Friday, April 29, 2005
Announcement: my new Website
My new website at http://www.luigifrascati.com is up and running ! It is linked here to the sidebar on the left of your monitor under "Links - Homepage of Luigi Frascati" to open up in a new window, or you can click it at the bottom of each post (but then you move out of this URL). Please take the time to go view it and let me know your comments and suggestions.
On a different matter, I would like to say that I am very pleased to have hosted, as of today, 105 visitors to my Blog in the past three weeks. Please note that the Site Meter is set to ignore my own visits. From a statistical perspective I have received forteen private e-mails which I have acknowledged and three visitors have posted their comments online here. I am very satisfied by this turn out, which indicates I must be doing a pretty good job. I would like to invite all visitors to post their comments online whenever possible, since many of the points raised are of general interest to all. That stated, however, I will continue to respond to all e-mails individually.
Finally, do not forget that I can send my quarterly e-newsletter as well. All it takes is a brief e-mail to me requesting a subscription. The Real Estate Chronicle e-newsletter comes in Word format, is four pages long and in full colors. Subscriptions are free, of course, and you can opt out at any time. But I think that you will find it useful and very informative.
Once again, thank you all for visiting my Blog.
Luigi Frascati
Real Estate Chronicle
Thursday, April 28, 2005
Property Transfer Tax: some Economic Considerations
Every time a transfer of title takes place in British Columbia, a registration tax applies to all transferees who register transfers of properties at the Land Title Office. This registration tax is known as the Property Transfer Tax (PTT).and amounts to one percent (1%) of the first $200,000 of the purchase price and two percent (2%) of the balance above. There are exemptions to the rule, most notably the one in effect as of February 16, 2005 wherein PTT is not applicable on transfers of properties whose consideration (purchase price) in Greater Vancouver is less than or up to $325,000, provided other conditions are met.
Studies have shown that British Columbians are facing an affordability crisis: the Province continues to have some of the highest housing prices in Canada during a time of record low mortgage rates and a fairly good supply of homes for sale. Eliminating the PTT entirely would be of great help in reducing this affordability crisis. It is estimated that the PTT prevents approximately 10,300 families and individuals from buying an average-priced residential property.
While the tax brings in some CAD $216 million revenue annually into the coffins of the Provincial Government, studies have shown that eliminating the PTT would:
- cause MLS sales and housing starts to increase by 9,000 units approximately;
- create 20,640 person years of employment;
- increase GDP by $1,274;
- lead to a stimulated housing economy and accompanying revenue of $357 per capita approximately.
All beneficial effects that should not be ignored by our Provincial Government. For a complete list of PTT exemption requirements feel free to send me an e-mail at luigi@dccnet.com .
Luigi Frascati
Real Estate Chronicle
Tuesday, April 26, 2005
It's official: Inflation is back ! (And it may be worse than you think)
Inflation is back. It's official, and you can blame costlier gasoline and other fuels. The tab for common services like a hotel stay and garbage removal are jumping too, as is the sticker price on packaged foods and many other household items. Companies are finding that they can pass on part of their soaring raw-material costs. There is a general consensus among American economic circles that interest rates are on the rise. And this concern is beginning to spill across the border into Canadian economic circles as well.
Typically there is an inflation that the government measures and the 'other' inflation that we are all used to feel but cannot see. Inflation that we all feel but can't see comes in many forms. For example, real estate prices have gone through the roof, so cash buyers are paying through the nose. Borrowers are increasingly resorting to floating-rate and interest-only loans, especially in the U.S., which all but guarantee that they will pay more over the life of their loans. But Canadians are poised to follow suit with the spread of the ever more popular 'Powerlines' and credit cards secured by real estate which, once again, have the deleterious effect of keeping you into debt for the rest of your life.
We all face notoriously soaring insurance premiums, deductibles and co-pays as employers shift more of the burden onto employees. Here in British Columbia, for example, Strata insurance premiums have more than doubled in the past year, with strata corporations - especially the financially weak - having no choice but to allot the extra cost to individual property owners.
