Being prudent best way to prosper in market

What trends do you see developing for people buying and selling their homes in 2016?

As we head along into another new year, it’s a good time to look at what we can expect in the real estate marketplace. And, if you haven’t already, it’s a good time to make some resolutions.

Housing affordability is an ongoing challenge for many in the Greater Toronto Area, especially when you’re looking to buy a detached house.

It’s important to remember that nobody can predict the future when it comes to real estate. But whether the market continues to be hot, or begins to slow down a bit, many families in the GTA will have to act prudently if they want to make a move in the market next year.

The federal government is bringing forward new rules for mortgages starting Feb. 15. In a nutshell, if you need an insured mortgage over $500,000, you will need to come up with a higher down payment. Be sure to budget for those additional mortgage costs if the rule change will apply to you.

In recent columns, I outlined the common costs that homebuyers should be aware of. Understanding the full cost of buying a home is essential as you go through the process.

If the cost of carrying a mortgage is a challenge, renting out a basement apartment is one way to help pay the bills.

Before you make an offer on a property with an existing apartment, it’s critical to ensure that the unit is legal. Or if you are thinking of installing one, you should make sure that it’s legal to do so.

Before hiring a representative, make sure to ask them about their expertise regarding basement apartments. They may be able to confirm that the home is zoned for a multiunit dwelling. It might also be a good idea to also consult your real estate lawyer, mortgage financing professional and insurance broker or company when considering whether to put in an offer on a property with a basement apartment.

Make sure the property meets zoning, building, fire and electrical safety codes. Your real estate representative can ask the seller for the permits they received before reno- vating the basement. If the renovations were made without permits, you should seek legal advice so that you can understand the cost to bring the unit into compliance. You will also need to determine if municipal zoning bylaws permit more than one family to live in the property.

Your broker or salesperson could also include clauses for your protection in the Agreement of Purchase and Sale. The clauses can confirm that the basement apartment is compliant with the requirements I’ve listed above.

If there is a basement but not an existing apartment, you should also confirm the conversion costs are affordable, and that you can justify the cost for the amount of rental income you’ll receive. I remember a friend having to pay a lot to build out a walkout entrance from the basement. He was not expecting that expense.

I’d also like to touch on the consequences of renting out an illegal unit. It’s fair to say that there are likely many illegal basement apartments in Ontario, but that doesn’t mean that buying one is a good idea.

If law enforcement finds out about it, you could be required to dismantle the apartment, and you could face fines, or even jail time. Not to mention losing the income from the tenant and any costs relating to the eviction.

You’re also opening yourself up to liability. If there was a fire and the insurance company found out about the illegal apartment, your claim could be denied and you could also have to pay for any losses that your tenant faced.

One thing that won’t change in 2016 is the importance of being well-informed. By educating yourself about the buying process, you’ll know the right questions to ask, you’ll know what to expect from your real estate professional, and you’ll be able to anticipate potential issues. Make a resolution to read this weekly column, as well as the helpful consumer resources on RECO’s website (reco.on.ca). They are not, however, a substitute for professional advice of a registered real estate professional, a lawyer or accountant. Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. Email questions to askjoe@reco.on.ca. Find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at youtube.com/RECOhelps.