Having said that, the money to run the province has to come from somewhere and not being a political science major or having a background in macro economics it’s hard for me to say what they would replace this tax with. I suppose this is why I have kept thinking about this article.

I am still grumpy about the HST though.

Ryan Coffey

Time to axe transfer tax

By Darrell Bellaart, The Daily NewsAugust 11, 2010

It’s time the provincial government started taking a hard look at eradicating the property transfer tax.

The B.C. Real Estate Association is keeping up its push to axe the PTT and has been busy arranging meetings with senior members of government for this September.

Now that the province has followed Ontario’s lead by harmonizing provincial sales taxes with their federal counterpart, it takes away one of the province’s biggest arguments for keeping the tax in place.

Provincial officials wonder how they would replace the millions of dollars the PTT brings in. In the 2002-03 tax year, it added

$400 million to provincial coffers and that amount grew by about $100 million each year afterward, reaching a peak of more than

$1 billion before the real estate market retreated in 2008.

Anyone who has bought a house in the past decade will be familiar with the shocking experience on closing day of sitting at the lawyer’s office and learning that the price of the transaction is several thousand dollars more than expected.

The reason is that in B.C. the first $200,000 is taxed at 1% but anything above that amount is taxed at 2%. The total is tallied up and inserted as a line item on closing day.

For the average Nanaimo homebuyer closing the deal on a $350,000 property, they can expect an additional $5,000 in taxes, which most people will likely add to their mortgage.

Add that to the legal fees, real-estate commissions, assessment and inspection costs and annual property taxes and insurance costs and it contributes considerably to the total the average person shells out each month to keep a roof over their head.

B.C. is not the only province with property-transfer taxes. Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island also use them, but in a recent analysis done for BCREA by economist Stanley W. Hamilton, he said the way B.C. applies the tax makes it “the highest property-transfer tax in Canada,” outside metropolitan Toronto, where a separate municipal tax jacks it up even higher.

Taxation pays for important services like health care and education and social services for the poor and needy.

But a shelter tax has unexpected social costs. It affects rental rates and that means it affects everyone, especially those people surviving on welfare and pensions who suddenly can no longer afford renting.

Many people now live in alleys, under bridges and in abandoned buildings. Suddenly, the province has a homelessness problem, requiring even more tax money to solve.

Taxes alone didn’t drive shelter costs up, but it did play a role.

Nanaimo realtor Jim Stewart was the chairman of the association’s committee fighting to axe the tax for more than 15 years. He says the government “does a terrible job of dealing with issues like affordable housing.”

He’s right. When the government gets involved, projects become more expensive due partly to standards unknown elsewhere in the marketplace. It drove the unit costs of a housing project on Meredith Road through the roof.

When former premier Bill Vander Zalm introduced the PTT in 1988, he said it would be a rich-man’s tax since it only applied to properties beyond the reach of the average worker. Twenty years later, it affects virtually all homes sold in the province.

The BCREA calls for a gradual phase-out of the tax, starting with eliminating the 1% portion applicable on the first $200,000. A year later, it proposes removing it on homes below $500,000, before abolishing it completely.

It’s time to axe the PTT.

I look at so many houses, condos and the like. I see so many ideas, both old and new, for decorating homes, making them more livable, functional or durable. But when I was stumbling through the depths of the internet one night not long ago, I came across this product that still managed to excite me. I see so much potential for creative people, office workers, people with kids and basically anyone who doesn’t want to clutter the house with little bits of paper that are intended as a temporary holding place for their ideas.

The creators of this product claim that it’s able to turn any surface into a white board and that you can leave marks there indefinitely without staining the wall.

Ryan Coffey

I am choosing this topic first not because it is the one that I see people hurting themselves with the most, but rather because it is the one that will simply not go away. The most common question people ask me  is after all “How’s the market?”.

My hypothesis of why the notion of good markets and bad markets is so firmly entrenched in the public mind is simply because we live in a world where most often people hear about real estate from media outlets or as part of some other sort of “news”. News by definition needs something new to talk about. The fundamentals of real estate change slowly if at all. So, what they hear about most often is not necessarily the most important stuff to understand, it’s just the stuff that has changed lately. Pump it full of drama and it’s ready for public consumption.

I explain my views on this is detail in the series  “When To Buy And Sell.” (Go to the oldest post in this section to start.) Having said all this I want to make it clear that I am not suggesting that what the market is doing will have no effect on you or your financial well being. I am saying that this is secondary to your financial standing as well as some other factors in most cases. One can pick these things apart and dissect it into a million peices. I do that a bit in the series mentioned above, and a lot more in my daily working life. In the end, it always comes back to the above for me.

So what is this viewpoint I have for homeowners you may ask? (Or maybe you’re just asking “Why don’t you get to the point already?”) Well,  the short of  is quite simple. What you can afford is more important than what the real estate market is doing. You have to remember that all the dramas about ups and downs are short term and that in the long term values rise. This simple truth is what makes real estate such a good investment for both homeowners and professional investors. It requires patience though.

