MARKETWATCH: Low-rise market conditions remain tight in June

IN JUNE, THE average price was $531,374, up 4.7% from June 2012.
JULY 2013. Greater Toronto Area REALTORS reported 9,061 sales through the TorontoMLS system in June 2013 - down by less than one per cent compared to June 2012. Over the same period, new listings were down by a greater rate than sales, suggesting market conditions became tighter.

"The sales picture in the GTA improved markedly in the second quarter of 2013. While the number of transactions was still down compared to 2012, rates of decline were substantially improved compared to the first quarter," said Toronto Real Estate Board President Dianne Usher. "As a growing number of homebuyers, many of whom put their purchase on hold due to stricter lending guidelines, now reactivate their search, the expectation is for renewed growth in home sales in the second half of 2013," added Ms. Usher.

The average selling price in June was up by 4.7 per cent year-over-year to $531,374. In line with the 2013 norm, June price growth was driven by the single-detached and semi-detached market segments, particularly in the City of Toronto. Over the same time period, average condominium apartment selling prices remained in line with 2012 levels.

"The short supply of low-rise home types in many parts of the GTA relative to the number of households looking to buy continued to prompt strong upward pressure on selling prices of singles and semis," said Jason Mercer, TREB's Senior Manager of Market Analysis. "We have also seen enough buyers in the better-supplied condo apartment market to provide support for selling prices at current levels.” (Source: Toronto Real Estate Board)

Average price by district (June 2013)

IN MORTGAGES: Ever heard of mortgage cancellation fees? You soon might

AS MORTGAGE SHOPPERS become more informed and more rate sensitive, many become less loyal. And that is leading to an increase in costly cancellations, as borrowers use one lender’s approval to get a better deal with another lender or broker.
You’re probably used to seeing cancellation fees from hotels, airlines and cellphone providers, but not when you’re getting a mortgage. Such fees are slowly becoming more common as a small but growing number of discount mortgage brokers are tying cancellation fees to rock-bottom rates.

Here's why: Many Canadians use mortgage brokers, who have access to multiple lenders, to get the lowest possible mortgage rate. To get the best terms, lenders require brokers to maintain high “closing ratios.” That means brokers must generally complete three out of four mortgages that they get approvals for. But as mortgage shoppers become more informed and more rate sensitive, many become less loyal. And that is leading to an increase in costly cancellations, as borrowers use one lender’s approval to get a better deal with another lender or broker.

One may rightly ask, “What’s wrong with that?” Consumers should shop aggressively for the best mortgage deal around, and pitting lenders and brokers against one another is a sound financial strategy. The issue, say some in the business, is that consumers can enjoy the same benefit simply by shopping around their rate quotes. It’s when they take the extra step of asking for a full approval, and then cancelling that approval, that the problem arises.

In order to stem these cancellations and preserve lender relationships, more brokers are instituting cancellation fees.

A case study
True North Mortgage is one of the nation’s largest brokerages, having closed almost $700-million worth of mortgages in 2012. Earlier this year, it started charging a 1 per cent cancellation fee in cases where:

a. A client asks True North to obtain a firm lender approval
b. True North arranges that approval at the client’s requested lender
c. The client then asks another lender to match True North’s rate, and
d. The client cancels his or her True North application.

Simply asking a broker to shop for rates entails no fees. And if it does, you should find another broker. Cancellation fees like the one outlined above usually apply only if a client has already received a quote and says, “Yes, I want you to approve me” – and then abandons that approval to go with another lender.

“If a client pulls out for legitimate reasons, or if it’s for a better rate, then we understand,” says True North CEO Dan Eisner. For example, if the client cancels because of circumstances beyond their control, like a purchase falling through, the fee would not apply. But if the person uses True North’s low rates and approval solely as leverage to get a rate match from their bank, a cancellation fee may apply. Mr. Eisner estimates less than 1 in 10 approved applicants cancel because of the rate.

Consumer and industry reaction
Anything that restricts consumer options is bound to be criticized and there are undoubtedly some people who will view these charges as another fee grab. So far, however, the fee isn’t scaring off True North’s customers. Despite introducing it this year, the company’s volume has risen 50 per cent. “A client who doesn’t sign [our borrower agreement when applying] was never going to be a customer anyway,” Mr. Eisner says. He admits that it’s occasionally a hard sell, since most banks don’t charge cancellation fees (yet). But brokers who do must provide better rates, better advice and a better customer experience.

“The biggest competitors for brokers are the banks, and brokers have long been impacted by banks matching rates,” says Jim Murphy, President and CEO of the Canadian Association of Accredited Mortgage Professionals. One of the major benefits of using a broker is that you do not pay, he added, especially on a well-qualified deal.

Opinions in the mortgage industry are mixed. Realtors have had exclusivity agreements for years. And in the U.S., fees are commonplace, with a median mortgage application fee of $365 (U.S.), according to the Federal Reserve. But $365 is a lot more tolerable than 1 per cent standard cancellation fee, which amounts to about $1,750 on the average Canadian mortgage. Another challenge with cancellation charges is that enforcing them can get messy. And there are also disclosure risks if clients are not explicitly made aware of such fees (e.g., if they’re buried deep in the paperwork). As a result, some brokers believe they could reflect poorly on the industry.

