JUNE 2011. Greater Toronto REALTORS reported 10,046 sales in May 2011 – up six per cent compared to May 2010. This result was the second best on record for May under the current Toronto Real Estate Board service area. The number of new listings in May, at 16,076, was down 15 per cent compared to last year.

“Positive economic news and low borrowing costs led to strong sales through the first five months of the year, including the increase in May,” said Toronto Real Estate Board President Bill Johnston. “At the same time, the market has become much tighter compared to last year, due to a substantial dip in new listings.”

Homes were on the market for an average of 23 days and sold for an average price of $485,520 – up nine per cent compared to $446,593 in May 2010. The strongest rate of price growth was experienced for single-detached homes sold in the City of Toronto.

“We have seen clear-cut seller’s market conditions emerge over the past two to three months,” explained Jason Mercer, TREB’s Senior Manager of Market Analysis. “The robust price appreciation that we have seen will hopefully prompt more households to list, resulting in a more balanced market later this year,” continued Mercer. (Source: Toronto Real Estate Board)

A more robust than expected Greater Toronto Area spring real estate market has the Canada Mortgage and Housing Corporation significantly upping their sales and pricing forecasts. The federal housing authority now says prices in the Toronto area market should increase by 4.3 per cent this year to a record $451,000 for the average home, according to a recent report.

The CMHC had earlier expected in their forecast released at the end of 2010 that prices would go in the opposite direction this year, falling by 0.4 per cent or $428,000. Sales were also initially forecast to drop by 3.6 per cent, but now they are estimated to be 2.5 per cent below 2010. “Interest rates have been much lower than expected, so that has given the market a boost for longer than we thought,” said Shaun Hildebrand, CMHC senior market analyst.

“Home prices have largely benefitted from the ultra-low interest rate environment on the back of the Bank of Canada’s highly accommodative monetary policy stance,” said TD Bank economist Shahrzad Mobasher Fard.

Another reason that average prices are elevated is a lack of listings, combined with the fact that more expensive homes are selling in relation to lower priced homes, skewing prices upward, said the CMHC.

Through the first four months of 2011, one in eight homes sold for above $750,000 and one in twelve condos sold for more than $500,000. “A rising number of wealthy immigrants, a large share of high income earners, downsizing empty nesters and homeowners with substantial amounts of equity,” are factors in the market, said the CMHC.

While the CMHC sees prices still moving upward in the Toronto market, the TD Bank sees average prices coming down across Canada, particularly in cities that have seen major price climbs, such as Vancouver. (Source: Moneyville)

Almost every resale home purchase is conditional on the buyer being satisfied with the results of a home inspection. But what does satisfied mean? When can a buyer back away and when are they just using the inspection as a convenient way to find a loophole when they get cold feet? If the buyer decided not to do an inspection and then just cancelled the deal, they would likely lose their deposit and could probably be sued for breach of contract by the seller if they sold to anyone else for less money.

Inspection conditions are not an automatic option to terminate, as many buyers believe. A lot will depend on the exact wording of the condition language. It will help a buyer if it says that the buyer has to be satisfied with the inspection in their “sole and absolute discretion.” The buyer may have difficulties if they use a relative who is not qualified and who just says something like “This is not a good house.” Make sure you use a qualified home inspection firm. Check to make sure that they are registered with the Ontario Association of Home Inspectors.

Usually, a buyer will find an inspector or, if using an agent, the agent may suggest one. The buyer and inspector spend a few hours going through the house and after the tour make a decision about whether to go ahead based on what they’ve seen.

One of the main problems is that inspectors are limited in how much they can investigate. They are not allowed to look behind walls to see if there is evidence of leaks or mould. This is made worse because sellers may not disclose defects in their property, expecting the buyer to be bound by caveat emptor, or buyer beware - meaning too bad if you find out about problems after closing.

Sellers, on the other hand, are not permitted to see the buyer’s home inspection report, unless it says so in the condition. This can be serious for a seller. Let’s say the house sells subject to a home inspection condition. The buyer says “I am not satisfied” and cancels. Now new buyers suspect something must be wrong with the house and the seller has no way of knowing how to explain this.

In order to solve this problem, sellers may consider inserting a clause into every home inspection condition that if the buyer is not satisfied for any reason and cancels, they have to provide the seller with a copy of their inspection report within 24 hours. In this way the seller can explain the problem to a future buyer or, better still, just fix it.

Still, in some cases sellers are taking the position that the buyer was not acting in good faith when they cancelled the deal as a result of an unsatisfactory home inspection and are refusing to return the buyer’s deposit. Deposits cannot be returned to a buyer unless both the seller and buyer agree. This can cause a buyer difficulty as they will not have the necessary money to make an offer on another house while they fight over the deposit.

To avoid this, buyers may request to make two deposits when they buy their next resale home; one small deposit when the offer is accepted, and then a larger deposit once they are satisfied with the results of the home inspection condition. This way, if the buyer is not satisfied and the seller tries to withhold the deposit, you are only fighting over a smaller amount.

If buyers and sellers understand all their rights and obligations under the home inspection condition, there will hopefully be more disclosure of defects up front by the seller, so that the buyer can in good faith conduct a proper home inspection and close. (Source: The Toronto Star)

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