Monday, November 24, 2014

Agents on the hook for illegal in-law suites

Discipline hearings signal need for fuller knowledge about two-unit homes
 By: Bob Aaron Property law, Published on Fri Oct 03 2014
The Real Estate Council of Ontario (RECO), the body that licenses and governs real estate agents, is cracking down on representatives who advertise two-unit homes without making clear whether the second unit — usually a basement apartment — is legal.
Many agents typically use wording such as, “Agents and seller do not warrant legal retrofit status of in-law suite.” Descriptions like this could disappear in the wake of two recent decisions of RECO discipline panels.
Dan Plowman has been a successful real estate agent in Whitby, Ont. for 25 years. Last year, he listed a property, describing it as having “income potential” with “separate entrance/in-law suite.” The MLS listing for the property included the disclaimer that “we do not nor does the seller warrant the legal retrofit status of the ‘in-law suite’.”
That wording, however, did not appear on Internet listings, or on
Wording like this is common in the real estate industry and is generally understood to mean that the basement suite is not legal. In my experience, Plowman’s listing used wording that thousands of Ontario agents have used and continue to use.
In a RECO discipline hearing, Plowman faced charges of acting unprofessionally by including information in an MLS listing which was either false, inaccurate, misrepresentative or misleading to consumers.
It was alleged that he failed to take steps to verify the legal status of the basement suite so that the appropriate language could be used in the MLS listing and available to consumers.
In an agreed statement filed at his hearing in June, Plowman admitted that he breached several sections of the RECO Code of Ethics and was fined $5,000.
The same thing happened this past May to Tammy Loeman, an experienced Hamilton real estate agent. She advertised a property with the remarks: “Fabulous home used as 2 family . . . own your own rental property or live in one unit and let the other one pay your mortgage.” She also marketed the home on web sites with the words “fabulous family home with income rental.”
Loeman acted for both buyer and seller in finalizing a purchase agreement. Unfortunately, the local zoning only permitted single-family dwellings. The buyer was an investor who intended to rent out both units for rental income.
His complaint was that if he knew the second unit was illegal, he would not have bought the property, or would not have agreed to the price in the contract.
At her discipline hearing, Loeman admitted that she acted unprofessionally by failing to determine and disclose material facts relating to the property. RECO fined her $10,000.
Under Ontario law, basement units that existed prior to November 1995 are exempt from meeting local zoning bylaw requirements (but not other safety standards). The discipline panel accepted that the basement apartment contravened the zoning bylaw, but in fact it may have been a pre-1995 unit and perfectly legal from a zoning viewpoint. As a result, the discipline decision could well be wrong in law.
It is not clear whether Plowman and Loeman were represented by legal counsel. What both Plowman and Loeman did is common practice in the real estate industry.
It appears that RECO now requires agents to confirm whether a basement apartment is legal — a complex task that involves determining whether the unit complies with zoning bylaws, fire code, building code, electrical safety requirements, and — in some municipalities — registration and licensing.
The problem is that municipalities will not tell owners or agents whether basement units are legal.

