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Real estate is an excellent investment. Always has been.

There is even a school of thought that says that as soon as you pay off your own mortgage, you should take the money you had been spending on it and put it straight toward a rental property.

This might be good financial advice . . . but are you ready to be a landlord?

Easy Money?

It sounds like the ultimate in passive income: Let the tenants pay down the mortgage while your equity builds.

Except being a landlord is not a hands-off or no-skills-required job.

It involves work, and you will absolutely require help for at least some of it.

Landlord Responsibilities

Here in Ontario, residential tenancies are regulated by the Residential Tenancies Act, 2006. (There are a few exceptions that can be found here.)

Outside the listed exceptions, all tenants (since May, 2018) are entitled to receive a copy of the Ontario Standard Lease.

It’s important to know that there is such a thing as an illegal, or unenforceable, clause. A landlord cannot contract out of a responsibility or restrict a tenant’s lawful right by adding clauses to the lease.

For example: A landlord cannot evict a tenant for having a pet, even if they have a “no-pets” clause in their lease.

Here are some other basic responsibilities that are not negotiable:

Provide legal documents without charge:

It is up to you, as the landlord, to provide a copy of the tenancy agreement, if you have one, with the Ontario Standard lease. You must also issue rent receipts to the tenant upon request.

There are also standard forms for you to use when notifying a tenant of rent increases, landlord visits to the rental unit, or eviction.

Repair and maintain the home:

The landlord is responsible to make needed repairs, even if the tenant was aware of them before signing an agreement. Some of these will involve repairs to heating, plumbing, electricity, and appliances that come with the unit.

The law also requires that you comply with all provincial/municipal health and safety standards. This includes providing and maintaining working smoke and CO detectors in all rental units.

Tenants are responsible for damages that they cause to the unit.

Access to vital services:

A landlord can’t legally shut off utilities (electricity, natural gas, water), even if the tenant doesn’t pay the rent.

In some cases, you may arrange for tenants to pay the utility companies directly. However, if they don’t pay, you may ultimately find the charges added to your tax bill.

Heat:

In Hamilton, the by-law requires that tenants have adequate heat between September 15 and May 15. The landlord must ensure that the temperature doesn’t go below 20 degrees Celsius.

Common Area Maintenance:

Cleaning and maintenance of common areas is always a landlord responsibility.

This means common hallways or shared spaces, as well as lawns and driveways.

Many tenants agree to cut the lawn and shovel the snow, but if they decide to stop or become unable to do it, the landlord has to make arrangements to take care of these tasks.

Calculate the True Cost

It’s important to protect your investment – and a little due diligence can help you avoid serious financial hardship.

While making your plans to buy a rental property, remember to factor in vacancy, maintenance, and repairs.

The main recurring expenses will be your mortgage, taxes, insurance, and utilities, unless your tenants will be paying those directly. Make sure, though, that rents cover these with a little left over to put toward a slush fund for the inevitable repairs that will come up.

Figure out how long you could carry the property if it became vacant or the tenants stopped paying rent. It’s not uncommon for the eviction process to take more than a few months.

Remember, too, that rental income has to be declared as income and that it is taxable.

Finally, if you are considering a single-family home with a secondary suite, be sure to investigate whether it’s legal before counting on renting it out. If it isn’t, find out what the cost would be to make it so.

You can read more about creating a legal rental suite here.

Professional Services You Might Use

If you’re considering becoming an investor, chances are that you already have a busy life and career. You probably don’t have time to be on call 24/7 for tenant issues, handyman work, lawn or snow maintenance, etc.

Before buying your first property, look into the cost of different companies to handle those maintenance items.

We also highly recommend that you speak to an accountant who can help you to structure your finances and taxes in a way that allows you to keep as much of your profit as possible.

Property managers can be a lifesaver if you have a very hands-on rental property that requires a lot of attention.

The Hamilton and District Apartment Association (HDAA) is a local resource where you can find support and education on matters of interest to landlords in this area.

At the very least, read through the Landlord Tenant Board (LTB) site to get familiar with the provincial laws that will apply to you as the owner of a residential rental property.

Your Success is Around the Corner

As long as you arm yourself with the right information, you can succeed at building an income-generating portfolio. Real estate is still an excellent investment. We want to help you to invest wisely so that you get the most for your efforts!

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This week, we’re continuing with our house hunting tips for buyers in a sellers’ market. (If you missed last week’s post about what to look for on the outside, you can catch up here.)

Buyers and their agents are still dealing with restricted showing times, usually 30 minutes or less. Be sure to use that time to look for red flags – signs that the house you’re viewing could have expensive issues.

Just to repeat the important part:

There is absolutely a measure of risk involved in buying any house. This is as true of new construction as it can be of a ‘handyman special.’ Things can go wrong, and previously unknown issues can crop up at any time. Every homeowner will have maintenance and repairs to do at some point.

You can do a few things to avoid big surprises. It’s possible to sharpen your eye for signs of problems on your first visit to a property. You’ll have to make the best use of your visit, though – looking past the cosmetics of the property – no matter how beautifully staged it is!

Let’s head inside the house and take a careful look at the basement.

Is a Wet Basement a Big Deal?

You might have heard people comment that a “damp basement” in an old house is “not a big deal.” Let’s put a pin in that thought and come back to it.

Literally everything about the exterior of a house, from the roof to the windows, the siding, and the parging on foundation walls, is there to keep water out of the house. Despite what seem like best efforts, though, sometimes water does get inside.

In any house, but especially one with a finished basement, water intrusion can be destructive. In an old house with damp air, you could find that your metal tools or appliances rust over time.

If you see a dehumidifier, chances are that there is moisture that needs to be controlled.

Dampness at the right temperatures (60-80 degrees F/15-27 degrees C) also provides the perfect environment for mould to grow. The health hazards of mould overgrowth are well known.

