended to my clients in a single offer scenario. The home was not worth that price to my clients so we watched that play out from the sidelines...Again, if you've picked the right agent then rely on their expertise to guide you.

And finally, sometimes you DO need to reduce...maybe your first offer ended up being your best offer but sadly it's long gone now (that's a bitter pill to swallow) or the market has changed or all the feedback you're getting is telling you you over-reached...

Regardless of why the property is over-priced, if it needs to be sold, there's a good chance you're going to be chasing the market just like the picture at the top shows! The old expression that you never get a 2nd chance to make a 1st impression is definitely true. Think it's a good idea to "try out" a higher price for a week or 2 because you can always reduce it? That's a big gamble with what's most likely your largest asset! I've seen homes that have ended up selling for less than I felt they should have because they didn't get it right the first time.

#ProTip...My "3 Ps" for maximizing the value of your home:

Preparation: spotlessly clean and staged to attract & appeal to your home's key demographic, create the buzz needed for a successful launch

Promotion: the right strategy for your circumstances & your particular home with great photography, targeted marketing & creative solutions, as needed

Presentation: execute the plan, maintain the standards set from start to finish & be available...whether it's for showings, offers or just questions

The True Costs of Home Ownership Series - Utilities

A good financial rule of thumb is to use no more than 35% of your household's net income (take home pay) on housing costs. These costs include your mortgage, condo fees (if applicable), property taxes & utilities. Of course the costs don't stop there, there are a number of others monthly costs that AREN'T included in that 35% so hopefully this series helps you understand the True Costs of Home Ownership.
The inspiration for this series came from the recent release of the Annual Auditor General's REPORT for 2014 & her disturbing findings on the Smart Meter program & how much Ontarians pay for one of the many news articles about it HERE  The costs for heating & powering your home can be quite significant & should definitely be taken into account when you're looking at affordability, whether you're a first-time buyer or moving up to a larger home.

When it comes to utilities, everything stems from consumption. Consumption is going to vary because every household is different, from the number of people living in the house to the actual size of the house itself. Many people in the Durham region are shift-workers & no doubt there are lots of people who work from home like I do. If you're home during the day for whatever reason, then you're consuming utilities during peak hours of the day & therefore paying more for some of those utilities because of that. If you're gone from 6am to 6pm, 5 days a week because you work in Toronto then I'll bet your utility bills are going to be a LOT lower! 

This is one cost that's pretty universal, regardless of how you heat your home, unless you've found a way to live off the grid. Think manufacturing your own electricity might be the way to go? Check out what I wrote HERE about how it could affect your home's value & desirability. I think that most Ontarians, if not all of them are on Smart Meters now so here's how Time of Use rates work. It's a one-size-fits-all system for residential usage so there's not much we can do about it except take as many energy saving measures as we can. There are lots of energy savings tips available on the internet...just a quick Google search away & remember, the cost of powering our homes will continue to rise every year. The Ontario Energy Board has a handy dandy calculator on their website HERE & there is a bill breakdown on the Hydro One website HERE that you may find helpful even if you're serviced by Whitby HydroOshawa PUC or Veridian.

Heating Options
Natural gas, oil, propane, water (boiler system with radiators), electric baseboard...there are lots of options! The most popular & cheapest to run is a forced air, natural gas system. If you have other gas appliances like a stove, dryer, fireplace, pool or hot tub heater then obviously those things will increase your consumption. Here's a great article I came across from Style At Home magazine HERE which explains way more intelligently than I ever could about these different heating options. As with all your utility costs, "other charges" in addition to your consumption will determine how much you owe each month. Enbridge Gas has a detailed breakdown of a bill HERE & you can also find interesting articles HERE & HERE

Each person in the Durham region uses aprox. 250 litres of water per day & the average household uses aprox 248 cubic metres of water per year. No matter where you live in the Durham region you pay the same water & sewage rates. Factors affecting your bill are consumption, whether your property is serviced by a well and/or a septic system as well as service charges...the region has a great detailed breakdown of a water & sewage bill HERE

Remember, the lifestyle choices we make are inevitably going to affect our utility bills.... Adding a pool or hot tub will definitely increase your hydro usage but if you have a gas heater for your pool then it will raise your natural gas consumption as well. Like a green lawn? Depending on what your watering habits are, this can impact your water bill. Like the A/C cranked in the summer or to feel like you're in a tropical destination in the winter? Hello $$$$$ or should I say, Goodbye $$$$$...Decide what's important to you and/or your family & save where you can so that you can splurge where you want to!