When you can understand and appreciate the statement “There are no good markets or bad markets. I all depends on what cards you are holding.” then you are starting to hear where I am coming from. If it still sounds like a Zen koan (riddle) to you, then you need to keep reading.

“It’s a startling finding, one that is reinforced by respondents’ overwhelmingly positive attitudes about Canada’s welcoming and tolerant treatment of newcomers. The results bode well for Canada’s efforts to attract highly educated immigrants as the global search for talent heats up in coming years.”

Click here for the full article.

Ryan Coffey

Ryan Coffey

Discount Realtor

After these two mishaps and three months of working hard to peddle their home to the masses with no (happy) results while trying to keep it spotless and presentable on top of both working full time, Roger and Shirley decided that it was time to hire a professional. After all, who knows what other unanticipated problems lie between them and a successful sale.

The discount Realtor, the third one if you were counting, came and took some photos and had the Pilkingtons fill out some paperwork. In a few days they saw the listing on the realtor.ca website and it looked pretty good. They felt much better now that they had someone to guide them through the process.

What no one told them is that paying half the commission for the real estate services means that half as much money is paid to the buyer’s agent BEFORE deductions and other business costs. At the end of the various deductions to the company, taxes and expenses most Realtors would be working for about the same as minimum wage or maybe less were they to sell this property to their Buyers. The Buyer’s agent has three choices: Work their stressful job with unpredictable hours for nearly free, refuse to show the property (and risk losing the client) or tell the buyer that they will have to kick in the extra comission in order to make the sale a part of the sustainable business model for that Realtor (and risk losing the client).

It never occured to Roger and Shirley that having the sign up and the listing on the internet would draw buyers to their Realtor. Nor did it occur to them that it would be a more sustainable business plan for that Realtor to sell other Realtor’s listing for full commission and leave up the for sale sign and listing of the Pilkington’s property in hopes of attracting more of such business.

Again days turned into weeks and weeks turned into months. A few showings happened here and there but there was no serious interest.

First off, I couldn’t agree with the poster’s comments at the end more. I so often see people drawing conclusions about the price of their home from information like this without taking time to understand the deeper working of it. I see the same sorts of conclusions being drawn from property assessments, what the neighbour’s house sold for (which of course isn’t as nice as their own) and  a price based on how much they paid for the place plus how much the average sale price has gone up plus how much it cost them to do their renos.

There’s only one thing that counts when pricing your home and that’s what people are willing to pay for it. When Realtors give you an estimate on the value of your home, we give you this price based on what has sold recently that is most similar to your home combined with  the experience and knowledge gained from spending pretty much every day thinking about the value of every property we see. And we see a lot.

If we’re really stuck for comparables, (rare) we might include average sale price changes as a factor. I for one, only do this if I really have no better option.

Why? Well, they only measure an average of what people are spending at a certain time.  Take on year ago for example, a time when hardly anyone was buying any real estate. A lot of people were scared off by the nonsense the mainstream media was spewing, those who were buying were being more modest with their purchases than usual and we had a higher number of first time buyers than usual. Those first time buyers were smart. The only deals I was doing at the time was with people like that and I was excited for them because I believed that it was the best time to be a first time buyer in quite a few years due to the low interest rates and the slight slump in the market. All in all, the although these stats do mirror the changes in actual value of real estate, they are only a general guideline. Unfortunately, I can’t think of a better way to measure the overall changes of vlaue in a given real estate market. The Vancouver Real Estate Board is trying a new way of doing these things, but I’ve yet to be convinced of its value. Pun intended.

To sum it up, what I’m trying to say is that I think most people make too much of the average sale prices. For real estate investors and real estate professionals they’re something to keep a finger on the pulse of. For most homeowners, they can be a source of making conclusions that appear more informed than they really are.  So, don’t get too detailed in your calculations.

By the way, what you should be paying at least as much attention to in my opinion is mortgage rates. Those can affect what you pay quite a bit more than market value.

Ryan Coffey

THIS time, the prize is a biggie. It’s a one week trip for two to Costa Rica with a stay in a fully furnished studio apartment with a yard, a community pool and a BBQ that’s 3 blocks from the tropical beach plus $1000 spending money.

It’s called the “1 in 10 Contest” because that’s the odds of winning. Once ten entries are received, the prize will be drawn. Those are pretty good odds if you ask me. How do you enter? Well, you need to refer me someone who is either buying or selling a property and have is turn into a successful transaction. This takes time, which is why it’s open until the end of the year.

Until the end of June, it’s only open to my existing clients. (i.e. Past sales.) But after that, it’s open to everybody and anybody who wants to enter.

Click here for more info.

Ryan Coffey

Sometimes, they’re surprised by the question and have no real answer for me, more often they give me some tips that help make things a bit easier for me and once in a while they save me from walking into a landmine or two. This post is about how I would answer such a question if a new buyer were to ask it to me.

