Making an Offer to Purchase

Once you have found the home you would like to purchase, you need to present the vendor with an Offer to Purchase or an Agreement of Purchase and Sale. As your home is probably your biggest investment, it would be wise to work with your real estate agent and/or a lawyer/notary in preparing your offer. Remember that the Offer to Purchase or Agreement of Purchase and Sale is a legal document and should be carefully prepared.

Any offer or agreement will typically include:

• Your legal name, the name of the vendor and the legal civic address of the property.
• The purchase price offered.
• The chattels that will be included in the purchase price (e.g.: window coverings, appliances or a satellite dish). Whatever items in or around the home that you think are included in the sale should be specifically stated in your offer.
• The amount of deposit.
• The closing day (date you take possession of the home)–usually 30 to 60 days from the date of agreement. It can also be 90 days or longer.
• Request for a current land survey of the property.
• Date when the offer becomes null and void.
• Any other conditions that go with the offer, including property inspection and approval of mortgage financing.

The process of making an offer, receiving a counteroffer and then revising it again is not uncommon. The whole process can seem like a roller coaster ride – exciting, but stressful. It’s all part of making the deal work best for you and the vendor.

Source: CMHC. Subscribe to the Montreal Real Estate Blog

A real estate investment plan

This very complete article was released this morning by the Financial Post. Richard Croft goes on to explain why is real estate a good diversifier in your portfolio: from owning a home to becoming an investor in Real Estate and it’s positives aspects as well as the negative ones.

Richard Croft, Financial Post
Their principal residence is most people’s primary exposure to real estate as an investment vehicle.

“…Real estate is an excellent diversifier within a portfolio, and in the case of real estate investment trusts (REITs), can provide some decent tax-advantaged cash flow to your portfolio. So here’s the question: Is your home a place to live or is it an investment that will at some point be sold to capitalize your retirement years?

If the former, then by all means include real estate in your portfolio. If the latter, then adding real estate to your portfolio would defeat the purpose of optimum portfolio diversification.

Assuming real estate should be in your investment portfolio, the next step is to understand what it brings to the portfolio in terms of performance enhancement and risk reduction.

As an investment, the real value in real estate is its cash flow. If you buy a rental property, for example, you buy it on the basis of some cap rate, which is really just another way of saying the property value is based on some multiple of its cash flow.

Like any other asset, the multiple accorded to that cash flow is determined by the stability of the cash flow. If you are buying a property with a solid, long-term tenant who pays the rent –like a major Canadian bank– the cash flow is stable and the property will fetch a higher valuation.

Another way to look at cash flow is in terms of how real estate is financed. In Canada, you can borrow 75% (sometimes you can borrow even more of the purchase price) of the value of your real estate, usually financed over a 25-year term. If your cash flow is stable, you can use the excess cash flow to pay down the mortgage, and at the end of 25 years, you own the property free and clear.”

Read the complete article at The Financial Post

The Resale Market Is Heading for Another Record Year

Greater Montréal Real Estate Board Statistics

The resale market is heading for another record year with an11% increase of transactions during the first four months of 2007. According to data recorded in the Greater Montréal Real Estate Board’s (GMREB) MLS® system, 21,908 houses changed hands compared to 19,807 transactions between January 1 and April 30, 2006.

“The volume of transactions since the beginning of the year is exceptional,” says Michel Beauséjour, FCA, Chief Executive Officer at the Greater Montréal Real Estate Board. “Economic indicators continue to point in the right direction. Among others, sustained job growth during the first quarter bodes well for the resale market during upcoming months.”

The resale market for condominiums, from January to April 2007, showed an increase of 14% with 4,853 transactions compared to 4,239 for the same period in 2006. We also observe that the average sale price increased by 6%, rising to $204,000 in comparison with $192,000 in 2006.

The resale market for single-family homes also showed an 11% increase, with 14,242 transactions compiled in the GMREB’s MLS® system, against the 12,805 transactions recorded between January and April 2006. The average sale price reached $223,000 this year compared to $210,000 for the first four months of 2006, which represents an increase of 6%.