Even Alan Greenspan, the once revered Chairman of the Federal Reserve Bank, is now coming under fire. Once known as the 'Maestro' for his impeccable talent at predicting economic behavior, and after being treated like royalty for presiding over the longest economic boom in the nation's history, Greenspan is now being accused by a small but vocal group of economists of presiding over the U.S.'s high consumer debt, low personal-savings rates, declining dollar and potential real estate bubble. And all this comes at a time when the U.S. is dependent more than ever on foreign money to sustain growth.
The dependence on foreign capital, Asian in the West and European in the East, is a great source of concern for Canada as well. As China is becoming a major economic player and is fueling its own economic growth, and as Europe is coming to grip with the reality of an oversold, overstrong, overvalued Euro compared with the relative weakness of many European economies, the worry is that this foreign injection into the Canadian economy will soon evaporate, thus leaving domestic growth without fuel .... the typical Mercedes without gas.
So where does all this leave mundane folks like you and I ? All I can tell my readers and real estate aficionados of my blog is: beware of your mortgages !
Luigi Frascati
Real Estate Chronicle
Saturday, April 23, 2005
The Strata Property Act and the Rental of Strata Units in British Columbia
Readers who own and rent strata property in British Columbia, whether they reside in the Province or not, will find this post very useful. As the owner of a strata unit myself as well as a four-year Council Member of the Strata Corporation where I own my apartment and this year's President of Strata Council, I have come to have first-hand knowledge of strata matters, both from the viewpoint of the strata corporation as well as a property owner. As a real estate practitioner, furthermore, I am frequently asked if and how the Strata Property Act affects by-laws dealing with rental restrictions in an apartment complex.
- The Strata Property Act, which came into effect on July 1, 2000 and replaced the former Condominium Act, contains several new provisions that affect rental restrictions. Section 141 of the Strata Property Act permits any residential strata corporation to pass a by-law that limits or even prohibits rentals. In the eventuality that a strata corporation creates a rental restriction that limits rentals, the Strata Property Act requires the by-law to set out the procedure for administering the limit.
- In the past, strata corporations regulated rentals by creating by-laws that required the strata corporation - through its Council - to approve any tenant or to require an owner/landlord to include particular wording in the tenancy agreement. Section 141 prohibits a strata corporation from screening tenants, approving tenants or requiring any particular term in a tenancy agreement.
- In addition, many strata corporations have sought in the past to impose fines for violating rental restrictions. Section 7.1 of the Strata Property Regulations now sets CAD $500 as the maximum penalty for breach of a rental restriction by-law. Moreover, Section 7.1 permits the strata corporation to impose a fine for a continuing violation every seven days.
- If an owner rents the suite contrary to a rental restriction by-law, Section 145 permits the tenant to end the tenancy without penalty within ninety (90) days of learning about the by-law violation. If the tenant ends the tenancy agreement under this provision, the owner/landlord must pay the tenant's reasonable moving expenses to a maximum of one month's rent.
- Section 144 permits an owner who wishes to rent to apply to the strata corporation for an exemption from the rental restriction on the ground of hardship. Section 144, furthermore, spells out the procedure to apply for such exemption. The application must be in writing and must set out the reason why the exemption is needed. If the owner wishes a hearing, the Strata Council must give the owner the hearing within three weeks from the date of receipt the application. Once the hearing is held, the strata corporation must render a decision within a week. Failure to give a decision within the allotted time results in the exemption being automatically granted. If a hearing is not requested, the strata corporation must give its decision within two weeks. Unfortunately the Strata Property Act, just like the former legislation, fails to define the term 'hardship' .
- Under Section 142(3) an owner is exempt from a rental restriction whenever the owner rents to a family member. Section 8.1 of the Strata Property Regulations defines a family member as the owner's spouse, parent(s) or child. A spouse, furthermore, includes a common-law spouse with whom the owner has lived continuously in a marriage-like relationship for at least two years, and it covers same sex relationships.
