Carol and Steve : property

Real Property Tax Assessment Act

Carol and Steve Coldwell Banker Parker Realty — Wed, 27 Jan 2010 18:31:00 GMT

The PEI Real Estate Association had an education session today on Real Property Assessment and the recent changes made to the legislation. REALTORS® were concerned with this change in legislation and how it may affect our industry so the Association decided it was a good idea to have the PEI Tax department come and explain the terms to us. It was an informative session and I have to say the Provincial Tax Commissioner, Beth Gaudet, did a wonderful job in the "hot seat" during the presentation in answering questions from the group of REALTORS®.

I am going to attempt to explain in simple terms what was conveyed to us today. The session was all morning, so I won't go in to all the details that were presented. I hope to cover the information that most people need to know when reading and understanding their tax bill.

Right now on your tax bill you have two values appearing on your "Summary of Assessment". One is called MARKET VALUE and the other is called FROZEN RESIDENTIAL. Effective January 1, 2010 the frozen residential is no longer frozen. It will appear on your 2010 tax bill as TAXABLE VALUE assessment.

For the past three years, property assessments on owner occupied residential property have been frozen. Therefore, unless there had been new construction or improvements on your property, the FROZEN RESIDENTIAL value on your tax bills should not have changed. The MARKET VALUE has continued to grow over the past three years based on a mass appraisal system used by the government. This may be where there is some confusion as when people think of "appraisals", they think of someone coming to their house and looking at it from the inside out which then gives them a report or an "appraisal" based solely on their property. This appraisal is often very close to the price of the home when it is put on the market to sell. The government, however, must assess all real property in the province each year and uses a "mass appraisal" system to do this.

Initially, an individual MARKET VALUE assessment is assigned to a new property. This assessment is the result of one or more on-site visits where an assessor will assign a value to the land and buildings. In general, a grading scale is used to capture size, the cost of construction for the respective components of the buildings (i.e. foundation and basement, windows and doors, exterior, etc.) and market conditions given the location of property. The grading scale is aimed at ensuring uniformity and comparability where, for example, a 3 bedroom bungalow with the same construction components and in the same area will have comparable values.

From that point on, however, annual adjustments to MARKET VALUE assessment are based on mass appraisal. For mass appraisal, government uses an analysis of the average sale price (three years of historical sales data) as compared to the average MARKET VALUE assessment for all property in a particular are or work unit. This is referred to as an assessment to sales ratio. A high assessment sales ratio is used as an indicator that on average the value of property in a particular area or work unit is in line with sale prices. Conversely, a low assessment to sales ratio is an indicator that on average the value of property in a particular area or work unit is low relative to sale prices. This assessment to sales ratio, together with market factors, is used to set an annual adjustment factor (usually in the range of 0-10%) for each work unit. Annual adjustments are applied to all property in that particular area or work unit to move the average MARKET VALUE assessment closer to the average sale price.

If you had work done to your home, information on building permits available to the tax department may be a reason for them to re-evaluate your home's MARKET VALUE assessment. In this case, the assessor would make an on-site visit to the property and, using the same grading scale as was used in the initial assessment of the property, re-assess the value of the property. As a result, the MARKET VALUE assessment for the property could be confirmed at the original value, increased to reflect the value of the property improvements, or decreased should the overall value of the property be determined less than the MARKET VALUE assessment on file. Any increase in MARKET VALUE assessment due to improvements is reflected both in MARKET VALUE assessment and the TAXABLE VALUE assessment.

Now as far as the FROZEN RESIDENTIAL tax assessment goes - that has been frozen for the past three years. That is the amount home owners are taxed upon. So home owners have seen no rise in this amount over the past three years and is the amount home owners have been taxed upon. So home owners have seen no rise (unless there had been new construction or improvements) in this amount over the past three years. The FROZEN RESIDENTIAL becomes the TAXABLE VALUE assessment on December 31, 2009 and is going to rise from here on in based on the CPI (Consumer Price Index) of the previous year. Since CPI was below zero in 2009, all TAXABLE VALUE assessments will remain the same for 2010 so property assessments will not increase. There is also protection for property owners in place which will cap the increase at 5%. So if there is a year the CPI is above 5%, the TAXABLE VALUE assessment will not increase more than the 5%. This is good for property owners in one way as you won't have to guess what your increase will be as you await your tax bill in May. You should have a pretty good idea what the increase will be based on the previous year's CPI. The government decided to use this process so there would be some transparency on the tax system and how it was calculated. They also found that in previous years if taxes rose in a certain area because of increased sales or development in an area, some people who had homes they had lived in for years with no updates were being taxed at an unreasonable rate based on homes around them. This won't happen now because the TAXABLE VALUE assessments will only rise at the rate of CPI, not at the rate of growth around the area of the residence.