So why would anyone minimize the importance of a wet basement? This probably goes back to the days when houses were built to different standards. It was normal to have air leaks through drafty windows and gaps in door frames. Insulation wasn’t as efficient, and there was much more air flow. Back then, if a small amount of water got in, it easily dried itself up and it really wasn’t a big deal.

Things have changed – our homes are tighter, warmer, and more comfortable now. But that also means they need to be drier, since moisture doesn’t evaporate as easily.

So, yes, a wet basement is something to watch out for – it can be a very big deal.

What to Look For in the Basement: Moisture and Flood Control

We’ve already discussed the role of grading and downspouts in keeping the water away from foundation walls. But if that doesn’t do the trick, there are some interior things that can protect the home.

There are some things that show that problems have been dealt with:

Not all houses need or have one, but look for a sump pump in the basement. In areas with a high water table, a sump pump can take care of some excess water by pumping it away from the house. It sits in a pit in the lowest part of the house where water collects. During a heavy rainfall or snow melt, when the water gets past a certain level, the pump will go on and drain water through a discharge pipe.

What you don’t want to see is a sump pump that is always running, or a sump pit that is full to the top. This could mean that there is more water than the pump can handle and you will need to find another solution.

Another thing you might see in some houses is an interior drain system. If the basement is unfinished, you’ll be able to see where the concrete floor was cut to create a trough around the perimeter for a drainage tile. There will also be a dimpled membrane along the wall(s). The system will direct water into the sump and keep your basement dry. It’s usually a good sign to see this type of waterproofing! If you see that only one or two walls have been done, though, look carefully at the others. Water looks for the weakest entry point – so check to ensure there is no dampness elsewhere.

You will find a device called a backflow valve in some Hamilton homes as well. These are installed to prevent contaminants from flowing back into the house from outside. (There is an excellent explanation of backflow valves here.) Hamilton has a rebate program that pays up to $2000 to homeowners who have them installed.

There are clues that some issues are ongoing:

You should also keep an eye out for signs that there is a problem that still needs attention.

Water stains, rust on surfaces, efflorescence (white salt-like staining), and, of course, actual moisture are all cause for concern. Pay special attention to exterior walls.

Ask questions if you see drywall that’s been partially cut out from the floor around the perimeter, exposing the studs. This could mean there was a flood or even a sewer backup.

Last, but not least, check for signs of mould. Your nose may be the first to pick up on the distinct musty smell, even if you don’t see anything. Not all smells are sinister mould infestations, but you should always investigate if you have any doubt.

Look Up

In unfinished basements, take some time to inspect the ceiling joists. The integrity of these literally holds up the house, so it’s important that they are not weakened.

Look for joists that have been cut or notched, for ones that are separating at the fasteners (nails/screws), or that are twisting. If you see evidence that someone has damaged them, it’s wise to get a qualified contractor’s opinion on what you would need to do to make it right.

If the house was built before the 1940’s, or sometimes a little later, you can sometimes see old knob and tube wiring by looking up, too. You’ll know it by the distinctive ceramic knobs and tubes. Sometimes, they’re just remnants of a system that’s been updated. But if you see any wires passing through these pieces, ask questions.

K & T is very outdated, can be a fire hazard if it’s brittle, is ungrounded, and can be an issue for insurance companies.

And while we’re on the topic of wiring…..

Electrical Panels

You will find these in the basement most often, so they’re worth a mention.

Unless you are qualified to do more, the closest you should get to an electrical panel is to open the front door. Never touch the sides or any metal part that is connected to a wire or any of the screws!

For those of us who are not electricians, we will stick to the basics. Are there fuses or breakers? Any panel that still has fuses is outdated. It might be fully functional and working fine, but it’s no longer the standard. Count on replacing it with a breaker panel.

Some fuse panels in older homes (prior to 1960) are only on 60 amp service. This could cause trouble when you try to get insurance on your home, as most insurance companies consider this “high-risk,” and some will not insure them at all until they’re upgraded. (Remember, without insurance, you will not get a mortgage…so this is a real concern.)

There are 100-amp fuse panels as well, and these are better – still outdated – but possibly a little easier to insure. Our best advice is to call your home insurer to see what their policy would be for a home with this type of electrical panel.

Look for the main breaker. You may see two parts to the switch that are connected to each other, each with a number on them. This is a two-pole switch – and you do not add the values. If each one says “100,” you likely have a 100-amp service coming in. A 200-amp service would have a two-pole switch, with “200” printed on each side (pole).

You can try to identify aluminum wiring by looking at the casings on the wires leading to your panel. Sometimes, you can see “AL,” “ALUM,” or “ALUMINUM” printed on the cable sheathing. As with other outdated components, insurance companies don’t love this type of wiring. Most that do offer coverage will charge a premium.

Plumbing

This is another component that you can see best in an unfinished space.

We could say a lot about the plumbing systems inside a house, but in the half-hour you have for showings these days, you can look for a few things that might need attention.

Especially in older homes, look for cast iron drain pipes. Although these were solid and long-lasting, they had a life expectancy of 80-100 years. This means that homes built in the 1930’s and 1940’s, if they haven’t had a plumbing update, are due. The last thing you want is to have a leak in your drainage stack that could’ve been prevented.

Other outdated plumbing systems include lead pipe and galvanized pipes. We now know that it’s not healthy to use lead that could get into our drinking water. And galvanized pipes corrode from the inside. Water flow will be reduced, which can be annoying. But the pipes also disintegrate, meaning that they could burst unexpectedly and cause damage. The current standard is copper or pex.

Here are the tricks to determining what type of water supply pipe you are looking at:

Use the flat edge of a screwdriver to scratch the outside of the pipe.

If the scraped area is shiny and silver, your service line is lead. A magnet will not stick to a lead pipe.
If the scraped area is copper in colour, like a penny (you remember pennies, right?), your service line is copper. A magnet will not stick to copper, either.
If the scraped area remains dull gray, and a magnet sticks to the surface of it, your service line is galvanized steel.

