“Little bit ‘a lotta things” today, as they say.
They who? I don’t know. But it sounded good when I wrote it.
I’m going to cover five or six topics today, all noteworthy & newsworthy, all free for your commentary. Although I think I already know which one will get solicit the most opinion…
How Can You Put A Price On Emotion?
If you didn’t read about this story a couple of weeks ago, then I’m so happy to be the one bringing it to your attention.
Sellers of a Beaches home have decided that they will not sell their property to the highest bidder, but rather, “a deserving young family who will benefit from the neighbourhood and preserve and enrich the community,” as the MLS listing states.
Here’s a Toronto Star article from May 15th:
“For sellers of this semi-detached home, a deserving family trumps price”
“This is about putting a nice young family in there. We’re not interested in a bidding war or anything like that,” the deceased seller’s daughter said.
As soon as this article came out, however, the reaction was just oh-so-perfect for the confusing times in 2018, in that the peanut gallery took a positive, and turned it into a negative.
That’s right; the peanut gallery started to call discrimination.
It is, I suppose.
Accepting the highest offer is an easy way to pick a winner. But when you start examining people, their personalities, their lives, their values, and start putting a value on their self-worth, then surely that does become, by very definition of the word, “discriminatory.”
We’ll never know how the sellers decided to pick the winner, and for many, that’s the problem.
Personally, I think it’s the sellers’ right to sell to whoever they want, for whatever reasons.
But what if behind closed doors, they never intended to sell the house to a person of a particular race, age, demographic, sexual orientation, etc?
Wow. Do you see what we’ve done as a society? Our glass is half empty. We create “what-if” scenarios, and then debate them. I miss the 1980’s…
In any event, the clamouring died down a little bit, and the sale went forward.
Low and behold, the house sold for the asking price, and no more.
I wonder what it’ll be like for that new family, with everybody in the neighbourhood asking, “What did they do, or who are they, to ‘win’ that house?”
–
Who Doesn’t Love A New Tax?
Wasn’t this simply a matter of time?
“York Region demands power to bring in new taxes”
To the surprise of just about nobody, one of the taxes at the top of the list is a land transfer tax.
For those youngin’s out there, I do recall a time when the sale of properties in Toronto only had one land transfer tax!
Ah, the good old days! When buying a $900,000 home only came with a $14,475 raping of the wallet, for absolutely no reason.
Then along came David Miller, who didn’t realize that “2 x 1 = 2,” and the tax doubled overnight.
Now it’s almost $30,000 to simply move.
Tell me I’m biased because I’m in real estate, but this tax, in my opinion, is the most bizarre tax I’ve ever seen. The tax isn’t tied to anything! Garbage pickup, hydro, sewer and water – all the services associated with a home are paid for via property taxes! What is the land transfer tax tied to? It’s a nothing tax.
In any event, York Region councillors are demanding that the government of Ontario give them power to increase, and create new taxes. They’re facing a $220 Million budget shortfall, and while a fiscal conservative like myself might suggest reducing spending, the obvious answer for anybody in government is simply to increase taxes.
I think it’s prudent to keep in mind just how hard York Region has been hit with the decline in real estate prices in the last 12 months.
May I remind you of the chart from a blog post earlier this month:
(yes I know that chart is prettier than my usual screenshots from Excel, but I gussied it up for the Toronto Life presentation last night…)
York Region prices are down 20.6%, April YTD.
Adding another land transfer tax isn’t exactly going to help stabilize real estate prices, but perhaps the government doesn’t care?
–
F*** The Rich!
This is old news, but it was recently brought up again via an interaction I had with a buyer client.
This client is looking to purchase for $4,500,000, and was last active in November of 2016.
He’s been away for 18 months, and when calculating the expenses associated with his purchase, he was using his old spreadsheet – from 2016.
Little did he know, the government’s rebate on land transfer tax for first-time home buyers in 2017 was offset by an increase in land transfer tax for luxury homes.
Do you guys even remember this? It’s like it almost didn’t make headlines.
