Monthly Archives: May 2008

Buyer’s Guide: Property Tax Adjustments at Closing, TIPP

The Property Tax adjustment at closing can catch some buyers off-guard, so this article will help buyers calculate how much they need to have in order to complete the transaction.

  • (NOTE: The following information is based on the criteria: 1) A June 30th date for collecting Property Taxes as is the case for most of Alberta. 2) The mortgage is not PIT (Principal, Interest & Taxes) 3) The mortgage was not being assumed)

Property taxes for the full calendar year are to be paid by June 30th. They are payable 6 months in arrears, and 6 months in advance. An adjustment has to be made at closing in every case in favor of either the buyer or the seller (unless the transaction closes on December 31st)

There are 2 guidelines that you can remember:

1) If the sales closes BEFORE June 30th, the BUYER will receive a CREDIT for the amount of the year’s taxes which are owed, but haven’t been paid by the seller. This means the buyer doesn’t need as much money to complete the purchase. HOWEVER, the buyer will then be responsible for paying the taxes for the ENTIRE YEAR by June 30th.

2) If the sale closes AFTER June 30th, the SELLER will receive a CREDIT for the portion of the year’s taxes which are owed by the buyers. This is because the seller has prepaid them already. This means the buyer will need more money upfront in order to complete the purchase. However, the buyer will then not need to pay any more for that year’s property taxes.

Here are two Calgary based examples, one in favor of the seller and the other in favor of the buyer.


Example 1.

Closing Date: April 1st
Property Tax amount (current year) $1,500

Since the closing date is BEFORE June 30th, the BUYER will receive a CREDIT.

Calculation: 91/365 X $1,500 = $373.97

The ’91’ in the above example represents the number of days in the year that the seller owned the property and is therefore responsible for paying the taxes on it, out of the total 365 days of the year.

Jan (31 days) +Feb (29 days) +March (31 days) = 91 days

So the BUYER gets a $373.97 credit to complete their purchase, but must pay the entire year’s tax bill by June 30th.


Example 2.

Closing date: September 15th
Property Tax amount: $1200 (already paid by seller)

Since the closing date is AFTER June 30th, the SELLER will receive a CREDIT.

Jan(31) + Feb(29) + Mar(31) + Apr(30) + May(31) + Jun(30) + July(31) + Aug(31) + Sep(14 days only) = 258

Calculation: 107/365 X $1200 = $848.22
$1200 – $848.22 = $351.78 CREDIT to the SELLER since they paid in advance.

The BUYER will need another $351.78 to complete their purchase, representing the 107 days remaining in the year that is their responsibility to pay property taxes on, which have already been paid in advance by the seller. However, the buyer does not need to pay any more towards that year’s property taxes.

NOTE: The above scenarios and examples may not reflect your exact circumstances.   Your lawyer will have the firm amount of your taxes owing when they receive the Statement of Adjustments from the sellers lawyer.    To be 100% safe, have taxes set aside for the entire year.


TIPP (Tax Installment Payment Plan)

Calgary residents have the option of paying their property taxes monthly on a Tax Installment Payment Plan, or TIPP for short. Many homeowners choose this option rather than having to face one large bill every June 30th.

If the SELLER is on the TIPP program, it simplifies any property tax adjustment that needs to be made at closing. There will still be a slight adjustment because the amount paid under TIPP will not usually equal the true tax adjustment. However, since taxes under TIPP are paid “as you go” rather than the aforementioned “6 months in advance, 6 months in arrears”, the impact on the buyer’s closing costs / net sale proceeds to the seller, are quite minimal.

NOTE: If the new BUYER chooses NOT to go on the TIPP program and,

1) Sale closes BEFORE June 30th, they will have to pay balance of the years taxes by June 30th
2) Sale closes AFTER June 30th, they will have to pay balance of the years taxes when they become owner of the property.

Fore more information on the TIPP, please visit the City of Calgary website: click here

Understanding the Median Price Stat

A message I received earlier today:

“Your website is fraught with severe calculation errors. It’s impossible that the Median has remained at $420,000 when there were 50 homes under that price sold that day…”

I’ll attempt to clarify how the Median Price stat works, because I suppose it can look questionable when you don’t have all the numbers.

The median is calculated by lining up all sales from lowest to highest, the median would be the price in the middle.

Yes, 46 homes sold yesterday, and the median was $412,500. What you’re not taking into consideration is the amount that have sold at each price.

This month 8 homes have sold for exactly $420,000. That means it can take 8 homes more that sell below the median of $420k than sold above $420k in a day to move the current median downwards.

