I found this excellent article on About.com, in their extensive Real Estate section. Although the information makes reference to American companies Freddie Mac & Fannie Mae, it is none the less relevant to the milton ontario real estate market. The article is aimed at real estate agents, but that’s a good thing as it gives you information that many homeowners won’t have! For more on the local absorption rates, see my most recent posts on this blog.

Whether it’s the listing presentation meeting, or you’re following up with a seller who’s been listed a while, provide the added service of helping the real estate seller to understand absorption rates and how their price falls into the pool of available homes for sale. Absorption rates are now required from appraisers for all government related loans; which is just about every loan.

CMHC, the Federal housing organization, also takes the absorption rate into account; the role the absorption rate plays in a funding decision is dependent on the type of loan, area the property is in, etc.

Fannie Mae’s Form 1004MC, and Freddie Mac’s Form 71 both require that appraisers calculate days on market, inventory levels, and absorption rates for the comparables and immediate area around the subject home. The assumption is that tracking the variability of these three measures across time periods can provide trend information to determine home value direction. So, what’s absorption rate?

Example of Absorption Rate Calculation – Let’s say that we take the number of settled sales for the last six months in a certain area, and it is 120. We then check the current number of active listings, and it is 520 in that area. First, divide the 120 sales by 6 months, to get a rate of 20 closings per month. Then, divide the 520 active listings by 20 to arrive at 26 months to move that inventory; that’s the absorption rate.

Using Freddie Mac’s Form 71, we see that they require this number for three time periods; the immediately preceeding three months, four to six months back, and seven to twelve months in the past. Then, the appraiser must indicate whether the absorption rate is decreasing, stable, or increasing. If it’s decreasing, then the market appears to be slowing, and this could cause the value of the home to be adjusted downward.

As a homeowner considering selling your home, the absorption rate, when viewed in an historical perspective, can be an extremely informative tool in planning when to sell, how long to expect the sale to take, etc.

Also considered are corresponding periods for days on market, inventory, and the sale-to-list price ratio.

If sale prices are getting lower in relation to list prices, this will be evident on these addendum forms, and the appraiser should be adjusting the home value downward. So, it’s clear that a good market is showing higher absorption rates, lower inventories and shorter times on market on average. They prefer to use “median” numbers by the way.

On the bad side, if median absorption rate is declining, and days on market and inventory are rising, this doesn’t look good for the market in the near term. Couple that with wider spreads between list and sale prices, and the picture darkens as well. But, good or bad news, you should be on top of this information and sharing it with sellers and prospects to help them in their decision processes.

I came across this article today, and it made me think abo u

t the real estate market locally – more specifically, how the market is in kind of a shambles because people have been buying into the messages from the mainstream media (msm) for far too long.

You see, the msm has spent the last 12 months talking about how everything is so bad, and how much worse things are going to get, and everybody listened. It reminds me of the politician who reports when gas prices are going to go up – they go up. What if he reported that gas prices are going to go down? Might they go down?

Anyway, my position on the real estate market has been, and still is, that people have to live somewhere, so why not buy a house? Prices have gone down, rates are crazy-low, and rents have gone up. Talk about three things to stop people from renting! Yet they have continued to hold off on buying a home.

The reasons given are varied:

1. Worry about job security. Well, as mentioned, if you have to live somewhere, and it is cheaper to own than to rent, why would you rent?
2. Prices are going to go down even more. Are they? They haven’t, and they’re not going to. Why? Because we are not the United States, our systems work very differently, and Canadian banks don’t want to own real estate.
3. If it is such a great time to buy, more people would be buying. Actually, the fact of the matter is that if there were more well-priced, well-maintained houses on the market, more people would be buying. There’s almost a herd-mentality amongst homebuyers – when everyone’s buying, it must be a good time to buy. Hmmm. The laws of supply and demand say the opposite, don’t they?
4. I’ve got 9 months left on my lease. Yes, and? What I mean by this is that there are all kinds of creative ways to buy now even if you are in a 1-year lease for another 364 days. Call me for details – there are lots of ways to take advantage of the rates and prices before they go up (which they will once everyone else starts buying).
5. I don’t have enough of a downpayment saved. Well, what is ‘enough’? You can still get 100% financing; you can still get cash-back. I’m telling you, times are perfect to buy!

So, are you going to just sit back and wait? Wait for changes that won’t come? Wait until the home of your dreams is priced out of what you can afford because prices and/or rates have gone up?

