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No such thing as high returns with no risk Investment scams are nothing new, as suggested by the phrase “a fool and his money are soon parted,” first written around the mid-1500s. But what if the victim was an experienced businessman with a substantial nest egg to prove it? When markets are volatile, anyone can fall prey to criminals taking advantage of people’s fears, say experts. Calgary realtor Odell Ramcharan thought he knew a thing or two about markets and numbers, and decided to venture into investing in stocks. When he met Nicholas David Reeves at a social gathering in 2009 after oil prices had tanked and heard about Disenco Energy, Ramcharan thought the deal sounded great. He did some research, even contacting the British Columbia Securities Commission before plunking down an undisclosed amount of cash. “I did it because of the returns. I was hoping to see a substantial sum in the future,” the realtor said, with a grimace. “It was all a lie, fraud.” Reeves, a self-described “venture capital specialist” who was fined $650,000 by the Alberta Securities Commission in March for misleading investors and keeping their money for himself, promised to take the company stock to $15 per share from 15 cents, when the markets adjusted — with no risk. That’s the first red flag, said Mark Dickey with the Alberta Securities Commission. “We know when there is a big financial event, fraudsters come out to exploit it,” Dickey said. “They tailor their approach to whatever that fear is at that time. They offer stability, guaranteed returns, it’s safe, come with us. In essence, they sell back your dreams to you.” There is no such thing as high returns with no risk, something outlined on legitimate share offerings, he noted. David Jones, who headed up Wealthstreet Inc., was a well-known market commentator on local radio and television who declared bankruptcy this year after losing at least $2.2 million invested by clients who also unknowingly provided $900,000 to fund his advertisements. Jones offered up “disastrous” and “unconscionable” investment advice to clients, who included naive widows and anxious senior citizens, the ASC said in a decision issued last week. Lloyd and Debra (assumed names) never thought they’d be identifying with Wealthstreet victims. They are heavily involved in managing their own diverse portfolio of investments, researching each company and mutual fund, and speaking with their stock broker weekly. Yet they recently lost $80,000 to a real estate developer who received more than $69 million from several thousand investors in Alberta in two projects. How the couple — who characterize themselves as savvy, sophisticated investors — got caught up in the Shire International Real Estate Investment case, along with other less informed investors is a question Debra has fielded since receiving a letter from the ASC about the cease-trade order against the company. “We dropped the ball on this one,” she said. Debra heard about Shire’s projects in Fort McMurray and Hawaii when Alberta was booming in 2006. She thought pitched returns of about 10 per cent per year were optimistic, but not outlandish. However, red flags started popping up when the couple did not hear from company reps after asking for project updates. Despite having increased concerns about the company representatives, a new house and other major life changes kept them preoccupied until it was too late, Debra said. The ASC in July concluded a hearing into allegations Shire and related companies pitched properties on which they didn’t have title and moved investors’ money from one project to others. The company’s president, Jeanette Cleone Couch, told the hearing she committed no fraud and that the economy caused her projects to fail. A decision is still pending. Ramcharan’s doubts about the Disenco group grew stronger when Reeves did not meet timelines, did not issue share certificates and became increasingly evasive. Ramcharan eventually called police, but it was too late to get any money back. His advice to other novices thinking about entering the investment market is to check, check and triple check, and not to let people brush aside concerns or inquiries about an investment. “I’m an educated person,” he said. “But I got caught by not asking the right questions. There were about 28 people investing, and we all thought the other had done the due diligence.” In the future, Ramcharan will be following his own advice to homeowners looking to sell: Hire a professional. The securities commission investor hotline has been ringing quite regularly with calls from people either seeking information about an opportunity or calling with concerns about one, said Dickey. The interest is positive for investors, he said. Two steps to take before mortgaging the family home to invest in a “guaranteed” deal are knowing what you can and are willing to risk, and doing a background check on the people and company selling the dream, Dickey said. One problem with that advice is the lack of inter-provincial alerts about scammers, said Ramcharan, who had been told Reeves was a retired member in good standing of the B.C. commission. He’d also like more collaboration between commission and law enforcement in tracking down and punishing criminals. Debra said her experience has taught her that private companies are riskier investments than public ones because they do not have to adhere to the same rules of disclosure. A lot of people don’t disclose they’ve been taken . . . because they’re ashamed to have been taken for a fool, she noted. “There’s no shame.” Warning signs Knowledge is power, and even more so when deciding on investments. The Alberta Securities Commission has a number of online tools for investors, including the top red flags to look for before investing: Sky-high returns with no risk, guaranteed! There is no such thing as a no-risk investment; usually the higher the returns, the greater the risk. Hurry, don’t miss out on this one-time deal High-pressure techniques keep investors from doing their homework or asking for independent advice. Don’t be pushed into a decision. Your friends can’t be wrong Yes they can. Affinity fraud exploits trust and friendship among groups of people with a common interest. Keep the government/agencies/lawyers from taking more of your money Secrecy and claims of offshore tax-free investments are invitations to break the law as well as lose your money. Never accept a verbal agreement; always read documents before signing. If it’s complex, take it to a lawyer. For more information: www.albertasecurities.com By Dina O'Meara, Calgary Herald
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Amazing satellite images show cities meant to be home to millions lying deserted By Daily Mail Reporter
These amazing satellite images show sprawling cities built in remote parts of China that have been left completely abandoned, sometimes years after their construction.
Elaborate public buildings and open spaces are completely unused, with the exception of a few government vehicles near communist authority offices. Some estimates put the number of empty homes at as many as 64 million, with up to 20 new cities being built every year in the country's vast swathes of free land. The photographs have emerged as a Chinese government think tank warns that the country's real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent.  Ghost city: Kangbashi was meant to be the urban centre for wealthy coal-mining community Ordos and home to its one million workers, but its roads are eerily empty and the houses stand vacant  The mostly empty city of Bayannao¿er, which boasts a beautiful town hall and World Bank-sponsored water reclamation building Of the 35 major cities surveyed, property prices in eleven including Beijing and Shanghai were between 30 and 50 per cent above their market value, the China Daily said, citing the Chinese Academy of Social Sciences.
Prices in Fuzhou, capital of the southeastern province of Fujian, had the worst property bubble with average house prices more than 70 per cent higher than their market value, according to the survey conducted in September.
The average price in the 35 cities surveyed was nearly 30 per cent above the market value, the report said.
Property prices have remained stubbornly high despite the government adopting a slew of measures since April including hiking minimum downpayments to at least 30 per cent and ordering banks not to provide loans for third home purchases.
Prices in 70 major cities were up 0.2 per cent in October from the previous month and 8.6 percent higher than a year ago, official data showed.
The increase came after prices gained 0.5 per cent month on month in September, which was the first increase since May.
 Property to let: Zhengzhou New District is China's biggest ghost city, complete with entire blocks of totally empty accommodation  Property bubble: Zhengzhou New District features vast public buildings that have never been used  Half of Erenhot is empty. The other half is unfinished  Now here's Kangbashi, a new city with capacity for 300,000 -- that houses 30,000 Massive stimulus measures taken since 2008 to fend off the financial crisis injected huge amounts of liquidity in the market and have been blamed for fuelling real estate prices.