Ready to Go Upstairs…

Once you’re satisfied with what you see in the basement, you can head up to admire the upper levels of the house. We’ll cover that next time!

*We would like to extend a huge THANK YOU to Don Dell – Instructor and Creator of the CRSE Course for realtors. His input and expertise is invaluable to us as we work with our clients to find the right home!

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The market is shifting… ever so slightly. Buyers finally have a little more inventory to choose from.

It’s still a seller’s market, though – which means that many offers are going in firm, without conditions. You, dear Buyer, may have rock-solid finances and have no problem without a condition on financing. Without a home inspection, though, and with only 30 minutes total time at the house you want to buy in many cases- how can you protect yourself?

Let’s review our house hunting checklist that can look at to help you decide whether a house is worth considering. First, we’ll talk about the exterior.

BEFORE GOING INSIDE

The exterior of a house can tell you a lot about its overall condition. Without having to become a certified home inspector, you should be paying attention to a few major things:

Roof:

In Southern Ontario, the most common roofing material will be asphalt shingles. Stand back from the house and look at it from the sidewalk. Most of us can tell quickly if shingles are missing, lifting, curling, or otherwise approaching the end of their useful life. Sometimes, if you look at the edge, you can see two or even three layers of shingles – which is less than ideal and can cause trouble with any insurance claims or inspections.

Besides the obvious, though – look for buckling or sagging in the roofline. Don’t ignore these signs of potential structural weakness.

Or maybe you can see moss or other greenery growing out of the roof. This is not the way to get a rooftop garden! Investigate further before pursuing a house that has this happening.

Flat roofs are a bit tough to assess from street level but, fortunately, they are also fairly rare on residential properties. If you are looking at a home that has an unusual roof that could be more expensive to repair, it might be a good idea to have it inspected before you put in your offer. And when buying a first home, try to stick to more common rooflines so that your expenses can be a little more predictable.

Pro tip! Always look at the south facing side of the roof. This side takes the brunt of the heat and will age the quickest. It will give you a better idea how much life is left before the roof will need replacing.

Gutters & Downspouts:

Downspouts are the vertical pipes that carry rainwater from the roof and eaves troughs away from your house. Start by looking for downspouts that are extended away from your foundation walls. Ideally, these will discharge onto the lawn or into a rain barrel.

Sometimes, you’ll see downspouts connected to a drain pipe that goes below grade. Hamilton is one of many municipalities that encourage disconnection for many reasons, including protecting your foundation walls.

Gutters are the horizontal pipes along the edges of your roof that carry rainwater to the downspouts. Look up to see the condition of the gutters: Are they plugged up and overflowing with leaves? Are they bent or misshapen in a way that prevents water from flowing freely? Are they otherwise damaged – or missing entirely? This simple component of the roofing system does the important job of managing the path of water around your home. They are not usually expensive to repair or replace. However, if they’re left in poor condition for a long time, there can be serious damage to the house, deck, and gardens.

For best efficiency, you can visually estimate whether there are enough downspouts to carry the load. The rule of thumb is that there should be a downspout for every 35-40 feet of gutter. If you’re buying your first home and gutters are the biggest issue you find – that’s a win! With the right professional to get things made right, they’re a relatively easy fix.

Exterior Walls & Foundation

As you walk around the outside of a house, you’ll also want to take note of the condition of the exterior walls. The parts of a home that are exposed to the elements are particularly vulnerable to water damage, and some repairs can become very expensive.

There are problems that can only be properly diagnosed by an expert, but it’s wise to be aware of signs that you can see to let you know you should call one in. Most types of exterior cladding will get damp, even if just from condensation that results from temperature differences. What’s really important is that the moisture has somewhere to escape.

Brick homes should have some version of weep holes for ventilation and drainage.

Vinyl or aluminum siding require flashing for drainage to be integrated with some sort of material that forms a water-resistant barrier behind it.

Stucco-like exterior finishes also need somewhere for the water to drain. The most common system you’ll find is a stucco weep screed. This is a specially made piece of metal flashing that draws water out the bottom of the wall.

You will probably not be able to see all the measures that the builders have taken to prevent water damage. What you may see is evidence of damage that’s already there. If you see signs of efflorescence (white salt residue from water that has evaporated), swollen wood, or other deterioration on the exterior, there’s a good chance that something isn’t right.

When checking the foundation walls from the outside, not every crack is cause for concern. Pay special attention to deep, horizontal cracks, though – as well as vertical or step cracks that are wider at one end than the other, since those may indicate structural instability.

Decks & Porches

You might be surprised to learn that most decks require a permit. Still, you will see many that have clearly been added without one – and some that are downright dangerous.

Before stepping out onto a deck or porch, especially a high one, check that railings are secure and that deck boards are sound. You don’t want to find yourself stepping through a rotted board.

Any looseness in the structure could mean that the entire deck was improperly fastened to the house. To be safe, deck framing must be secured to a structural component of the house – usually floor joists – with the proper hardware. There needs to be adequate support beneath the deck, too.

It may be impossible for you to see the screws, nails, or joist hangers – but you will definitely see it if the support posts are not anchored, if they are too small, or if they are not there at all. Check around the bottom of the posts. Do you see rot or deterioration? Are they set in concrete?

Finally, pay attention to climbing hazards for children. Built-in benches or cross pieces in decorative railings can look great. But they are not safe unless there is enough height above the top of the highest point to prevent a child from climbing over. The minimum railing height should typically be 36 inches. If the deck is six feet or more off the ground, that requirement becomes 42 inches.

Don’t rush…

It’s tough to be thorough in this age of hurried showings that last 30 minutes or less. Regardless of the market, though, a house is a huge purchase. Especially if you’re buying your first home. See if you can arrange a second visit or a pre-inspection if you are serious about a property. Try to see the inside first and look more carefully at the outside as the next showing begins.