If you are a home buyer, the news isn't as great. Since 2003, property taxes for a home buyer have been based on the full MARKET VALUE assessment and in most cases been greater than the taxes paid by the seller. Although this is not a change, it is something that came to light for REALTORS® on PEI as a result of the recent legislative amendments. Your taxes for the first year (or portion of the year) of ownership will be based on the MARKET VALUE assessment found on the public assessment roll for that property. In other words, the TAXABLE VALUE assessment for home buyers at date of purchase is set at this MARKET VALUE assessment. From this point forward, the TAXABLE VALUE assessment will increase annually by CPI as described above.

REALTORS® have expressed great concern about this part of the bill as we were worried that there would be a huge gap arising between the two taxes and this would cause a deterrent for people to sell their homes. The government has indicated that right now there is an average of a 4% difference between the MARKET VALUE assessment and the TAXABLE VALUE assessments on people's tax bill. We were concerned that these two assessments were going to grow at different rates since there are different factors determining both of them. Of course, the government can't predict the future, but they have researched the past ten years and have concluded that this shouldn't happen in the years to come based on numbers gathered from the past. They have also told us that if it does happen (and REALTORS® will be keeping a close eye on this), and/or data shows that the difference can be linked to deterring people from selling their homes, there will be some sort of recommendations put forward to resolve the problem.

So, as it stands now, a buyer will pay taxes on the MARKET VALUE assessment on a home when they purchase it. In most cases, this amount is higher than the TAXABLE VALUE assessment so a buyer's taxes will be higher than the current owners. At this point, the MARKET VALUE assessment is then moved to the TAXABLE VALUE assessment on the buyer's tax bill and going forward it will increase at the same rate of the CPI, just like everyone else's. The same value will remain in the MARKET VALUE assessment and that will grow based on the same formula as before using the mass appraisal and other criteria by the government.

We hope going forward that the process becomes easier to understand for current home owners and home purchasers. One thing we caution home owners to do is to keep an eye on both of these amounts on their tax bills. Although the government does not anticipate that the gap between the two will significantly exceed an average of 4%, we encourage you to look closely at your totals. Should the gap become a large one on your bill, we encourage you to contact the tax office or your local MLA. If this gap grows significantly, it could have an impact on your ease in selling your home. A potential buyer is not going to be happy about paying significantly higher taxes than you currently pay now and that is what will happen should the MARKET VALUE assessment rise to be a large percentage higher than your TAXABLE VALUE assessment. It may not seem important when you are living in your home, but some unforeseen future circumstance could see you having to put your home on the market and by then it may be too late to correct. As REALTORS®, we will only see this gap when we list your property, so it's up to the public to monitor their own tax bills on an ongoing basis.

One last thing of interest for home buyers. When you go to the bank or to your mortgage broker to calculate what you can afford to spend on a home, you should keep in mind you will be paying a higher tax than the current property owner. Make sure to ask your REALTOR® to find out the MARKET VALUE assessment of the home and take that number with you to your bank. We even encourage you to call the Tax office and ask them to calculate the amount of taxes you will be paying on your home based on that MARKET VALUE assessment. We as REALTORS® are able to give you the MARKET VALUE assessment, but we are not able to calculate the exact amount of taxes you will be paying based on that amount.

For more information on Real Property Tax you can visit this website: http://wwwtaxandland.pe.ca

Carol and Steve

http://www.peihouses.com

How can a seller prepare for a home inspection

Carol and Steve Coldwell Banker Parker Realty — Wed, 06 Jan 2010 18:57:00 GMT

If you have your house on the market and you receive an offer you choose to accept - this is always good news and can be an exciting time! You can now move forward with your plans to purchase another home, build a brand new one or move to an apartment. Before you pop open the champagne, you should first wait until all the conditions are removed from your contract such as financing and home inspection clauses. A home inspection can sometimes scare sellers but it's your real estate agents job to ease those worries and educate you on what a home inspection actually is as well as what you can do to make the inspection go smoothly.