'The government target is not clear and policy is incoherent,' CASS senior research Ni Pengfei was quoted saying.
According to research carried out by Time magazine, fixed-asset investment in the Asian country accounted for more than 90 per cent of its overall growth - with residential and commercial real estate investment making up nearly a quarter of that.
Regional governments across China have been building massive real estate projects, including Kangbashi in Inner Mongolia and Zhengzhou New District, which have remained empty, because of the high prices and interest in investment. Kangbashi, which was built in just five years, was meant to be the urban centre for Ordos City - a wealthy coal-mining hub home to 1.5million people. It was filled with office towers, administrative centres, museums, theatres and sports facilities as well as thousands of homes, but remains virtually deserted.  The ghost city of Dantu has been mostly empty for over a decade  The orange area to the north-east of the Xinyang has yet to be occupied  No cars in the city except for approximately 100 clustered around the government headquarters  Zhengzhou New District residential towers: Soaring property prices in China and high levels of investment has fuelled the construction of up several new cities. Experts fear a subsequent property crash could damage the global economy Prices have continued to soar, investors have increasingly turned to property speculation fuelling the continued bubble.
The onset of the 2008 global recession was the bursting of the real estate bubble in the U.S. and experts fear a similar situation in China could prove catastrophic for still struggling economies and banking systems.
Beijing has introduced measures to cool 'ridiculous' property prices, but the risks of a crash mean the campaign is unlikely to ease up in the next year. Public discontent has been fuelled by high prices in China's cities and the measures, introduced in April, have made it more difficult for speculators and developers to hoard land and chase up prices as lending has been restricted. Wang Shi, chairman of China Vanke - the country's largest property developer - said: 'Tightening measures will not loosen next year.
'If we can control the pace of property price gains within a reasonable range, it's already an achievement.'
 In most neighbourhoods of Dantu, there are no cars, no signs of life  A giant empty hotel sits in the city of Erenhot  This city was built in the middle of a desert: Erenhot, Xilin Gol, Inner Mongolia Property sales for Vanke already exceeded $15billion so far this year, but Mr Shi has insisted China will not end up in a worse place than Dubai - where a property price bubble imploded during the global financial crisis.
He said: 'It could be really, really bad without the government stepping in.
'If the bubble bursts, Japan's past will be China's present.'
But short-seller Jim Chanos has issued a more dire warning, and said he expected China's economy to implode in a real estate bust.
He said the country was 'on an economic treadmill to hell' and the country's bubble was 'Dubai times 1,000'. In the 1980s, Tokyo saw a massive rise in property prices and a subsequent crash. The Hong Kong property market experienced a similar phenomenon in the 1990s.
 This $19 billion development is packed with blocks of empty houses  This giant new development doesn't even have a name yet
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August 27, 2011 Mario Toneguzzi, Calgary Herald B.C.'s harmonized sales tax has been a "disaster" for the recreational property market, critics say, and scrapping it will open the doors for buyers, many from Alberta, who have been sitting on the sidelines. "It's going to be well received. It's going to be huge because the HST has been a real detriment to recreational properties, developed lots on lakes, secondary houses, people coming out and buying a place on the ski hill, a condo," said Philip Jones, of Royal LePage East Kootenay Realty. "It's had a very staggering impact on our recreational market in the Okanagan and the Kootenays." In a referendum, the people of British Columbia voted to scrap the HST, which had combined the five per cent federal GST and the seven per cent provincial sales tax. The provincial tax hadn't applied before to recreational property sales so the HST effectively raised the tax rate from five per cent to 12 per cent. Jones said about 80 per cent of the Kootenay region's recreational market is from Alberta. "A large pool of buyers have been just waiting for this," said Jones. "They've been looking but they're not buying. One of my realtors alone has got 22 people that are waiting to buy something that does not have HST on it. They're all Alberta buyers. Alberta by far is our biggest market and that goes for the Okanagan too. "For businesses, the HST's a good tax. But for recreational property, it's a disaster." Eric Watson, vice-president of real estate for Bellstar Hotels and Resorts, said the move should be a positive one for the industry but there's need for clarity on the issue. "But assuming everything is the way it was before, it's definitely going be a big plus," he said. "We have a project in Kokanee Springs where it certainly will be a big plus." Don Campbell, president of the Real Estate Investment Network, said the scrapping of the HST will increase the demand in the condo market. "When the HST came on it actually put a bit of a cap on demand," said Campbell. "You'll start to see new homebuilding increase over the next six to 12 months. "But my concern would be that it will take some of the demand off the resale market because now people who are moving to resale and doing renos will now be able to go back into the new market." Campbell said the HST is not a big financial deal but more of a psychological one as people feel they have more money in their pockets. "The psychology of the HST coming off new property is a big difference," he said. "I think what you'll find on the recreational property is that there hasn't really been that much of a negative response. It slowed down just because the economy has slowed down a little bit, but the HST itself didn't really have a major effect on that because it really was only on the new-build property. During this downturn, there hasn't been a whole lot of new-build being built in the recreational world." Mike Bucci, of Vancouver-based developer Bucci Developments Ltd., said transitioning from one tax regime to another creates significant confusion in the purchasing process. "We experienced a lot of confusion when we went to the HST. Nobody really understood how it was going to get rolled out and what the rebates were. And going back I think you're going to see some of that confusion again. We have 18 to 24 months to transition back and there will be a lot of questions in buyers' minds over what taxes and rebates they'd be paying during that period," said Bucci. "It doesn't help. And the recreation property market needs all the help it can get right now."
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A friend, who is a home inspector shared these tips with me: When buying or selling a home, people are often surprised to find how appropriate that old maxim, “the more things change, the more they remain the same” can be. That's because no matter the age, style, size or location of a house, there are common problems that are likely to turn up during a home inspection, so knowing what these potential defects are, and preparing to deal with them, is key to making the most out of the circumstance. Craig Hostland, RHI, of Pillar To Post, one of North America's leading providers of home inspection services, identifies these problems as the 10 most common – which are best understood prior to an offer being made on your home: 1.Structural damage: As the foundation settles, it can knock doorways, walls and support beams out of alignment. The end result could make the entire house a safety hazard. Or foundation cracking may be merely cosmetic with no issues.
2.Leaky roof: Roofs may leak due to poor construction or aging materials. The question is, will the subsequent repairs be minor (replacing shingles) or major (replacing the entire roof)?
3.Faulty wiring: Older homes often need electrical upgrades, especially if you plan on installing a lot of electronic equipment (computers, exercise machines) or a pool or hot tub. When electrical circuits are not overloaded, the risk of fire is reduced.
4.Defective heating system: If it's an older system, it can pay to upgrade to one that uses less energy and is more efficient. If you've got gas or oil heat, a carbon monoxide detector is advisable.
5.Poor drainage: If the property is not properly graded, water may not run away from the house. In addition, gutters and downspouts should be checked and replaced if necessary.