- When a strata corporation amends its by-laws to restrict rentals, the Strata Property Act protects owners against the immediate effect of the by-law. To varying degrees, the legislation permits owners to rent their strata lots for a while. Every situation is different and every owner must consult the Strata Property Act to calculate the extent to which his/her unit is grandfather. When in doubt, a consultation with a real estate law practitioner is more than warranted. However, in general lines, every owner is allowed at a minimum to rent the unit for one year after the by-law comes into effect. The best case scenario applies to the owner who is the first purchaser of the strata unit from the developer and the strata lot is designated for indefinite rental in a rental disclosure statement. In this case the owner can continue to rent for as long as he/she owns the unit, the rental restriction by-law notwithstanding.
- Section 146 mandates that within forteen (14) days of renting, an owner must give the strata corporation a Notice of Tenant's Responsibilities signed by the tenant. Such notice is found in the Form K of the Strata Property Regulations. Failure by the owner to provide the strata corporation with a Notice of Tenant's Responsibilities signed by the tenant, or to provide the tenant with copies of the current by-laws and rules allows the tenant to terminate the tenancy within ninety (90) days without penalty. Furthermore, if the tenant ends the tenancy agreement under this provision, the owner/landlord is liable for the tenant's reasonable moving expenses to a maximum of one month's rent.
For any further questions concerning the subject matter of this post feel free to send me a private e-mail or to post your comments here. Please note that all answers will be of general nature and must not be construed or interpreted as legal advice. If you require legal advice, please consult your lawyer.
Luigi Frascati
Real Estate Chronicle
Friday, April 22, 2005
Announcement: my new Website
My new website at http://www.luigifrascati.com/ which has been under construction since the advent of Homo Erectus will be finally launched (from Cape Canaveral) on or about May 1, 2005. In the interim, please continue to make do by using, perusing, abusing and misusing my old website at http://www.sutton.com/sg/lfrascati (yeah, I know .. I have never liked this particular URL myself ...). Thank you for your patience. Luigi Frascati |
Real Estate Chronicle
Wednesday, April 20, 2005
Selling of Real Estate by Non-Residents of Canada
As I deal routinely with non-resident investors wanting to sell Canadian real estate assets, I would like to shed some light on this otherwise somewhat arcane subject. DISCLAIMER: please note that the following essay is presented solely for general information purposes, it is not intended to be legal advice or purported to be as such, it may or may not apply to your particular situation and that I strongly recommend - in fact I urge you - to discuss this topic in-depht further with your lawyer, notary, conveyancer or accountant - and not necessarily in this sequence - if a need there be.
If you are a non-resident involved in the selling of Canadian real estate assets that you own, you should be aware of the applicable provisions of the Income Tax Act to avoid problems when the time comes for the sale to complete. In brief, if taxes are owing to the Canada Customs and Revenue Agency (Revenue Canada) by a property owner, the property can be charged to secure payment of outstanding taxes. This applies to both residents and non-residents. What, however, specifically applies in the case of non-residents selling Canadian real estate is that the property may be charged even after being transferred to the new owner.
In order to be protected and pursuant to the requirement of the Income Tax Act, the Buyer must make a 'reasonable inquiry' as to the Seller's residency status. Thus the need for indicating 'Resident of Canada/Non- Resident of Canada' under the Sellers information in the top left section of the Contract of Purchase and Sale. The Buyer's notary or lawyer will make a similar inquiry of the Seller when the convyancing documents are signed.
If the Seller is a non-resident of Canada, he must apply for and obtain a Clearance Certificate from Revenue Canada and provide the Buyer with this Certificate. It normally takes four to six weeks for Revenue Canada to issue a Clearance Certificate. If a Clearance Certificate is not provided to the Buyer or his conveyancing representative, then the Buyer must hold back one-third of the sale price until the Certificate is provided. If the Certificate, furthermore, is not forthcoming the holdback money is then remitted to Revenue Canada and the Buyer - and the newly acquired property - are protected from any further liability or charge.