Next week's installment will be a little primer on Property it HERE! :)

The 3rd installment is all about it HERE! :)

At Home in Durham Update for Friday Dec 12th

Snow (& lots of it!), more provincial government fun & games with our money, awesome Open House's what's happening....At Home In Durham!

Have a great weekend everyone! :)

So You Want To Buy An Income Property...4 Things To Consider!

There are all kinds of income producing properties but my focus for this post is on basement apartments in Single Family Dwellings & the average Buyer....
                                               via Toronto Life

I love to do Open Houses! I meet lots of Buyers at Open Houses & more often than not, those Buyers are looking for a house where they can rent out the basement to help pay their mortgage. Many of them are not that picky as to whether they're legal or long as they can get the cash flow going, they're happy!

Here's why you SHOULD care!

1. Financing - You can't use the potential rental income on an illegal apartment to qualify for a mortgage. The benefits of buying a home with a LEGAL income suite are that you can CAN use that income to qualify for a mortgage on a more expensive house because of that rental income. Illegal = out of luck, end of story.

2. By-Law Enforcement - The Municipality can come shut you down. If this happens, you're going to be in deep doo-doo when it comes to your Tenant! You will probably have to cover their costs to move & to rent a new apartment. You could face charges & have to go to court & the courts may require you to convert the home back into a Single Family Dwelling at your expense.

3. Big Responsibility - Being a Landlord is not just taking cheques to the bank each month, it comes with a lot of liability. The rules are geared towards protecting Tenants & not Landlords so it's crucial that you understand & follow those rules. Ever see the movie Pacific Heights with Melanie Griffith? There really are so-called "Professional Tenants" out there who know how to work the system to their advantage, which usually translates into YOUR disadvantage!

4. Your Problem - That's right, lol, once you own the property, these & the issues I mentioned in my post for Sellers become your problem!

Other things to keep in mind:

Bait & Switch...Suppose you've purchased a home, with the illegal basement apartment & you've paid a premium for the "perceived" value of this income producing choose to rent it out & then you get caught. The Municipality makes you renovate the space to revert it back to its Single Family Dwelling status (at your expense). Is the home still worth what you paid for it?

Slightly off-topic but here's another scenario...I met a nice couple this summer who purchased a re-sale 4bed/3bath home. They paid the going rate for a 4bed/3bath home in that neighbourhood. They later found out that the 4th bedroom was actually an open "bonus" space in the original builder layout that the previous owners framed in themselves to create that bedroom. The new owners, the nice couple, found the room to be too small & awkward so they changed it back. They now own a 3bed/3bath it still worth what they paid for it or did they fall for a bait & switch as well?

Taxable Income...The rent you will receive is taxable income, at your marginal rate, minus expenses (& you have to be careful what you claim as an expense). Are you planning to claim that additional income which will mean paying additional income tax? And if you're not, will your Tenant claim their rent on THEIR taxes? The CRA might not catch on right away but they probably will put 2 & 2 together eventually...

Capital Gains...Those dreaded taxes again! This will come up when you eventually sell the property. Tax advice is best given by Tax Experts so please do seek out a professional for guidance...To get you started, you can find more information HERE, HERE & HERE

So if you see the following statement in an MLS® listing...“Seller and Agent do not warrant the retrofit status of basement apartment”  that's a dead giveaway that it's an illegal apartment. If you decide to purchase that property then a savvy Listing agent will have inserted clauses in the offer to protect their Seller & you will be left holding the bag. Now maybe that bag is full of money, but it could also be full of problems! As with any transaction, you want to go into it armed with as much information as possible & have a good grasp of the risks (& your tolerance for them) as well as the rewards.

Happy House Hunting! 
(And of course, if I can help in any way, I'm just a phone call, text, or email away... :))

Related:  Is Your Tenant Killing Your Sale? 4 Things To Consider When You're Selling!

Is Your Tenant Killing Your Sale? 4 Things To Consider When You're Selling!

I've had the title for this blog post on a post-it note on my bulletin board for several months now...ever since I helped a client buy a condo in downtown Toronto. When I started to do an outline of what I wanted to share on this topic, I realized there were way too many angles to explore so I've just covered what I feel are the most key points & divided it up into 2 posts, one for Sellers & one for Buyers (find it HERE)

So first up are 4 things Sellers should consider when selling an income producing property (does not apply to multi-plexes) & the backstory of what inspired me to write down this title in the first place:

My first-time Buyer had some very specific requirements for his first home relating to location, budget & amenities. I was doing my best to put those requirements together with a "quality" building in terms of reputation (both of the builder/developer & of the building itself) & future re-sale potential. 