Search on Twitter for GTA real estate agents – they are all saying the same thing: multiple offers. The sellers won’t sit back and wait for you – get into the market while it is to your BEST advantage.

Here’s the article that spurred my thinking:

The Bank of Canada is declaring the recession essentially over in Canada and projecting the economy will bounce back at least twice as strongly as in the United States.

The bank said today it estimates the Canadian economy will advance by 1.3% during the current July-September period, and 3% in the fourth quarter, both at annualized rates.

The bank’s quarterly monetary policy report contains many cautions about how the world and Canada is coming out of the deepest and most painful downturn since the Second World War.

The bank remains concerned that the fragile financial systems in the United States and Europe may contain more unpleasant surprises that will sideswipe the global economy once more, and it believes the strengthening loonie is not helpful given the Canada’s dependence on exports.

As well, it warns the recovery is at best nascent and dependent on massive government stimulus and historic low interest rates to support domestic activity and consumer spending.

But overall, the new outlook represents a clearly more optimistic view of the Canadian economy than governor Mark Carney presented in April, when he saw the contraction that began last October lasting at least until the fourth quarter of 2009, and the dip in the first month of this year breaking all records.

The Bank of Canada first indicated it was about to brighten its outlook on the economy on Tuesday in a statement accompanying the decision to keep short-term interest rates unchanged.

At that time, it said the economy would shrink by 2.3% this year—implying growth had already begun—and expand by 3% in 2010.

On Thursday it said that economic growth “is now projected to turn positive in the third quarter.”

Carney told reporters the recovery it will be a “gradual” process.

“Global economic activity appears to be nearing its trough, and there are increasing signs that activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system,” he said.

“However, this recovery is nascent, and to sustain global growth effective and resolute policy implementation remains critical.”

That effectively means that the downturn that cost Canadians close to 400,000 jobs since October has ended, although the recovery will be modest by historic standards.

The bigger bounce the bank is projecting starting this quarter does not change its overall view that it will take until mid-2011 for Canada’s economy to return to full capacity.

Looking for a 4 bedroom home for sale in Milton Ontario? Your search just might be over. SORRY – IT IS NOW SOLD!

Before you walk in the front door of this home (originally a prize in the Princess Margaret Lottery), you have to turn around and make note of the beautiful, lush forest across the street, and you have to look down to take in the classic slate flooring on the covered front porch. Take a seat, close your eyes, and imagine relaxing on the porch in the evening, watching the world go by.

Entering into the home, you will immediately sense that you are in a special place, a place of rich wood, marble, and granite finishes; a place bathed in pure sunlight. Standing in the grand entry foyer, you can’t help but imagine how great you will feel greeting your guests at the door, whether they’re coming for a Summertime BBQ, a formal dinner, or a Holiday meal with your famil

y. Yes, this 4 bedroom home in Milton Ontario is an entertainers dream.

To your left as you enter is the formal dining room and/or living room, however you prefer to present this home.

Just past the dining room of this 4 bedroom home in Milton Ontario is the main-level family room.Personally, I think the builder should have called it the ‘Great Room’, because you will absolutely feel GREAT! relaxing in this 2-storeyroom with more rich, dark flooring, a virtual ‘wall of windows’ and the gas fireplace with it’s classic marble mantle and surround. Those cool Fall evenings aren’t that far away, so you’ll not be waiting very long to enjoy this toasty-treat.

Now, granted, family life is, for most people, more important than entertaining, and you’ll certainly be pleasantly surprised by all the ammenities this home has to offer for your every-day life.

As you might expect in a 4 bedroom home for sale in Milton Ontario, the kitchen of this home has plenty of space for family meals, or Dad to cook dinner while Mum helps the kids with their homework,or, there’s tons of room for all family members to cook together!

How are you feeling about this immaculate, totally upgraded 4 bedroom home in Milton? Are you thinking that it’s a home that might work for your family? Well, perhaps a word or 3 about the home theater will sway you?

Most people, when they think of home theater, think of a big TV and surround-sound. Well, that’s not the kind of home theater I’m talking about here, no sirree. I’m talking about a MASSIVE screen and projection unit, reclining chairs like you find in movie-star’s houses, and 2nd-tier seating, all combined to bring you a feeling of being totally immersed in the experience of watching movies. All without the need for 3-D glasses!