A problem, moreover, may arise at the time of completion if, for instance, the existing mortgage exceeds two-thirds of the sale price and there are therefore no sufficient proceeds to allow for the holdback and clear title, not to mention payment of closing costs. So therefore, if you are (or will be at the time of completion) a non-resident Seller be sure to raise this issue before the property is sold and there is still time to obtain the required Clearance Certificate. Likewise, if you are the Buyer and you learn that the Seller is a non-resident, be sure there is ample time before completion and possession.
Luigi Frascati
Real Estate Chronicle
Monday, April 18, 2005
British Columbia Geography 101
For the benefit of those who are not acquainted with British Columbia - especially my American and European readers - and in the wake of the forthcoming 2010 Winter Olympics, here is a short essay to help you better familiarize yourselves with it.
More than three quarters of British Columbia is considered mountainous. The Rocky Mountains run the lenght of the Province flanked by a series of companion ranges - the Columbia, Monashee, Cariboo, Selkirk, Purcell, Cassiar, Omineca and Skeena Ranges. More than one-half of British Columbia is 4,200 feet or more above sea level.
Only five percent of the Province is arable and is irrigated by coastal rains, mountain rivers and run-off that provide rich, fertile soil for agricultural pursuits such as wineries and orchards in the Okanagan to dairy farming in the Kootenays and Fraser Valley. Ten percent of British Columbia is grazed by domestic animals or is under cultivation. Forests cover about sixty percent of the Province where huge Douglas Fir and Western Red Cedar grow in the moist coastal regions, and vast forests of pine, spruce and hemlock are found in the higher and drier interior.
Freshwater lakes or rivers make up about four percent of British Columbia - a statistic that belies the nature of the Province remarkable water resources. There are 650 Provincial Parks and recreation areas along with several National Parks and National Park Reserves. More than ninety percent of the land in British Columbia is owned by the Provincial Government as Crown land. Mining, forestry and tourism impact how these Crown lands are managed, as do many Aborigenal land claims. In fact, the majority of Aborigenal land claims in Canada are in British Columbia.
British Columbia is a frontier truly to be discovered. Aptly enough our motorvehicle licence plates bear the inscript 'Beautiful British Columbia' . Come see for yourselves: you will be impressed.
For further information feel free to send me an e-mail. I will be more than glad to respond.
Luigi Frascati
Real Estate Chronicle
Friday, April 15, 2005
Six Mistakes you don't want to make when selling your Property
I wanted to publish some suggestions for Sellers drawn from my 18 years of experience in real estate sales. I hope you will find the useful.
Mistake #1 -- Pricing Your Property Too High
Every seller obviously wants to get the most money for his or her product. Ironically, the best way to do this is NOT to list your product at an excessively high price! A high listing price will cause some prospective buyers to lose interest before even seeing your property. Also, it may lead other buyers to expect more than what you
have to offer. As a result, overpriced properties tend to take an unusually long time to sell, and they end up being sold at a lower price.
Mistake #2 -- Mistaking Re-finance Appraisals for the Market Value
Unfortunately, a re-finance appraisal may have been stated at an untruthfully high price. Often, lenders estimate the value of your property to be higher than it actually is in order to encourage re-financing. The market value of your home could actually be lower.
Mistake #3 -- Forgetting to "Showcase Your Home"
In spite of how frequently this mistake is addressed and how simple it is to avoid, its prevalence is still widespread. When attempting to sell your home to prospective buyers, do not forget to make your home look as pleasant as possible. Make necessary repairs. Clean it. Make sure everything functions and looks presentable. A poorly kept house in need of repairs will surely lower the selling price of your property and will even turn away some buyers.
Mistake #4 -- Trying to "Hard Sell" While Showing
Buying a house is always an emotional and difficult decision. As a result, you should try to allow prospective buyers to comfortably examine your property. Don't try haggling or forcefully selling. Instead, be friendly and hospitable. A good idea would be to point out any subtle amenities and be receptive to questions. Speak SOFTLY !!!!!!
