I would like to use my first â€œFrom the Presidentâ€ message to try to clear up a misunderstanding I and other members of the REALTORSÂ® Association of Hamilton-Burlington keep hearing about.
Early last year, we â€“ and everyone else, it seemed - talked about how much the HST was going to add to the cost of a real estate transaction when the new blended tax took effect on July 1 of 2010. Somehow, for a lot of people, that meant that the HST was going to apply to the purchase price of a resale home. According to a survey commissioned by the Ontario Real Estate Association near the end of last year, fully 56 per cent of Ontarians â€“ more than half - believe that the sale price of a residential resale home is subject to HST.
I cannot state emphatically enough that this is not the case! The purchase price of a resale residential property is not subject to the HST.
There has been speculation that this misunderstanding about how HST is applied may have deterred some potential home buyers from buying a home and some homeowners from selling their homes in the last half of last year.
Even though the HST does not apply to the price of residential resale homes, buyers and sellers will pay HST on the fees paid for services that are related to the purchase and sale of a resale property: legal fees, home inspections services, movers, home appraisals, real estate fees and other services buyers and sellers might use.
We estimate that, on a normal real estate transaction in the Greater Hamilton-Burlington and surrounding area, the HST will add approximately $1,500 in taxes. This is not an amount that can be built into a mortgage and amortized over the length of the mortgage. The taxes will need to be paid as buyers and sellers pay for the services they have used to bring their sale to completion, so will be paid a bit at a time to various service providers.
I would be remiss if I did not point out that, even though home buyers will not pay HST on the purchase price of a resale residential home, they may pay HST if they purchase a brand new home. While new homes are subject to HST, new homes under $400,000 are exempt from HST and homes between $400,000-$500,000 are subject to proportional rebates. Buyers of new homes are urged to discuss how the HST works with the builder or salesperson they work with when they are considering purchasing a new home.
Right now in our associationâ€™s area â€“ from Burlington, Flamborough, Ancaster and Dundas down through Hamilton, Stoney Creek, Grimsby, Caledonia, Hagersville and down to Port Maitland on the shores of Lake Erie â€“ there are a good number and variety of homes for sale in a wide price range. Interest rates are still low and it is expected that they will remain at these levels for at least the first part of the year. Itâ€™s a great time to purchase or sell a home. And, if you are buying a residential resale property, there is no HST to pay on the purchase price!
Ann Forbes Arndt President, 2011