Check back soon for some things you can look for once you get inside …!

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I’ve been in my house for 8 years now. This week, we had to replace our dishwasher – and it got me wondering: What’s next?

We replaced all the appliances and mechanical things when we moved in. How long will it be before we start having to swap out other appliances?

When buying a house, there are so many necessities to think about. Furniture, appliances, yard maintenance tools, and more – all these items can require a sizeable budget.

As a buyer, the only promise you get in a typical Agreement of Purchase and Sale is that everything in the house will be in working order on the day of closing. If anything breaks down after that, you have to figure out a solution at your own cost.

Since nothing lasts forever, it goes without saying that it’s a good idea to make sure you don’t spend every penny on your down payment. Keeping a separate slush fund for unexpected things is wise. However, a little foreknowledge can help you to anticipate future expenses.

Everything has a lifespan – even the house itself. With regular updates and maintenance, including replacement parts, most things can last longer than average. Becoming familiar with the life expectancy of the replaceable components of your home is a good step in your budgeting process. It can even help you to figure out how much to offer in the first place, since you can predict which items will need to be repaired or replaced soon after you take possession.

*For the purpose of this article, we will assume that replacement is needed. A good technician can often help you decide whether replacement parts and/or repair is possible.

Here’s a cheat sheet you can use for reference:

FURNACE:

It’s Canada, so heat is non-negotiable. The most common type of furnace you’ll find in Hamilton, Burlington, and Niagara is a natural gas furnace. You can expect your gas furnace to last an average of 17 years. Some can live almost twice that long, but that should be considered a bonus. Start saving toward a replacement furnace before year 15, and you should have no major surprises. When buying a house, if the furnace is nearing the end of its useful life, assume that you’ll need to have $4000-5000 to replace it.

CENTRAL AIR CONDITIONER:

We have a relatively short AC season here in Ontario! Still, a central AC unit has a typical life expectancy of about 10-15 years. As with everything, regular maintenance can extend its lifespan. Short though it may be, our summer can be uncomfortably hot and sticky – so at or before the 10 year mark, start preparing for the $2800-5000 replacement cost.

*Some companies offer a discount for replacing both furnace and AC at the same time. There are also some government energy rebates that could come in handy!

HOT WATER TANK:

Another can’t-live-without-it item. These typically work for about 10 years, but can last longer depending on a multitude of factors. A tankless water heating system is likely to last much longer – 18-20 years.

To buy a replacement water tank, expect about $1100-1600 (installed). However, this is an appliance that is commonly rented for $15-30 per month. Considering the cost of repairing the damage that a burst or leaking tank could do…this is a tiny expense!

It’s no surprise that a tankless system will set you back a bit more. We found a special price offering at $2399 or a rental for $39/month.

REFRIGERATOR:

A full-sized fridge should last 14 years, according to experts. In our experience, 10 years is a good run. With so many options to choose from, we won’t even offer a replacement budget. I mean, does anyone really need a fridge with more bandwidth than your laptop? Not that we’re judging; food is important, of course!

STOVE & RANGE HOOD:

You either love a gas range or it terrifies you. I don’t believe there is an in-between.

A gas stove should serve you well for 19 or 20 years. An electric one may quit a little earlier, 16 years or so. This is one hardworking appliance that really earns its keep! And a range hood will last between 14 and 19 years. Again, there are too many options to suggest a budget – you’ll have to shop around.

MICROWAVE:

Your microwave, on the other hand, is a more delicate appliance. Expect to replace it after 7 years with regular use. This can be a bit of a pain with the ones that double as exhaust fans – over the stovetop. But what would we do without our ability to zap leftovers?? You can replace an over-the-range microwave for $1200 or less.

DISHWASHER:

The closest thing some of us can hope to have to a kitchen helper or maid, this one is non-negotiable in my kitchen! Fragile, yes – and finicky a lot of the time – but it can last between 9 and 16 years. Apparently, I was too hard on mine. *Sorry!*

There are plenty of built-in dishwashers for under $1000.

WASHER/DRYER

Unless you live by the river and are willing to beat your clothes against a rock, a washing machine is an absolute necessity! It’s a workhorse, too, in most families – and you’ll probably need a minor repair or two along the way.

Having said that, you can expect a set – washer and dryer – to last between 8 and 12 years. Keep hoses, lint traps, and vents clean to extend the life of this pair that will cost $1500 or more to replace.

POOL PUMP

Your pool pump will keep your backyard recreation from turning into a science experiment when it’s working well.

With proper maintenance and care, it will last from 8-15 years and cost about $800 to replace.

A Note For Sellers

You know your home and all its parts better than anyone. You also know how careful you’ve been to maintain each appliance. A buyer, though, has little more than the age of the appliances to go by when figuring out a budget.

Even if you would bet the farm that your 22-year-old furnace will go another 5 years, most homebuyers need to assume that it will need immediate replacement. When negotiating your sale price, remember that buyers are calculating future expenses and replacement costs. The older the appliances are, the more money a buyer needs to keep in their reserve fund for immediate replacement.

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Unless you are among the rare and independently wealthy, you’ll probably need a mortgage to buy a house. It’s a fact of life for most of us.

If you’re a buyer just starting out, know that going through a mortgage pre-approval is crucial before putting in offers. But where do you go? And what can you expect during the mortgage approval process?

The Mortgage Approval Process For Buyers

When shopping for your mortgage, the number of available options might come as a surprise. The first option to come to mind is usually your bank. Sometimes, banks offer you the best deal. However, we always recommend that you work with a mortgage broker who has access to other alternatives for you. A mortgage broker can work with any of the traditional banks as well as a long list of other lenders to find the product that works best for you.

A-Lenders

Canada’s “Big 5” banks [TD, RBC, CIBC, Scotia, BMO] are what we call “A-lenders.” These banks are regulated at the federal level, and they offer mortgage loans to customers with good credit scores and a reliable stream of income. Borrowers must pass the federal stress test to qualify.