Will they stick?
In an ideal world, the lender or broker with the best overall deal should win the client’s business. That seems logical. But cancellation fee advocates say that doesn’t mitigate customers who ask for a complete approval with little intention of closing with that lender. That increases costs in a market with razor thin margins, costs that are eventually transferred back to consumers.

Going forward, there will unquestionably be more lenders and brokers that tie better rates to such fees. Whether it’s a trend with legs will depend on how superior the value is, and if no-fee lenders or brokers are willing to match that value. In the end, mortgage consumers will vote with their signatures. (Source: The Globe and Mail)

IN REAL ESTATE LAW: Some title insurance is better than others

BUT UNLIKE INSURANCE policies in other fields, some title insurance policies also include coverage for risks that are not specifically itemized. This type of protection is called legal services coverage and not every title insurer offers it.

In the world of real estate, it’s not very well known that title insurance policies vary significantly from one company to another.

When it comes to basic title protection, though, policy coverage among insurers is very similar. Title insurance typically protects home buyers against loss from risks which are listed in the policy, including another person having an ownership interest in the property, outstanding liens, construction without a permit, fraudulent title dealing, breach of zoning by-laws and other circumstances which could result in loss.

But unlike insurance policies in other fields, some title insurance policies also include coverage for risks that are not specifically itemized. This type of protection is called legal services coverage and not every title insurer offers it. In plain language, if a mistake in a real estate transaction occurs due to a lawyer’s negligence, legal services coverage in a title policy protects the owner — even if the mistake falls outside the specific risks listed in the policy.

A real-life example of legal services coverage occurred when a purchaser signed an agreement to buy a lakeview condominium unit, described as Suite 5321 and Unit 5 Level 2. It turned out that Unit 5 Level 2 was actually Suite 5531,which did not have a view of the lake. In reviewing the status certificate, the buyer’s lawyer missed the inconsistency.

The buyer took title to a unit he had no intention of buying and the lakeview unit was sold to someone else.

Normally, since the purchaser received good title to the numbered unit in his purchase offer, the loss would not be covered by a title insurance policy. In this case, however, the legal services coverage came into play and the insurer compensated the buyer for the difference in value between the two units.

Other examples of legal services claims might include putting incorrect names on the deed, land transfer tax and income tax implications, errors in calculating the adjustments between buyer and seller, and financial consequences of the purchase.

In Ontario, only two title insurance companies are authorized to issue policies which provide legal services coverage: FCT Insurance Company Ltd. (First Canadian Title), and Lawyers’ Professional Indemnity Company (LawPRO — TitlePLUS). TitlePLUS routinely includes legal services coverage in all its Ontario residential purchase policies, and FCT does not include it although it is licensed to do so.

In the case of TitlePLUS, any negligence or mistake by a lawyer in providing legal services for a real estate purchase transaction is covered by the TitlePLUS policy whether or not the mistake is a specific insured risk set out in the policy. This coverage is included in the policy without extra charge to the lawyer or buyer.

FCT Insurance offers what it calls E&O Extra coverage to lawyers who pay a one-time annual fee. The coverage reimburses the lawyer for his or her deductible and insurance premium surcharge if the client sues the lawyer due to an error in the transaction which is not covered by the title insurance. With FCT, the homeowner would have to sue the lawyer in order to recover any losses.

Although Stewart Title is unable to provide legal services coverage, it does offer what it calls StewartPROTECT for an extra premium with each policy. The wording of the coverage suggests that there is no protection from lawyer mistakes for post-closing errors (such as payout of funds) or mistakes (such as calculation errors) which do not affect use and enjoyment of the property. Stewart, though, may provide protection outside policy boundaries.

Home buyers who want the broadest possible protection with their title insurance policies should always discuss legal services coverage with their lawyers before closing. (Source: The Toronto Star)


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DID YOU KNOW: Rapper Drake puts Yorkville condo up for sale

Long before releasing the single “Started From the Bottom,” Toronto-bred rap star Aubrey “Drake” Graham had established upward mobility as a recurring theme in his music: “Let’s toast to the fact that I moved out my Momma’s basement,” he rapped in “Say Something,” a single from 2009. “To a condo downtown, ’cause it’s all about location.”

Looks like the four-time Juno award winner is on the move again, and Wednesday afternoon his real estate agent confirmed that the superstar’s Yorkville condominium is for sale.

The three-bedroom dwelling that occupies 3,600 square feet on the 22nd floor of a high-rise condo building on St. Thomas St. includes three bedrooms, three bathrooms and a pair of heated balconies. You can have all that and access to the building’s amenities, including a pool, sauna, gym and valet parking, for $4.2 million. The price doesn’t cover maintenance fees, which total $3,361.51 monthly, but it does include two parking spots.

Photos of the interior show a rapper immensely proud of his roots — one living room features a wall-mounted bookcase shaped like a map of Canada.

Of course, Drake is well acquainted with the condo market, and referenced buying a place in Miami in his hit single “The Motto": “Wrist bling, got a condo up in Biscayne,” he rapped. Last year he made nearly $500,000 flipping a pair of condos in South Florida. (Source: The Toronto Star)

This report is courtesy of Edward Wang, Coldwell Banker Case Realty. Each Coldwell Banker Office Is Independently Owned And Operated. Not intended to solicit buyers or sellers currently under contract.