6.Plumbing problems: Older homes may have faulty pipes made of galvanized steel -- popular in the 1940s which are prone to leakage and should probably be replaced with newer, more reliable materials. PB plastic piping used in the 80s and 90s has a stigma attached due to poor installation practices in the USA, but has stood the test of time in the Okanagan.
7.Poor ventilation: Check the bathrooms. Without sufficient ventilation, moisture may have built up, potentially causing structural damage inside the walls.
8.Water seepage: If water's coming in, be sure to add caulk and/or weather stripping to your shopping list. Water leaks can lead to mold, mildew and dry rot.
9.Improper maintenance: Any did-it-themselves, non-professional repairs could be a source of aggravation down the line.
10.Hazardous materials: Older homes may contain lead-based paint, asbestos, carbon monoxide, radon gas or toxic molds. Any of these could eventually cause serious health problems. For further information please contact us so we can put you in touch with a qualified home inspector. http://www.castanet.net/news/Home-Finance/63414/Concerns-for-homebuyers-sellers
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An upward bounce in a popular remodeling index shows that homeowners are going ahead with remodeling projects despite the dismal real estate market. In fact, BuildFax says that remodeling projects were up across the country in May continuing a 19-month trend. "Even with the continued struggles in the economy, the remodeling industry has been a bright spot, as consumers look to make upgrades to their current homes, rather than purchasing a new residence,” said Joe Emison, Vice President of Research and Development at BuildFax. Based on construction permits filed with local building departments across the country, the BuildFax index shows that in May remodeling increased by 12 percent in the Northeast, 7 percent in the South and West and 18 percent in the Midwest. “Based on the trends from the first months of this year, we expect to continue seeing strong gains from coast to coast," said Emison. Apparently, homeowners aren’t waiting to replace aging appliances, worn flooring or banged-up countertops. And they don’t have to spend a lot to do so as Consumer Reports testing shows. In our recent special report Your New Kitchen we found major appliances and home improvement products that’ll stand the test of time, including: Flooring. In our latest tests we found that the best oak and bamboo floors can fend off most wear and tear for about the same price as vinyl, which is still tops at resisting dents. Three oak floors from Mullican, Lumber Liquadators and Bruce topped our tests of sold-wood products. And Congoleum and Armstrong produced the top-scoring vinyls.
Countertops.This year we added bamboo, recycled glass and soapstone to our tests of countertop materials. The bamboo was a bust and was the lowest-scoring product in the entire kitchen report. Granite and quartz, an engineered stone, were the only materials that aced most tests. Cabinets. Well-made cabinets are likely to look good year after year. Look for doors with solid-wood frames, drawers with solid-wood sides and dovetail joints and shelves made of ¾-inch plywood or medium-density fiberboard. Major appliances. Our new Ratings of refrigerators, dishwashers, ranges, and cooktops and wall ovens feature a lot of bargains. And keep in mind that today’s refrigerators and dishwashers use less energy and water. If you’re planning to remodel your kitchen, take a look at our special video section which has makeovers that cost $5,000, $15,000 and $50,000 as well as interviews with homeowners about their biggest remodeling mistakes. Number one? Not planning ahead. —Mary H.J. Farrell http://news.consumerreports.org/appliances/2011/07/remodeling-remains-robust-in-ailing-real-estate-market.html
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Hi Nancy, How would the economic issues in Greece affect the Canadian markets? Thank you, Bennett Dear Bennett, There is not a short simple answer to your question. I’m sure that books will be written on the subject. I will try and give you the best simplified answer I can. Basically, Greece has borrowed money in the form of issued bonds. If Greece defaults on the interest payments or any part of the principle value of maturing bonds, the owners of those bonds are not going to receive what they should. The largest holders of Greek debt are France, Switzerland and Germany, but there are many others around the world. If the European Union doesn’t cover the debt, then the value of the bonds will drop significantly. Nobody wants a bond that doesn’t pay the coupon. Like any bankruptcy, they would receive either nothing or pennies on the dollar. That would ultimately mean losses for the other governments, financial institutions and investors. The loss then means other countries, such as Portugal and Spain, may default on their bonds as well. It could lead to the mentality that, “if they can do it so can I.” That, in turn, will have a large negative impact on the value of the Euro dollar relative to other currencies. We have already seen the weakening over the past year. That means they need more Euros to buy foreign dollars. With fewer dollars they import less from other countries, including ours. Lower trade sales from Canada lowers our companies’ profits, meaning a possible loss of jobs and slowing down the growth of our economy. Lower profit translates into little or no share growth of a company’s stock, and negatively impacting our Canadian markets and investors. Read more articles on this issue at Globe and Mail http://www.theglobeandmail.com/report-on-business/international-news/how-a-greek-default-would-ripple-around-the-world/article2079359/
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Workers are flocking back to Alberta after a recessionary lull, with the province’s hot jobs market luring people from every region of the country. Alberta tallied the fastest growth rate in Canada in the first quarter of the year, with its net inflow from other provinces hitting the highest level for a first quarter in five years, Statistics Canada’s preliminary population estimates show. The numbers reveal that labour movement is bouncing back after virtually drying up in 2009 and 2010, suggesting the hiatus was only a lull in a 15-year stampede of western migration. “It’s back to the level of a few years ago,” said Jonathan Chagnon, demographer at Statscan. “Pretty much all provinces seem to be losing to Alberta.” Mobility is key for several reasons. For workers, it can help them land a job or better opportunity in another province, potentially boosting their earnings. For provinces that need workers, it can help fill key gaps in skills or labour shortages. Broadly, it can also reduce pressures as fewer people rely on jobless benefits or social assistance. Jeff Blay, 22, landed in Northern Alberta earlier this month after he and his girlfriend drove from St. Catharines, Ont., for new jobs. Rather than face the prospect of more low-paying jobs outside of his field, the recent journalism grad decided to relocate. “It seems there are a lot more opportunities for jobs out here than Ontario,” said Mr. Blay, who is now a reporter for the weekly Peace River Record Gazette, while his girlfriend, 21, is an event planner for the local chamber of commerce. “Just in our town, if you walk around, whether it’s gas stations, pizza places, accountant shops or hairdressers, there are help-wanted signs in almost every window.” Alberta has led the country’s job growth over the past year, with employment swelling by 2.8 per cent. The province’s jobless rate is 5.4 per cent, compared with a national average of 7.4 per cent. Last week, the province’s website launched a forecast of jobs most likely to face shortages between this year and 2013: retail trade managers, restaurant and food service managers, and mechanical and petroleum engineers. Computer programmers are also likely to be in short supply along with web designers and family physicians. It’s also running a new Facebook page on Fort McMurray jobs. Alberta saw a net inflow of 5,275 people in the first