Friday, November 14, 2014

Sell your house like a boss

Golden Girl Finance,   
5 pro-tips that would make the representatives of 'Million Dollar Listing' proud
We admit it: Real estate reality shows have become our new guilty pleasure, especially those featuring luxury real estate, such as Bravo’s Million Dollar Listing. The gorgeous interiors, the personal dramas and the antics of the fast-talking, charismatic real estate agents… it all adds up to pure entertainment.
When it comes to selling your own home, however, entertainment is probably the last thing on your mind. For most people, it’s a stressful exercise fraught with emotion. After all, you’re parting with your home and any offer for less than you think it’s worth can be downright insulting!
But selling a house is a business transaction. While home may be where the heart is, selling it requires you to rely on your head, not your heart.
Fortunately, we’ve got some tips for you to do just that, thanks to the Real Estate Council of Ontario (RECO).  Focus on these and you’ll be on your way to a closing party… MDL style!
5 tips to sell your house like a boss
1.     Hire the best in your ‘hood
Many people are tempted to DIY their home sale in order to save on commissions, and sometimes it makes sense to do so. However, a great agent will earn her own keep by providing you with invaluable expertise and guidance. Choose someone who knows your neighbourhood well, may have a few potential buyers in mind, and has recent experience successfully marketing a property like yours. Pro-tip: Ask friends and family that have recently bought or sold a home for recommendations. Meet with a few prospective agents, ask about their experience and how they would market your home. Social media has become a huge selling tool, so check out potential agents on Facebook and Twitter to see if you like their style.
2.     Help your agent help you
Read through your listing agreement carefully, ask questions, and make sure you understand the fine print when signing with a brokerage. Then help your agent out by providing information about your home’s features, including renovations  you’ve done and any appliances or chattels you may be willing to sell with the house, like the fridge, washer, dryer and light fixtures. Pro-tip: Dig out those renovation permits and product warranties.
3.     Be open to the open house - but not too open
Remember that opening your home to outsiders requires a thoughtful eye and meticulous preparation – especially when a very real ‘open house’ is planned. While open houses can be a useful way to attract buyers, you want to make sure you do it right - i.e. maximum appeal for visitors, while ensuring protection for your property and valuables.  First off, the protection: Before you open up your home to potential buyers, take the time to safeguard your valuables. Lock away anything of value or personal significance, shut down computers, and remove personal files such as financial statements and bills. Secondly, the presentation: Remember that buyers are attracted to sparkling clean, neutral spaces with ‘good energy’, where they can envision their own furnishings, not yours. While you may feel strongly that the hand-painted belly casts of your children add charm and the collection of vintage whiskey bottles adds character, remember, your agent is not selling your lifestyle, she is selling a house. Pro-tip: Discuss with your agent how the open house will be run and set any ground rules that may be important to you, like having a sign-in sheet for visitors or having someone escort attendees at all times. 
4.     Know what you’ll give and take
Be clear with your real estate professional about your priorities, expectations and limits. Is the most important factor selling by a certain date or getting a certain price? Your agent is your lead negotiator and will have candid discussions with other agents, so she needs to know where you stand. When offers come in, she will help you weigh the benefits of each and provide advice on sign-backs. Pro-tip: It’s easy to get caught up in the excitement of an offer. Your agent can be an impartial guide, “keeping it real” and helping you to make clear-headed decisions.
5.     Pay attention to the closing details
You may not like talking about money, but it’s your real estate professional’s job to talk about it. So don’t be squeamish and ask for help estimating a budget to include all the costs of closing - such as staging, commissions, legal fees, and moving expenses. Pro-tip: If the closing date on your sale doesn’t match up with the move-in date of your new home, you’ll need to factor in storage costs and rent (unless you have some very kind relatives).
Hello partner!
The most important thing to remember is that when you engage a real estate professional to sell your home, you are entering into a partnership. And like any partnership, things go more smoothly when there is plenty of communication, respect and trust. While we can’t promise the process will be as entertaining as Million Dollar Listing, with the right partner, it will certainly be a lot easier and more enjoyable for you.

Tuesday, November 11, 2014

3 simple things that can destroy your credit score

By Gail Johnson | Pay Day – Tue, 7 Oct, 2014

As a small-business owner who happens to travel the globe, Trish Sare is always looking for deals. The founder of BikeHike Adventures, a Vancouver-based tour company for the physically active, she’s the first to admit she used to be a sucker for all the promos and bonuses offered by credit card companies to get people to sign up. 
“I used to apply for credit cards that offered deals all the time,” Sare says. “I never had any intention of using the card; I just wanted the deal. Then I found out that doing that wasn’t good for my credit score.”

Too many credit cards

It could be a whack of air miles, a gift certificate or a store credit: lenders are doling out all types of perks to lure new applicants. Having too many credit cards in your wallet can harm your credit score, though.
Transunion Canada and Equifax Canada — the two credit reporting agencies in this country — assume that if you’ve opened several new accounts recently, you’re planning on making several purchases and taking on a lot of debt, meaning you could be a greater credit risk.
“There are lots of incentives out there in the marketplace to entice consumers to open up credit products at additional institutions; it’s credit candy,” says Paul Le Fevre, director of operations for credit bureau Equifax Canada.

“But ultimately that has an impact on the credit score. If the consumer is in a position where they’ve got an additional $10,000 worth of debt because they’ve amassed five credit products at $2,000 each, they’re impacting their debt ratio.”

Even if you have no plans on using a card once you’ve scored the bonus, a large collection of plastic can still be a problem.
“Credit scores don’t get produced based on the intent of the consumers,” Le Fevre says. “It’s on the actual potential debt load and risk to the credit grantors. The more potential debt the consumer can get with credit products, the higher the risk.
“If I’m applying at 17 different retail places for credit cards,  that can have a negative impact from a scoring perspective.”

Miss a payment

Of all the things that can affect your credit score, missing a payment is the most damaging. That’s because payment history accounts for 35 per cent of a score. And the later you make a payment, the worse it is for your credit health.
“Payment history is a key driver in the score,” Le Fevre says. “It’s not only about the actual products you have but how you manage those products. You need to ensure all your payments are on time without exception.”
Once you make a payment, you need to be acutely aware of exactly how much you’re charging and what your credit limit is. Not doing so could get you into trouble.