In the first four months of 2007, the volume of sales reached $4.9 billion, an increase of 19% compared to $4.1 billion recorded for the same period in 2006 in the GMREB’s MLS® system.

From January to April 2007, 39,563 new listings were recorded, representing an increase of 2% compared to the 38,698 new listings counted for the same period in 2006.

As of April 30, 2007, 38,335 residential listings were active in the GMREB’s MLS® system, as
opposed to 36,845 for the same period last year.

Source: CIGM

Dowload the full article

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Females Drive Housing Demand

…And hammer away at renovations

Royal LePage survey finds 25% of women searching for a home are looking for a ‘fixer-upper’ and plan to do the work themselves – Currently, 30 per cent of single, never-before married women own their own home, while 45 per cent of divorced or separated women and 64 per cent of widowed women are homeowners, according to the Royal LePage Female Buyers Report released today.

“The notable upswing in real estate activity among females is not surprising given that women are earning higher salaries than ever before,” said Lisa da Rocha, vice president, marketing, Royal LePage Real Estate Services. “There has been a shift in mindset whereby women have distanced themselves from the traditional notion that you must first find Mr. Right and then together you buy a home. Our findings reveal that 66 per cent of women who intend to purchase would not find the process of buying a home on their own intimidating.

“In Montreal, home buying activity among females has increased significantly over the last three to four years. Activity growth has been supported by the larger number of women in executive and professional careers, which has afforded them the financial freedom to purchase a home on their own. Women of all age groups tend to favour condominiums for their maintenance-free lifestyle, and generally spend an average of $300,000 on such properties. They tend to place the style, design, and security of a property at a high priority, and are not interested in undertaking renovations. The centre of Montreal is a popular neighbourhood for female purchasers who are looking to stay close to the city centre, while Old Montreal offers heritage-style properties in a desirable location.”

Additional Poll Findings:

• Among those who own and rent and intend to purchase a home/condo in the next three years, men and women both rank equally (81%) taking out a mortgage from a bank, however, nine per cent of men said they would rely on their family to pay for their entire home, in comparison to only three per cent of women.
• Of women who own, who don’t intend to purchase in the next three years, when asked, “Which one of the following motivations most influenced your decision to purchase your home?” the top three responses included: it makes more sense than renting (36%), want to put my money into a good investment (22%) and pride of ownership (13%).
• Among women who are intending to purchase in the next three years, when asked, “Which methods will you use to educate yourself about home purchasing?” the top three responses cited were speaking with a real estate agent (83%), speaking with friends and relatives (78%) and using real estate and financial websites (64%).

Source: Royal LePage Female Buyer Release

Interesting article

Recreational Property Values in Canada ‘Set to Soar’
by Jim Adair
Canada’s two largest real estate companies issued reports about recreational properties this week, and while bargains can still be found for those willing to travel and buy seasonal properties, prices are climbing in most parts of the country.

The 2007 Re/Max Recreational Property Report says starting prices for waterfront properties are more than $500,000 in 31 per cent of the recreational property markets, and that only seven markets offer waterfront properties starting at less than $250,000.

Re/Max says aging baby boomers, which represent about one-third of Canada’s population and control 45 per cent of its wealth, are driving the recreational property market. Some are preparing for their retirement years, while others are looking for a second home in which to spend time with family and friends.

“Baby boomers are investing in the future — both from a lifestyle perspective and an economic standpoint,” says Eldon Ash, regional director at Re/Max of Western Canada. “Tremendous equity gains have been realized in recent years as demand for recreational properties across the country swells. Given the aging of the population, this trend is expected to continue for at least the next five to 10 years as baby boomers move through the cycle.”

A Royal LePage report lists some of the hottest cottage areas in Canada, including the Moore Point area in Ontario, where cottages cost up to $3 million; Chester, N.S., which has top-end properties for $1.5 million; and Okanagan Lake in Kelowna, B.C, where small waterfront condos start at $500,000 and year-round waterfront properties range from $1 million to $5 million.