Here are some basic pointers to get you started:

* Make sure all utilities are operating. If the house (more often cottage) is vacant, make sure the power and water are turned on. An inspector isn't able to complete his inspection without these two main utilities operating. If they are not turned on and he has to come back, there may be a fee involved that the buyers will ask you to pay if it's not taken care of the first time. Also, make sure there is oil in the tank so the inspector is able to check the operation of the furnace. Pilot lights should also be lit on propane appliances to ensure they are in working order.

* Make sure attic and crawl space access is unobstructed. This may seem like common sense, but often sellers don't think of it and will park their cars under the hatch in the garage. If the seller is not home, the inspector is not able to inspect the attic as he is not going to crawl on your vehicle! If the hatch to the attic is in a closet, make sure you clean it out allowing easy access. The same goes for basement hatches. Inspectors are not inclined to moving large furniture or piles of boxes in order to gain access to these places. (** As a side note, it doesn't hurt to do the same for showings as many people do like to look at these areas when looking at a home)

* Have the house accessible in the winter. Again, this seems like common sense but some people forget to shovel out the front door if they are used to always using the back door. The home inspector wouldn't be able to test this door to see if it opens and closes properly if there is a foot of snow in front of it! The same goes for any debris you may have stored on a back porch in front of a door you never use. Keep these things in mind and make sure all doors can be accessed.

* Make sure all areas are accessible. Remove any items you may have stored around areas such as: Electrical Panel, Water Shut Off, Boiler or Furnace or Oil Tank. These are always included in a home inspection and will need to be easy to reach.

* Catch up on normal maintenance. There are many simple things you can do to avoid any questionable remarks made by home inspectors.

* Replace all light bulbs that are not working. An inspector won't know the bulb is blown so that means there will be a question on whether or not the light in that room actually works.

* Clean debris from gutters and roof. Make sure gutters extend at least 6' to 8' from the building.

* Replace rotting wood and paint/caulk windows as necessary.

* Test and replace batteries in smoke detectors.

* Maintain furnace and boiler (have them cleaned on a regular basis by a professional). Replace furnace or HPV filters.

* Check the grading around your lot to make sure ground is sloped down and away from the house, leaving at least 6" of exposed foundation below the siding.

* Make sure sump pump is functioning properly.

* Check to make sure doors and windows are operational.

* Make sure your window wells are clean, well drained and properly attached to the foundation.

* Check plumbing fixtures for leaks and proper operation

* Ensure bathroom fans are working and are vented to the outdoors - NOT the attic!

* Provide receipts for recent work done to your home. You can also let the purchaser know about any transferable warranties that may exist.

The above information is based on a presentation we were given by a group of home inspectors. Many of the things they suggest should be a part of your overall maintenance to your home and things you may be doing on an ongoing basis. If not, you should consider sitting down with this list and doing as many of the items as you can. Doing these things won't guarantee a perfect home inspection, but it may avoid some small headaches and give you a more favorable report than if you chose to do nothing.

If you have any further questions about home inspections or about selling your home, you can contact us through our website at

http://www.peihouses.com

Carol and Steve

How a Real Estate Agent can prepare for a Home Inspection

Carol and Steve Coldwell Banker Parker Realty — Thu, 19 Nov 2009 18:58:00 GMT

Yesterday I attended an education session that had several home inspectors presenting information to a group of real estate agents. They gave us valuable information on what should be expected from a home inspection and how we can help our clients benefit from them.

