This month we saw a 6% rise in the average cost of homes in the GTA. Also we look at status certificates and some important tips on evaluating adjustable rate mortgages. The ever popular pearls of wisdom also return

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for more detailed GTA statistics: REALTYSTATS.CA/5A2X
416-931-4161
James Metcalfe BROKER
www.OurHomeToronto.com | Service@OurHomeToronto.com
REAL ESTATE UPDATE
Royal LePage Real Estate Services Ltd.
Johnston & Daniel Division, Brokerage
477 Mount Pleasant Rd., Toronto, ON M4S 2L9
NOVEMBER 2012
The average price of a resale home in the GTA in October was
$503,479 - a 6% increase versus the October 2011 average price
of $474,241. Price growth was reasonably strong across all of the
low-rise segments of the market: single-detached homes (+7%),
semi-detached homes (+6%) and townhomes (+3%). Condo
apartments turned a flat performance (±0%) in terms of price
growth. The overall price increase remains well above the rate of
inflation, mainly due to the fact that active listings have remained low
in historical terms. However it is also worth noting that the annual
rate of price increase has been edging lower over the past few
months as the market has gradually become better supplied. Finally,
on a year-to-date basis, the average resale price of a GTA home
stands at just over $500,000 and is up by 8% versus last year.
From a volume perspective, the month of October witnessed a 7%
decline in sales (6,896 transactions versus 7,425 in October 2011).
The sales decline was evident across all low-rise market segments:
single-detached homes (-3%), semi-detached homes (-7%) and
townhomes (-3%) and was particularly evident for condominium
apartments (-16%). The soft sales trend in recent months coincides
with the onset of stricter mortgage lending guidelines, which
came into effect at the beginning of July. Despite the recent trend
of softening volumes, overall sales volume is still in positive territory
on a year-to-date basis (January thru October). Over this expanded
time frame, 2012 sales are slightly as ahead of 2011 sales to the
tune of 1% (78,674 transactions in 2012 versus 77,606 transactions
in 2011).
GTA RESALE HOME SALES
8 9 10 11 12
GTA Resale Home Sales
APRFEB JUN OCT DECAUG
3,000
1,500
4,500
6,000
7,500
9,000
10,500
12,000
2011
2012
8 9 10 11 12
sale Home Sales
GTA AVERAGE RESALE PRICE
APRFEB JUN OCT DECAUG
$400,000
$540,000
$420,000
$440,000
$460,000
$480,000
$500,000
$520,000
20122011

2. A recent Court decision has specifically addressed the following
question:
Do condominium corporations need to inspect the unit before
issuing a status certificate (for the unit)?
The Court’s answer was “no”.
We know from other cases that condominium corporations may
need to disclose unit defects (of which the corporation is aware)
in status certificates issued by the corporation. But in the case
of Orr / Rainville v MTCC 1056 and Gowlings the Court said that
the condominium corporation only had to disclose problems of
which it was aware. And the Court said:
“It is not the obligation of a property manager to conduct an
investigation to determine if there has been duplicitous conduct
on the part of a unit owner which might somehow compromise
the title to a unit, prior to issuing a certificate.”
Briefly, the facts in the case were as follows: MTCC 1056 is a
39-unit townhouse condominium. Richard Weldon (“Weldon”)
was one of the principals of the original developer of the
project. Weldon had acquired one of the units and had “expanded
the unit” into the common elements (namely, the third floor
attic) - without approval. This work had started before, and was
completed shortly after, the condominium was declared. No
related amendments were made to the Declaration or Description.
The registered Description (in particular the survey plans)
showed the townhouse as a two-storey unit with a common
element attic space above.
Weldon was on the Board of Directors (along with another
representative of the developer) for the first few years after
declaration of the condominium – until he sold the unit. Weldon
agreed to sell the unit in 1997 and the sale closed in early 1998.
Prior to the sale, the “illegal third floor” was not brought to the
attention of the other Board members or the property manager
(by Weldon) and was discovered by them only after the unit
was sold. The status certificate issued to the purchaser (in 1997)
did not include mention of the “illegal third floor”.
The purchaser’s lawyer did not review the survey plans with the
purchaser prior to closing. The purchaser closed the transaction
without knowledge of the fact that the third floor was illegal.
After the purchase, the purchaser learned of the illegal third
floor. The Court held that the status certificate (which, again, did
not make mention of the illegal third floor) was adequate and did
not give the purchaser basis for claim against the condominium
corporation. [Note that the Court also found that, on these
particular facts, the knowledge of Weldon (even though he was
a Board member) could not be considered knowledge of the
corporation (at least on this issue).]
In summary, the Court concluded that the corporation was not
aware of the illegal third floor and therefore was not required to
mention it in the status certificate. And, again, the Court said
that the corporation had no obligation to inspect the unit, before
issuing the certificate.
The Court held that the purchaser’s lawyer should have
reviewed the survey plans (with the purchaser) including the
cross-sections showing the vertical unit boundaries. This could
have revealed the illegal third floor.
The Court ordered the purchaser to reinstate the attic to its
original condition. Furthermore, the purchaser (and Weldon) were
liable to the condominium corporation for reasonable fees for
use of the common elements (during their respective periods of
use of the third floor).
[Note: This decision is under appeal.]
This article was contributed by James M. Davidson. James practices condominium law with the law firm Nelligan O’Brien Payne. Please visit them at nelligan.ca.
STATUS CERTIFICATES AND UNIT INSPECTIONS
2