We'd been looking for a couple of months when a great unit, in a great building, became available that seemed to meet all of the criteria. It was a tenanted unit with an out-of-town owner. Long story short, I tried to get us in for a showing for over a week & all I got was the run-around...the Listing agent wasn't much help, he let me know that he was also helping the tenant purchase his own condo & he didn't want to "pi$$ him off" by pushing too of the non-confirmation messages I received said "time not convenient, please try back next week...seriously? Technically the tenant only had to be provided with 24hrs notice that a showing was booked, his permission was not required. Sadly in this case, the tenant was the only one with a key so nobody was able to show the unit as a result!

It was a frustrating situation since what we were looking for was in short supply in my client's price range but in the end we were very fortunate that another unit came up in the building, within a few days of the first one & I helped my client successfully make the purchase! A few points for your consideration:

- If a property/unit is listed on the MLS® then it must be available for showings, otherwise the Listing agent is in breach of MLS® rules.
- The Listing agent was not acting in the best interests of his client, the Seller...although he may have been acting in the best interests of his client, the Tenant. So who's interests should have taken precedence?
- My Buyer was ready, willing & able to purchase the unit & COULDN'T because the Tenant would not allow access...effectively killing any chance of a sale!
- The unit was pulled off the market & re-listed a few months later & eventually sold for 95% of the listing price...Ouch!

So now YOU'RE the Seller & we're talking about YOUR home that you're either renting out in its entirety or just a portion of...what do you do if you want to sell?


Vacant Possession on Closing Day
 - Lease...You can't evict a tenant with a lease. A Buyer would need to assume the Tenant during the lease period.
- Monthly Tenancy...60 days notice is required from the 1st of the following; today is Dec 8th, 60 days from January 1st.
- Read more on this subject HERE

Giving Notice for Showings
-24hrs notice must be provided to the tenant for showings, their permission is not needed
- Showings allowed 8am-8pm only

Act in Good Faith
- You can get yourself into big and/or costly trouble if you're found trying to "trick" your Tenant into leaving early
- Read more on this subject HERE


When it comes to Basement Apartments, unless you have paperwork to prove otherwise, you're just a Single Family Dwelling.

Big Brother IS Watching
- The Fire Marshall as well as city/town employees are watching the MLS® for listings advertising "illegal" basement apartments
- The Fire Marshall states that if you have separate quarters where someone can eat, sleep & be self-sufficient in, then you have an apartment & it CAN happen that that they will knock on your door & require you to remove or retrofit the space
- A Buyers' Lender could request that the space be retrofitted
- You can retrofit but you may not be able to make it legal
- The rules for what makes a basement apartment legal are both Provincial & Municipal (so it varies depending on where you live) & there is also zoning to consider as well
- Anyone can request that a unit be inspected for compliance...neighbours, angry tenants

- Your insurance & your Tenant's may be null & void if you have a claim stemming from your "illegal" basement apartment


- Landlords are responsible for Tenants' unpaid utility bills
- Most utility companies will not install separate meters for "illegal" apartments


Smooth The Way
- Offer your Tenant incentives for keeping the unit clean & presentable and to co-operate with the inconvenience of showings & open houses
- Buy your tenant out of their lease...make it a WIN for both of you


Back to my client, we looked at a lot of units in those couple of months, many of them tenanted & they ran the gamut from presentable to pig sty. The pig stys didn't bother me in the least, in fact, the worse the unit looked, the better deal  I could probably get for my client!

There is an expression "don't step over dollars to pick up nickels". The fear of losing rental income while you prepare & have your home/unit on the market is a good example of this! Don't lose sight of the big picture because a properly presented home/unit could net you TENS of thousands of dollars more! It might cost you more in the short term but doing it right, maximizing your biggest asset, will pay you back in the end!

One final note, if you're selling a home with a non-legal basement apartment then make sure that any Agreement of Purchase & Sale that you sign says you're selling a Single Family Dwelling! I'd suggest putting a clause in the offer, that the Buyer acknowledges that the home is a Single Family Dwelling. That way you're covering yourself & it's up to the Buyer and/or their Representative to do their due diligence if they want to use it for any other purpose. 

Related: So You Want To Buy An Income Property...4 Things To Consider!

Additional Links You may Find Helpful:

Choosing the right Tenant HERE
Landlord & Tenant Board HERE
Retrofitting a Bsmt Apt HERE
City of Oshawa on Accessory Apts HERE
Town of Whitby on Accessory Apts HERE
Municipality of Clarington on Accessory Apts HERE