One important tool they supplied us with was a checklist of things we could do as real estate agents to ensure the home inspection went smoothly for all parties involved. This checklist included the following suggestions:

Give the inspector a quick call the day before the inspection to verify the appointment.
Make sure the inspector is aware of access arrangements. If they need to pick up a key at the office or if you need to meet them there to let them in, they should be informed of this ahead of time.
Ask the inspector how much time he will need to perform the inspection and then let the home owner know. This is important as the home inspector is not able to shorten this time if the owner only wants to give access to the home for a short time. If the inspector is unable to have access to the home for the alloted time period, they will need to return to the home and charge an extra fee.
Encourage the seller to have all the utilities in operating mode. This is especially important in seasonal properties. A thorough inspection cannot be done on a property without the electricity or the water turned on. Should the inspector visit the home and all the utilities are not operating, they may need to return at a later date which would result in an additional fee.
Let your client know that it is normal for some issues to be brought up during a home inspection. Educate them on the process and their options.
Encourage your client to attend the home inspection. Even if they attend at least part of it, they can go through the property with the home inspector to learn about the components of the home and better understand any concerns that are presented in the report.
Real estate agents are also encouraged to attend the home inspection. This often ensures there are no miscommunications between agent and client when the concerns are later addressed.
Real estate agents should advise their clients that two people are usually all that should attend the home inspection. Some buyers use the home inspection to invite family members and friends to the house to view. This is not advised and should never happen if there is no real estate agent present in the home at the time of the inspection.

By following the guidelines outlined here, you should be able to make the process as painless as possible for everyone!

Carol and Steve

http://www.peihouses.com

Home Inspections

Carol and Steve Coldwell Banker Parker Realty — Thu, 19 Nov 2009 00:15:00 GMT

When you buy a home, you don't receive a money back guarantee as you do with other purchases. There is no return policy if you find yourself disappointed in your purchase after the fact. Once you are the owner of this home, you are then responsible for all the maintenance and repair costs as well as any bills that go along with it.

Before you purchase a home and when you write up a contract to purchase, you do have a clause that allows you to have a home inspection on your home before you decide that you want to go ahead and finalize the deal.

Since most people only use a home inspector once or twice in a lifetime, it's sometimes difficult to know how to choose a good one. Your real estate agent can steer you in the right direction with this decision and give you a list of names of home inspectors who are qualified. They may also give you the website of The Canadian Association of Home and Property Inspectors. The inspectors you find on this website are all qualified home inspectors. You should call each inspector and ask questions on price, availability, how their reports are presented, etc. This may also give you an idea of their personality and professionalism. Some people choose their home inspector in a similar fashion to other service professionals and use recommendations of other purchasers who have used the inspector and were pleased with their service.

When choosing a home inspector, keep in mind they usually only have time to perform one or two inspections per day, so they may need several days notice in order to accommodate your request.

A home inspector will review the property and record and assess it's condition as well as the condition of the systems within the home. They will note the components that are not working properly or those that have gone past their useful life or are unsafe. They are able to identify areas that may need repairs or areas that may have had problems in the past. Inspections are used to educate people on the property they plan to buy and give them valuable information on how to better maintain or improve the quality of this property.

Home inspections are opinion based which means several inspectors could have totally different reports after viewing a home. Just as several real estate agents could have differing opinions on the price of a home, home inspectors may have different opinions on certain aspects of a home inspection.

You can expect a home inspection to include the following:

Roofing and roofing components
Exterior components
Attic
Structure
Interior
Electrical
Plumbing
Heating
Water penetration

** Note: If the inspection takes place in winter months, the roof and foundation may not be fully visible for inspection if they are covered in snow and ice. Due to safety, home inspectors don't typically climb up on snow or ice covered roofs. They will inspect the roof from the ground.

Some things home inspections are not:

A home energy audit (Home inspectors are not able to tell you how energy efficient the home you are buying will be.)
Not a building code review
Not a renovation cost estimator (Home inspectors are not qualified to give you an estimate on work you may need to do to your home. You should have a contractor come into the home to give you this information.)
Not an appraisal (Home inspectors are not able to tell you how much the house is worth that they are inspecting. There are qualified people who can do this for you. Your bank may request an appraisal on the home for your mortgage.)
Not a well or septic system inspection. (Home inspectors are not able to check your well or septic system. You would need a professional to do this for you.)

A home inspection can cost a purchaser anywhere from a little under $400 up to $450. It typically takes about three hours for a home inspection. Following the inspection,the purchaser is presented with a written report with the details of the inspection. The home inspector can answer any questions you may have about the report at the time of this presentation. Many purchasers are present for the last part of the inspection which allows the home inspector to take them around the property and physically show them problem areas or educate them on how to use certain components of the home.

