AUGUST 2010. Greater Toronto Realtors reported 6,564 sales in July – a 34 per cent dip from the record 9,967 sales reported in July 2009. New listings, at 10,825, dropped to the lowest level for the month of July since 2002. "The level of July sales remained below the expected long-term trend. The market has become more balanced following record monthly sales through most of the winter and early spring," said Toronto Real Estate Board (TREB) President Bill Johnston.

Total sales through the first seven months of 2010 were up 12 per cent compared to the same period in 2009. Notwithstanding the fact that price trends vary at the neighbourhood level in GTA, the average price for July transactions was $420,482, representing a six per cent increase over July 2009. Over the first seven months of 2010, the average selling price was up 12 per cent annually to $432,253.

"Market conditions promoting growth in the average selling price have remained in place. While July sales were down compared to last year, the number of new listings in the marketplace also fell. This means there was enough competition between buyers to exert upward pressure on price," said Jason Mercer, TREB's Senior Manager of Market Analysis. (Source: Toronto Real Estate Board)

The tighter mortgage standards introduced by the federal government this year address some of the risky behaviour in today’s hot housing market, but home buyers still need to be cautious to avoid getting in over their heads. The rules require new borrowers to qualify for a five-year, fixed rate mortgage, even if they are applying for a shorter, variable rate mortgage. The government is also reducing the maximum amount homeowners can withdraw when refinancing to 90 per cent of the value of their properties, from the current 95 per cent.

Even if you qualify for a large mortgage under the new rules, make sure you build enough flex in your budget to avoid taking on too much housing debt. That’s the message from Laurie Campbell, executive director of Credit Canada, a non-profit credit counseling agency. She frequently sees homeowners who can’t afford the lifestyles they’ve committed to. While Ms. Campbell believes the new rules will prevent some buyers from becoming house poor, all homebuyers need to consider their life circumstances.

But a change in your lifestyle could quickly affect your ability to afford your debt. If you’re thinking about having a family, tally the extra expenses sure to hit your budget. Think about how you’ll cover costs for major car repairs or how you will manage if you get ill and can’t work.

Ms. Campbell has some rules of thumb to follow. First, make sure your mortgage payments won’t exceed 30 to 35 per cent of your gross income. Unsecured payments to creditors should represent no more than 15 per cent of your take home pay. And, just as important, keep an emergency fund that could cover three to six months’ worth of expenses. “We see people that are one paycheque away from financial disaster.” (Source: The Globe and Mail)

Here’s a basic checklist of what steps you should take before you sign a contract with any contractor:

Scope out the work you think needs doing and be specific. Allow for the fact that if you want a wall moved, for example, there will be costs incurred in ensuring structural integrity and there may be plumbing that will need to be rerouted. Check with the local building office to see if a construction permit is required for the proposed renovation.

Check the price of finishing materials you want to use. For labour costs, a general guide is to multiply the cost of materials by 1.5 to 2 times as a “guesstimate.” Remember, this is a guide for you to start setting your budget and not a hard rule.

Ask for referrals from friends and inspect the work done or search RenoMark’s website. Get three quotes in writing for the job as you’ve written it out. Ask the bidders to flag anything you may have missed which will also have to be done and will cost extra, or if they recommend anything you should consider at the same time.

Meet with the contractors to get their bids. Ask for references of recent jobs. Remember, no contractor will give you the names of unhappy clients but it is a good safeguard. If the referrals are all for minor work and your job is a major gut-and-rebuild, determine if the contractor can handle a big job.

When you’ve decided which bid you’re going to accept, go the Ontario Ministry of Consumer Services website where you can search the names of contractors who have had issues with compliance. And also call the city to see if they are licensed, at either 311 or (416) 392-6700. Check that the contractor has current workplace safety insurance and liability insurance.

Ask for a written contract specifying the work, method and frequency of payment, how much is paid up front to purchase materials and as a downpayment on work to be performed. It should include the process for a "change order," which is additional work as required either because you decide to upgrade or because of unforeseen issues. The contract must include: a detailed description of all work to be done including cleanup and disposal of materials; the full price and that it is subject to the provisions of the Construction Lien Act; the name of the company, the business address, phone number, a completion date, and a Toronto License number.