Land transfer tax was increased from 2.0% to 2.5% on the portion of purchase price over $2,000,000.
That means an additional $12,500 in land transfer tax payable.
$12,500?
Really? Am I making a fuss about this?
$12,500 in the context of a $4,500,000 house is a rounding error!
But what if I told you that the total amount of land transfer tax payable on this purchase was $197,950? What then?
It’s tough to define the word “fair” in today’s world, especially in the context of politics and governance.
But I’d love to know what you all think. As I alluded to in the previous point, people don’t really “get anything” for their payment of land transfer tax. Is shelling out nearly $200,000, fair? And would any of you subscribe to the simple theory that “These people can afford to pay it?”
–
Have You Seen My Agent? I Can’t Find Her…
This is a great story.
And by “great,” I mean it’s entertaining. But in reality, it’s sad, and pathetic.
I was set to receive offers on a listing last week, and I got a call around 5:30pm from a young lady who asked, “What time are offers?”
I told her we were going to review offers at 7:00pm.
I asked, “Are you an agent?” since I assumed she was. But she said, “No, I’m not, but I’d like to submit an offer.”
I wasn’t sure if she meant through me, or not. So I simply asked, and she said, “Maybe, I’m not sure yet.”
I dragged the situation out of her – it seems that she had a buyer agent working for her, who works out of Oakville, but she couldn’t get ahold of the agent. She said she had been trying “all day,” and she knew “something was wrong” when her agent didn’t email her on the morning of offers (let alone, the night before…) to tell her that offers would be reviewed at 7pm, remind her she needs a deposit cheque, etc.
Imagine that.
You hire somebody to represent you, and they do anything but.
“What about somebody at the brokerage?” I asked her. “If your agent is away on vacation, surely she has somebody to look after her business, right?”
“I don’t know,” she told me. “I’m not sure how she runs her business; she’s often hard to reach. What can I do here? What are my options?” she asked me.
“If you want to make an offer, that can happen,” I explained. “You can do so through any agent, any brokerage, whoever you want.” I told her.
She asked if she could make the offer through me, and I explained that I was representing the seller, and while it’s technically possible, I don’t like multiple representation, and I’d rather her work with somebody from my brokerage. Or another brokerage. It was totally up to her.
I further explained the buyer representation rules and regulations, and explained the difference between a Buyer Representation Agreement and a Customer Service Agreement and that’s when she said something amazing: “I’ve already signed a buyer representation agreement with my agent.”
Well, crap.
“For me to speak to you about this property, a potential offer, and your options, technically, is interfering with a buyer under contract,” I explained. “The B.R.A. is signed with the brokerage, not the agent,” I told her. “So you can make the offer through anybody at the brokerage.”
Then I asked her, “Which brokerage is it?”
Even more amazingly, she said, “I don’t know.”
“You don’t know?” I asked. “Re/Max, Royal Lepage, Homelife, Century 21, Chestnut Park, Keller Williams,” I went on, and on, and on.
“Nothing rings a bell,” she told me.
So I told her quite honestly, “You’re under contract with a brokerage, working with an agent that you can’t get in touch with. I honestly don’t think I can help you.”
And this isn’t about commission, in case you’re wondering. The truth is, I’m not sure if I could have even drafted the offer for her to sign, and submitted it on her behalf – with the full understanding that she was working with another brokerage, and they would receive the commission. I just can’t interfere with somebody else’s client. It’s very simple.
I felt bad for the girl. I told her to call the brokerage, and ask for the manager or the broker of record, to see if they could help.
Then she reminded me that she didn’t know which brokerage it was, and I essentially gave up.
I don’t know that there’s a moral of the story, a conclusion, or any takeaway her. It’s just really unfortunate.
–
“What Goes Up Must Come Down……Most Of The Time”
We see a lot of real estate “fluff” columns in the newspapers, so I love seeing something new and interesting; something I haven’t read about before.
Shane Dingman from the Globe & Mail wrote an interesting, albeit depressing piece last week:
“Elevators a let-down for Toronto condo dwellers”
According to the article, condominiums have the lowest rate of elevator “availability” at 93%, which translates to 25 out-of-service days per year.
