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June Ju une ne 2012 201 012 Volume Vol olu lum ume 02 02 Issue 02 Issu Is sue 09 09 09
Tan and the
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Visit Us At: www.TANteam.com
Tan.ga 1 G G .G ΠG G .G Team editorial team for keeping up with the good work. It is our pleasure to pres G G G G H : G I G G G I H G I G G G G G G G double on the starting and ending of the year. Please kindly observe launch dates below: January, February, April, June, August, October, December We will be bringing a new presentational format in which our readers will enjoy a lot more than reading our past issues presented before. Our next launch is this August 2012! Look out for it! Another update we will want to inform you is that the Tan Team will forego this years Canatan event yet again, we were unable to secure a successful venue to host our event at a popular location that was sure to be a hit with our guests...however, do look out for Client Appreciation 2012 this November! More information will be released as the date draws nearer. -Tan Team Editorial Team June 2012
azine
Future Updates & Important Notices
Tan.gazine
V2
Coming August 2012
Good just got Better
CONTENTS June 2012 Volume 02 Issue 09 FEATURED CONTENT pg 06
Be Very Afraid Of The Canadian Housing Bubble
Strong Sales And Price Growth In May
pg 16
June Mid-Month Resale Market Figures
pg 17
FEATURED PROPERTY LISTINGS pg 14 Wolverton Crescent - Wonderful family home in desirable M-section
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pg 15 Wildgrass Road - This wonderful 3 storey semi-detached home is loaded top to bottom with upgrades! Featuring a over-sized kitchen complete with granite countertops, traverstine backsplash, walk out to a beautiful deck and large eat in area. Finished basement with rec-room and bar!
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7DQĂ•JD]LQH 1(:6 pg 10
Happy Birthday Canada!
pg 12
Mortgage Rules to be Tightened Further!
pg 18
Is your Home Over-Priced?
pg 22
Borrowers Win Clarified Penalty Terms Rising Interest Rates: The economic forces at play
pg 24
Peng
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Tan
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Tan.gazine NEWS
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Tan.gazine NEWS
Be very afraid of the Canadian housing bubble Don Pittis has been a Fuller Brush man, a forest fire fighter and an Arctic ranger before discovering journalism. He was principal business reporter for Radio Television Hong Kong before the handover to China and has produced and reported for CBC and BBC News. He is currently senior producer at CBC's business unit. By Pittis - CBC News April 16, 2012
“I want you to be afraid. Very afraid of the Canadian housing market.�
penghocktan.com | 7
Tan.gazine NEWS want you to be afraid. Very afraid of the Canadian housing market.
Macleans magazine went a step farther with a screaming headline saying it was "Time to Panic."
I want people who are considering buying a house in Canada to be the most frightened. People who just bought a house also have every right to be nervous. But even if you don't have a stake in the property market, I would like you, too, to be fearful of a bubble in Canadian property.
When I saw that one, I pictured readers taking the advice – wide-eyed, shrieking, hyperventilating, running aimlessly back and forth – and wondered at the advantages of being advised to panic, no matter what horror might be in store. But I liked the tone. It was frightening.
I'm frightened myself. A lot of smart people are. But I should make it very clear I've no desire to be the Nouriel Roubini of the Canadian housing market. Roubini, for those who didn't notice, rose from B-team academic to A-list fame and fortune by predicting the U.S. housing and market collapse of 2008. Before the crash, he was just one more Chicken Little – that children's story character, who, after being whacked by a falling acorn runs about shrieking, "The sky is falling, we must run and tell the King." After the crash, Chicken Little no more, Roubini was Solomon the Wise. Having demonstrated his credentials, Roubini is still travelling the world, dining out as The Man Who Got It Right. When doomsters are right, they are showered with honours. Think of how religious enthusiast Harold Camping's star would have risen had the world actually ended last May. But I don't want that for me. I just want you to be frightened.
Time to panic? Right now in Canada we are at the Chicken Little stage. The real estate industry and the banks say there is no bubble. Our finance minister, Jim Flaherty, has warned repeatedly about high debt levels, but even he is on the record saying there's no bubble. I don't want you to listen to them. I want you to listen to the Economist, Canadian Business, the Wall Street Journal — each of which have sounded scary warnings. 8 | penghocktan.com
The investment site Seeking Alpha had a wonderfully terrifying chart. Using the same kind of analysis that warns of flu outbreaks before health officers know they are coming, the chart analyzed Google data to show a rising number of searches in Vancouver, Toronto, Calgary and Edmonton for the term "housing bubble." The chart shows that a similar searching pattern happened in 2007 at the epicentre of the U.S. property earthquake. Now here is my dirty little secret: I am not convinced we are in the midst of a property bubble. I have lived in Hong Kong. I have lived in southern England. I have seen property prices go very, very high and, apart from little downward blips, stay high for years. I know that middle-class Canadian homeowners will do almost anything to avoid defaulting on their mortgages.
