Government Funds Renovations--Do It This Year

The Federal Government of Canada passed into law the Home Renovation Tax Credit as part of the last budget ratified in the House of Commons. The measure implemented a temporary 15-per-cent Home Renovation Tax Credit (HRTC) to provide approximately $3 billion in tax relief to an estimated 4.6 million Canadian families.

The HRTC is intended to encourage investments in Canada's housing, as well as provide employment for trades-people and boost sales for those who make and sell building products. It applies to eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010. Work committed to after January 27, 2009 will qualify.

The 15-per-cent credit may be claimed on the portion of eligible expenditures exceeding $1,000 but not more than $10,000. It will provide up to $1,350 in tax relief to the tax payer.

There are two things that must be done in order to receive the tax credit. One must retain receipts for the eligible expenses (they do not have to be sent in to Revenue Canada) and one must also claim the deduction on the year-end tax filing for the period.

This is an example of HRTC eligible and ineligible expenses.

Eligible

• Renovating a kitchen, bathroom, or basement

• New carpet or hardwood floors

• Building an addition, deck, fence or retaining wall

• A new furnace or water heater

• Painting the interior or exterior of a house

• Resurfacing a driveway

• Laying new sod

Ineligible

• Furniture and appliances (refrigerator, stove, couch)

• Purchase of tools

• Carpet cleaning

• Maintenance contracts (furnace cleaning, snow removal, lawn care, pool cleaning, etc.)

The HRTC can be claimed by homeowners for renovations and enduring alterations to a dwelling, or the land on which it sits. A dwelling will generally be considered eligible for the credit if it is used for personal purposes, such as a house, cottage and condominium unit.

Benefits of the HRTC—Example

Greg and Karen, a couple who have a son getting married this year, have decided to upgrade their home so that wedding guests who stay with them will have a fresh place to live while they visit the province. Greg and Karen paint some of the rooms, upgrade the deck, stain the house and install new flooring throughout the home in 2009.

It cost them a total of $10,000 in expenditures. After taking into account the $1,000 minimum threshold, a 15-per-cent credit will be available on $9,000 in eligible expenditures, providing tax relief of $1,350.

When you consider that in Newfoundland the HST charged on all goods and services is 13%, one can quickly see that the HRTC roughly computes to an amount similar to a wavier of HST for eligible expenses. The amount won’t buy you a new car or a trip down south but the way Greg and Karen see it, “Its money better in their pockets than being squandered by the government on some futile public inquiry.”

R. Greg Osmond is a Platinum Award winning Realtor serving St. John’s and surrounding areas, Newfoundland and Labrador for over 20 years and can be reached at 709-895-2500. Visit http://www.rgregosmond.com/ for further information.

When Canadians Move, Home Sales Create Jobs

In April of this year, CMHC reported that the resale housing industry in Canada has generated more than 202,000 jobs and an average of $22.3 billion annually in various economic spin-offs in the period from 2006 and 2008. As a point of interest, each residential MLS® transaction has generated an average of $46,400 in additional consumer spending during this period. This includes the purchase of furniture and appliances, moving costs, renovations, services, and taxes.

The study suggests that the economic impact of each MLS® sales varies by province or region, from a high of $60,200 in British Columbia to $28,925 in Atlantic Canada. The report notes that spending relates to the cost of moving from one home to another and for renovations after moving in – it does not include any renovation expenditures by sellers to prepare properties for sale. It seems likely that this would add meaningfully to the total expenditures incurred. In my experience, there are not many who put their home on the market without spending at least $1000.

There is no doubt that Canadians on the move continues to be one of the major engines leading to job creation and economic prosperity. Many home buyers will typically buy new appliances or furnishings, and renovate in various ways to tailor their home to their specific requirements. All of this activity helps keep the money flowing throughout the economy. This indicates that if people stopped moving, the economy would slow significantly and many jobs would be lost.