The median yesterday was $412,500. But being that there were an even number of sales (46) the two median numbers actually were $406k & $419k (resulting in a $412,500 median) The next highest price was $432k. So, yesterdays median price of $412,500 was only 1 sale amount below the Month-to-date median. And seeing that there are 8 sales at $420,000 it can theoretically take 8 sales below the median price MORE sold in a day to even move it. Likewise, it will take that same amount to move it upwards as well.

Here’s an example that reflects our current situation this month:

Sold Prices Month-to-date

$420,000 (#1)
$420,000 (#2)

Let’s pretend our current Month-to-date median price was at $420k, as illustrated above.

Now today, we have the following 3 sales:



Our median for the day would be $377,500 (the two middle figures divided by two) which is well below our median for the month. But now let’s line up all the sales again, including the 3 that sold today:


$420,000 (#1)
$420,000 (#2)

It’s still at $420,000 (#1) – but not the same sale that was the median at $420,000 previously (#2).

I hope this has clarified any confusion or problems. If you do see an obvious error (for instance I noticed I had Vacant Listings yesterday at 2217 instead of 1217) please let me know so I can correct it ASAP.

Thanks for your time, and I hope you continue to find the stats useful.

You can view the Calgary daily MLS Stats here:
You can view Bob Truman’s Weekly Stats and more, here:

Buyer’s Guide – Protecting Yourself From Former Grow Ops

What Exactly Is A Grow Op?
A Grow Op is any building that has been leased or bought by persons in the drug trade and turned into an indoor nursery or hydroponics operation to grow marijuana plants.

How Prevalent Are These Grow Ops?
It’s not exactly known how many of these grow ops are operational in Calgary, however Ald. Diane Colley-Urquhart said: “We do know it’s a serious problem.”

Roger Morrison, a former sergeant supervisor with the Southern Alberta Marijuana Investigative Team, said that during his time with the unit “we always commonly said we have a minimum of 3,000 in Calgary.”

Calgary Police say they raid about 120-140 grow ops each year.

Ron Esch, the executive vice-president of the Calgary Real Estate Board says, “They’re scary in that there are a lot them out there, and if they are not remediated properly, they are a real problem,” he said of residential grow operations. “They’re a real health risk for buyers.”

Mr. Esch estimates there are between 25 and 30 former grow-op homes on Calgary’s multiple listing service at any one time.

Grow ops operate in all parts of the city, in all neighbourhoods, from apartments, to large upscale homes. Most notable was the police raid on May 9th which discovered the largest residential marijuana grow op in Calgary’s history. The assessed value of the Patterson Crescent S.W. home where 2,445 plants were found “was” $1.2 million.

Because of how lucrative marijuana growing is, homes become expendable, just another expense in the operations, leaving a trail of toxic mold-infested homes with severe damage.

The Cost of “Remediation”
If a grow op has been operating for some time, there will be extensive water and moisture damage from the heat. Besides the damage caused by the actual growing of the plants, is the damage purposely caused to set up the operation. Holes can be burrowed through foundation walls where the growers bypass the meter to steal electricity. Exhausts from the furnaces and hot water tanks are disconnected, so the C02 can filter out and help the plants grow.

Depending on the size of the home, the “remediation process” can cost around $150,000, says Ron Esch. The entire home has to be gutted- all the drywall must be removed and the insulation needs to be stripped to prevent the mold from growing back.

According to the Insurance Bureau of Canada (2004), the average claim to repair the damage caused to a grow op was $41,000. As well, many insurance companies have policy clauses that will not cover this type of damage.

Why do I have “remediation process” in quotes? Just because a house has been “remediated” doesn’t mean it’s safe.

Virginia Salares, a senior researcher with Canada Mortgage says homes renovated to clean up mould and indoor air problems caused by defunct grow ops may still be unfit to live in. Insecticides, fungicides, solvents and other chemicals used in the operations are absorbed by drywall, carpeting, wood, subfloors and even concrete basement floors, she says. The chemicals may also be found in backyards, where they are frequently dumped.

Calgary Health Region Website
Calgary Health Region publicly provides a list of Health Inspection Orders, so you will be able to see what residences have been previously ordered “shut down.”

For example, here is the Order for 55 Patterson Cres SW that was recently raided, detailing the problems and what needs to be done:

Here is an excerpt:

  • Mould growth is evident within the premises. Excess heat and humidity produced during the plant growing activities are suitable conditions for mould growth. Mould growth was noticed along several rafters in the basement ceiling as well as in the corner beneath one of the circuit breaker panels.
  • Combustion gases from furnace and hot water tank are being discharged into the premises.
  • Electrical system has been tampered with to bypass the meter.
  • Surfaces throughout the growing and mixing areas are contaminated from the use of chemical/fertilizer solutions.
  • Structural and interior damages are evident in the premises. The entire house is very badly water damaged. Ceilings and walls are condensation-stained, water stained, collapsing and water logged on all levels of the house.