Canadians different from Americans Unlike in the United States, it is very hard for Canadians to walk away from their mortgage responsibilities. Mortgage insurance protects your bank, not you. Here, a default is not a get out of jail free card. In Canada, mortgage interest cannot be deducted from your taxes. Instead, we only benefit by getting tax-free capital gains after you sell. I know that the Canadian mortgage market is not the wild west that it was in the United States in 2007. I know that the U.S. central bank, which effectively controls our mortgage rates, is planning to keep money cheap until at least 2014. I know that markets can go up, and up, for a long time
Tan.gazine NEWS without crashing. I know that the only proof of a bubble is when it pops. But at the same time, when I look at my own neighbourhood, my fear grows. Houses listed for sale are gone within a week. "Sold over asking price" shingles dangle from the real estate signs. Condos climb out of the ground everywhere and the builders say they have buyers. It seems clear to me that people haven't been listening to the dire warnings. And that is why I want to spread fear. Because though we may not be in a bubble now, if we keep this up, we are going to be. And if a bubble pops, that is something really worth being frightened of. Look at this sentence from last Thursday's main editorial in the Financial Times: "When house prices rise because households gorge themselves with debt, IMF researchers found, the ensuing recession is much deeper and more protracted than busts not preceded by such debt accumulation." The logic is not too hard to see.
First-time buyers in jeopardy When a housing bubble pops, first-time buyers with large mortgages are really screwed. Leverage is great when assets are rising, but a decline of even five percent can quickly wipe out a young family's nest egg. A drop of 10 or 20 per cent leaves many homeowners tens of thousands in the hole. Even homeowners without mortgages feel poorer – the so-called inverse wealth effect.
Canada, a popped bubble will really hurt us all. If you've suffered from government cuts, you ain't seen nothing yet. If you're unemployed, it will only get worse. If you're poor, expect to get poorer. I hope you are truly frightened now. But no matter how frightened you are, it may be there are too many forces pushing us in the opposite direction. Despite deep fears of their own, banks are still crazy to lend. Just as Hertz makes its money by renting cars, banks make money by renting money. They just can't help themselves. They have shown it again and again. Low interest rates held down artificially by central banks in an attempt to jump-start the economy make the math for borrowing to buy look good, for now at least. Longstanding folk wisdom learned from your parents and grandparents like "Why pay rent to somebody else?" or "They ain't makin' any more land" or "Safe as houses" is deeply embedded in the popular psyche and hard to shake with rational arguments. And perhaps the worst thing: No matter how many times central bank governor Mark Carney or people like me cry wolf, the housing market disproves us, year after year, rising far above the return on other investments. But I fear that eventually, just like in the story, the wolf will come. I don't want to become famous for predicting a bubble in the Canadian housing market. I will forego the honours. Because of my fear, I don't want it to happen at all. But maybe fear is not enough.
According to the IMF, when that happens, spending dries up for five years, and stays flat for years after. In
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Tan.gazine NEWS
Happy
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Tan.gazine NEWS
y Birthday Canada! anada Day (French: Fête du Canada) is the national day of Canada, a federal statutory holiday celebrating the anniversary of the July 1, 1867, enactment of the British North America Act, 1867 (today called the Constitution Act, 1867, in Canada), which united three colonies into a single country called Canada within the British Empire. Originally called Dominion Day (French: Le Jour de la Confédération), the name was changed in 1982, the year the Canada Act was passed. Canada Day observances take place throughout Canada as well as internationally. Frequently referred to as "Canada's birthday", particularly in the popular press, the occasion marks the joining of the British North American colonies of Nova Scotia, New Brunswick, and the Province of Canada into a federation of four provinces (the Province of Canada being divided, in the process, into Ontario and Quebec) on July 1, 1867. Canada became a kingdom in its own right on that date, but the British Parliament kept limited rights of political control over the new country that were shed by stages over the years until the last vestiges were surrendered in 1982 when the Constitution Act patriated the Canadian constitution. Under the federal Holidays Act, Canada Day is observed on July 1 unless that date falls on a Sunday, in which case July 2 is the statutory holiday, although celebratory events generally take place on July 1 even though it is not the legal holiday. If it falls on a Saturday, the following Monday is generally also a day off for those businesses ordinarily closed on Saturdays.
