GST Has Risen Again

This trooper has a new name...Harmonized Sales Tax.

The Ontario Budget released last week announced the plan for a harmonized sales tax like our friends in Atlantic Canada. For those of you buying homes after June 1st 2010 this new tax will not be charged on resale homes. There are some increases on tax charged on new homes, dependent on the value.

Where this tax increase will hit the everyday consumers is when purchasing a service related items. Service oriented businesses like lawyers, hair dressers, car repairs, accountants, real estate agents. That's right real estate commissions are subject to GST today and as of June 2010 taxes will increase to 13% on all commissions charged by a real estate agent.

Here is how deep this will effect you, the home seller.

Today: $300,000 x 5% commission = $15,000 + 5% GST = $15,750

June 2010: $300,000 x 5% commission = $15,000 + 13% HST = $16,950

Of course there is a way to avoid this HUGE increase of $1,200 in costs to you. As a matter of fact you can REDUCE it by thousands. Sell your home privately and you only have to pay HST on the fee of your marketing. Let's look at the same example, but as a private sale.

Today: $300,000 x 0% commission = $0 + $1,500* + 5% GST = $1,575 ($14,175 Savings)

June 2010: $300,000 x 0% commission = $0 + $1,500* + 13% HST = $1,695 ($15,255 Savings)
*PropertyGuys.com Elite Package

So as it turns out this new HST thing gives you even MORE savings selling privately. What a Trooper.


M

5 Equals 20 or "Real Estate Math"

Sounds complicated but it's not.

Your family is growing and it is time to move out of your starter home and into something with room to breath. What is the first thing you do? Call your parents of course. Always a great place to start.

After the obligatory apologies for not calling more and assurances that you are eating enough vegetables you get on to the business at hand. This is your first house, you have never sold one before and you are looking for some advice. Your parents are from the old school and say that they will call Joe the realtor because he has sold 3 houses for them. Joe is such a good guy he will only charge you 5%.

Wrong, he is going to charge 5% of the transaction but he is charging YOU 20% of your equity!

Here is the breakdown.

You paid $190,000 for your townhouse 3 years ago and put down the minimum deposit of 5% leaving you a mortgage of $180,500 (not including any CMHC fees). Based on an interest rate of 5% (you didn't have the advantage of today's low rates) you would have $168,672.50 left on that mortgage. For ease of calculation we will call it $168,000.

Your house has increased in value since you purchased it and is now worth approximately $225,000, congratulations. If you were to sell this home with Joe he would charge you 5% or $11,250 (I won't even get into the fact that you would have to pay GST on this).

$225,000 (Value) - $168,000 (Mortgage) = $57,000 (Equity)

The bank owns such a large piece of your home (75%) you really only have $57,000 in equity built up between your appreciation and the amount of principle you paid off on the loan. If you take the $11,250 as a percentage of what you actually own of the house, Joe is taking a total of 19.7% of your equity. Everything that you have worked for over the last 3 years and he is coming in and taking 1/5th, that's fair, right?

$11,250 (5% Commission) / $57,000 (Equity) = 19.7%

For those that need a refresher on how to calculate using "New Math"...


M

Seeing The Future of Joe Schmo

He is reading the mind of the North American culture.

He being Seth Godin, author of best sellers like Purple Cow, Permission Marketing and most recently Tribes.

I recently read a tweet (post on Twitter) from @ebloch about one of Seth's blog posts talking about the decline of agents in today's world. Travel agents, insurance agents, real estate agents. Anyone that is a middleman in a transaction is in danger of being replaced by a cheaper, faster, more efficient way. He goes as far as to say that it may even be a consumer with a computer.

This is nothing new to me, I see it every day.

I am going to draw your attention to a quote from the blog.

"Think about how anonymous the typical real estate broker is. He will sell almost any house or represent almost any buyer. When selling a house, he has a fiduciary responsibility to represent that house to the best of his ability. Just like every other broker. The great real estate brokers do far more than this."

This quote describes perfectly the term "Joe Schmo Agent" from PropertyGuys.com radio commercials and marketing materials. Does an ordinary agent deserve the extraordinary fee charged in the transaction? What have they done in order to justify their fee?

It seems everywhere we go these days we run into an agent. I'll bet at least one person you know from High School is an agent today. Why do we have so many Joe Schmo agents out there? I'll let Seth explain it...


With nothing stopping people from becoming agents in the Tiger Woods Market, with no "Dip", we have become overrun by the unexceptional.

M

The Tiger Woods Years

I swear I didn't write that on the photo.

Last week a "Real Estate Investment Specialist" by the name of Don Campbell was on The Hour (click to watch). Strombo's laid back interview style allowed for a light easy going interview that talked about all sorts of things.