As you can see, the damage is widespread throughout the house and will take significant amounts of money to fix.

If Grow Ops Are That Obvious, Why Should I Be Concerned?
Not all grow ops are shut down by the police, which means only a small portion of former grow ops are listed on the Calgary Health Region website.
It could be that they attempt to aesthetically fix up the place to make it appear as though there are no problem.

Ald. Diane Colley-Urquhart said, “I have been told by residents . . . that they would move into these houses, and then when they go to hang a picture on the wall, the hammer goes right through the drywall because it’s all mouldy and wet.”

Signs to Look For

  • Mould in corners where the walls and ceilings meet.
  • Signs of roof vents
  • Painted concrete floors in the basement, with circular marks of where pots once were
  • Evidence of tampering with the electric meter (damaged or broken seals) or the ground around it.
  • Unusual or modified wiring on the exterior of the house.
  • Brownish stains around the soffit that bleeds down along the siding.
  • Concrete masonry patches, or alterations on the inside of the garage.
  • Alteration of fire places.

It is ALWAYS, ALWAYS, recommended for the Offer to Purchase have a Property Inspection Condition applied. A home inspection is vital for any purchase. At approx $400, it can save you tens of thousands of dollars in repairs, not to mention what health implications there might be if it was a previous grow op.

What To Watch For With Neighbours
A difficult question to answer is whether a former grow op affects the property value of a neighbouring house. What do you think, from a buyer’s or neighbours perspective?

There are things that you watch for:

  • They unload unrecognizable equipment and very few household furnishings.
  • They unload copper and/or PVC pipe, soil, halogen lamps, large amounts of black plastic aluminum ducting, and fans.
  • Come and go at unusual hours but never seem to stay overnight.
  • Little or no garbage is brought to the curb each week.
  • Mail is rarely delivered to the house; mailbox may be taped shut.
  • Windows are always dark and may be secured with metal bars, blacked out or heavily draped.
  • A strong odor similar to skunk cabbage (bulk marijuana) comes from the house
  • Power meter spins at a very high speed (unlikely, as most try to bypass this to avoid being caught by the utility company) or signs of electrical tampering.
  • Heavy condensation on the inside of the windows.
  • Humming sound of fans or generators.
  • Condensation or discoloring on the roof.
  • Unusual amounts of steam coming from vents in the house in cold weather.
  • Rooftop with no snow on it when the surrounding houses are covered in snow.
  • People entering and exiting the residence only through the garage keeping the garage door closed.
  • What are the legal consequences of selling a home without disclosing that it was once used as a grow op?

There is always an obligation to disclose material latent defects that are known or should be known by the seller. The seller (if they knew or ought to have known) could be liable for damages to the buyer for the costs of any necessary repairs to make the property fit for habitation. (Please consult with a real estate lawyer regarding any legal questions, or issues you may have)

But why take that risk? Can you imagine the legal costs, time, and everything else associated with taking the matter to court? An ounce of prevention…

When working with a buyer client, I always check the Calgary Health Region website first, check the title (the Health Order is applied to that as well) as well as STRONGLY RECOMMEND (persuade?) them to have a Property Inspection completed.

Unfortunately, many buyers decide to forego property inspections in order to be competitive in multiple offer situations.

Article Sources:
May 20, 2008 Calgary Herald
August 16, 2007 Calgary Herald
Grow Ops – Canadian Real Estate Association 2004

Related posts:

April 2008 in Review, Long term Comparisons

Average and median prices of Calgary SFHs & Condos barely fluctuated between March & April despite the continuing growth in inventory.   How long can prices continue to be unaffected by this surge of supply and decreased demand?

 The average price/sq ft stayed exactly put at $314 for SFHs, while it dropped to $314 from $319 for condos (click here for sq ft stats) 

The Calgary real estate market is clearly in a “Buyers Market” as indicated by the graph below, with over 5 months supply of SFHs & condos for sale.

The last 2 tables show how the first few months of this year compared to previous years.   April 2008 saw the highest level of new listings and the lowest sales amounts compared to previous Aprils going back to 2004.  April year over year  had the average price for SFHs remain unchanged while the median was down $12k.  

If you were to look at the astronomical median price rise between 2005-2007,  it’s understandable why “based on the historical analysis of all measures, Calgary was at one of its most affordable positions between 2000 and 2005…and in 2007 Calgarians had the least amount of discretionary income available after purchasing and adequate living standard.”   View the entire Calgary Chamber of Commerce Housing Affordability Report here, with data going back to 1980