Real Estate Talk:
The importance of timing

The timing between selling your last home and taking possession of your next home

By Joseph Marovitch

Recently a client sold their property and purchased another. The client required the funds from the sale of their last property to pay for the next property. The buyer of my client’s property required the funds from the sale of their property, which they just sold, to pay for my client’s property. The timing for signing and possession of both the buyer and seller was crucial and had to be precise otherwise both would be without a home to go to.

To make the situation even more complicated, the seller of the property my client purchased could not vacate their property until the last minute.

To solve part of the issue, my client contacted their bank and attained a temporary bridge loan to pay for their purchase in advance. This meant my client could take possession and move their belongings to the new property before they signed over their old property to the buyer.

Bad timing in an offer can lead to costly mistakes and can nullify an accepted promise to purchase.

The final solution was arranged signings. The first signing for my client for their purchased new property took place three days before the signing of their own house. The day after, my client completed their move to their new home. The second signing for the buyer of my client’s house took place on the morning of the possession date. This allowed the buyer to move in on the day of the signing to a house that was clear and clean.

The entire process was quick and decisions had to be thought out to the last detail to coordinate the buyer, seller, notary, and mortgage broker.

When a seller receives a promise to purchase that is acceptable, the seller and buyer can become excited and not consider some of the details of the offer, such as:

• Does the inspection clause allow enough time to acquire an inspector? Eg: Are seven days enough?
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• Does the buyer have enough time to acquire financing?
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• Do the possession dates work for both buyer and seller or will the seller not have time to find a new property?

As well, all these questions can overlap. Real estate brokers coordinate all these questions so that signing takes place without complications. Those who are not professional brokers can lose the sale with bad timing in an offer. Bad timing in an offer can lead to costly mistakes and can nullify an accepted promise to purchase.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: The effect on income property during COVID-19

State of the market

In the past two weeks, the rate of Covid-19 infection has increased across Quebec as schools open and people visit bars and restaurants. Last week over 500 geniuses decided to stage a protest in downtown Montreal. They were protesting their right not to wear masks and be allowed to spread infection in defiance of provincial law, thus permitting the spread to increase.

Downtown is dying under these conditions. Office buildings, bars, restaurants, and stores remain mostly empty and the condo market is running in the mud. However, more buyers than ever before are purchasing property outside the city at record rates. The suburbs, from Westmount to Dollard Des Ormeaux, are also active markets with rising prices.

The downtown situation will play out in one of two ways. Either everyone will wear masks, wash their hands and social distance to reduce the infection rate or they won’t, in which case infection will spread, deaths will increase, and the government will enforce another major lockdown until the pandemic is under control. We should all be smart and speak up when we see people not respecting the rules in place to protect everyone.

‘Office buildings, bars, restaurants, and stores remain mostly empty and the condo market is running in the mud.’

On another note, there has been talk of the government removing the tax exemption on the sale of primary homes. When a property is your primary residence for six months and one day or more, and you sell the property, the sale is tax-free. Therefore, many Canadians use their home as their retirement fund either via reverse mortgage or when they sell the property.

Now that the provincial and federal governments have huge deficits since providing CERB funds to citizens and Quebec special unemployment funds, the government is discussing taxing the sale of our homes. Note that homeownership is not tax-free. Homeowners pay transfer tax upon purchasing, tax on home renovations, land transfer tax and other subtle taxes along the way. These taxes will not be cancelled. If the government applies a tax to the sale of our homes, we will be the highest taxed homeowners in the world.

On the bright side, if a primary residence is taxed, the home also becomes a tax deduction as does every aspect of the property such as electricity, oil, cable, lawn maintenance and more. Borrowing against the property also becomes a tax deduction. Owners may as well leverage their property to the hilt, declare losses and get another deduction. Taxing Canadian primary residences is a bad idea.

Have a great week and stay safe!

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Other articles by Joseph Marovitch