Some Credit Unions also cater to an “A-clientele.” Their regulation is provincial, but their lending criteria is equally stringent and their mortgage approval process is just as thorough as the bigger banks.

Still another category of A-lender is the monoline lender. This is a company that deals only in mortgages, with a streamlined process and low overhead. They tend to market themselves to mortgage brokers instead of going directly to the consumer. You’ll often get very attractive interest rates and excellent terms from these lesser-known (by the public) institutions.

A-lenders have a very detailed application process and high standards for their applicants. This is why A-lenders are able to offer the lowest interest rates. This is also the only type of mortgage available to buyers who have less than 20% toward a down payment.

B-Lenders

A common alternative for some applicants is to use a “B-lender.” Companies like Home Trust and Equitable Bank offer financing options to buyers who don’t meet the stringent requirements of ultra-traditional lenders.

B-lenders are regulated, reliable, and quite popular. In today’s gig-economy, more and more people are self-employed. B-lenders are more flexible in the way they consider income, making it easier for entrepreneurs to qualify for a mortgage.

They may also offer options for recent immigrants and those with less-than-stellar credit for any of a multitude of reasons. As long as you have at least a 20% down payment, B-lenders may be an excellent option.

Expect to pay a slightly higher interest rate on a B mortgage while keeping it affordable.

Private Lenders

This is almost always a last resort. Unless the private mortgage is between you and a wealthy relative and is based on a personal relationship-this will be a high-interest loan.

Private loans come from individuals or groups who pool their funds for this purpose. Interest rates are always high and there are typically up-front fees that could be in the range of 2-4% of the cost of the loan. This means that you would have to pay $10-20k just to get a $500,000 mortgage in place. Besides your own legal fees for the transaction, you’ll have to pay the legal fees to register the loan for the lender as well.

Often, a private loan of this type is a short-term agreement, 6 months or a year long. Payments might be interest-only.

Buyers who need this type of mortgage are usually in a temporary bind of some sort. They may be working to raise their credit score, going through a period of unemployment, a divorce, or some other set of circumstances that will change in the near future. As these loans are considered high-risk, you’ll have to have a substantial down payment with ratios that are acceptable to your particular lender.

This sector is unregulated and it’s wise to have your lawyer review any contract before you sign.

Even within the same category of lenders, you will find multiple mortgage products and different interest rates.

High-ratio or Conventional?

Without getting too detailed, there are two basic types of mortgages:

A conventional mortgage is uninsured. The buyer has a minimum of 20% down payment, and the mortgage is for 80% or less of the value of the property.
A high-ratio mortgage is insured by a company like CMHC, Sagen, or Canada Guaranty. This incurs additional monthly costs.

At the point of going through your mortgage approval process, if you need mortgage insurance, know that any deal will need to be approved by both the lender and the insurer. CMHC has some qualifying criteria of its own that you’ll have to meet.

What You Need Before You Apply

The whole mortgage approval process can be tedious, especially if you’re not extremely well-organized with your personal paperwork. You’ll have to produce a long list of documents to prove your financial status, including:

pay stubs
employment letter
Notices of Assessment and two or three years of tax returns if you’re self-employed
proof of down payment + closing costs (bank statements)
list of assets (savings, RSP’s, cars, boats, other real estate, etc)
proof of current debts (credit cards, lines of credit, personal loans, student debt, etc)
details of financial obligations (spousal or child support)
leases and rental agreements
ID

If your application meets the underwriting guidelines, the lender will issue a commitment letter. This letter is usually conditional. Read it through carefully to find out what loopholes there might be for the lender to pull the financing before closing. This is especially important if you are putting in a firm offer without a financing condition.

Then I’m done, right?

Once your application gets processed, you will know how much of a mortgage you qualify for. But you’re not quite done yet.

There are two parts to mortgage approval:

Your financial status
The property you want to buy

Since the lender essentially becomes part-owner of the property with you, they reserve the right to appraise and approve the actual asset (the property).

The appraisal is one issue that could become a pitfall. The bank might qualify you to borrow $500,000 (based on your finances)- but only if the house you want to buy appraises for at least $625,000 and meets their criteria.

Remember, A-and-B lenders only want to lend up to 80% of the value of a home for a conventional mortgage.

If you get caught up in a bidding war and end up paying a price that’s higher than what the lender will support, you may have to increase your down payment.

Here’s an example:

You buy a house in competition and pay $640,000. The appraisal comes in at $625,000.

The lender is willing to lend only $500,000 on a conventional mortgage. Anything over that requires mortgage insurance through one of the companies mentioned above, and will incur fees.

Your down payment will need to be $140,000 or more to avoid these fees.

Other things that could affect your funding are a change in your employment, financial, or credit situation, or the discovery of something about the property that disqualifies it. (For instance, if the house is found to be uninsurable.)

Talk to your mortgage broker to find out what you need to know about the mortgage approval process before putting in offers.

This is the best way to protect yourself from ugly surprises when it comes to financing.

What Sellers Should Know Before Accepting an Offer

In a hot sellers’ market, you want to get the most money. That’s a given. But take a look through the information for buyers who need a mortgage. Who your buyer is really matters because if their financing is not solid, your deal could fail.

As you sit around the table looking at multiple offers, try to remember that the highest offer is not always the best offer. And even a firm offer, if it isn’t supported by solid financial backing, isn’t always the best offer.

Your realtor needs to ask questions about the buyer. Are they pre-approved? How much of a down payment do they have? Do they have parents or others who can help them if they have a shortfall? Do they have a property that they need to sell before they can buy yours?

Once you have a better idea of who is making the offers, you will be in a better position to know which one to accept. You’ll be glad you did on closing day!

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We have yet to meet anyone who looks forward to moving houses. They look forward to the end result, sure. But the process- not so much.