quarter of 2011 from other provinces. It attracted people from every province except Quebec, with Newfoundland, Saskatchewan, British Columbia and Ontario sending the most. The flow of people from Newfoundland to Alberta had slowed in prior years, but that movement resumed in the first three months of this year, Mr. Chagnon said. Trends are shifting between Saskatchewan and Alberta. Workers had left Saskatchewan for its westerly neighbour in 2005 and 2006, but that reversed in 2007, 2008 and 2010. Now, for the first quarter “Saskatchewan is again losing people to Alberta,” he said. Manitoba also saw a net outflow, with most people going to British Columbia or Alberta. Manpower Canada general manager Lori Procher said her recruitment firm is seeing signs of a resurgence of interprovincial hiring – and demand from Alberta’s oil patch is the leading source. “Alberta is once again finding itself challenged to find the talent it requires,” she said in a recent interview. “We’re working across the country to find individuals willing to go to Western Canada.” Many moving west are coming from the hard-hit manufacturing belt in Southern Ontario, filling a strong demand for engineering and electronics technologists and heavy equipment operators and mechanics, she said. The demand is so great that Ms. Procher has encouraged her own teenaged son to consider training in a skilled trade, she adds. “I think there’s a great opportunity for young people to look at that field,” she said. A recent survey of private- and public-sector employees by the Canadian Employee Relocation Council has found employees are “far more likely” to move to Western Canada than any other region, said chief executive officer Stephen Cryne. “We’re seeing renewed growth – unfreezing is probably a good way to describe it,” Mr. Cryne said. “The western provinces are the most likely destinations for people to relocate.” He said Canadians remain more reluctant to move, however, than Americans, who are traditionally “more apt to just pick up and move” to follow the flow of jobs. That trend, he notes, has slowed in recent years following the collapse of the U.S. real estate market, which has made it more difficulty for workers to sell their homes. A tendency to stick close to home can hamper growth, economists say, because labour mobility ultimately makes people work more productively where their talent is best used. But University of Ottawa economist Serge Coulombe says Canada has been unfairly tagged with having low labour mobility, arguing the data are misleading because there are 50 states and they tend to be much smaller than Canada’s provinces. Canadians frequently move within the same province, and would appear as interprovincial migrants if large provinces like Ontario and Quebec were smaller. Prof. Coulombe says his work suggests Canadians have quite high levels of labour mobility, particularly compared to Europeans who much more rarely move, even within their home countries. But the trend has a downside. The people who move are typically younger, more educated and more skilled than the provincial average, which means provinces with long trends of outward migration are losing their most valuable “human capital,” Prof. Coulombe argues. That increases the disparity between richer and poorer provinces. International immigrants can close some of the gap and the balance is also somewhat offset by large amounts of pay brought or sent back home by workers who don’t move permanently. Some workers from Atlantic Canada, for example, take jobs in northern Alberta but maintain homes in Atlantic Canada and return every few weeks. “They come back home with a lot of money and they renovate their houses, and then they go back to Alberta,” Prof. Coulombe said. Two provinces that have historically been among the most likely to lose workers have seen the trend shift in recent years. Newfoundland has posted net growth of interprovincial workers in each of the past two years, marking its first annual gains from migration since 1975. And Saskatchewan, which posted a net loss in interprovincial workers every year from 1983 to 2005, posted net gains in each year from 2006 to 2010, although it recorded a loss of 600 people to interprovincial migration in the first quarter this year. Saskatchewan now boasts the country’s lowest jobless rate at 5 per cent, and is taking assertive steps to attract labour. It has a program that grants tuition rebates to recent graduates who work in the province that sees them receive up to $20,000 reimbursed over a seven-year period. It has issued nearly 50,000 certificates for the graduate retention program since 2008. Saskatchewan also runs one of the most complete labour market information websites in the country. Its job board posted 13,450 new jobs in May, a 53-per-cent increase from last year’s level. Online visits to its SaskJobs site hit a record in the month, with traffic mostly from Ontario, followed by Alberta and British Columbia. Canadian relocations paid by employers faltered during the recession, stabilized last year and have risen 6 per cent so far this year from last year’s levels, said Scott Sullivan, executive vice-president of global sales and marketing at Brookfield Global Relocation Services, which oversees about 50,000 relocations around the world each year. Much of the movement this year has been to Alberta, he says. “Higher commodity prices are driving increased demand” for workers in sectors such as energy, mining and agriculture, he said in an interview from Chicago. By: JANET McFARLAND AND TAVIA GRANT http://www.theglobeandmail.com/news/national/time-to-lead/time-to-lead-archives/as-economy-recovers-canadian-job-seekers-head-west-again-mostly-to-alberta/article2071901/page1/
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Historic central Alberta town finds itself on the radar of Calgary commuters and retail investors BY DAVE HUSDAL, Western Investor The length of the phone interview is indicative the boom is back on in Olds. It takes Larry Wright quite a while to brief you about what's going on in his central Alberta community, largely because there's a lot more to Olds these days than a successful agricultural college - though that's still a key piece of the puzzle. Wright, the director of operations for the Town of Olds, patiently reels off the details of various development and redevelopment projects in the community, one that enjoyed boom years from 2006 to 2008, before the recession hit. Back in 2006, building permit values were in the $75.8 million range. They zoomed to almost $117 million in 2007, thanks to large commercial and institutional projects, but have dropped steadily since then, hitting only $28.3 million in 2010. Wright expects that to change in 2011, and be particularly obvious another year down the road. "I really think that 2012 with be our benchmark year," Wright explains, partway through listing everything that's coming down the pipe for Olds - from the new 45,000-square-foot branch and head office of the Mountain View Credit Union on the west end of town to a variety of infrastructure improvements planned or underway that involve the town, Alberta Transportation, or both. It's clear from the conversation that Olds is a community where both new development and redevelopment are economic priorities. Downtown makeover On the redevelopment front, the town is pursuing a plan for Uptowne Olds, the traditional core of the community. Wright says redevelopment work and infrastructure costs could make use of a model that Calgary used to finance East Village redevelopment. That model sees new tax revenue from a defined area targeted to cover infrastructure costs. An innovative approach to revitalizing the town's core isn't exactly a new concept. In fact, the Uptowne Olds moniker is already fairly well known in central Alberta - the result of businesses in the town's centre banding together with marketing and promotions efforts when big-box retailers arrived in the west end a few years ago. The smaller shops have also focused strongly on service, notes Gail Scott, community economic development officer for the Olds Institute for Community & Regional Development. Now Olds boasts Wal-Mart, Sobeys, Extra