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9
Feb

The dangers of not including a status certificate condition on a condo purchase

toronto-condosToday’s Mastermind meeting focused, yet again, on the fast paced downtown Toronto real estate market particularly with respect to condo purchases. As mentioned in previous posts, condominiums have experienced unprecedented price growth over the last year. This is due to a perfect storm of low interest rates, employment growth, a wide choice of condo sizes and styles, and lack of inventory in the freehold sector. As the Manhattanization of Toronto continues, supply in the condo market is likely to tighten which in turn will increase competition and drive prices up even further.

An offer on a typical condo usually includes a Status Certificate clause which, in the simplest terms, allows a potential purchaser some time to review condominium documents that include budgets for future improvements or repairs to the building, but also specific accounting information on the unit being purchased and what the unit holder is responsible for as far as maintenance fees. A typical clause would specify that the buyer would instruct the seller to order the status certificate from the management company as soon as the offer was accepted and the seller (or seller’s agent) would have 10 days to deliver the certificate to the buyer (or buyer’s agent), who would then have 2 days for their lawyer to review the documents and make recommendations if necessary.

Today market conditions warrant a new approach. Offer holdback dates and bully offers are becoming the new normal. An astute agent will order the status certificate (about $100-$125) well ahead of time. It is important to know however that there is a limited shelf life on status certificates and if the listing extends longer that a month, it is recommended to get an updated version. Many management companies now have the capability to deliver the certificate digitally which will also shorten the 10 day time period for delivery. The reality is that not every agent is ordering a status certificate ahead of time. Buyers are submitting clean offers (no conditions) knowing full well that a seller will favour their offer over any offer with a condition, unless it is for substantially more money.

So what could go wrong? If you can imagine it…it can go wrong. For the most part, very little can go sideways if the unit owner owes back maintenance fees or taxes because proceeds from the sale would pay those off on closing, but illegal uses or unapproved renovations could put a buyer in serious jeopardy by requiring them to return the suite back to the previous condition. Recently I had heard about a buyer who bought without a status review only to find out later that the unit had suffered a serious fire. While the unit had been completely restored the buyer was deeply traumatized by this information because of a major fire in her home growing up. The craziest story I have heard was of a condo owner who used a concrete saw to open up a load bearing wall in their condo! Many years ago I delivered a status certificate to a lawyer on behalf of a buyer I was working with. The Lawyer came back quickly with this recommendation…”I would not buy in this building even if you gave the unit to me for free”. The small boutique building was deep in debt, had a couple of lawsuits pending and required extensive window replacements and as a result a special assessment was being considered. In another building, the management company had stolen all the reserve funds which hadn’t been caught because the company hadn’t provided yearly audited statements as required. Other buildings have class action lawsuits against Kitec plumbing, other condos have special assessments to top up their reserve funds or do elevator replacements or underground parking resurfacing. These Special assessments are not limited to older buildings in need of updates or repairs either. Occasionally new buildings quickly realize that the maintenance fees needed to effectively run the building are not sufficient. Higher fees have a considerable impact on value of the units as well as financing qualifications for purchasers.

Moving forward, agents need to explain the ramifications of not including this clause in an offer. There are extra things you can do, like google the address, call the agent of a recent sale and ask them if the certificate revealed anything, ask neighbours, and dig as deep as you possibly can. Even then, that may not be enough.

Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association. The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE.

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8
Feb

Market conditions stressing out local Realtors too

hair-pullAs a manager for a busy downtown Toronto real estate office, I never thought I would be spending my time talking agents off the edge of a cliff. The truth is, that the market is breaking new ground on agent management. In the past, my conversations with fellow agents revolved around helping them write clauses, dealing with complaints, running meetings, being a liaison with front desk workers, reviewing advertising and generally ensure their business was running smoothly. Today I’m still doing those tasks but as an unfortunate byproduct of this market, I find myself spending a lot of time comforting agents, offering condolences and talking through the ‘post offer’ game tapes. Don’t get me wrong, these are great conversations, but I worry about an office full of stressed out and exhausted agents.
Now, you might be thinking…boo hoo, poor agents, they make so much money it’s hard to have any sympathy. The reality is that the buying process is seriously intense these days. Frustration levels amongst agents are extremely high. They are missing out on offers on both condos and houses and our office meetings and masterminds are dominated by countless stories of failed offer attempts despite clients throwing everything they have at a property.
The problems of low supply, as reported in the media, are not limited to the downtown core either. This is a Golden Horseshoe problem, from Hamilton to Ajax and as far north as Barrie. Granted, the supply crisis is highest in the 416. For several years I have been tracking the weekly sales of houses and condos in the downtown market, defined by the area between the 401 and the lake and east to include the Beaches and west to include High Park. Over the years I have watched the general trend of tightened supply in both houses and condos as well as an increase in the percentage of properties selling over the list price. While housing has stayed relatively consistent, only edging up slowly, the condo market has often surprised me. When I first started tracking sales, there was only true competition on about 13-15% of units sold. That percentage was pretty stable for a few years. Then the number started to shift. By mid year 2016 I started to see more units selling at or above the list price. By June we started to see 30%, by October we were testing out 40% and by December we were seeing some numbers in the 50% range. Imagine, half of all condos selling above the list price. In January 2017 new records were set. Last week we hit 65% and when I am reviewing each and every listing on a line by line basis I notice that condos are not selling over the list price by a $5-10,000 like a few years ago, they are selling over the list price by $50-100K now. It is an extraordinary phenomenon.
Freehold homes face the same challenges for buyers. Recently a home in the west end, listed at $799K sold for $999k then, less than a month later a similar home sold for over $1.2M. Everything in an agent’s gut says these houses are worth the same money. So imagine what is happening to those clients who are being told to submit their offer based on a recent sale, only to get completely blown out of the water.
What impact, if any, is filtering down to the agent on the street? Productive agents are feeling the pressure as much as new agents entering the real estate field. I personally find myself spending as much time coaching the newbie agent the art of increasing your odds at the offer table as talking to the experienced agent who is frustrated with market conditions and looking for answers. And it’s not just the shear number of buyers looking for homes that is creating high stress levels. Increased scrutiny by the banks on their borrowers (sometimes insisting on conditional financing clauses), appraisals and quick home inspections are severely complicating the buying process. Are there any quick fixes? Nothing seems evident on the horizon and my impression is that as the spring market approaches it is going to be a whole lot harder before it gets easier.
Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association. The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE.

2
Feb

Too good not to post.

zero-talent

Think you don’t have what it takes to be an awesome Realtor? Here are ten things that escape many agents I have worked with in the past. Not only do these ten points require no real talent, they are also free. So really there is no sense spending money on SEO if you can’t deliver on most (or all) of the traits on the list. Boom!

Thanks @sethprice for sharing

Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real Estate Association. The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE.

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