Moving is hard work. It’s physically exhausting. And often, it’s also emotionally draining.

One of Life’s Top 10 Stressors?

If you do a quick Google search, you’ll find a few different lists of “the top 10 most stressful life events.”

Most of them look very similar to this:

Death of a loved one
Getting married
Separation or divorce
Marital reconciliation
Workplace stress/job loss
Money problems
Moving
Chronic illness or injury
Retirement
Incarceration

The Holmes and Rahe Stress Scale measures stress levels to assess potential health consequences. A “change in residence” rates as a significant stressor on the scale.

Part of a Bundle

Take another look at the list. There is something striking about the items on it. Do you see it?

The nine other events that make up the top 10, whether positive or negative changes, can all be triggers for a move. Death of a family member, financial challenges, a change in marital status, retirement – even incarceration – can force a change in residence.

The real stress often results from having to deal with the factors that lead to the move.

For example, most of us look forward to our retirement. We plan for it. We dream of all the things we’re going to do when we don’t have to work so much. When the time comes to do it, though – people have at least some mixed feelings. There are emotions connected to getting older, worries about finances, and fears of losing health and independence – all of which cause real stress.

How to Offload the Stress of Moving

If you’re currently making plans to move because of a major life change, you’re already dealing with a lot. And if you are buying or selling a home, there is the additional pressure of figuring out how to navigate the real estate market.

You may have to make health, marital, or employment decisions with support and advice from doctors, lawyers, or counselors. Such important matters deserve your full attention.

When it comes to preparing a home for sale, buying a property, and navigating the process of moving, though – we have systems in place to help you out. Our primary role is to be negotiators who represent your interests to sell your property for the best price at the best terms. However, it’s important to us that you know we are available to help with other practical aspects of your move along the way.

Here’s a sample of some of the things we can help you get done:

Decluttering. If you are struggling to get through the process of clearing out your space ahead of a sale, we can get you help to purge, pack, and store things away. This is especially helpful when you are moving due to health issues or reduced mobility. We will even provide you with a supply of moving boxes to get you started!
Repairs. There are some repairs that are well worth doing to make sure you get the most money on the sale of your home. We can help you decide which items to tackle and which ones to leave. We also have a database of reliable people who will be happy to offer their services.
Cleaning. Whether you need help with the inside or the outside, we can offer help with pre-listing cleanups. And even if you want to take care of the regular cleaning yourself, we can send in a window cleaner to save you from that time-consuming job!
Exterior Maintenance. Curb appeal is important when selling. If you need a hand with keeping the lawn and garden looking neat in the summer or the driveway and walkways shoveled and salted in winter, we can send help.
Staging. It’s common knowledge nowadays that staging a house results in higher sales prices. We work with stagers who can provide services ranging from basic consultations to full staging with rented furniture.
Marketing. We arrange professional photography, video, and other media. We ensure that your property is exposed to as many buyers online as possible, using every distribution tool available to market your offering, even internationally. At the same time, we make it easy for potential buyers to see as much detail as possible. This prevents unnecessary in-person visits.
Coordinating with lenders, lawyers, and others. You will need to deal with mortgage brokers, lawyers, buyers and their agents, appraisers, insurance companies, and others in the course of selling your home. The paperwork, communications, and scheduling can all be very time-consuming – especially if you’re also dealing with other important personal matters. We are happy to handle all of this so you can concentrate on yourself and your family. We stay with it until closing day to protect your interests and make sure that things go as smoothly as possible.
Packing and Moving. Finding trustworthy help can be a challenge. Our goal is to connect you to people who carry some of the burden to relieve you of as much stress as possible. Our network of reliable professionals is a godsend.
Notifying contacts. We make sure to provide you with a guide to follow so that you can make the proper notifications of your new address. Having everything in one place makes the job less daunting.
Keeping you safe. We’ve all learned a lot since March 2020 about how to stay safe from viruses and contagion. We now have protocols in place to limit the number of people who enter your home. We screen and track visitors and enforce attendance limits to protect you and your property as best we can. When all showings are over, we send in someone to disinfect all the hard surfaces in the house using safe, food-grade disinfectant so that you can feel safe and comfortable going back into the house.
A listening ear. We know it’s a stressful experience and we have been through it ourselves. We are happy to take your calls whenever you need to talk to us. Throughout the process, we are always available to hear your concerns and help address any issues that come up.

A Phone Call Away

When dealing with one of life’s most stressful events, having a good support team can make a big difference. We are honoured when our clients choose to make us part of that support system – and we will always do our level best to reassure them that they’ve made the right choice. If you have questions about how we can help you make some decisions about moving, don’t hesitate to call us!

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If you’re looking for a house in Hamilton, you want as much information as you can get about the place before you buy. Especially in these times of frenzied bidding wars and shortened showing times, doing your own research can help you make an informed decision.

Whether the Hamilton property you are interested in is for sale or not (yet), you can do a little legwork to find out some important details.

Here is some preliminary recon you can do to find out some important details:

TAXES

Hamilton makes is really easy to find out the annual taxes for a property within the municipality. If you are curious about how much you’d pay in taxes, you can search by address here at Hamilton’s Property Inquiry Tool.

This database includes the original City of Hamilton, as well as Stoney Creek, Dundas, and Ancaster. You can look up commercial and residential properties. It will show you three years’ worth of taxes, as well as the breakdown of what’s included.

Here’s a guide to help you read Hamilton property tax bills.

PERMITS

You always hope that a seller obtained the appropriate permits for any work beyond cosmetics. Structural changes can create danger if not done properly by a professional who knows what they’re doing.

Maybe you’re looking at a property (listed or not) that was recently renovated. You’d like to know about the existence and status of any permits.

Hamilton has a public search option for permits here. It will show you closed permits within the past 12 months. This means the City approved the final renovation or modification.