Foods, Staples and Canadian Tire, yet it's also home to a vibrant main street that lacks any boarded-up storefronts, Scott said. Indeed, the box stores have helped the merchants of Uptowne Olds in some ways, because they've widened the catchment area for retail traffic in the community of 9,000, Scott says. The trading area for Olds is considered to be 40,000 plus. Location is a big part of the draw for Olds, which is situated roughly 80 kilometres north of Calgary and roughly a half hour from Red Deer and Airdrie just west of Highway 2, the province's bustling north-south traffic artery. Residents can reach Calgary International Airport in 45 minutes. Try doing that from a home in southwest Calgary at the wrong time of the day. No wonder Olds attracts the likes of airline pilots and oilfield professionals among its new residents. Hugh Bodmer, an Olds realtor with CIR Realty and a past economic development staffer in the community, says Olds is an attractive place for people to escape city life. They're looking for homes on larger lots close to amenities. In some cases, they're choosing Olds because it's not that far from Calgary, Red Deer or Edmonton, where family members may already be living. Buyers in Olds are displaying a general desire for new properties, rather than existing ones, he says. "The market is growing and expanding for new homes," Bodmer explained, adding that while price points vary somewhat, a new single-family home in the community's northwest Vistas neighbourhood with a double garage sells in the $420,000 range. Higher-end duplex units in the same area sell in the $310,000 range. Like Scott, Bodmer says retailers in the community are clearly seeing increasing customer traffic. He cites a friend who owns an Uptowne Olds shop. "He's seeing lots of new people to town, people he has never seen before," Bodmer explains. Oil and gas That's likely to continue, based on what's going on in the central Alberta community that also boasts an oilfield service sector that's picking up again with increased natural gas activity. Future business development and infrastructure enhancements are clearly linked in Olds, and progress is ongoing in the latter category. Construction is underway to hook Olds up to a regional wastewater treatment system in 2012. It's already part of a regional water system that runs through communities south of Red Deer, and that system is also being expanded to guarantee capacity for growth. Alberta Transportation is looking at enhancements to Highway 27 - the main east-west commercial strip - as new development and redevelopment projects happen. The province has also committed in its three-year transportation plan to rework the interchange at Highways 2 and 27 to improve access in and out of the community from the east. Gaming play The interchange sits east of Olds in Mountain View County, and there are also projects eyed for the area outside of town. A noteworthy one is a long-shot proposal from the local agriculture society to build a "racino" facility at the interchange. The gaming venue would feature a horse-racing track and related slot machine gaming, not to mention a hotel. No licence has been granted for the racino to date, and the province's gaming authority has a moratorium on new licences at this point. Meanwhile, Pomeroy Inn & Suites Inc. is looking at a $12 to $14 million hotel project on Olds College land that would see the establishment of the Canadian Institute for Rural Entrepreneurship. According to Pomeroy, the "state-of-the-art" facility will encompass the brand's blueprint of extended-stay suites, full amenities and service culture, plus it will also feature full food and beverage services including conference facilities and a restaurant. Perhaps the most unique design element will be the learning services built into the property. Students will be able to work and learn in the interactive design, which will include teaching and observing areas. Construction is expected to start this fall, says Wright, once development agreements are in place for the site on the east end of Olds. Industrial scarce While Olds College started out as an agriculture institution, its program base has diversified to land and environmental management and rural entrepreneurship. While Olds has a lot going for it, the community also faces challenges, notes Bodmer. Among them is a shortage of serviced industrial land. What little is available can run in the range of $250,000 to $280,000 per acre. Unserviced industrial land is in the $30,000 to $40,000 per acre range, according to Scott. Entrepreneurs looking at setting up shop in Olds face a wide range of commercial and industrial lease rates. According to Scott, industrial leased rates are in the $7 to $12 per square foot range, with commercial rates varying significantly throughout the community - from $8 to $14 in Uptowne Olds, up to $30 for new highway commercial space on the west end. Older highway commercial runs in the $12 to $22 per square foot range, with service commercial buildings more typically in the $13 to $20 range. Bodmer says residential revenue properties can also prove decent investments in Olds, thanks not only to the college but the local employment market. Two-bedroom four-plex units, for example, rent in the $750 per month range, while larger duplexes can rent for $900 to $1,100 per month. All in all, Olds is benefiting from people looking for something different in the Highway 2 corridor. Noted Wright: "We're seeing a shift from Calgary into the Olds area, and we're seeing people not go to Red Deer." Back to My Blog Page
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Following months of speculation, Nordstrom spokesman Colin Johnson recently told Bloomberg and The Wall Street Journal that the company is scouting a number of sites north of the border for its full-size stores (not its discount arm Nordstrom Rack) in its first foray outside the U.S. Seattle-based Nordstrom already has a dedicated base of Canadian customers living near border crossings. Canadians also make up the biggest share of Nordstrom's international online shoppers. Johnson has not yet returned calls seeking additional information. Nordstrom joins Target, Victoria's Secret, Kohls and Marshalls in the so-called American retail invasion. A recent report by Colliers International found the Canadian market is lucrative and relatively underserved compared with the U.S. It found Canadian sales average $580 per sq. foot compared to $309 per sq. foot in the U.S. and Americans have access to 2.1 sq. metres of shopping space per capita, compared with 1.3 sq. metres available to Canadians. Booming cities such as Surrey, B.C., Brampton, Ont., and Calgary are seen as particularly attractive to retailers, Colliers said. Back to My Blog Page
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By Tara-Nicholle Nelson, April 14, 2011 One of the hardest, most important decisions homebuyers face is how much to offer for their home. And the glut of information on the web about real estate only makes buyers even crazier than the decision itself does. Supply, demand, foreclosure rates, mortgage rates – buyers think they need to run spreadsheets and do fancy math to make a smart offer. And THAT can be super intimidating. But the fact is, there is a pretty short list of steps you need to take to make a smart offer – one that gets you a great value, but is also likely to be successful at getting the property. (A low offer does not make for a great deal if you don’t get the house!) And most of the same steps apply to sellers trying to set the list price that will lure the most buyers (and net them the most cash)! Step 1: What do the “comps” say? First things first. When it comes to pricing a home, or making an offer to buy one, the ‘first thing” is the home’s fair market value. Both buyers and sellers should work with an experienced, local agent to understand what the home’s value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood – i.e., the comparable sales, or comps.
HINT: You can also find comps for a home listed on Trulia by scrolling down to the section labeled Sold Homes near 1234 Merriweather Lane on the property's Trulia listing page.