Agree on the holdback provisions in the contract. A holdback is money kept by the homeowner after the job is finished. Holdbacks ensure all sub-contractors on the job were paid so they don’t put a lien on your property. A seasonal holdback is money held for payment after the final stages of the project are completed when the season allows, such as painting the exterior or landscaping in the spring. (Source: Your Home via The Toronto Star)

When a lawyer is presented with an unconditional but obviously defective agreement of purchase and sale by a client, does he or she have an obligation to try to negotiate an improvement to its terms?

That was the question for the court to decide in the case of Graham v. Diamond, released by the Ontario Superior Court of Justice. In July 2002, Patrick and Heather Graham entered into an agreement to purchase a house. The agreement was conditional on the Grahams arranging satisfactory financing, failing which the deal would die and the deposit money would be returned. There was no condition for either an environmental assessment or a home inspection. After the financing condition had been waived and the deal was firm, the Grahams retained lawyer Raymond Kaufman to represent them in the transaction. Prior to closing, Kaufman confirmed that there were no outstanding work orders on file against the property. The transaction closed August 16, 2002.

Three years later, the buyers sued the sellers, their real estate agents, their lawyer, and others claiming damages for “serious and permanent injuries” resulting from apparent contamination of either the land or the building itself. Among other things, they claimed that Kaufman failed, neglected or refused to ensure that a proper environmental site assessment was performed at the property, and that it was a customary practice to have a home inspection performed on the property before the closing of the purchase.

Kaufman’s position in court was that he accepted the retainer from the Grahams after all the conditions in the agreement had been waived by them, that he completed all the standard title and other searches and had certified title in accordance with standard solicitor’s practice.

On June 4, Justice Michael Quigley released his decision dismissing the claim against Kaufman without the need to have a trial. “There is no law,” wrote the judge, “to suggest that the Grahams were entitled to either a home inspection or environmental assessment unless there was a condition in the agreement to that effect. Even if (Kaufman) had been alerted to such potential problems, I am not convinced that Kaufmann’s retainer to close the transaction could be extended to include an obligation on his part to examine the possibility of the existence of such problems.”

In his decision, the judge asked, “Did Kaufmann have any obligation to negotiate a 'better' deal than the one negotiated by the Grahams themselves? Firstly, he was never instructed to do so, and secondly, had he been so instructed, the Grahams were not entitled to a 'better' deal by virtue of their signed agreement of purchase and sale. In effect, the Grahams are asking the court to find that Mr. Kaufmann should have closed the barn door some days after the horse had bolted the stable.”

Several lessons emerge from the case of Graham v. Diamond:

Lawyers should be consulted before an offer is signed, or at the very least, during the conditional period. Getting legal advice after the conditions have been waived is very risky.

Buyers who sign agreements that are not conditional on home inspections are risking years of aggravation and huge expenses to remediate a defective house.

Trying to renegotiate any part of a firm transaction is frequently a waste of time and effort.

And finally, there is no such thing as a "simple" real estate deal which doesn’t require legal advice in advance. Even the most straightforward transaction can blow up, resulting in years of expensive litigation. (Source: Your Home via The Toronto Star)

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Whether you’re looking to buy your first home, or trading up to a larger one, there are many costs – on top of the purchase price – that you must figure into your calculation of affordability.

These extra fees, such as taxes and other additional costs, could surprise you with an unwanted financial nightmare on closing day if you’re not informed and prepared. Some of these costs are one-time fixed payments, while others represent an ongoing monthly or yearly commitment. While not all of these costs will apply in every situation, it’s better to know about them ahead of time so you can budget properly.

Remember, buying a home is a major milestone, and whether it’s your first, second or tenth, there are many small but important details, not to mention stress and excitement, to deal with during the process. The last thing you need are unbudgeted financial obligations in the hours before you take possession of your new home.

To help homebuyers understand what these extra costs are, and in what situation they may apply, a report has been prepared called “13 Extra Costs to Be Aware of Before Buying a Home.” To receive your free copy, click here. Order your report to make sure you’re budgeting properly for your next move.