It will also show you permits that the City has issued. These permits are still open and subject to inspection and/or final approval. If you see this status, it’s a good sign. It means the current owners are doing their best to do the work correctly. But it’s a flag for you to ask some questions to make sure that the permits will be closed before you buy.

Here’s a guide to what requires a permit and what doesn’t.

LEAD WATER SUPPLY PIPES

If you’re looking at a home that is pre-1960, it’s a good idea to do a little research into the water supply pipes. Hamilton still has some lead pipe in its infrastructure. They are working to update it. Any time a homeowner applies for a plumbing permit to replace interior plumbing, it triggers the City to look at their public supply lines to that property. They do a “Size and Type” inspection to assess whether the public service pipe (between your property line and the water main) is lead or is less than 3/4″ in diameter.

As a potential buyer, it’s important that you know where your household water is coming from. Especially in the Lower City, you should investigate whether the pipes are 3/4″ copper supply lines.

This one is not a simple online search, unfortunately. It is, though, a simple call to 905-546-CITY (2489). When you call, make sure that you are clear that you are only inquiring about the public portion of the supply lines. They will not release any information about updates done by the owner to the private portion.

For more info about lead pipes, check the City of Hamilton website.

ZONING

Seldom will you truly need to deal with zoning unless you plan to make some changes to a property. For example, Hamilton allows conversion of single family homes into two-family dwellings only in certain zones: AA, B, B-1, B-2, C, D, R-2 (as of the last time we checked).

Zoning designations affect things like parking, property use, and setbacks. It also affects whether you can have farm animals, including chickens. (Only rural or agricultural zoning allows them.)

If you’re looking at a property, and you need to know about specific uses, it’s always good to do a full zoning verification. This will cost between $124-384.

To start, though, check out Hamilton’s Interactive Zoning Map. At the top, enter the address of the property into the white text box, and a clear map will show you the base zoning of the area. This will let you know if you’re on the right track to pursue your plans!

FUTURE BUILDING

When you fall in love with a place that has open space around it, you might want to know if there are any planned projects for the area. Whether you just want to be surrounded by greenery and quiet, or you have a beautiful view you don’t want to lose, you’ll be interested in any upcoming development plans.

Take a peek into applications for development here. Enter the address in the text box at the top of the map. Use the Legend and the Layer List options at the bottom of the screen to see what the pins close to your property mean. If you see any pins that are in an area that you want more detail about, you can call the City of Hamilton at 905-546-2489. Ask for the Planning Department and tell them what your concerns are. They will tell you what they can about the application and how you might be affected.

CONSERVATION LAND

In the City of Waterfalls, surrounded by so much of nature’s beauty, it’s no surprise that some of our lands come under Conservation Control. This could affect the way you use your land and even its resale value.

To find out whether any part of a property is Conservation Land, go to the Conservation Hamilton website. The map tool isn’t as user-friendly as we’d like, but it does give you the choice between desktop and mobile. Type the address in the text box. If any Conservation Control applies, it will show you results. Click the arrow that says, “Click to expand results.” Then click on “Layers” to get a description of what the map shows you.

If you find out that you do fall into a zone that is under this Conservation Authority, you can get more information about restrictions that apply by calling 905-525-2181 or emailing nature@conservationhamilton.ca.

We are always happy to do this research and more for you before you make offers on a property. Due diligence is crucial to make sure that you get what you really want. If you have other questions about a property that is listed for sale, please don’t hesitate to reach out. We will help find answers!

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If you want to watch a conversation get heated QUICKLY, ask a roomful of people for their opinion about bidding wars. Then put on your asbestos suit and watch the sparks fly!

In a market, like we’ve been in for the past few years, sellers and their agents expect a bidding war. If they don’t get one, they feel that they’ve done something wrong. Some sellers are surprised at how emotionally draining the process is on them. (We hear you, Buyers – “Cry me a river, you’re making off like bandits.”)

Buyers, by and large, are fed up. Some buyers have been outbid many times and have lost hope. A few are super frustrated because they didn’t get the house they wanted despite bringing the highest offer. (Because a handful of those emotional sellers actually still choose to sell to the buyer who told the most compelling story in a personal letter.) Buyer agents are working their tails off to try to secure an accepted offer for their clients.

With all the focus on getting – and winning – a bidding war, it’s important to remember the importance of CLOSING the deal. Failure to do so can have serious financial consequences.

Today, we want to share the cautionary tale of some Toronto buyers who got ‘caught up in the craziness,’ and what you can learn from their experience.

Gamoff v Hu – Just the Facts

The Gamoffs listed a Toronto property in March 2017 for $2,000,000. The market then was much like it is now, in April of 2021 – super hot.

Hu, a buyer, fell in love with the house. Hu didn’t want to get involved in a bidding war. Still, they offered $2,050,000.

The Gamoffs’ agent informed them that there were two other offers and that theirs would not be accepted at that price. Ultimately, the Gamoffs accepted an improved offer from Hu on April 2, 2017: $2,250,000.

Their offer included a $30,000 deposit on acceptance, with a further deposit of $90,000 to be made later. Problems became apparent when the second deposit never came.

Unfortunately, Hu was not able to secure financing to close the deal. They were forced to notify the seller that they were walking away from the deal. This was the notification their lawyer sent to the Gamoffs’ lawyer:

We are putting your clients on further notice to take immediate steps to start mitigating their losses by (a) immediately contacting any buyers who made offers on April 1, 2017, to determine whether they may be willing to purchase the property; and (b) re-listing the property on the market/MLS as soon as possible in order to find a suitable buyer. We trust your clients will make best efforts to sell the property for the highest price possible in order to satisfy their duty to mitigate.

So What Happened?

The Gamoffs responded to the notice right away, re-listing their property for $2,250,000.

However, the timing for both the Gamoffs and the Hus was rather unfortunate. You might remember that in April of 2017, the provincial government announced a new Foreign Buyer, or Speculation, Tax that would apply to the Greater Golden Horseshoe Area.