Ideally, look for comparables that are very recent sales (3 months or less before you’re listing or buying), very similar properties (i.e., same number of bedrooms, bathrooms, square footage; and similar style, condition and amenities). If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can: (a) provide factual support for a lower-than-asking offer or for the asking price, in a negotiation, and
(b) result in a sale price at which the property will actually appraise, later on - avoiding the common glitch of the deal falling through because the appraisal comes in way below the agreed-upon price. Also, looking at comps is the first step for locating a home’s seller and prospective buyer in the reality-based universe of current home values. The fact that you bought or refinanced the place at a given value 5 or 6 years ago is entirely irrelevant to what it’s worth today, as is the buyer’s belief that the place was worth $100K less at the trough of the market, in 2009. Step 2: What can you afford? This step is much more critical for buyers than for sellers. (Unfortunately, sellers, the facts that you need to net a particular amount to buy your next home or pay your existing mortgages or credit card bills off has no relationship whatsoever to the price at which you should list or will sell your home.) Buyers – it’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you. This includes offering a price within the range for which your mortgage was preapproved, but also includes making sure that the monthly payment and cash you’ll need to close the deal (down payment + closing costs) are affordable in light of the particular house. If, for example, the property will require repairs for which you’ll need to conserve cash, or has HOA dues you hadn’t planned on, you may need to rejigger your offer accordingly. Step 3: What’s your competition? (And what’s theirs?) This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face – whether you are a buyer, or a seller. As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range (your agent will brief you on this). Sellers should also consider what type of transactions their home will be up against – the more distressed properties (foreclosed homes and short sales) with which your home must compete, the more aggressive you must be with your pricing to get your home sold. The more competition you have, as a seller, the lower you should tweak your list price to attract buyers to come see your home. (And the more buyers come to see your home, the more likely you are to get an offer!) Buyers should also be cognizant of the competition level they will face for homes. Believe it or not, even on today’s market there are properties and neighborhoods in which multiple offers are the name of the game. Work with your agent to understand the list price-to-sale price (LP:SP) ratio , which lets you know how much under or over the asking price properties are selling for in your target home’s neighborhood; the higher the LP:SP ratio, generally speaking, the less competition there is among buyers. Your agent can also brief you on: (1) (1) The number of offers – if any - that have been presented on “your” property (which the listing agent will usually, gladly tell). If there are other offers, you’ll want to make a higher offer to compete successfully against them; and (2) (2) The number of days the home has been on the market, relative to how long an average home stays on the market before it sells – the longer it has, the more pressure is on the seller, price-wise, and the less competition the buyer is likely to have. (One exception is the sweet spot scenario, when a property that has been on the market for a long time has a price reduction and gets a bunch of offers as a result! ) 4. How much do they need to sell (or buy) it? Buyers: Has the listing in which you’re interested been reduced at all? By how much? Has the listing agent informed you that her clients are highly motivated, flexible or have an urgent need to sell? Sellers – most buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates, except when they have an urgent personal reason for moving, e.g., buyers who are relocating for work. Of course, all of real estate is hyperlocal, so it’s important to understand how motivated buyers are in your local market, generally speaking, before you set your list price.  Trulia’s new, interactive Price Reductions Map offers a number of clues to critical indicators of buyer and seller motivations in your home’s town and zip code, in just a click on the map - including: · how many homes in your target property’s area have had at least one price reduction, · how likely a home in the area is to have multiple price reductions.
The higher these numbers are, the stronger of a buyer’s market it is, and the more bargaining power buyers likely have. And if you’re the seller, the higher these numbers are for your area, the lower you may need to price your home to be successful at getting it sold. 5. How much do you want to buy, or sell, the place? Step #4 was about taking the motivations of the folks on the other side of the bargaining table into account when formulating your offer and your list price. This step is all about you – what’s your level of motivation? Now, buyers, you certainly shouldn’t offer a price way above what the place is worth (see Step #1) just because you really, really want it, unless you have the cash to throw around. But within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property. Sellers: think of your list price as the most powerful marketing tool at your disposal. if you really want or need to sell, get aggressive about setting your price as low as makes sense for your your home's value and local market dynamics to attract qualified buyers and help your home stand out against all the competition.
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Between the collapse of the United States’ housing market and the weakened U.S. dollar, Canadians have been seizing the opportunity to invest in U.S. real property. U.S. tax authorities have increased their focus on foreign investments in the U.S. This increased focus has resulted in many Canadian investors being caught offside with their tax compliance, and has resulted in substantial, unrecoverable financial penalties and interest being assessed. For many investors, tax implications have not generally been part of the planning process, and for some, the often misunderstood and late-filed tax compliance has resulted in substantial penalties. It is important for Canadians who are investing in U.S. real property to understand the respective tax implications and reporting requirements. Ownership Structure There are many forms of ownership for investment in U.S. real property, and many factors to consider when determining which structure to use. There are certain forms of ownership that are generally not recommended for Canadian residents due to high effective tax rates or tax treaty restrictions. The optimal ownership structure for an investment in U.S. real property will vary based on the investor’s facts and circumstances. It is important that, in addition to other planning considerations, investors understand the U.S. and Canadian tax implications of their respective form of ownership to ensure the proper compliance, and to ensure their investments are structured in alignment with their goals.
Foreign Investment in Real Property Tax Act (FIRPTA) The Foreign Investment in Real Property Tax Act (FIRPTA) authorizes the United States to tax foreign persons on dispositions of U.S. real property interests. A withholding tax obligation is generally imposed on the buyer or withholding agent when a U.S. real property interest is acquired from a foreign person. If the required amount is not withheld and the required forms are not submitted to the U.S. tax authorities in a timely manner, the buyer may be subject to substantial penalties. It is very important for buyers to establish whether they are acquiring a U.S. real property interest from a foreign person. (Note: a Canadian resident who is not a U.S. citizen would be considered a foreign person for purposes of FIRPTA.) With the large number of Canadian investors in the U.S., more buyers of U.S. real property interests will be subject to FIRPTA withholding and reporting requirements. Spending time in the U.S. Under the U.S. Substantial Presence Test, Canadians who winter in the U.S. may involuntarily become U.S. tax residents if they are determined to have substantial presence in the U.S. An individual who is classified as a resident of the U.S. under the U.S. resident rules, in addition to other possible implications and reporting requirements, is subject to U.S. income tax on their worldwide income. It is important for Canadians who are spending time in the U.S. to understand the U.S. substantial presence rules and the preventative reporting and filing opportunities available to them. Renting or Selling U.S. Real Property – Income Tax When a Canadian resident rents or sells an investment in U.S. real property, there are U.S. and Canadian tax implications and filing requirements. If properly planned and administered, the Canada – U.S. tax treaty may apply to avoid double taxation. Other income tax implications when renting or selling a U.S. real property may include: 1. U.S. States U.S. states are independent from one another in their taxing authority. Depending on which of the U.S. states the investment of the real property is made, the reporting and filing requirements may vary. In recent years, the state tax authorities have stepped up their tax compliance audits, and have started assessing penalties to those who are not compliant. Accordingly, in addition to understanding the U.S. Federal and Canadian tax implications, it is important that an investor understand the U.S. state tax implications. 2. Withholding Tax Generally, an individual is subject to U.S. tax on U.S.-source income. Most types of U.S.-source income received by a Canadian resident are subject to U.S. withholding tax in the amount of 30 per cent. Pursuant to the Canada — U.S. tax treaty, a reduced rate may apply. The 30 per cent tax is generally withheld from the payment made to the Canadian resident unless an application for a tax treaty based reduction of withholding has been provided to the withholding agent. 3. Other Reporting Requirements In addition to reporting the income from a U.S. real property investment, there are other various reporting requirements that may apply. For example, the U.S. Department of Commerce is authorized to collect information on foreign investment in the U.S., including investments in U.S. real estate. Another important disclosure of ownership in foreign property is required by the Canada Revenue Agency. It is important to stay abreast of the rapidly changing U.S. tax legislation, as failure to report the required information may result in significant penalties. 4. U.S. Estate Tax On acquisition of U.S. real estate or other U.S. investments, a U.S. Estate Tax implication and filing requirement may eventually arise. There are tax-planning structures that are aimed at avoiding and/ or minimizing the U.S. estate Tax. However, these structures can be complex in nature and require specialized planning and administration. It is recommended that investors understand the U.S. Estate tax implications when investing in U.S. property. Ultimately, it is important for Canadian, and other foreign individuals to understand the U.S. and Canadian reporting requirements when investing, doing business, or having a substantial presence in the U.S. Investors should periodically review their tax planning and compliance with respect to their U.S. investment due to the rapidly changing U.S. tax legislation, which is affecting a large number of Canadian residents. Alanna Caplan CGA, CPA (U.S.) provides U.S. and Canadian cross-border tax planning and compliance services. Caplan is authorized by the U.S. Internal Revenue Service (IRS) to provide certifying acceptance agent services on behalf of Canadian, and other foreign individuals. Contact Caplan at 403-237-8586 or info@taxinternational.ca or visit www.taxinternational.ca. To ensure compliance with U.S. Treasury Department Regulations, we wish to inform you that any tax advice that may be contained in this communication is not intended or written to be used, and cannot be used, for the purpose of: (i) avoiding tax-related penalties under the Internal Revenue Code, (ii) applicable state or local tax law provisions, or (iii) promoting, marketing or recommending to another party any tax-related matters addressed herein. Back to My Blog Page
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April 11, 2011 Jonathan Chevreau, Financial Post
Want to invest in real estate without the hassle of becoming a landlord?