Royal LePage says the big attraction in Kelowna is the recreational lifestyle and the climate. “For example, in April you can ski in the morning, golf in the afternoon and be cruising in your boat at the early evening — all in the same day,” says the report. Read the rest of the story here

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How Much Can You Borrow?

A home is typically the largest purchase you will make in your lifetime, and for most Canadians this means obtaining a mortgage. The amount of your mortgage will determine the size and location of your new home - not to mention the size of your payments. So how do lending institutions decide how large your mortgage loan can be?

Lending institutions (such as banks, credit unions, trust companies and insurance companies) want to be certain that you are capable of repaying the money you borrow. Consequently, the loan application process is thorough. Lenders consider your income, credit history, debt load, employment history and collateral, including the value of the property you wish to buy.

Although there is some discretion in determining the exact amount, the size of your loan is generally calculated using set formulas - Gross Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS). Read more

Tories hope for Montreal beachhead

“The Conservatives have no plan for the city’s waterfront, but they announced a ‘land-assembly’ project nonetheless

L. IAN MACDONALD, The Gazette

Published: Monday, April 23, 2007

The hardest part of any big real estate deal is usually assembling the land before speculators get wind of it.

That’s in the private sector.

In the public sector, as in the crown land along the Montreal waterfront, the biggest challenge is settling turf wars among multiple stakeholders within the federal government.

Or even, as in the case of Transport Minister Lawrence Cannon and Public Works Minister Michael Fortier, getting two people in the same room as they were at the Montreal Board of Trade last Friday.

Cannon and Fortier shared the same stage, but stood at different podiums as they announced that nearly 5 million square feet of federal land on the waterfront would be “rehabilitated and developed” by the Canada Lands Corporation. Fortier acknowledged that the setup of twin podiums looked more like a debate, but assured the audience he agreed with the announcement.

The sensibilities in orchestrating such a joint appearance can only be imagined with their offices, where when staff refer to “the minister,” they mean their guy, not the other guy.

Let’s see. Cannon is the Harper government’s Quebec lieutenant, meaning he’s the senior political minister for the province. This means nothing is supposed to happen here without his signoff. And as transport minister, he has 17 crown corporations reporting to him, including Canada Post, the Port of Montreal and the Old Port of Montreal, all of which figured in the land assembly announced Friday, but none of which talk to each other on a regular basis.

Senator Fortier is the minister responsible for the Montreal region, which means nothing happens here without his say-so.

A redevelopment plan for the Montreal waterfront usually involves a grandiose scheme for the Bickerdike Basin next to the Port of Montreal headquarters on Cite du Havre. For years, there has been a steady procession to the port’s president and CEO, Dominic Taddeo, who always explains that Bickerdike is an important part of a $2-billion-a-year business.

But this time Taddeo was prepared to part with three non-strategic assets, the Pointe du Moulin north of Bickerdike, the Rue des Irlandais at the foot of the Victoria Bridge and the restored waterfront segment of the Lachine Canal.

In addition, CMHC is prepared to sell some fallow land on Cite du Havre and Canada Post has agreed to unload a disused mail-processing plant and parking lot on Ottawa St.

Canada’s New Government, as the Conservatives still style themselves after 14 months in office, call this land assembly “Montreal’s New Harbourfront.”

Harbourfront? That’s a Toronto turn of phrase, and not necessarily a felicitous one. The redevelopment of the Toronto waterfront has mostly been a series of high-rise condos, which obstruct the views of Lake Ontario from a city already cut off from the water by the elevated Gardiner Expressway.

In Montreal, there are enough stakeholders to fill a Chamber of Commerce lunch to overflowing. There’s the city of Montreal, the province of Quebec, the CN and CP railways, the Port of Montreal and the Old Port, developers, lawyers and lobbyists, not to mention community activists in the southwest part of town.”

source: Montreal Gazette