Here are some of the snipits that I took from the interview.

1. The market is adjusting and people that are expecting the same outcome as the last few years are nuts. If you were a player over the last 3 years you did well, anyone could have done it. It was the "Tiger Woods Years". There was no failing. Things are down now and people are still expecting the high return. There is a home in Cambridge that I was watching. The owners bought a little over a year ago and now have it on the market for almost $100,000 more than they paid for it. They are now on their 2nd agent (over 3 months listed) and still way over priced for today's market.
2. Now is a good time to buy especially in an area that is growing. We are lucky enough to be one of the areas that he keyed in on along with Barrie/Orillia, Hamilton, Edmonton and Calgary. As an aside if you are a first time home buyer it makes even more sense with programs available for you.
3. If you are looking at investing in property you don't have to buy where you live. Look at the hot spots, where your investment will grow the most and focus there. He really thought Hamilton was an area poised for growth, looking at access to commuter transit and it's proximity to GTA and KWC.
4. If you want to live in Toronto because you like the "city life" look at renting. You will not be "house poor" and still be able to save up for a deposit when/if you are looking at investing in a property down the road.
   

What does this mean for us here in Waterloo Wellington? Well if you are looking at selling a home you can expect to be at an advantage over any of your friends in the GTA. Sure their house may be worth more than yours but you won't lose as much as they will. If you are looking at buying for a principle residence or an investment property, go for it. You will be fine as long as you are thinking 5-7 years down the road.

You may not pull off a shot like this but he is the best...


M

Your Dream Vacation Is One Move Away

At least you won't get burnt.

How much will a real estate agent give back to earn your business? Well that depends on how much they stand to pry out of your wallet.

Aeroplan has a program entitled "Aeromove" that earns you points when selling or buying a home with an agent enrolled in their program. They recently announced a promotion that could get you to Hawaii when you buy and sell a home with one of their "referred agents". I found a flight to Hawaii departing on April 5th and returning April 12th on Air Canada. It worked out to be $1,457.28 per person from Pearson to Maui. Sure is nice of the agent to send you on vacation for using their service.

Based on a 5% commission let's see just how they can afford to send you away to Hawaii.

Selling your house ($300,000).
Commission paid by you $15,000
Less paid to buyer's agent $7,500 (based on 50-50 split)
Less paid to broker $3,000 (based on a 60-40 split)
Less advertising $1,000 (estimated @ $100 per week)
Net Commission $3,500

Buying your house ($300,000). (Don't ask why you would buy a house of the same value, it is the example Aeroplan uses)
Commission paid by seller $15,000
Paid to your buyer's agent $7,500 (based on 50-50 split)
Less paid to broker $3,000 (based on a 60-40 split)
Net Commission $4,500

Total Net Commissions $8,000

Less the $1,500 for your one return flight it leaves a mere $6,500 for your agent to cover off any other sundry costs they may have like assistants, desk fees or office space.

Poor buggers, not sure how they survive.

Now let's look at the same scenario for you selling privately.

Selling your own home ($300,000)
Commission not paid to an agent $15,000
Marketing costs $1,500 (Elite package with PropertyGuys.com)

Net Commission paid to you $13,500

Flight, Hotel, Rental Car and $200 per day for a week in Hawaii (Family of 4) $11,340

That still leaves you $2,160 to spend on upgrading the lights (or bathroom fixtures or a new washer and dryer) in your new house.

The best part is if the house you bought was listed privately, you can go on vacation with the new friends you made because they saved the same amount of money.

If Hawaii doesn't float your boat...


M

Pigs Get Fat, Hogs Get Slaughtered

An old saying that talks to the greed of the world.

Clay Rideout is a new PropertyGuys.com franchisee in Saint John NB. Like any "newbie" he was nervous yet excited about his upcoming home show.

As a new business he didn't have the money nor the justification to spend thousands of dollars on a trade show booth. What he did have was a compelling story and an idea to help people understand the message with clarity.

Here is a picture of Clay at the Atlantic National Home Show in Saint John NB.

"(I was) at the home show this weekend. Lots of interest in the bike, even more when they found out what it represented. Here was my schpeel: Traditional Real Estate commissions are something in the range of 5-6% of the price of the home. And when the deal finally closes, we are so happy to have a successful sale, that we are usually unaware of what 10 or 12 thousand dollars actually looks like. We just sign off those funds at the lawyer's office. Piece of paper, stroke of the pen. But this represents that commission. This motorcycle represents the (conservative) 5% commission on a $199000 home. Does that make sense?"