Mistake #5 -- Trying to Sell to "Looky-Loos"
A prospective buyer who shows interest because of a "for sale" sign he saw may not really be interested in your property. Often buyers who do not come through a realtor are a good 6-9 months away from buying, and they are more interested in seeing what is out there than in actually making a purchase. They may still have to sell their house, or may not be able to afford a house yet. They may still even be unsure as to whether or not they want to relocate.
Mistake #6 -- Limiting the Marketing and Advertising of the Property
Do not limit the marketing efforts of your agent. For example, signs are a good and effective marketing tool, possibly the best. It is counterproductive for you - not your agent - if you ask not to post signs on your property. Understand that your neighbors normally do not care if you put one, two, ten signs on your property. In fact, more often than not, they will help in that they will talk to their friends about the availability of your house.
Every seller obviously wants to get the most money for his or her product. Ironically, the best way to do this is NOT to list your product at an excessively high price! A high listing price will cause some prospective buyers to lose interest before even seeing your property. Also, it may lead other buyers to expect more than what you
have to offer. As a result, overpriced properties tend to take an unusually long time to sell, and they end up being sold at a lower price.
Mistake #2 -- Mistaking Re-finance Appraisals for the Market Value
Unfortunately, a re-finance appraisal may have been stated at an untruthfully high price. Often, lenders estimate the value of your property to be higher than it actually is in order to encourage re-financing. The market value of your home could actually be lower.
Mistake #3 -- Forgetting to "Showcase Your Home"
In spite of how frequently this mistake is addressed and how simple it is to avoid, its prevalence is still widespread. When attempting to sell your home to prospective buyers, do not forget to make your home look as pleasant as possible. Make necessary repairs. Clean it. Make sure everything functions and looks presentable. A poorly kept house in need of repairs will surely lower the selling price of your property and will even turn away some buyers.
Mistake #4 -- Trying to "Hard Sell" While Showing
Buying a house is always an emotional and difficult decision. As a result, you should try to allow prospective buyers to comfortably examine your property. Don't try haggling or forcefully selling. Instead, be friendly and hospitable. A good idea would be to point out any subtle amenities and be receptive to questions. Speak SOFTLY !!!!!!
Mistake #5 -- Trying to Sell to "Looky-Loos"
A prospective buyer who shows interest because of a "for sale" sign he saw may not really be interested in your property. Often buyers who do not come through a realtor are a good 6-9 months away from buying, and they are more interested in seeing what is out there than in actually making a purchase. They may still have to sell their house, or may not be able to afford a house yet. They may still even be unsure as to whether or not they want to relocate.
Mistake #6 -- Limiting the Marketing and Advertising of the Property
Do not limit the marketing efforts of your agent. For example, signs are a good and effective marketing tool, possibly the best. It is counterproductive for you - not your agent - if you ask not to post signs on your property. Understand that your neighbors normally do not care if you put one, two, ten signs on your property. In fact, more often than not, they will help in that they will talk to their friends about the availability of your house.
Luigi Frascati
Real Estate Chronicle
Sunday, April 10, 2005
Vancouver, BC : A Picture is Worth a Thousand Words
For those of you who have never visited my hometown, I thought I'd create a little photo album for you to review. I have used www.dotphoto.com to create a little online album to share with everybody. Link to :
to see the first of ten photographs of Vancouver. I took them in the Summer of 2002 and they are still stored on my computer. When you are in my album make sure to click the little arrow on the top right of the photo to scroll through them all.
I plan to add additional albums and, of course, I'll share them with you. Let me know what you think of them.