But the really interesting part of the article was about one specific building in Toronto: 59 East Liberty Street.
Apparently none of the elevators were in service at one point, and residents were without options – other than the stairs.
One of the three elevators has been out of service for a year!
And what of the board of directors?
They told residents not to voice any displeasure; not to “tweet, talk to the media, or make waves.”
What a mess.
The article is a solid read – click the link above.
Ralph Cramdown
at 7:34 am
Hey, does everybody remember the Canadian government’s response to the Panama Papers release of offshore tax haven customer information? Not much. How about the response to the discovery that, for many transactions in the lower mainland, “hockey bag full of cash” is the unit of exchange? OK, so offshore is a bit of a misstatement, money goes to where it can have a bit of privacy, and this includes Canadian real estate, and trusts in several US states, as well as the usual suspect city states in Europe and the former British colonies.
So estimates are now that maybe 9%+ of money is domiciled somewhere that tax isn’t paid on income. Here in Canada, Richmond BC supposedly has among the highest child poverty rates in the country, but it is apparent that the poor waifs aren’t deprived of healthy food or supercars, their families just don’t have any Canadian income…
So,
– governments get smaller, OR
– they spend without taxing and we get inflation, OR
– they start taxing non-salary income more and cracking down on supposedly non-domestic income, OR
– they tax more immovable assets.
Sure, you can move somewhere else, but you have to pay the taxes on the house you leave behind, or sell it to someone else who will. I don’t really believe that emphasizing taxing land (see “Georgists”) is the best way to go, but I think that is the way things probably WILL go. People with money have gotten too good at avoiding tax with hundreds of finagles (and outright evasions) of our complicated tax codes and their interactions with the international financial system. But aside from getting your home designated a place of worship, dodging property tax is near impossible. And people of limited means (the “middle class”) understand taxing owners of $4.5 million mansions, and don’t have a problem with it (see Vancouver West).
Libertarian
at 10:32 am
As Ralph alludes to below, gov’ts have no choice but to tax real estate because that’s where everybody is putting their money – not only foreigners, but many citizens who believe real estate is the best investment and as such, buy any many properties as possible.
Since we’re less than a week away from the provincial election and have the municipal election in the fall, it would be a good time to discuss what the role of gov’t should be in the 21st century (now that we’re almost 20 years in) and how to fund it. But instead, all we have are parties promising that they can outspend the others. So as long as spending is the mandate, the gov’ts need to tax anything and everything, especially real estate, since that’s where everyone is bidding all of it up in value. And if we’re not going to tax sellers, then tax buyers.
As for that buyer with the crappy agent – yikes!!!
Not Harold
at 1:07 pm
LTTs have problems as they create disincentives to buy houses in the area affected and are unstable sources of revenue. This is especially true when they are heavily weighted towards the highest value houses.
They are an exceptionally bad idea for cities as the affected area is so low and they can become a large proportion of total revenue, making the city very vulnerable to changes in the RE market. You can see similar problems in California where they are exceptionally dependent on the capital gains taxes of a very small number of people. CA took severe budget hits post dot com bubble and in the 08 crash, while they are currently awash in revenue thanks to the intense tech market.
Libertarian
at 5:32 pm
Of course LTTs have problems and are bad policy. That’s not the issue though because that train has left the station.
Will any gov’t repeal them and replace them with something else? Not a chance.
That’s why I wrote that we as a society have to debate what services do we want from gov’t and how should we pay for them. Income tax, sales tax, property tax, land transfer tax, corporate tax, user fees, etc., etc.
Is there a politician out there brave enough to run on a platform about tax reform? Not a chance.
So that’s why we have 3 parties all talking about spending like drunk sailors. My only hope is that once elected, the victorious party changes its mind after realizing how much debt we’re in.
Penelope Graham
at 10:38 am
Hi David – look, my first comment on your blog! In regards to the client who couldn’t reach her agent and didn’t know the brokerage name, I’m a bit baffled. Could she not have simply googled to find out? Did she not have a copy of her BRA, where it would surely state the name of the brokerage? Something about her situation just doesn’t seem to add up. At any rate, I hope she reads her agent the riot act when she does – if she does – ever locate her.