This hits home here in Waterloo Wellington more than you know. I had a good friend that had sold his home just prior to me getting into PropertyGuys.com. He was newly married and was selling the old bachelor pad and getting a new (much bigger) place with his new bride. He used the same real estate agent that he had purchased his "man cave" with years before. He ended up selling for around the $250,000 range and purchased in the $400,000 range. Now his realtor was such a nice guy he gave him a break on the commissions of the sale because he was also buying. After the move my friend was out front of his new place doing some yard work when a guy on a brand new bike rolled into the driveway. The helmet came off to reveal the face of a smiling real estate agent. "Just thought I would pop by and congratulate you on the new home". It was not lost on my friend that this new bike was paid for solely from his move.


There goes your equity down the road. Too bad you were not the one driving...

M

Don't Feel Like An Ass

It's a valid question.

Before I give you an answer you need to answer a question for me. Are you buying for the first time or are you moving on up?

For our primordial buyers
(I just couldn't resist the star burst. Who doesn't love a good star burst?)

I am hearing time and time again that first time home buyers (FTHB) are going to be what kick starts the stall in the housing market. It's kinda like the food chain. FTHB buy the starter home which allows the young family to move up to the single family home which allows the growing family to move up to a bigger home that gives them room to breath and allows the empty nesters to move down into a condo.

So is it a good time for the FTHB to buy? Given that mortgage rates are at their lowest point in years, government programs are increasing, house prices are dropping it makes more sense now than ever before.

You're an old pro
Are you ready for an upgrade? Can you afford to if your house value has dropped? Not only can you afford it but you can profit off of it!

You must remember that you are buying and selling in the same market and that it all fluctuates together. The time you would loose is when you are either down grading to a smaller home or if you are not repurchasing at all.


Take advantage of this buyers market because any equity you have sure as heck can't buy you love.


M

So How Far To The Airport?

I just love seeing all the losers that live by the airport when I land in a plane. Do you think any of them used a real estate agent?

If you remember my Fly In A Think Tank post from last year you will recall the new realtor ads that were being proposed.

They have now started to air on TVs across Canada telling us all just how useless we are without real estate agents. So far I have only seen the one with the guy that bought the house in the flight path of the airport. Last time I checked airports were pretty hard to hide. I mean look at any map, you will easily see your proximity to an airport....or a school or a park or a 400 series highway. Heck take a drive around the neighbourhood with your eyes open and I am sure you will see these things.

I think I know where the they got there idea from...


I like to think this is a realtor in some foreign land helping his client avoid making the decision he could not have made on his own. Thank goodness he was there to point out the airport is "hidden" behind those bushes!!

Their new website lists all the wonderful things real estate agents can help you with. They do it with a virtual board game asking you questions along the way. Concept is neat but to have multiple choices like "A: $322,000 should ensure a quick sale.", "B: $503,000 means a hefty profit." or "C: Ask a realtor." insults your intelligence. Only a realtor would know that the difference of $181,000 is ridiculous?

On the question about marketing your home if you actually choose "Ask a realtor" you get great advice like "there is a list of 25 things a realtor will do to market your home. Things like virtual tours, other media sources and of course top of the list putting it on the MLS". Last time I checked on PropertyGuys.com there were virtual tours, various print media options and national exposure with thousands of properties listed from St John's NFLD to Vancouver Island BC not to mention hundreds right here in Waterloo Region and Wellington County.

Getting great advice when looking to buy or sell is a great idea. Just make sure you ask someone that doesn't think you are stupid.

M

Holy Crap I Think We Just Bought A House

Straight jacket seems fitting, no?

Like molten lava engulfs the country side we are swept under the warmth of the sun. With aimless abandon we drive through the streets just enjoying the happy brightness. The darkness of winter oozes from our souls and our skin is once again kissed by the glory that is the sun.

We Canadians appreciate our summers more than most. The contrast allows for it. It also makes us do weird things. Crazy things like buy houses. That Sunday drive so epically described above was mine some 9 years ago. The good weather had taken us, to of all places, a sales office for a builder. As young renters we had no immediate plans for a house. "Can't hurt to look and see what's out there"

When we signed the papers we were expecting full well to be denied from the bank so no big deal. Two young newlyweds with not much in the way of savings, what were the chances. "We were approved???"

Stats show that as we work our way from winter through spring and into the summer more people buy homes. It is a cyclical sales pattern that can not be denied and is less to do with the market and more to do with the psyche of the Canadian home buyer. Knowing what the property looks like when you are spending time outdoors helps but so does the fact that it is no longer dark when you leave for work and when you get home!