Luigi Frascati
Real Estate Chronicle
Saturday, April 09, 2005
REVERSE MORTGAGES: ALL YOU NEED TO KNOW
A lender’s promise of fast cash and no monthly payments make reverse mortgages an attractive alternative for cash-strapped seniors who are house-rich but cash-poor. Offered to homeowners over the age of 62 (in Canada), reverse mortgages allow seniors to convert the equity of their home to finance living expenses, home improvements or other needs. It seems like a good idea, but it could cost a fortune. While they offer distinctive advantages - such as allowing people to stay in their home , receive a monthly income and maintaining an enjoyable standard of living - reverse mortgages aren’t for everyone and they involve a number of risks that should be taken into consideration. A reverse mortgage is the opposite of a conventional mortgage. Instead of borrowing money from a lender to buy a home, the lender pays you based on your home equity. The home must be your principal place of residence. If the mortgagor (homeowner) dies, sells the home or otherwise changes principal residence the initial loan must be paid back together with accrued interest, usually through the sale of the property. Because the proceeds of a reverse mortgage are classified as a loan rather than income, they are non-taxable. The mortgage principal amount is anywhere between ten to forty percent of the home appraised value and is in direct function of the borrower’s age, current interest rates and property value. With eighty percent of the average Canadian seniors’ assets tied up in their home and little or no income, this can be a viable financing tool for some people. The downside of a reverse mortgage, however, is that it can quickly eat up the accumulated equity of the house. Let’s say you take a $50,000 reverse mortgage today at the rate of five percent. You will owe $50,000 seven years from now, double in fourteen years. For seniors who want to leave one-hundred percent of their estate with heirs or who hope to have a certain amount of equity leftover after re-paying the mortgage, this type of financing may not be ideal. When considering whether or not to take out a reverse mortgage, it is important to understand the risks involved, the types of reverse mortgages available and the different terms offered by lenders. And it never hurts to seek the advice of a third party such as a lawyer prior to entering into an agreement . Luigi Frascati |
Real Estate Chronicle
A Special "Thank You" to Google
Now, this has absolutely nothing at all to do with Real Estate, but I feel like the folks at Google deserve a special praise for making blogging extremely easy. More specifically, the way the templates are designed and conceived make creating your own blog a real snap. I'm sure someone else must have posted a similar comment somewhere in the web, but one more is never too many. So, therefore, thank you Google ! Luigi Frascati luigi@dccnet.com www.luigifrascati.com |
Real Estate Chronicle
Friday, April 08, 2005
OIL AND REAL ESTATE: SPREADING SHOCK WAVES
As oil becomes scarcer and more expensive there is a high probability that the economic shock waves will hit hard throughout the economy. Petroleum is a basic raw material used in the manufacturing of many products including chemicals, paints, plastics and synthetic textiles. Other industries-steel, aluminum, electric power-use large quantities of oil and oil derivatives in the course of their production. When petroleum supplies become pinched and prices push up, these industries may well be forced to restrict output and raise prices, thus putting even more inflationary pressure on the economy. These past few weeks there have been these chilling hints, mostly in our neighbor to the South, of what the future holds, by reflection, also in Canada:
Scarcely any enterprise is immune to the oil squeeze, as the lessons of the ‘70’s and the ‘80’s teach, and real estate is definitely no exception. With the economic shock waves reverberating through secondary industries not directly connected to oil consumption, shortages may also arise in such disparate items as lipsticks, nylon stockings, records, toys, garbage bags, hair curlers and innumerable other products that use petrochemicals. One such example, perhaps the biggest, is the auto industry which since the ‘60’s has increased the amount of plastics in the average car from 20 lbs. to 138 lbs. The Big Three - GM, Ford and Chrysler - have lately drawn up contingency plans for going back to using metal body parts if plastic cannot be obtained. As shortage of supply is typically followed by price increase in many economic models, there is a general consensus in many circle that the inflationary cycle will start all over again, prompting the Federal Reserve Bank to hike interest rates. This process has begun already, as interest rates are slowly oozing upwards. An increase in the prime rate means typically a subsequent increase in both passive and active banking rates, that is the rates banks charge for mortgages, credit cards and consumer loans as well as the interest they pay on bond, term deposits and certificates of investment. Mortgage rate increases normally signal a cooling off of real estate inventory sales, as demand for real estate products typically slows down. Luigi Frascati |
Real Estate Chronicle