- First off, you want to make sure you know what you can afford and what your plan is. I recently saw the phrase somewhere “A goal without a plan is just a wish.” So, regardless of what you think you can afford, you will want to make sure you have a solid financial plan in place and talking to a Mortgage Broker is a big part of that.  You don’t need to wait until you’re about to buy the home, and it’s much better to do it as soon as you start thinking that’s making the purchase is something you’re serious about doing. A Mortgage Broker will usually do more for you than a bank can for reasons I won’t go into here.  It would cause professional embarrassment for your Realtor, and waste the time, effort and money of everyone on both sides of the deal if you have an accepted offer on a place that you were sure you could afford, but it turns out you can’t get the mortgage for. You may find that it makes more financial sense to buy sooner than later, or vice-versa. Or you may find that you can afford something nicer than you originally dreamed of quite easily, or the opposite.

- Know the difference between what you need, want you really want and what you would like to have. Too many criteria can make it hard for you to find anything that suits you and asking for too much for your given price range is a sure way to find few if any potential places to live. In other words, be ready to redefine your search as you become more familiar with what’s available.

-I generally recommend that buyers look at 6 to 8 homes in person before they make a choice. This way, they have a reasonably good idea as to what is out there that is available to them. I also think, but don’t need to say so often, that if you’ve looked at 15 places and still haven’t found anything you want to make an offer on, it’s probably time to change your criteria. If you can’t change the price range, you might change something like how many square feet in the home or in the yard, how many bathrooms you need, how new and polished in needs to be and so on.

-Remember that I, as your Realtor, spend my days looking at homes of all sorts. I’ve seen all sorts of things real estate both beautiful and crazy exist and happen. I’ve dealt with a lot of negotiations in my time and I’ve seen people get what they want against the odds and I’ve seen people throw away amazing, life altering opportunities because they decided to take the advice of their buddy, their uncle, or some guy they met at a bar. That’s the one that gets me, and that’s probably the one that stresses me out the most. When I hear phrases that start something like “I was talking to (someone who bought a house once) and they told me to….” I cringe because that advice is as likely to be useful as it is to be harmful. You see, every sale is unique and what that person went through won’t be quite the same as what you go through. I find that some people also think they know more than they really do, that’s just how some people are wired. At least when you’re dealing with a professional such as me, you know that if I have an opinion on something I can back it up with experience or at very least with legit info that has been passed my way. If I don’t know something, I will tell you, and will either find out the answer or tell you how you can do it.

-Above all, clear and concise communication is key. It’s just as import that you listen and understand everything I tell you as your Realtor as it is for me to listen and understand everything you tell me.

A piece of advice that I am dispensing more and more often these days is that it is generally wiser to buy real estate than it is to sell it.

The reasoning is quite simple. Real estate values increase over time, and it costs money to sell. You can rent a property at a price that is similar to what it costs to make mortgage payments based on current real estate prices so why not buy today and rent it out tomorrow? If you are patient, you can allow the rental income to increase as the years pass while your mortgage payments decrease. This way, someone else will pay most of of your mortgage at first and eventually all of your mortgage on the property you are renting out. I suppose it is worth pointing out here for the uninitiated that if you already have an existing property you are more appealing to mortgage lenders.

Remember, the golden rule is that real estate prices go up and down in the short term but up in the long term. That’s faster than inflation by the way. So, let’s say you had bought a property  ten years ago and know it to now be worth a little more than twice what it was worth at the time. (This is average right now.) Instead of selling it before buying again, you can rent it out at today’s prices and receive an income from that property which you can use towards paying for your new one. Should you decide to do this again in a few years, it will be even easier. This way, you will accumulate wealth throughout your life.

Most people sell their existing home before buying the next one. This is understandable because the proceeds from the sale gives you more buying power for the next property, but in the long term it holds you back. You see, in the process of making that move you have to pay for a variety of things like lawyers, any fixing up you have to do in order to make the property more appealing and Realtors too. Us Realtors are expensive. I will defend the notion that we’re worth what we charge to my last breath. However, for you and your interests, that money is better left in your pocket, or rather left in your property.

My position is simply that there are good times to buy and better ones. The only bad time to buy is when you can’t afford it.  As for selling, if you don’t have to sell, don’t.  Just rent out your existing property and move into a new one. You’ll be better off in the long run.  This is all providing you can afford the payments and that you don’t get carried away and that you are realistic with how much rent you will get. Obviously, if you’re having kids and you can’t afford a big enough place for the new larger family without selling the existing one, this is an exception. Or if you are retiring and want the cash, or if you have just lost your job and can’t make the payments… these are good reasons not to follow my formula. Conversely, reasons like “I am moving overseas” don’t matter so much because I have a number of clients who are in that position and they own property here which they are renting out via a property management agency which charges 10% of the rent for the service.

Selling costs you a good chunk of change, and holding on to a property and renting it out rather than selling it will increase your net worth in the long run.

My position is not shared by all, and it is certainly not something that every Realtor will promote as listing properties that need to sell is the best kind of business we get. Also, the mainstream media will probably never tell you this because they are usually peddling drama and fear as this sells better than informing people on how to get ahead.

If you are of the more analytically minded, read the following posts for a deeper understanding of where I am coming from:

Good Debt: Yes, There IS Such a Thing!

When Should I Buy My First Home?

When to Buy and Sell Part 1

Ryan Coffey