Over-limit spending

Let’s say you make a payment of $500 on a card with a balance of $5,000 but then you go right back out and use it.
“If you go to the bank to pay off $500 then leave the bank, run to the mall, and put $500 back on or you go and put $600 on,” Le Fevre says. “Now you’re going over your limit, and you’re over your 100-per cent utilization from a scoring perspective.”
“The closer you get to 100, the more negative impact on your score,” Le Fevre adds, noting that credit utilization accounts for 30 per cent of a score. “Once you go over that, it has a significant negative impact on a score. Not only that but you may be paying $30 or $50 for an over-limit per-transaction fee.”
Other factors used to calculate a credit score are:
  • length of credit (15 per cent)
  • credit mix (10 per cent)
  • inquiries (7 to 10 per cent).
The best thing you can do for your score is to pay debt down or off completely. Credit grantors want to see you have a mix of credit and that you can use it responsibly. A score is important because it will affect the type and amount of credit grantors are willing to provide you in the future. If one day you want to apply for a mortgage, a strong credit history will help make it happen.
If you’re making efforts to improve a credit score, keep in mind it takes time.
“If you have outstanding debt, get that utilization down and pay down your outstanding balances overtime,” Le Fevre says. “If you decide on a Monday to get your credit score up it won’t be fixed by Friday.”

Thursday, November 6, 2014

3 strategies to pay off your credit cards

By Geoff Williams | U.S.News & World Report LP – Mon, 20 Oct, 2014 
If your monthly to-do list includes dedicating a chunk of change to your credit card balance -- or multiple balances -- you're not alone. Approximately 4 in 10 Americans carry revolving debt on their credit cards, according to a 2012 survey by the National Foundation for Credit Card Counseling and the Network Branded Prepaid Card Association. And although the average debt varies by source, credit reporting agency TransUnion puts the sum at $4,878, not including zero-balance cards and retail credit cards.
There are only so many ways to pay off a credit card if you have a significant amount of debt and an insignificant amount of money. But here are the three common strategies people in your situation employ, along with what you need to know about each option.
Focus on the card with the highest interest rate. Most financial experts say this is the way to go. Scott Halliwell, a certified financial planner at USAA, a financial services company that specializes in helping the military, speaks for many when he says: "The best move from a purely financial perspective is to attack the highest-interest rate cards first."
It makes sense. The card with the highest interest rate is usually the one that will cause you the most financial pain. The national average interest rate on a credit card is 15.2 percent, so if you bought a $1,000 refrigerator with a credit card, you'd pay a lot in interest if you took your time paying it off. Most monthly payments are 4 percent to 5 percent of the balance, so if you're making a $40 to $50 monthly payment, you can see how things can get bad in a hurry. Only making $40 monthly payments on that $1,000 refrigerator means you'll pay it off in 65 months and shell out $368 in interest.
So focus on paying off that high-interest credit card while at least making the minimum payments on your other cards. Once you've accomplished that, Halliwell says, "roll all the money you were applying to [the highest-interest card] each month to the debt with the next-highest interest rate. And so goes the process until all the debt is eliminated."
But beware: This is a responsible approach, but it can be a slow one. If you're buried under a lot of revolving debt and living paycheck to paycheck, you may get overwhelmed by how slowly it's taking to pay everything off. Then, like a dieter falling off the wagon, you may end up using your credit cards and adding even more revolving debt.
Aim for the card with the smallest balance. If you're someone who likes to see progress, try what Zev Fried, a financial adviser with JSF Financial Services in Los Angeles, calls the "snowball" strategy.
It involves paying off the credit card with the smallest balance first while, of course, continuing to pay at least the minimum balance on your other credit cards. Once you've done that, take the extra money you now have every month and apply it to the credit card with the next-smallest balance. After that one's finally paid off, you should have even more money to hurl at any other credit cards. Your extra money snowballs and eventually overpowers the debt on that last credit card.
"Generally, we recommend clients estimate the most expensive debt first since they will pay less interest," Fried says. "However, the snowball method's value is psychological and behavioral. It feels good to see an account at zero. This often motivates them to stick with the program and become debt-free."
Passard Dean, an associate professor of accounting at Saint Leo University in Saint Leo, Florida, and a former employee at the credit reporting agency Equifax, also likes the snowball method. "While it may make more logical sense to attempt to pay off the card with the highest balance to save on total interest paid, we need to be cognizant of the fact that we like to accomplish short-term goals, and the card with the highest rate may not be the one with the lowest balance," he says.
But beware: As Fried says, in the long run, you will probably pay more in interest.
Target somewhere in between. If you have $300 to throw at debt on four credit cards, and it makes you feel better to hurl equal amounts at each card, that's fine if it keeps you on track -- provided you're making at least the minimum payment for the cards and preferably paying more than the finance charge. The finance charge is the fee that makes up the interest you accrue every month if your card isn't paid off in full by the payment due date.
"It really does depend on how the person is wired and which method will keep them motivated until the finish line," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.
But beware. Since you're acting on emotion, and your strategy is more reliant on what feels right, make sure you're paying your bills on time. That's important no matter how you pay off your credit cards, because late fees will just make your debt fatter and possibly cause your interest to climb. Since this approach will probably be the slowest one, paying on time is even more vital.
Also, you need to look at that finance charge as much as you do the minimum payment, says Rakesh Gupta, a business professor at Adelphi University in Garden City, New York, who teaches a freshman seminar called "Your Money and Your Life."
"Some credit cards' minimum payments are less than the finance charge," Gupta says. So if that's the case, and you pay the minimum but the finance charge is higher, "you wind up paying interest on the interest," he says.