3. With the popularity of adjustable (variable) rate mortgages
continuing to grow, the need for accurate comparison of these
products has become increasingly important. While traditional
closed term mortgages are very easy to compare, adjustable
rate mortgages (ARMs) take a great deal of understanding to
effectively evaluate. Where selecting a specific closed term
mortgage from one of two institutions offering the same
rate would likely only mean a slight variation in the privileges
provided, the options and interest calculations on adjustable rate
mortgages can literally mean the difference of being financially
savvy or being conned.
The problem with evaluating adjustable rate mortgages really
stems from two things. First, comparing the effective prime
discount (or cost of borrowing) requires a relatively complex
financial calculation (for the average consumer). Second, to
compare the privileges and features, you have to understand
what they all mean, as well as know the right questions to ask.
Before you sign for the biggest loan that you will likely ever
have in your life, here are some things that you should definitely
know in advance (and as always get in writing):
1. Don’t be fooled by the low introductory teaser rates or
prime discounts. Take the time to determine your average
cost of borrowing until the mortgage becomes open (or
renews).To effectively compare the rates offered on ARMs,
you need to determine the average cost of borrowing for
the period until the mortgage becomes fully open (or
renews). To do this you need to do a weighted average
calculation that will give you the effective cost of borrowing.
A weighted average calculation can be done by: 1)
multiplying the introductory rate by the number of months
it is in effect, 2) multiplying the rate after the introductory
period by the number of months until the mortgage
becomes open (or renews), and 3) take the total from
1 and 2 and then divide this number by the total number of
months in 1 and 2.
2. Understand the conversion options and the rate discounts.
Many people sell clients on the idea that you can convert
an adjustable rate mortgage to a closed term mortgage
without any penalty at any time - so what??? Know exactly
what the rate discount will be if you convert. If it costs
you three months interest to switch to another financial
institution, they have got you trapped when you go to
negotiate your closed term rate.
3. Know how rate changes will affect your payments. Some
adjustable rate mortgages have payments that adjust
as prime moves while others do not. When prime goes
up and your payment stays the same then the portion of
your mortgage payment that goes towards principal is
decreased. This means that your amortization period is also
extended.
While the ups and downs of their face interest rates are not
for everybody, those who possess the financial and
psychological ability to endure generally won’t consider
anything else. With pre-payment privileges and rates that are
amongst the most competitive in the market, this is one risk
that has a tendency to pay off.
EVALUATING ADJUSTABLE RATE MORTGAGES
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This article was contributed by Calum Ross, a leadingToronto-based mortgage consultant. Please visit him at calumross.com.

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James Metcalfe BROKER
416-931-4161
www.OurHomeToronto.com | Service@OurHomeToronto.com
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477 Mount Pleasant Rd., Toronto, ON M4S 2L9
GTA Res
According to the Bank of Montreal’s inaugural report on
housing confidence (which was released in late October),
Canadians still have strong buying intentions when it comes
to housing. The survey found that 46 percent of homeowners
say that they intend to buy a property in the next five years.
Having said that, the number who would buy in the next five
years drops to 36 percent if house prices were to rise by
5 percent. This shows the sensitivity of the market to prices
at a time when many economists expect them to soften.
Notwithstanding this sentiment, the survey also revealed
that homeowners generally expect housing prices to rise by
2 percent over the next year (residents of the GTA are even
more optimistic).
Among the other interesting findings of the study was the
insight provided on consumer debt. While nearly all of those
surveyed said debt is a serious issue for Canada, only 19
percent thought that it was a problem for them. Sixteen
percent did say that a 10 percent increase in mortgage
payments would leave them at risk of not being able to afford
their home.
All in all, this study is encouraging in the sense that it
demonstrates that most Canadians seem to be more
confident and optimistic about housing than both many
economists and the federal government! At the end of
the day, consumer decisions are what make markets so
consumer confidence is of utmost importance.
It’s hard to believe that this is my last newsletter of the
year - where has the time gone! I would like to extend my
most hearty wishes to you and your family for a joyous and
festive holiday season. I would also like to wish you a very
happy, healthy and prosperous year in 2013. Speak to you
again in January!
“Anger is an acid that can do more harm to the vessel in which it is stored than to anything on which it is
poured.” – Mark Twain
“Some cause happiness wherever they go; others whenever they go.” – Oscar Wilde
“Do not worry about avoiding temptation. As you grow older it will avoid you.” – Joey Adams
“The difference between stupidity and genius is that genius has its limits.” – Albert Einstein