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What To Know About Condos With Post Tension Cables

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If you're shopping for a condo, you've likely come across units you've like in buildings with Post Tension Cables (PTC).  You may have also heard concerns, warnings, and stories about them, which makes you question if they are right for you.  Let's take a look at the pros and cons so you can make a confident decision on if they are right for you.



WHAT ARE THEY?


Post-tension cable concrete is a construction method used in condos, parking garages, and also office buildings, bridges, etc. It's a process by which sleeve- covered steel cables stretch along the width of a structure, anchored at either end and encased in concrete. Because the cables add strength to the slab, longer spans are possible, and fewer supports are needed. The benefits are lower construction costs and more design versatility.



WHAT COULD GO WRONG?

Some of the considerations for this construction method are the ongoing maintenance/costs and potential for corrosion and deterioration of the cables if exposed to water and oxygen, which can lead to expensive repairs. For these reasons, some lenders are cautious, and fewer mortgage insurers provide coverage. As of this writing, Genworth Insurance does not consider buildings with post-tensioning, and Canada Guaranty will consider an exception, a building constructed in 2001 or after. Canadian Mortgage Housing Corporation (CMHC) is the only mortgage insurer for buildings between 1970'-1985'.



WHY DO MORTGAGE INSURERS MATTER?

If you have less than a 20% down payment, the mortgage will need insurance, and you are limited to only lenders that work with CMHC. This limitation can also come into play when you sell and potentially reduce the number of buyers that qualify to purchase your property.



WHY WOULD YOU CONSIDER A BUILDING WITH POST-TENSION CONCRETE OR THIS AGE?

Because some of the older buildings offer greater affordability and benefit from larger square footage, ideal locations, quality construction, and features like underground parking, etc. which can add value and increase the quality of living.


Some people may focus only on buildings without post-tension concrete; however, that does not protect you from all risks as other systems could fail (i.e., plumbing, HVAC, patios, envelope membranes, roofs, etc.). These repairs can be equally as expensive and require additional funding from owners.

If you decide to consider buildings with post-tension concrete, confirm your options and the policies with your mortgage broker or bank. And below are other resources that will help you make an informed decision.


  • Post-Tension Cable Report with engineer's feedback on the overall condition, if there are potential concerns and funding requirements for future repairs.
  • Details of repairs maintenance and funding can are in the audited financial statements, operating budget, and reserve fund study (a physical inspection of the building's depreciating property every five years).
  • Review the Board and AGM Minutes for related comments.
  • Condo Document Review - Along with reading all the documents yourself, I recommend having a condo document specialist review all information for an objective summary on the financial health, Bylaws, management, etc.
 
WHAT I WOULD DO

Because condos in older buildings with PTC are often larger than newer and have ideal central locations, I would consider them. Iunderstandthatonresalethat there may be fewer buyers; however, if the property itself offers a higher quality of life than that is a trade-off, I am willing to consider for the right property. I would undoubtedly have the condo documents reviewed by a specialist and get their opinion.

Defects and expensive repairs and replacements can happen in buildings of any age, so the PTC is not the only potential risk.

Give yourself the most options by doing your own research, talk to a specialist in all related areas for their feedback, and be clear about your risk tolerance and capacity. Then you can make a confident decision if condo buildings with PTC are right for you.



YYC - CONDO DOCUMENT SPECIALISTS


RoyRasmusen-ExpertCondoReview 403.383.2920|rrasmusen@shaw.ca


Condo Check http://condo-check.com/


Condo Document Inspection Centre http://www.cdicinspections.com/


Condo Doc Review https://www.condodocreview.com/




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FTHBI


There seems to be more criticizing than applause, so let's discuss some of the pros and cons so you can decide for yourself if the program is right for you.



WHY?

The Liberal government introduced the FTHBI program in September 2019' intending to make it easier for first-time homeowners to purchase a property and lower the monthly payments through a shared equity mortgage.



THE BASIC 411

  • Canada Mortgage and Housing Corp (CMHC) administers the program that offers qualified first-time home buyers a 10 % shared equity mortgage for a newly constructed home, 5 % existing homes home in exchange for an equity stake. Consider the Incentive as a second mortgage.
 
  • The Incentive must be paid in full when the property is sold, after 25-years, if you are buying out the co-borrower, porting your mortgage, or there is a change in use.
 
  • A qualified buyer can withdraw funds from an RRSP to purchase or build a home without having to immediately pay tax on the withdrawal.
 
  • The property must suitable for full-time and year-round occupancy, and not a revenue property.
 
  • Additional fees will be insured upon closing because your lawyer will need to process two mortgages. And, you may also incur additional appraisal charges.



CMHC'S EXAMPLE

Anita wants to buy a new home for $400,000.


Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) from the Government of Canada.


The Incentive lowers the amount she needs to borrow and reduces her monthly expenses.


As a result, Anita’s mortgage is $228 less a month or $2,736 a year.



SOME CONSIDERATIONS

  • When the home is sold, the government takes back the same percentage amount on the new value. So if your home sells for a higher price, they get more than they initially invested while you paid for all the related costs, mortgage insurance fees, renovations, and upgrades costs, plus you did all the maintenance.
 
  • On the Incentive program, if your property value increases, then you're forgoing a portion of the tax-free benefits on the appreciation value.
 
  • If the value of your property goes down, you still owe the government the same percentage amount on the new value, and their money comes out first, which will affect how much you walk away with.
 
  • It could take much longer to be approved for this program than for a normal mortgage loan, and sellers may not be willing to wait.
 
