BUYER'S GUIDE: MORTGAGE CALCULATOR
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Joining the ranks of hundreds of families who realize that home ownership offers a number of rewarding benefits including building equity, saving for the future, and creating an environment for your family. When you own your own home, your hard-earned dollars contribute to your mortgage. The equity you earn is yours. Over time, your home will increase in value.
We'll take you through the planning process step-by-step, to help you determine which home is right for you. You'll find a host of informative articles on mortgages, viewing homes, the offer, closing details and moving.
We will walk you through each step of purchasing a home; from helping you Locate a Home, show you the home, pointing out all the features, evaluating home sales in the area to help educate you on prices, explain the "Offer Process" and what is involved. We will explain the importance of speaking to one of our mortgage brokers, to get pre-approved for a mortgage.
We will also review the importance of a Home Inspection to help protect you from any hidden structural defects that the home may have. Finally we will also explain typical Closing Costs when you are purchasing a home.
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Definition of a Tax Sale Property
A tax sale property is the sale of a property by municipal or government tax authorities. Usually in cases where the homeowner has failed to pay property taxes and is now in arrears. The sale of the home can be held by public auction, public tender or by sealed bids. Usually, the purchaser acquires nearly clear title and immediate possession of the property. Just like Power of Sale homes, the purchaser's right to possession of the property may be postponed in order to enable the delinquent taxpayer a specified period of time to repay the tax.
With any investment, there are risks involved. The proceeds of the sale are used to pay back all of the unpaid taxes and expenses that were incurred in listing the property. Any balance, is given to the delinquent taxpayer.
Occasionally, when taxes that are due on a property remain unpaid, the tax authority at public auction, sell the "lien" obtained against the delinquent taxpayer's property. The successful bidder can then convert this lien into ownership of the property if the delinquent taxpayer does not pay the taxes that are due within a specified redemption period.
In Canada, tax sales occur in every province. In Ontario, the process is as follows:
Process for purchasing a Tax Sale Property in Ontario
Tenders must be submitted in the prescribed form and must be accompanied by a deposit of at least 20% of the tender amount in the form of a bank draft, certified cheque or money order made payable to the municipality or board.
The municipality that is selling the property will not make any representations regarding the title or to any other matters relating to the land(s) to be sold. Responsibility for researching these matters remains with the potential purchasers.
The Municipal Act, 2001, governs all tax sales and the Municipal Tax Sales Rules made under that Act. The purchaser is required to pay the amount tendered plus any other accumulated taxes, land transfer tax and possibly GST. Typically, the municipality does not have any obligation to provide vacant possession to the purchaser.
Interestingly, if the Municipality, were to foreclose on a property, all of the mortgages owing on that property would be automatically cleared from the title. That is why mortgage lenders insist on verifying that the taxes are paid.
Most governments do not want to deal with the expense and hassle of foreclosures. That is why they opt to sell the tax defaults. The government recoups its tax revenues immediately, by selling the past due tax certificates.
The property owner is given many opportunities to pay the taxes due in full in an effort for them to keep possession of the property; before there is a sale of property.
The City or Municipality is only interested in recovering the outstanding taxes, they typically offer the owner many opportunities to bring the taxes up to date and if arrangements for payment have been made between the owner and the city, the tax sale of an advertised property will be cancelled.
Occasionally, no one bids on a property. Some reasons for this could be:
There might be an easement on the land and the building on it is restricted, the property may be too small so that you can not build on it. The property could be land locked and is not accessible, zoning of the land could limit its use, the property may be in such disrepair that it is not worth the taxes owed.
In most situations the city or municipality may try to identify any restrictions so that bidders are fully aware before they bid and commit their 20% deposit; as the deposit would be forfeited should the bidder not close the sale.
Where the tax sale has does not have any bids, the City has one year from the first failed tax sale to decide if the City wants to vest the property to itself. The city will have to review and analyze any and all concerns regarding the safety of the building as well as any concerns as to contamination to decide if the city should assume any risk by putting the property in the City's name.
If the City has decided not to vest the property they may issue another request for offers and accept much less than the taxes owed. These types are properties where the taxes owed are much more than the assessed value. The City also has the option to do nothing with the property and then start the whole tax process again on that property.
When a property does get sold at the tax sale, the minimum price bid for that property must be at least for the taxes owing. Where the bid was for more than the taxes owing the balance goes to Provincial Court as well as any other creditors that were registered on title.
The Real Estate Department is responsible for any properties where there are not any bids, and the property is vested to the City. They will work with transferring title to another government agency, or the city may acquire the property for its own use. The Real Estate Department may market the property and attempt to get the best price for the property. Most likely, the city will market the property on the MLS.
Often, real estate properties will first end up as a power of sale and the lender will sell the property before it becomes a tax sale property. Most tax sale properties are usually vacant lands or if there is a building on it, the building is usually in very poor repair and adds little to no value to the property.
The outstanding taxes are paid first, even before the mortgage, but typically it is the lender that sells the properties in Ontario. Municipalities may sell when it's only bare raw land and there may or may not be any mortgages on the property.
You must do your homework as well as due diligence before you consider purchasing such a property.
Assignment of a Sale
The Assignment of Sale is just the assignment of a sales contract that two parites entered into at an earlier date.
This is the transfer of the right to purchase a property from the original purchaser to the new purchaser. It is not the transfer of the property.
An Assignment of sale is more common during the construction stage of many new developments and allow an original purchaser the opportunity to resell their right to purchase a property before having to complete the sale of that property.
Seling on Assignment
The first step to selling on Assignment is to clarify the terms of the original contract that you have entered into. You
require to confirm the details of your eligibility to assign the contract. In most cases the developer may have some administration fee charges and or other restrictions on when or how an assignment may take place.If you are permitted under your contract to assign your original purchase agreement; then you may do one of the following:
You may find a Buyer on your own. In this case you would be responsible for all costs relating to contract preparation, advertising, showing of the property, etc.
You may hire a licenced real estate company to handle the contracts, advertise, show the property, etc.
Any administration charge(s) and/or restrictions that may be in your contract can/will be enforced regardless of the manner in which you assign your property.
When Selling an Assignment of sale, it is recommended that you seek independent legal and financial advice as this can be a complex transaction.
Buying an Assignment
When Buying an Assignment of Sale, it is quite different than your regular real estate transactions. In this transaction you are only purchasing the contract from the original owner of that contract and assuming all of their rights and obligations.
Example of an Assignment
Original Purchase Price:$300,000 (as agreed upon in the original Contract of Purchase & Sale)
New Purchase Price: $350,000 (as agreed upon by the original owner and the new owners)
Difference /Assignment Fee: $50,000 (paid to the original owner of the Contract of Purchase & Sale)
Once the Assignment Fee has been paid by the new owner to the original owner; the new owner is then pays the original purchase price of the property as per the terms of the original Purchase and Sale Agreement to the developer.
The Assignment of Sale contract is not as simple as the above example. When entering into an Assignment it is important that both the original owner and the new owner seek professional advice. Let work for you and make your buying or selling experience easy and stress free.
For more information on Assignment of propeties, please give us a call.