Ideally you would always be able to coordinate your house closing dates so that the house you buy closes on the same day as the house you sell. In practicality, closings rarely line up, and when they do it can be extremely stressful to close and move on the same day, especially if there are delays in either of the closings.

Many people prefer to close on the purchase of their new home some time before they close on their old home. There is the added cost of obtaining “bridge financing” for the new home while still paying the mortgage of the old one but the resulting stress reduction may well be worth it. This scenario is also ideal if you want to do some cleanup, painting or renovations on the new home before moving in.

Some folks may choose to close on their old home before closing on their new one. This may appeal to those on a tight budget or adverse to risk. Obviously the big downside is that you will have to find a place to stay and store your belongings while waiting for your new home to close. You will most likely incur added moving expenses as well.

However you choose to bridge the gap between the two closings, ensure you plan well ahead and don’t forget to budget for the added expenses.

Capital gains tax is one of the most common areas of questioning I receive as a real estate practitioner. Capital gains typically do not apply to home sales in Canada, except where the home is not the seller’s principle residence. While I am no tax expert, the following information may help. For more details on Capital Gains Tax you can visit the Canada Revenue Agency Website

What is Capital Gains:

Defined as any profit received from the sale of an asset over its cost. A taxable capital gain is the amount to be included as income on a tax return and is calculated to be 50% of net capital gains (capital gains minus capital losses for the year).

An unrealized capital gain is the capital gain that builds up on an asset before the asset is sold or deemed sold. A realized capital gain is the taxable capital gain that results when an asset is sold or deemed sold.

Real Estate Transactions:

Profits from the sale of an asset would most likely be taxed as regular business income if the taxpayer buys and sells real estate on a regular basis (e.g. real estate investment is deemed to be the taxpayers line of business). However, if the taxpayer can prove that these sales were part of an investment program and not their main line-of-business, then there may be a case for capital gains treatment of the profit.

Exemptions:

The most common exemption for a real estate practitioner to consider involves the sale of a principal residence. A property qualifies as your principal residence for any year if it meets the following four conditions:

1. it is a housing unit (house, condo, houseboat, mobile home), a leasehold interest in a housing unit, or a share of the capital stock of a co operative housing corporation;

2. you own the property alone or jointly with another person;

3. you, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year; and

4. you designate the property as your principal residence.

The land on which your home is located can be part of your principal residence. Usually, the amount of land that you can consider as part of your principal residence is limited to 1/2 hectare (1.24 acres). However, if you can show that you need more land to use and enjoy your home, you can consider more than this amount as part of your principal residence. For example, this may happen if the minimum lot size imposed by a municipality at the time you bought the property is larger than 1/2 hectare.

Note: Tax laws change continuously. You should consult a qualified accountant or tax lawyer to discuss your specific tax situation.

September 15, 2011

Average Home Prices Across Canada in August

I have to say, I dislike the idea of a rental hot water tank. In Ontario rental tanks have become accepted practice - I estimate that more than 95% of homes have one. When you consider the cost of renting (about $18/month) versus the cost of buying (about $850 installed), the tank would be bought and paid for in about 4 years. Hot water tanks can easily last more than 10 years and I have seen them functioning fine at 13+ years old. No doubt this is a very profitable business for the rental companies.

Recently I have seen more and more instances of rental furnace/AC systems. A furnace/AC system is a much larger investment than a hot water tank and I caution homeowners and homebuyers to carefully consider their options before renting one or purchasing a home with a rental system already in place.

Before signing on the dotted line find out the length of the contract, the total cash outlay over the length of the contract, buyout options and transferability of the contract.

While no money down and a low monthly payment might sound enticing when your furnace needs replacing and you are on a tight budget, consider that at $95 per month (an amount I recently saw for a rental furnace/AC system) you would pay for a typical system in about 6 or 7 years. The remainder of your payments are profit for the rental company and most furnaces have a life expectancy of at least 12-15 years and I’ve seen much older models still running strong.

When selling a home a furnace/AC rental contract can be a big deterrent as the majority of home purchasers prefer owning versus renting a furnace. Home sellers should carefully read the contract before listing their home for sale and know the amount of time remaining on the contract, remaining financial obligation, buyout options and other pertinent information, as potential buyers will ask those questions.

Home buyers definitely need to take a rental furnace/AC system into account before making an offer on a house. They should ask for the pertinent rental information before they put in an offer and consider reducing their offer price on the home to reflect the rental furnace. If they do purchase the home they should ensure all contract information is included as an addendum to the purchase agreement.

If you already own a home with either a rental hot water tank or furnace take some time to investigate what your options are. If the equipment is old there may be a low buyout available so you can rid yourself of that annoying monthly payment – but you will have to do the legwork yourself, the rental company definitely won’t volunteer that information!

Number of Homes sold in Oakville each month in 2011

Total Inventory: 659 homes currently listed for sale in Oakville (as of Sept 7).

There were 237 sales in Oakville in August, down significantly from the previous 3 months but much stronger than last August when we had 220 sales. For the most part the weather cooperated with much more moderate temperatures than in July, making house hunting much more comfortable.

Currently there are 659 homes listed for sale in Oakville, up from 619 to start off the month of August. Of those 659 homes, only 174 are priced below $500,000. 264 homes are priced between $500,000 and $1,000,000. There are 221 homes priced above $1,000,000, which represents about 1/3 of the market.

As with the previous few months, we continue to see a real shortage of homes on the market, especially in the lower price ranges. With 111 homes selling for less than $500,000 last month and only 174 home listed in this range, this represents about 1.5 month's supply.

Please feel free to contact me directly if you have any questions about the statistics or would like information specific to your area.