  • At this time, it's not clear if the government will allow refinancing on the first mortgage and postpone their security on the new financing, which could create more risk and complications for the lender on the first mortgage.



WHAT WOULD I DO

It seems like the new program could help some first-time buyers focusing on lower price point properties get into the market because it can lower monthly payments. However, the opportunity does not come without costly strings attached and unknowns that I am not comfortable with.



For me, the potential risks are higher than the possible gains.


The Incentive does not help buyers save for, contribute to the down payment or lower the bar to make it more feasible.  And it also doesn’t help buyers in Canada’s most expensive cities like Toronto, Vancouver, etc either because property value far exceeds the limit.  It's also interesting that they share the gains on resale when the homeowner invests all the time, money and effort. Yet, they don't take less if the property loses value on resale.  Interesting...



WHAT TO DO NEXT

Do your research and educate yourself on all the details of the program then speak to different industry professionals for their feedback and insight on various aspects of the program.


  1. Contact your mortgage broker and bank for all your options.
  2. Reach out to your real estate lawyer and get their insight.
  3. Plan out the potential best and worst-case scenarios.


Once you've gathered all the information, you can decide if the First-Time Home Buyer Incentive Program is right for you.




Get in touch with me if you have any questions.

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Do Open Houses Work To Sell Homes?


CLICK HERE to view the HIGH-QUALITY version of this article.



This is one of the most common questions I receive, so let's talk about the pros and cons so you can decide for yourself.



OLD SCHOOL 

Once upon a time, Open Houses were effective selling tools because it was one of the few ways buyers could see properties, so they increased the home's marketing exposure. However, technology has drastically changed how buyers shop for their new home now; in fact, statistics show that less than 4% of buyers attend.



THE NEW WAY TO SHOP

With the latest viewing tools, buyers have full exposure to property details, an endless number of still and panoramic photos, videos, 3D tours, conveniently available 24-7, and from anywhere and at their convenience.

Because there is so much information available now, one could consider online viewings to be the buyer's first showings. After researching the property, if buyers are interested in a walk-through, they will book a private showing with the listing Realtor or ask their own to organize one.



SAVING TIME & ENERGY

The tech-tools save everyone time and effort. Buyers can rule out properties that are obviously not suitable, and that saves sellers from preparing their homes and vacating for unmatched buyers.



DO YOU WANT BUYERS OR VISITORS?

Buyers actively shopping and ready to purchase will organize private showings so they can explore properties at their own pace and undisturbed by others. These are quality buyers that have spent some amount of time pre-qualifying the property to have some of their criteria. They have also chosen to commit their time and energy for a "second viewing", and this matches the seller's efforts of preparing and leaving for the showing.

In Open House, your doors are wide open to unknown visitors. There's no way to know if they can afford the property, if it's a suitable match or their intentions. Plus, there are potential security risks as you are allowing strangers into your home.



WHY A SELLER MAY CONSIDER HOSTING AN OPEN HOUSE?



AS SEEN ON TV, NOT.

If a seller sees benefit in opening their doors to everyone (including curious neighbours, dreamers, people out for a walk, or driving by), then having their Realtor host an Open House may give them peace of mind. However, they must also understand Open Houses don't actually work as they do on HGTV shows where the seller has an offer by the end of the day. In fact, some stats show the odds of receiving an offer because of an Open House is less than 1%, excluding super-red-hot market conditions.



SUPER-RED-HOT MARKETS

In a super-red-hot seller's markets, (THINK - the heydays for Vancouver, Toronto), Open Houses can be effective tools. They provide access to all potential buyers at one time, which can boost the sense of urgency or FOMO to work in the seller's favour.



FROM THE REALTOR'S ® PERSPECTIVE

Some Realtors® volunteer to host an open house because during them they get exposure to new prospective purchasing clients and introduce themselves curious neighbours that may sell in the future. Open Houses are also opportunities to market themselves and boosting their brand recognition.

There are some Realtors® that believe Open Houses help the sale; however, the majority do not. Some stats show as many 63% of Realtors® do not recommend them to their clients.



WHAT DID I DO?

When I sell my properties, my philosophy for buyers is "quality over quantity," and I do not host Open Houses.  I choose to focus on private showings for qualified buyers that have pre-determined that my property is a good match for them or at least has the potential to be.


SPENDING BIG BUCKS ON SECURITY

I spend thousands of dollars are year on security systems to keep strangers out, so I'm not going to throw all that away to let unqualified randoms wander through to scope out my property.


WHAT ABOUT AGENT TOURS?

I also do not host Agent Tours (an open house for only other realtors) because if Realtors® have qualified clients, the property will come up in their custom searches, and they will request a private tour if it's a suitable match.



THE KEYS TO A SUCCESSFUL SALE

  1. Effective pricing on the open market.
  2. Prepare the home to show in it's best showing condition (i.e., declutter, neutralize, refresh, carpet cleaning, etc.).
  3. Get the property ready to pass inspection (i.e., clean gutters and functioning downspouts, fix leaky toilets and faucets, replace failing window hinges, etc.).
  4. Professional photos to maximize online marketing and first impressions to drive traffic through your front door.
  5. Be flexible with showing requests to give buyers access they need and leave it in it's best condition for the viewing.


THERE'S NO RIGHT OR WRONG ANSWER.

Open Houses are not on my "to-do list," but they could be on yours.



WHAT IS THE PURPOSE OF THE OPEN HOUSE?

If it's to provide access to all with hopes of improving marketing exposure, then hosting on Open House is likely the right answer for you.

If you're hoping for an offer at the end of it it, you have very long odds.



Get in touch with any questions or feedback.



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