As real estate agents, we like to accompany our clients to their home inspections. This gives us the opportunity to hear what the home inspector says about the report so we can better understand any problems that may arise. This also eliminates any misunderstandings our clients may have about the home inspection and ensures everyone is on the same page when we sit down to discuss any issues arising from the inspection.

If you have any questions on home inspections or on purchasing a home, please feel free to contact us and we will help you in any way we can.

Carol and Steve

http://www.peihouses.com

Closing Costs - Purchasing a home

Carol and Steve Coldwell Banker Parker Realty — Fri, 02 Nov 2007 16:56:00 GMT

More and more we are hearing from clients how surprised they are at the fees involved in purchasing a home. I am including the typical closing costs involved in purchasing a home of $180,000. Costs can differ from company to company, but they should generally be this amount:

Payable to the government of PEI:

Deed Registration Fee: $375

Mortgage Registration Fee: $100 for collateral mortgage OR $375 for mortgage of $150,000 - $180,000.

Land transfer tax: 1% of the purchase price or the assessment of property (whichever is higher). $1800 on a purchase of $180,000. This tax can be waived for first time home buyers who have lived on PEI for at least six months prior to the home purchase.

Depending on bank requirements, you will also need either a Plot plan ($345 to $375 depending on the company); or Title Insurance: $275

Legal fees: These can vary according to companies or even lawyers within companies. It pays to shop around to get the best fee. And be sure to ask the lawyer what this fee includes. The suggested fee is $1500 but many lawyers will do it for less. The fee often depends on how much work is involved with the bank/mortgage company.

Disbursements and taxes on legal fees is approximately $200. Search fees, photocopies, postage, etc can be approximately $125.

When you purchase a property, the owners fill the oil tank of the home and submit the receipt to their lawyer. The cost of this full tank of oil is included in your closing costs. Depending on the price of oil at that time, it can be upwards of $800. If the owner has paid their property taxes, you will need to reimburse them for any they have paid in advance. For example, if you take ownership in July and they have paid their taxes up until December, you will need to pay them for the months they have paid but won't be living there. If there is a propane stove or fireplace involved in the sale, this tank is also filled and you are responsible for that expense as well. You will also need to take over the propane lease in this scenario.

If the home is on a well, you will need to pay for a water test before the closing day. This can run around $150 - $200. The cost will depend on the results of the test. If the first result comes back okay, no further testing is required. If the results are unsatisfactory, there needs to be more tests and the third party tester may charge you for mileage.

We hope this breakdown is helpful to purchasers and make your final meeting with your lawyer a bit less stressful as you will be expecting these charges on your final bill.

Visit our website at http://www.peihouses.com for more helpful information.

What things can lower your property value?

Carol and Steve Coldwell Banker Parker Realty — Sun, 04 Mar 2007 19:22:00 GMT

I watched an interesting program on HGTV that talked about the top 20 things that lower the value of a property.

Some of the things were as follows:

Laminate flooring: Although there is nothing wrong with laminate, putting it EVERYWHERE in your home can bring the dollar value down.

Personal style decorating: This is an interesting one. Very often, people want to stand out and want their home to be unique and special. They decorate a room, or their whole home in a unique way - country style, outlandish colors, or some other way to attract attention or to express themselves artistically. However, when the time comes to see their home, their very unique style may be a turn off to most people and hurt the value of their home.

Animals: Of course many people adore their animals and wouldn't trade them for anything. But the smell of animals can put people off and due to allergies, some people may not even view a home housing an animal. None of us want to get rid of our beloved pets so the only thing to do is to make sure your home is as hair free and smells as animal free as possible.

Smoking: This one is even worse than animals. The smell of smoke lingers in a home and is extremely hard to get rid of. Some buyers won't even finish looking at a home if there is a strong smell of smoke in it. If you are selling your home and you are a smoker, try your best to air it out and for the duration that your house is on the market..smoke outside.

Foundation cracks: Cracks in the foundation can be enough to send a buyer running for the hills. If your home is on the market, make sure these are repaired. If you don't want to spend the money to fix them, be prepared to price your home accordingly or to have someone give you a low offer to cover the cost of repair.

These are only a few of the twenty.

See if you can guess what some of the others were???

http://www.peihouses.com