Pretty much every advantage of buying property directly and renting it out can be achieved passively through REITS or funds invested in them.
In a popular blog this week at financialpost.com, fee-only financial planner Jason Heath wrote that real estate is a “secret” tax shelter because few advisors make money recommending its purchase. He focused on direct ownership of rental real estate and the tax deductibility of related expenses like interest.
While perhaps not all advisors openly discuss this “secret,” there’s certainly no shortage of real estate gurus happy to do so.
Vancouver-based Don Campbell, author of the best-selling Real Estate Investing in Canada, has helped thousands of Canadian investors climb the hefty learning curve to real estate riches.
Among the advantages of owning bricks and mortar (or underlying land) are control over revenues and management of properties, and the potential to add value through improvements or well chosen locations, he says. Borrowing can add to both potential reward and risk, but with dedication and planning, there’s no reason you can’t try to emulate Donald Trump.
CIBC Wealth Management’s managing director of tax, Jamie Golombek, says there’s a common perception that real estate investors can sit back and collect the rent, “but pipes break and roofs leak and someone has to fix them. If you’re not big enough to keep a superintendent on call, that person is you.”
Fortunately, those who want the benefits but not the hassles have an alternative. If you’re comfortable with stocks, bonds or investment funds, real estate can be considered just another asset class. A study by Chicago-based Ibbotson Associates found Real Estate Investment Trusts (REITs) boost return, even when adjusted for risk, if a 10 to 20% weighting is added to traditional portfolio of stocks and bonds.
Anything you do as a landlord — including use of leverage and favourable tax treatment of rental incomes — can also be realized through individual REITS or exchange-traded funds holding baskets of them.
The price of such convenience is annual management fees. But in return, you get diversification, less risk and more liquidity. Owners of a local duplex apartment concentrate risk in one location and it takes months to sell — with commissions of 5% or 6%. Owners of publicly traded REITs or real estate mutual funds can cash out any business day.
Michael Nairne, president of Tacita Capital Inc., puts 8% to 10% of client investable assets in real estate or REITs, Canadian and foreign. While a principal residence is the best tax shelter of all because of the tax-free capital gains family units enjoy, he views homes as consumption items and not part of the 10% investment allocation.
REITs topped all asset classes in the decade ended February 2011, with a 13.7% compounded return, but Mr. Nairne expects a more modest 6% to 8% from here. One easy way to play them is via the iShares S&P/TSX Capped REIT Index Fund [XRE/TSX] or the BMO Equal Weight REITs Index ETF [ZRE/TSX]. Both have MERs of 0.55%.
Many REITs or ETFs are publicly traded, but investors can instead choose private real estate deals, which are less likely to move in tandem with stocks, says David Kaufman, president of Westcourt Capital Corp. REIT payouts are tax effective when the money is distributed as Return of Capital, deferring some tax for years. Their consistent distributions are well in excess of dividend-paying equities. “I can’t think of a compelling reason why you’d own real estate if you could find a well-run REIT or why anyone would provide a private mortgage to the guy down the street when you can buy a well-run MIC,” Mr. Kaufman says.
MICs are mortgage investment corporations, which can be private or public ones like Timber Creek (TMC/TSX) or Firm Capital (FC/TSX). Payout may be 8% a year, but MICs are less tax-effective than REITs because they spin out 100% income, taxed like interest or earned income.
Individual commercial REITs provide more potential reward but more risk: most suffer from anchor-tenant risk. Apartment REITs are less risky since people must live somewhere. ETFs own both, plus riskier REITs focused on hotels or nursing homes.
Investors contemplating buying a local triplex might instead consider something like the privately run Centurion Apartment REIT, which invests in Ontario rental units. Centurion president and CEO Greg Romundt sees little difference between the landlord route and the indirect route in terms of tax impacts, except the former have more control and more work.
“I don’t believe there’s anything about real estate which is remotely passive,” he says.
Those excited by books and seminars have a distorted view of investment real estate, Mr. Romundt says. Because of the ease of listing properties on the web, real estate is as efficient a market as stocks and bonds. That makes it harder to make a killing exploiting bargains. Newcomers are up against full-time professionals who “pick the bones of newbies.”
David Chilton, author of the forthcoming The Wealthy Barber Returns, says being a landlord is twice as much work as people think. However, lack of liquidity works in their favour because unlike stock investors, landlords are less likely to panic because they can’t get in and out quickly. Back to My Blog
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1. Get – and stay – clear on your deal points (must-haves and deal-breakers), and keep them to a minimum. If you’re trying to get a chunk off of the asking price, as a buyer, or trying to be a stickler to your bottom dollar, as a seller, you’ll be much more effective if you can aggressively negotiate on a small number of items. If you must have ten different things your way, you’ll come off as unreasonable and impossible to satisfy. If you have just a couple of musts but can offer flexibility on other items, you’ll be much more likely to get your way (or close to it).
Be extremely clear, going into the negotiation, exactly what would make or break the deal for you – then, you can state your position clearly and know, in the words of the great Kenny Rogers, “when to hold them, when to fold them, when to walk away and know when to run.”
2. Don’t take it personal. If you are trying to be a hard-core negotiator, it’s best not to get overly emotional about the offers you make and receive from the other side of the bargaining table. Homesellers: if you get a low offer, understand that the buyer is simply trying to get the best deal they can - they are not insulting you or your home, or trying to throw a monkey wrench in your financial plans. (Also understand that for every lowball offer you receive, there are a dozen of your neighbors who wish and pray every day they could get such an offer.)
Buyers: if the seller counters or rejects your offer, understand that they are more concerned with paying off their mortgage or receiving what they believe to be the true market value of their largest asset. This is the place where they might have lived and raised their family; it's also the largest investment they have probably ever made, and they want to be certain they don't recoup too little for it. Even if the seller does have unreasonable expectations about what their home is worth, don't take it personal and begin slinging insults (e.g., "you must be nuts!") or get worked up into a tizzy because you think they are attacking your personal American Dream.