The real estate market tumbled a little, going down about 18% in just four months.

Before finally selling again in July 2017, the Gamoffs dropped their list price to $1,998,000, then to $1,798,000. The final accepted offer price was $1,700,000.

The Ontario Superior Court Decides

With a difference of $550,000 between the two accepted offers, the sellers decided to take the matter to court.

Typically, when a market is in decline, the courts will award the sellers damages to compensate for the difference based on the “highest price obtainable within a reasonable time after the contractual date for completion following the making of reasonable efforts to sell the property commencing on that date”

In this case, Judge Edwards – though he sympathized with Hu’s position as a buyer in a crazy market – ruled in favour of the seller. He awarded damages to cover the loss of $550,000 plus other special damages to which they were entitled under law.

How to Avoid Disaster

Needless to say, Hu suffered great financial pain in this situation. Gamoff, too, lost out on the opportunity to sell at the height of the market. We wouldn’t wish this nightmare scenario on anyone, whether buyer or seller.

So what can you do to keep yourself out of hot water?

Here are a couple of rules of thumb for a buyer to keep in mind:

Know Your Limits

For as long as there are bidding wars, it’s crucial that buyers set limits for themselves no matter what anyone else is doing. Get all the information from your mortgage provider, whether that be a broker, a bank, or another lender. How high can you safely go? What, if anything, should you consider before going to the top of your budget? (For example, condo fees will lower your purchasing power. Find out how much you can afford with fees.) Ask how much your property has to sell for to be able to offer on the property you want.

It will be nice for buyers when the market calms down enough to allow you to make offers that are conditional on financing again but, until then, do not make offers that are higher than you are qualified to make.

Stay in Control of your Emotions

More than one buyer has unraveled during the frenzy of making offers on hot properties. Staying in control of the desire to “win” is a must, especially if you have made many offers and lost out on properties you really wanted.

If you feel like you might weaken and make a risky offer in a high-stress, multiple offer situation, tell your realtor. Tell them well before the offer presentation what your limits are, and ask them to help you stay focused. You can come up with a plan to make sure you don’t get caught up, only to repent at leisure. Remember, Hu never wanted to compete in the first place. And they, at first, offered much less – probably the amount that they could actually afford. Throwing caution to the wind cost them dearly!

Sellers, too, can take steps to protect themselves when receiving multiple offers.

There is no rule saying that a seller must accept the highest offer. As we learn from Gamoff v Hu, the highest offer might not be the best offer. Once you have considered the price and conditions in the offer, there are a few, somewhat more subtle, indicators that you can and should pay attention to.

These are some things that a seller can look for to evaluate the strength of an offer:

The deposit

A very low deposit could be a sign that a buyer is stretching beyond their ability to pay. Always ask for an explanation of the terms of the deposit if it seems too low for the deal.

It’s also much better if the buyer submits the deposit cheque with their offer. We’ve heard of many cases where buyers have failed to show up the next day with the deposit due to buyer remorse. This can cause legal issues and throw a wrench in your plans.

The down payment

Your agent can ask questions to find out whether the buyer has a sufficiently large down payment to compensate for any difference between the purchase price and the appraised value, if the two numbers don’t match up.

The names on the offer

If a couple is buying a house together, but only one name appears on the offer, ask a few questions. Sometimes, this happens in a time crunch when it would be difficult to have both parties sign. But once in a while, one mate is hiding from responsibility by staying off the paperwork in case of a breach of the contract. Find out all you can about the buyers – and decide if theirs is truly the strongest and best offer you have on the table.

Bidding wars are not for the faint of heart – on either side of the table! This market will not last forever. While it does, though, take advantage of the expertise of your realtor and your real estate lawyer to protect you from unnecessary stress and financial losses.

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Easy Money?

Landlord Responsibilities

For example: A landlord cannot evict a tenant for having a pet, even if they have a “no-pets” clause in their lease.

Provide legal documents without charge:

Repair and maintain the home:

Access to vital services:

Heat:

Common Area Maintenance:

Calculate the True Cost

Professional Services You Might Use

Your Success is Around the Corner

Ready To Buy a Rental Property?

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Just to repeat the important part:

Is a Wet Basement a Big Deal?

What to Look For in the Basement: Moisture and Flood Control

There are some things that show that problems have been dealt with:

There are clues that some issues are ongoing:

Look Up

Electrical Panels

Unless you are qualified to do more, the closest you should get to an electrical panel is to open the front door. Never touch the sides or any metal part that is connected to a wire or any of the screws!

Plumbing

Looking to Buy a Home?

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BEFORE GOING INSIDE

Roof:

Gutters & Downspouts:

Exterior Walls & Foundation

Decks & Porches

Don’t rush…

Looking For Help Through the Buying Process?

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Here’s a cheat sheet you can use for reference:

FURNACE:

CENTRAL AIR CONDITIONER:

HOT WATER TANK:

REFRIGERATOR:

STOVE & RANGE HOOD:

MICROWAVE:

DISHWASHER:

WASHER/DRYER

POOL PUMP

A Note For Sellers

Would You Like Info Like This Sent To You Weekly?

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The Mortgage Approval Process For Buyers

A-Lenders

B-Lenders

Private Lenders

Even within the same category of lenders, you will find multiple mortgage products and different interest rates.

High-ratio or Conventional?

What You Need Before You Apply

Then I’m done, right?

Here’s an example:

Talk to your mortgage broker to find out what you need to know about the mortgage approval process before putting in offers.

This is the best way to protect yourself from ugly surprises when it comes to financing.

What Sellers Should Know Before Accepting an Offer

Confused by all the details?

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One of Life’s Top 10 Stressors?

Part of a Bundle

How to Offload the Stress of Moving

Here’s a sample of some of the things we can help you get done:

A Phone Call Away

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