It does not take a pitch from a pushy agent to buy a house, just a buyer out for a Sunday drive with not much more than a dream.


The point is if you are looking at selling your home and wait until May you are missing out on the people that are out and about at the first eruption of sunlight. We have already seen it starting. The warm spell in February that saw temps in the high teens had door bells ringing and emails chiming. People were out.

Knowing someone is at home riffling through their files for their tax assessment so they can buy your house is a neat feeling. Almost as neat as rifling through your files for your tax assessment so you can buy THAT house.

M

February Real Estate Statistics

Still not pretty.

Well according to the numbers in KW, Cambridge and Guelph things are continuing as expected. Sales are down almost 30% and average house prices are still below last year, albeit not by a lot.

Real estate boards are sticking to this ridiculous notion that increasing sales versus December and January is something to boast about. Here is the quote from the KWREB president.

Last month's sales represented a healthy gain over the activity in December and January, the boards said.

"It's a small victory," Karen Shartun, president of the Kitchener-Waterloo board, said in a news release. "But after a steady diet of bad news concerning our economy that we've had in the past couple of months, we'll take it."

At least this time they only claimed it as a "small victory".

Now I know you are wondering if all this lipstick is doing any good? Is the pig looking any better? Is it actually kissable? Someone seems to think so...


I expect the spring market to pick up, as is the cyclical nature of our market. Based upon what we have seen over the last 4-5 months I would expect about a 25% drop in solds over last year. So for March that would put KW at about 470 solds, Guelph at about 210 and Cambridge at about 175. Let's see how close my predictions are.

M

SNAP II

Pretty snazzy camera. And they thought Justin brought sexy back.

Nothing like a fancy camera with rhinestones to impress the clients! Heck it must be better than using the Blackberry!

We often get into a debate at PropertyGuys.com about using the right tools for the job, specifically for photography. What is the best camera, DSLR or point and shoot? This debate has raged long and hard for one reason. Everyone has a DSLR except me. I would stop arguing because the DSLR photos our Private Sale Consultants take are amazing, but I have a secret weapon. A point and shoot with a wide angle lens.

That's the biggest issue with most interior shots of a home. Lack of W I D E angle lenses. There is no substitute for this. After that things like white balance, lighting and sharpness of the photos are needed to properly show your home. It's what you would want to see in a home you are looking to buy, why should you provide anything less?

I was sent this video from my colleague Dave. He is a bit of a camera junky and thought he would pass this on.


The video helps point out the importance of a good quality photo. It also points out why so many BAD photos are on agent sites. I was not exaggerating about the Blackberry photos. I have seen it. The agent standing across the street from the home with RIM's darling in their hand. Ensure you have high quality, wide angle shots taken of your home. If you are spending $15,000 to sell your home the least they could do is use it to buy a proper camera like we do.

M

The Perfect Grilled Cheese

PERFECTION (Through my eyes)!

The other day I was making myself a grilled cheese sandwich for lunch. I work hard on my grilled cheese. Butter right to the edge. Just the right amount of time to pre-heat the pan. Precise timing on each side for a golden brown colour and gooey cheese.



I was so impressed with my sandwich making ability I could not help but take a photo with my Blackberry and send on to my Facebook page. This sandwich was a thing of beauty and needed to be let loose on the world.

The response shocked me. My perfect sandwich was being critiqued. People questioned the symmetry of the bread and the browning, the type of cheese, with or without onions and relish. One comment even suggested seeing a gnome if you looked long enough.

I have big enough shoulders to take this criticism. This sandwich was perfect to me, maybe not everyone else. That is when I realized it. Do you see what I see? That's just it. If everyone has a different perception of what they look for in a grilled cheese sandwich imagine what they would think of my house?

Each and every person has different wants, likes, needs and will see your house through the glasses that they wear. You are in no position to judge whether they should like it, maybe they WANT onions on their sandwich! This is where a Home Staging Professional comes in to the mix. Call them the Iron Chefs of real estate. They can take a plain jane house and whip it into a culinary masterpiece with a few secret ingredients.



Feel free to comment on how you like your grilled cheese. Are you a "classic" lover or more of a "gourmet" aficionado.

Why Are They Selling?

Not everyone is this clear.

As a buyer of a home it is important to ask the seller as to why they are selling. Up sizing, down sizing, job relocation, job loss, neighbour disputes or maybe just "Moving On Up".



As a seller you should be prepared for this question. We all have motivation when we move. Are you ready to answer this question from your buyers? A buyer needs you, as the seller, to let them know that you loved living in your home. If not for the changes in your life you would be happy to stay in the home that you built.

Because your life has changed you can enjoy your deluxe apartment in the sky.