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Posts tagged ‘clauses’

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.

16
Apr

Realtors Circa 1989. Masters Of The Cut And Paste.

1989At our meeting this morning we were talking about what it was like being a realtor 25 yrs ago. It was 1989. The year I started in real estate. In a room with 20 agents only 2 had been in the business longer than 8 yrs. The changes we have seen over the years are quite staggering and since nearly 60% of the Realtors currently working today have less than 10 years experience (check out a blog post I wrote on the subject here), they really have no idea what it was like in the ‘good old days’ to list or sell a property but I suppose none of that should really matter. They operate by today’s standards and are used to smart phones and Google maps. Frankly there were a lot of blank faces when we talked about legal size offers with carbon pages, how we were sceptical of fax machines, and had to write crazy financing conditions like assuming mortgages, vendor take-backs, selling 2nd mortgages. So just for kicks I asked a bunch of long time Realtors to talk about their experiences 20+ years ago compared to today. The answers are hilarious and brought back a lot of memories.
1. MLS books we guarded with our lives. Often very thick, they were broken up by district and came out every few weeks. Properties took longer to sell but you had to get used to calling about a listing and learning that it had sold a week ago.
2. Also had daily “tear sheets”. Each 8.5 X 11 had 4 listings which were perforated. You would tear out the listings that were interesting and store them in little black binders. One agent I knew had a binder just full of funny listings with terrible spelling or grammar. (you know who you are).
3. Agents had pagers and used pay phones to return calls. Argh! Always a drag to have to break paper money to get a quarter.
4. When rates were high (15%+ sometimes) Sellers would often agree to pay money up front to buy down the interest rate. Agents were skilled at creating these clauses.
5. Agents had to get mortgage details prior to listing a home because if the mortgage was at a good rate it was often smart to transfer that mortgage to a buyer and then do a vendor take back 2nd mortgage. We would then try to sell that 2nd mortgage so the seller could get their cash out of the sale. Sometimes we blended mortgages too and had to calculate the payments. Crazy complicated but standard practice.
6. Processing listings and producing feature sheets took forever. Take pictures of the property, take the film to get developed, pick out the good ones, tape them to a piece of paper and then photocopy it for open houses. They were pretty much always in black and white. We were masters of the cut and paste.
7. Agents relied heavily on the secretaries to create feature sheets. We didn’t have marketing are graphics people.
8. If you had a good listing, you would go around and drop a bunch off at other real estate offices. I have to say that I still see that once in a while although usually for exclusive listings.
9. If you had a client out-of-town you had to snail mail everyone and wait for paperwork to come back. No one had a fax machine, although clients could find one at a business centre and go there and wait for your fax which was on thin thermal paper. The ink would eventually fade so you couldn’t really save files for any length of time.
10. Forget about lock boxes. If you were out showing houses you had to go around to offices to pick up keys and then drop them back after you were done. And yes, sometimes we would forget.
11. Obviously no computers so no CRMs. Our databases were in our day-timers. If you lost it you were screwed.
12.There was no such thing as a home stager so what you saw was what you sold.
13. Offices were packed with people in large “bullpens” and pretty much everyone smoked so there were ashtrays all over the place and plenty of whisky near by.
14. When you arrived at the office in the morning the secretary would hand you your stack of pink “while you were out” message slips. At your desk you would sort trough them and then jam them on a desk skewer.
15. We all wore suits and ties. No jeans. Ever.
16. All our paperwork was done in triplicate legal size with carbon paper between the copies. When photocopiers were used more no one could figure out how to print double-sided offers. There was always at least two pages that were upside down on one side.
17. We needed 6 copies of an offer. One for the buyer, seller, each agent and each lawyer.
18. Caravans. After every meeting we would all jump in our cars and tour the listings of the day. No one wanted to be last and sometimes if you got a listing but had trouble pricing it, you would get agents to write down a suggested price on the back of their business card so you could show the seller. What?!?!
19. We used the Perly’s Map book to get around (no gps) and had this huge book called the Bowers book which was kind of like a reverse phone book with properties listed by street.
20. No condos.
21. Training? Not so much. Sell houses or move on.
22. We all worked for the Seller. There were no BRAs.
23. There were no standard clauses stored somewhere. We would cut and paste clauses or write new ones. Webforms didn’t exist.
24. A good deposit was $10,000
25. No one ever argued about commissions. EVER!

Well, we’ve come along way in 20+ years. This isn’t just a trip down memory lane. What sticks out the most for me was that we all worked full time at the office. We were in every morning. Started our day the same way…everyday. Today we have incredible technologies that keep us connected to the business from anywhere we are. Effectively, besides actually showing property, you could be on a beach in Miami and no one would know. Still, there were no efficiencies at work back then. We had to work hard to survive and buyers and sellers saw value in our service.
Here’s something else to consider. After reviewing how we worked 25 years ago, and thinking about how you work today…..What will it be like 25 years from now?

mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.

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