In my next post, I plan to tell you how to save money by investing in home renovations before you list your home. People who spend money on their home in order to prepare it for the market can save thousands of dollars by doing two simple things. Come back soon and get the truth about renovation expenses. Or if you prefer, subscribe to my blog now and receive any updates as soon as they are posted.

R. Greg Osmond is a Platinum Award winning Realtor serving St. John’s and surrounding areas, Newfoundland and Labrador for over 20 years and can be reached at 709-895-2500. Visit http://www.rgregosmond.com/ for further information.

St. John's Real Estate Market Cools A Little

According to the Senior Market Analyst with CMHC, the fourth quarter average MLS® prices in St. John's surged 27% to $193,529 compared to $152,160 during the fourth quarter of 2007, representing the only growth market in Canada.

Prices spiked in the 2008 as there were often multiple buyers for the same home leading to a bidding war which contributed to the significant rise in average prices for the year. In light of this, real estate in St. John's, NL was one of the best places to have been invested in North America in 2008.

Thus far in 2009, market demand has weakened allowing for a more moderate pace of sales. As well, inventory has began to rise and some prices which were set with the 2008 demand in mind have now started to decline. But we are a long way from the buyers market that characterized St. John's in the early 90's.

While prices are cooling off from the peak of 2008, agents that I have spoken to are expecting that we will see a return to a more "normal" market in the current year. This will allow first time home buyers an opportunity to purchase a home at a more affordable price.

Buyers who have been put off by the slowing economy worldwide will find some selection again as well as home prices that are within their reach. But the fear of buying in a slowing economy may delay the next rise in prices. Some industry experts are suggesting that a return to market growth nation wide may not occur until 2011 to 2012.

It should be remembered though that the Newfoundland market will trump any national trends if any of the major construction projects anticipated are given the go ahead. In this event, real estate prices would rise again as demand would quickly return to the 2008 levels.

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Real Estate Negotiating

In Canada, Real Estate transactions are formed as legally binding buy and sell agreements that must be negotiated by at least two parties. A Purchase and Sale agreement will have a specific buyer and seller. As a minimum, it lists the terms and conditions of the agreement, the parties involved in the transaction and the closing date.

While it is true that some folks would rather not haggle for anything, negotiating is as important to Real Estate trading as writing the cheque on closing day. But securing an agreement between two competing parties is often not as easy as said, especially if either party has had little or no negotiating experience.

By the way, negotiating with a street vendor in Mexico to buy a toy clown is inadequate preparation for the rigor of contest over a quarter million dollar home. I am familiar with negotiating with the Mexicans. Let's just say I found myself pushing a little too hard when my wife announced I was arguing over 25 cents. I learned then that you have to know when to accept the final offer.

There are a few guidelines to bear in mind before beginning the process of negotiating for the dream home that you have just found, already love and now, oh my, must have! Things often move slowly with the home buying process until one experiences the "love at first sight" factor. Let consider the basic principal of successful negotiating.

Why Do We Negotiate?

One normally negotiates to acquire something if interest. The home buyer wants the vendor's home to gain a certain utility; a nice place to live, a convenient location, prestige among friends and colleagues, a two car garage, the indulgence of an "ensuite" bath, or if you can believe it, some want a certain proximity to the mother in law. I kid you not! The needs for home grown childcare have a way of taking precedence for some men who overlook the mantra, "don't by next to your mother in law"! By the way, my own mother in law is great, in case you are ever talking to her! That's all you heard me say.

So for some utility such as these, the buyer offers to exchange a sum of money with the vendor as an attempt to trade for their home. It isn't legal for any of us to just take what we want as some did years ago. We negotiate because as a society, we believe in "fair" trade; that is where we exchange fair market value for our acquisitions.

Negotiating is based upon the principal of fair trade. We refer to it as a win/win transaction. Both parties will trade if they believe they are not being pilfered. We should not offer a ridiculous price to purchase someones home without expecting a rejection. The more ridiculous the offer, the more emphatic will be the "not interested" from our trading opponent.

If either buyer or seller comes to the table with only their wish list front and center, giving no thought to the needs and desires of the other, a successful trade will be difficult to achieve.