This home in Milton is a total WOW! I KNOW you’ll love the benefits of owning a home as grand as this, such as having a self-contained guest suite in the lower-level (with separate access from outside), 4 large bedrooms upstairs, a beautiful deck to enjoy all year round, premium finishes, which really counts when it comes to durability and standing the test of time.

This 4 bedroom home for sale in Milton Ontario is all set for you to move in and enjoy your life in comfort, style, and peace.

For the rest of the details, make sure you give me, Chris Newell, a call at 905-208-7002, or send me an email

I received the information below from a mortgage broker I was not aware of until today, and thought it relevant to those of you who are interested in investing in real estate.

Residential and Commercial Multi-Unit (Underwriting Guidelines)

The following issue of Financial Report will concentrate on commercial and residential multi-unit underwriting. I will show you what banks, trusts and CMHC look for in clients and properties before recommending deals for approval. This info will be of particular interest to you, if you work with investor clients who are looking to diversify their investmet portfolios by adding some real estate to it as well as additional source of passive income.

Underwiting Residential Investments (1-4 units)

• 1-2 units as low as 5% down – purchase (refinance – 95%)

• 3-4 units as low as 10% down – purchase (refinance -90%)

• Conventional deals start at 20% down

• Must be zoned Residential

• Usually lenders ask Retrofit Certificate and Legal Zoning

• Can be owner occupied or pure rental

• 80% of the rental income is used to qualify the deal in addition to applicants income

• Minimum Beacon scores are 600 to 650 – depending on circumstances

• Down Payment can be gifted or borrowed as long as applicants qualify. Also Down Payment can come from proceeds of refinance of other properties, including principle residence.

• Income coming from other properties can be used as well

• Some lenders use Rental Offset, which helps a lot in qualifying new purchase or refinance.

• General rule is – Property should be self-supporting.

• Debt-To-Coverage should be between 1.25/1.00 (CMHC) to 1.10/1.00 (Convential)

• Some lenders require rental spread-sheets to be completed some only consider existing rental agreements.

• 2 year financial history on the property is preferred

• Maximum Amortization is 35 years (Important for cash-flow)

Underwriting Commercial Investments (5+ Units)

• CMHC will consider Multi-Unit Properties with as low as 15% Down Payment

• Down Payment can be gifted or borrowed as long as applicants qualify. Also Down Payment can come from proceeds of refinance of other properties, including principle residence.

• Ideally, investors should have some experience in running residential type of investments

• CMHC requires that the borrower have a net worth equal to at least 25% of the loan amount, with a minimum of $100,000.

• Minimum Debt Coverage Ratio (DCR) based upon agreed amortization period and the contract interest rate (minimum five-year term)

• Rental properties with five to six units: 1.10, 1.20 (for refinance)

• Rental properties more than six units: 1.30 (term less than 10 years) 1.20 (term 10 years or more)

• Loan-to-Value Ratio:
Up to and including 80% – 3.50%
Up to and including 85% – 4.50%

• Conventional deals start at 75% Financing

• Vendor-Take-Backs may be considered subject to qualifications.

• Financial History and Statements of the building are required for at least 2 years (Some times up to 3 years, depending on the lender)

• Amortization can be higher or lower then 25 years depending on the useful life of the building and general property condition.

• Appraisal by an AACI accredited appraiser and Phase 1 Environmental Assessment as usually required. (CMHC and Conventional)

• Commercial Insurance Specialist will prepare an Insurance Binder in accordance with lending institutions requirements.

Approval Process:

1. Application with all applicable docs is submitted to the lender.

2. Letter of Interest is Issued outlining various conditions.

3. Once signed and all applicable conditions are met, application gets sent to CMHC or internal department for final approval – if conventional.

4. Once approval is granted, internal credit sends the file to its treasury department to lock-in the rate.

5. Instructions issued to the lawyer to register upon closing.

This is great information, and very useful to keep bookmarked in your browser, so you can get a solid idea of cash requirements, lender requirements, etc. For an even better idea, let’s sit down and invest an hour in discussing your thoughts and plans for investing in real estate anywhere in Ontario.

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• Commercial mortgage

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Below you will find the most common real estate forms used in Ontario, with a plain’ English explanation accompanying each section of the forms.

These are a great resource for you to view, so that you understand the forms your agent is asking you to sign.

This first form explains the difference between Customer Service & Client Service:

For offer forms, listing agreements, and more, click the link below:

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