Housing Bear
at 11:08 am
I’m sure had she just googled the phone number she was using to reach her agent she would have had all the info she needed.
I think 1 of 2 conclusions can be drawn here.
1. She thought she could maybe play dumb and get some insider info from David in regards to pricing or competition.
2. It shows the intelligence level of the remaining buyers in the market
Maybe a bit of 1 and 2.
Not Harold
at 1:02 pm
Given David’s notoriety and the number of people in the business who don’t love him, I wouldn’t rule out a third possibility: someone with an axe to grind trying to get him to commit a violation that would threaten his real estate license.
David has been very frank about what he thinks of certain specific developers years before they went bankrupt and about buildings that have problems with their status certificates. He’s also alluded to industry people who aren’t fans. Given the amounts of money at stake and the intense competition at all levels of the industry I wouldn’t be surprised by nefarious behaviour.
Housing Bear
at 2:02 pm
Well that could make some sense too. Someone trying to catch him in a trap. Interesting theory.
However, David was invited to speak at the Toronto Tomorrow event (hosted by Toronto Life, Bosley RE, and Misrahi Devs). He was one of 5 speakers who Toronto Life referred to as “five of the city’s most influential voices in housing, city planning and architecture”. Not a single bear or opposing view was given the opportunity to speak. The only one who touched on prices being to high, was the AirBnB chick who was promoting how millenials can help cover their purchases by renting out their space from time to time.
Sam Mizrahi declared that he believes Toronto is still very undervalued.
Therefor if it was a hit job, I would assume it was by a jealous lone wolf rather than some industry lead take down. Just my thoughts.
Not Harold
at 2:16 pm
Not saying that it’s probable, just that it is definitely plausible. I do agree that it would be a rogue (and likely crazy) individual.
The most likely explanation is just that people are dumb, because that’s ALWAYS the most likely explanation.
Housing Bear
at 2:24 pm
Yeah. I’ll also add that not ever buyer today is an idiot, being facicious again. If its your primary home, it provides enough room to support your lifestyle and potential family growth for the next 10 years so your are not trapped, and you can support an increase in your debt costs it can still make sense.
J
at 12:05 pm
Regarding land transfer taxes: when you crunch the numbers it’s really not surprising there’s little turnover in Toronto real estate due to nosebleed prices and high land transfer taxes. Moving from one $2M home to another will set you back $100,000 in real estate commission (at 5%) and $72,950 in provincial and municipal land transfer taxes, for a total of $172,950. That’s money that just vanishes (i.e., doesn’t become equity) and that number doesn’t include the many other smaller costs of buying a new home.
And those are after-tax dollars. Assuming a 50% marginal income tax bracket (which someone ought to be in to afford a $2M home) you’ll need to earn an additional $346,000+ in income just to be able to change neighbourhoods and move into another equally valued home (much more if interest and other costs are factored in). This makes upgrading to a more expensive home very costly, and on the other hand downsizing isn’t likely to net you much.
Not Harold
at 1:13 pm
This is a big driver in the renovation market. Houses with good schools and large lots make far more sense to expand than to sell and buy a larger house.
10%+ of the value of the house is wasted in transaction fees (since the moveup buyer is selling the old house and buying a new one). In Lawrence Park and other great school districts that can pay for one hell of a renovation, never mind the additional cost of the new house (which is presumably more expensive).
Instead of paying 10% and then another 500k to 1MM, you can spend 700 to 1MM on a renovation while saving 3-500k compared to a move!
Blowing sunshine
at 6:42 pm
I always marvel when Agents deride land transfer taxes as wasted and unfair and say nothing about 5% commissions, which are a larger transactional cost. Taxes go into the general revenues of the govt and in term pay for services everyone uses. Outside of the agents and Audi dealerships I’m not sure how maintaining 5% is considered okay given the run up in prices. Just sayin