Failure to understand what the other party needs in the transaction will leave little room for success. I have known a few deals to go south quickly when the vendor was offended by an offer that looked more like a heist.

What happens if we try to see things from our opponent's eyes, if we ask ourselves a few questions to help us understand our opponent? What will s/he deem fair and acceptable? If negotiations are going to succeed they must reflect a deal that allows both parties to win. Trying to negotiate a one sided deal where one party gains at the other one's expense will nearly always meet with unfavourable results. These win/lose deals fail to conclude because they violate the fair trade principal.

If you want to succeed in negotiating, it will be important to remember that each party to the negotiations must gain something that they are satisfied to substitute for whatever they are asked to concede. Expectations will vary depending on time, circumstances and the skill of communications. The first thing to remember though is to think about the other side before you begin. If you can find something that is important to your opponent but of little consequence to your own interests it will aid in you success.

Oh Canada, Oh Say Can You See?

Well, the highly anticipated visit of US President Barack Obama finally happened today. He and the Canadian Prime Minister, Steven Harper met with the press to answer a barrage of questions about our inter country relations, bilateral trade, border security, the environment, the war in Afghanistan, energy demands and of course, not the least of importance, the economy.

After listening to them eloquently address the multiple questions skilfully crafted by the press, I felt as though we Canadians and Americans were very good friends. One might even say the best of friends.

There was so much warmth between the state leaders that a person having gone into a coma only six months prior, might have concluded that our respective leaders were representatives from different regions of the same country, were he to arouse at that moment, Mr. Obama’s accent notwithstanding.

There were a few thousand Canadians with both American and Canadian flags waving who had positioned themselves to observe the motorcade that carried the state entourage to the press conference. When both Harper and Obama emerged, there was an outburst of cheer which hailed from the crowds who were thrilled by Obama's wave and brilliant smile.

As an aside, some Canadians will have to admit that those outbursts of exuberance were not so much for Mr. Harper. OK, all Canadians will probably have to admit that. Mr. Harper is a nice guy but Obama, he is just so smart and so articulate and so warm and so enamouring....you get the point. We too are struck by the charisma of the man.

The picture of the two statesmen dressed so smartly, walking side by side together was impressive. Their demeanour conveyed the appearance of two friends who were happy to be together again rather than those who were meeting for the first time.

It is no secret that the Bush era did little to invoke a courtship with Canada. But today was different! The mutual compliments, their warm smiles and to top it all off, Obama’s unscheduled visit to an Ottawa bakery to buy Canadian maple leaf cookies for his girls was icing on the cake. I can't help but think that perhaps we should be more than just friends. Perhaps the time had come to contemplate, dare I say it....our national unification.

Think of it now. When will there ever be such a strong sentiment in Canada as

Image via Wikipedia

we have seen today. We feel such a common bond as never before. Our neighbours to the south think like us, they talk like us, only with a twang, they shake hands like us, they look like us, and they shop like us; just more than us. We might as well have the same currency, retrain the border guards as greeters, rationalise our book prices, set up a Tim Hortons in Florida, raise a common flag and call ourselves the Republic of USACan.

We all live together on this over sized island, we all like to eat the same french fries, and we wear the same type of clothing. We drive the same kind of cars, on the same side of the road, we burn the same kind of fuel and along with a multitude of other things, we both blog on the Internet and we all love hockey. OK, strike the last one. Canadians love hockey. The Americans just love to beat the Canadians at hockey. And who could blame them since beating the Canadians at their own game is every ones dream.

I note with interest that Obama said he was looking forward to coming back here again...when it is warmer. And we understand that. My wife being one of the few exceptions in Canada, we like it warmer too. We could go on, but let me ask you. Given we are so much alike, would our union be such a bad idea?


R. Greg Osmond is a Platinum Award winning Realtor serving St. John’s and surrounding areas, Newfoundland and Labrador for over 20 years and can be reached at 709-895-2500. Visit http://www.rgregosmond.com/ for further information. Find him on facebook at R. Greg Osmond.

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