If you're tempted to flip all the way out and exhaust your repetoire of curses at the buyer/seller, revisit #1. Be clear on what does and doesn't work for you, respond to the other side accordingly, and keep your communications business-like. If they want too much, or offer too little, it's okay for you to walk away. Note - it's also okay for you to budge a bit, depending on what works for you!
3. Investigate what is negotiable (and what's not!) on the other side of the table. Have your people (i.e., your agent) ask their people (i.e., their agent) what's important to the folks sitting across you at the bargaining table. They have the right to decline, but nine times out of ten, you'll get some information that will empower you to tailor your offer or response in the vein of a win-win. If the listing agent says the seller 's top priority is cash (hint: it always is!), but that the ability to move on without doing any more work to the home is a close second, consider making an as-is offer (subject to your right to obtain inspections, so you know what you're getting yourself into, before you remove contingencies).
If the buyer's broker says the buyer's top priority is getting the lowest possible price (hint: it always is!), but that they sure would like that flat-screen TV hanging over the fireplace and the desk in your office, consider throwing them in. Personal property can bridge a much larger negotiating gap than the property was worth in the first place. (And who wants to take down the flat screen and patch the wall anyway?!)
4. Sellers: work with a very reputable agent who has a strong track record of success at your type of transaction. If your home is a short sale, look for an agent with a strong history of closing short sales - they will have skills of . If it's a "regular" equity sale, look for an agent who (a) has a good, recent track record of closing deals in your area, and (b) whose closed sales have a high list price-to-sale price ratio (LP:SP ratio). The LP:SP ratio is a number that reflects how close to the asking price their listings have sold for, on average. Agents with a higher LP:SP ratio than the area average tend to have very strong skills of pricing properties appropriately for the market, and for negotiating their clients' deals. Plus, once you know that your agent is an LP:SP rockstar, you're more likely to treat their advice with more trust and less skepticism, resting assured that you're working with an expert!
5. Buyers: boost your “closeability” factor. Many a seller would take a lower offer that seemed highly likely to actually close over a higher offer that has a snowball's chance in you-know-where of ever actually closing. Make sure your offer has a high "closeability" factor by insisting that your broker or agent submit it in a complete package that includes a well-written, detailed loan approval letter that verifies that you have sufficient cash to close the transaction, that your credit checks out and your job tenure is robust.
If you're putting a larger-than-normal amount of cash down or possess other extraordinary loan qualifications, the letter should state that as well. Your agent should also be one with a good reputation in the industry (check references!), and should prepare your offer via computer (vs. handwriting) if that's the standard of practice in the local community.
6. Get educated. There's much more that can be negotiated than just the purchase price. Ask your agent to educate you about the full range of items that are up for negotiation, as well as the implications of giving or taking on repairs, contingency periods, closing costs and included items. Also, collect as much background info as possible before you make or respond to an offer to buy a home. Are there multiple offers? How long has the place been on the market, compared with the area norm? Such things should be factored into an offer or a response.
7. There's no such thing as a national rule of thumb. One of the most frequently asked questions among homebuyers is: "How much (below or above) the asking price should I offer? What's the rule of thumb?" Sophisticated real estate consumers know that real estate is a hyperlocal phenomenon; trying to make an offer on the basis of a national rule of thumb is not just naive, but also results in ineffective offers with a low chance of being accepted. Have your agent brief you on the local area's pricing trends and negotiation standard practices, as well as the all-important recent comparable sales data, and use that, along with your personal priorities, values and opinion of the property, to formulate your offer or, if you're a seller, your response to a would-be buyer's offer.
8. Be respectful. Didn't your grandma ever tell you that you'll draw more flies with honey than with vinegar? Well, mine did, and although she said that in the context of my teen-era negotiations vis-a-vis my Dad for phone privileges, the advice is equally applicable to negotiating a real estate transaction. It's never a good idea for buyers to gush over how much they LURRRRRRRRRRRVE the house, and can't live without it, and so forth; that can certainly put you behind the 8-ball in terms of your bargainin power. But it certainly never hurts to accompany your offer with a polite letter about yourself and /or your family to the seller, explaining what you do like about the house and asking them respectfully to consider your offer in the spirit it is made.
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Buying a home and building equity over time is a great investment in your future. While homebuyers can look forward to one day being "mortgage-free," renters will continue to pay rent indefinitely and will likely see their rent payments increase significantly as time goes by. Even though the average time to pay off a mortgage is about 25 years, you can speed up the process. When you are buying a home, ask your Realtor to advise you on ways you can pay down your mortgage as quickly as possible. This information will be helpful when you are arranging financing on your home and be sure to discuss these various options with your financial institution before choosing a mortgage. AMORTIZATION SCHEDULE One of the best ways to pay off your mortgage faster is to shorten the amortization period. By choosing a shorter amortization, you will not only pay for your home in less time, but you will make substantial savings in interest too. For example, the most common mortgage amortization is 25 years. By shortening that period to 15 years, you will erode the amount of money you owe much more quickly and make fewer interest payments. Shortening the amortization period is not for everyone as it does mean larger payments, but for many people the benefit of long term savings is worth it. Usually each mortgage payment is blended and applied to both the principal and interest so at the beginning, the interest portion of the payment is extremely high. However, with each payment, more and more of is applied to the principal. Ask your Realtor to give you examples of what your payments would be at the current interest rate amortized over 25 years as compared to 15 years. PAYMENT OPTIONS It used to be that most people made monthly mortgage payments, but weekly, biweekly and semi-monthly payments are more popular today. With these types of payment options you will reduce the amount of principal you owe faster because you make payments on a much more frequent basis and less interest is accrued. Many mortgages also offer homeowners the option of making an additional payment each year or increasing your payment each month. Making the equivalent of one extra payment a year can save you a considerable amount over time. Read full article Back to My Blog Page
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The Canadian housing market has a number of built-in rules and regulations to prevent a US-style meltdown, one being mortgage default insurance, says Stu Pocock, a broker with CMAC Mortgages. “In Canada, there are two different products commonly referred to as mortgage insurance,” says Pocock. “One is mortgage creditor insurance, which continues to pay your mortgage payments in the event of death or disability. But the other type of insurance — mortgage default insurance — also offers important benefits.” A downpayment of less than 20% on a mortgage requires default insurance. “If you’re buying a home and borrowing more than 80% of its value, your mortgage is required to be covered by default insurance,” he says. “This insurance protects lenders from loss in case a loan isn’t repaid. With this protection, lenders are willing to offer loans with very low down-payments — as little as 5% of the loan amount. For loans without default insurance, most lenders require a downpayment of 20%, which is a lot of money in today’s housing market. “Default insurance allows you to enjoy the benefits of homeownership sooner and insured mortgages are generally approved more quickly.” Default insurance is available from organizations such as Canada Mortgage and Housing Corporation, Genworth Financial and AIG United Guaranty, which charge a premium based on the percent of your home’s value that you borrow. For full article Back to My Blog Page
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