Day Source: Wikipedia
Sunday, July 01, 2012
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Tan.gazine NEWS
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he federal Finance Department is moving to further tighten mortgage rules to address concerns over high Canadian household debt. The government announced Wednesday June 20, 2012 that it will reduce the maximum amortization period for a governmentinsured mortgage, lowering it from 30 to 25 years, and also drop the upper limit that Canadians can borrow against their home equity from 85 per cent to 80 per cent. Buyers who purchase a home with a down payment of less than 20 per cent of its value are required to purchase governmentbacked mortgage insurance through Canada Mortgage and Housing Corporation. Under the new rules, mortgages amortized over a period longer than 25 years will no longer qualify for that insurance, making it effectively impossible to get a highly leveraged mortgage of more than 25 years in Canada. A shorter amortization period demands higher payments, but it will also mean homeowners build up equity in their homes faster. The announcement marks the fourth time in four years that the government has clamped down on mortgage rules. It first moved in 2008 by cutting the maximum amortization period to 35 years from 40 and requiring a minimum down payment of five per cent. Further changes were announced in February 2010, and came into effect April of that year. In January 2011, the federal government reduced the maximum amortization period for new government-backed insured highratio mortgages to 30 years from 35 years and cut the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent. It was not immediately clear when the changes will be phased in, but the last two announcements of changes were in effect about 60 days after they were announced. Canadian mortgage rates have been near record lows for months. Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have been warning for months that Canadians have been racking up more debt than they can sustain during the long period of ultra-low interest rates. CMHC first introduced insurance for 40-year-amortizations in 2006, when it also moved to provide mortgage insurance on 100 per cent financing.
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Tan.gazine NEWS Strong Sales and Price Growth in May In May, the median price was $516,787 from the $485,362 recorded during May of 2011. Toronto, June 5, 2012
Greater Toronto REALTORS® reported 10,850 transactions through the TorontoMLS system in May 2012 – an 11 per cent increase over the 9,766 sales in May 2011. Sales growth was strongest in the ‘905’ regions surrounding the City of Toronto. “Sales growth in the ‘905’ area code was stronger than growth in the City of Toronto across all major home types. While lower average prices are certainly one factor that has contributed to this trend, recent polling also suggests that the City of Toronto’s land transfer tax has also prompted many households to look outside of the City for their ownership housing needs,” said Toronto Real Estate Board (TREB) President Richard Silver. New listings were up substantially on a ear-over-year
16 | penghocktan.com
basis in May – rising by more than 20 per cent to 19,177. The average price for May 2012 sales was $516,787, representing an annual increase of 6.5 per cent compared to $485,362 in May 2011. Price growth continued to be driven by the low-rise market segment. “Strong competition between buyers seeking to purchase low-rise home types drove strong price growth in May. However, if new listings continue to grow at the pace they did in May for the remainder of 2012, the annual rate of price growth should begin to moderate on a sustained basis,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
Tan.gazine NEWS Greater Toronto REALTORS® Report Mid-Month Resale Market Figures Greater Toronto REALTORS® reported 4,597 sales through the first 14 days of June – a result that was on par with the strong sales activity reported in the June 2011 mid-month release. While sales were flat on a year-over-year basis, the total number of new listings entered into the TorontoMLS system was up by 16 per cent to 8,382. “Sales growth continued to be much stronger outside of the City of Toronto in the first half of June. While higher average home prices and slower listings growth in the City of Toronto likely explain some of the disparity in sales growth, recent polling suggests that the City of Toronto’s Land Transfer Tax is having a substantial impact on where many households are looking to buy,” said Toronto Real Estate Board President Richard Silver. “Recent polling indicated that three-quarters of people in Toronto and surrounding 905 regions who are planning to move over the next two years said that they are more likely to move outside of Toronto specifically because of the added upfront costs associated with the Toronto Land Transfer Tax,” continued Silver. The average selling price for transactions during the first two weeks of June was $516,834 – up by over eight per cent compared to the average of $477,025 reported for the first two weeks of June 2011. “The annual rate of price growth remains very high in the GTA. Increased listings will result in more balanced market conditions over the next year, but it will take some time before price growth will moderate to a more sustainable pace. Right now, months of inventory remains very low from a historic perspective and will likely not climb back to the pre-recession norm until 2013,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
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Tan.gazine NEWS
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Tan.gazine NEWS
Is your home over-priced? Your home has all the benefits: hardwood, fresh paint, a great security system, heated pool, and a built-in barbecue pit. But, why is your perfect home still on the market after 4 long months? In today’s buyers market, your home may be overpriced. That may be a tough pill to swallow after all of the hard work you put into your home, but the market just isn’t on your side right now. So, how can you tell if your home is priced to sell or priced to stay? By Pittis - CBC News April 16, 2012
Here are a few warning signs that you’ll be holding onto that mortgage for awhile penghocktan.com | 19
Tan.gazine NEWS
Is your home over-priced? 1. No showings After two months, youâ&#x20AC;&#x2122;ve only has one prospective buyer through your home. This is a huge red flag that something is wrong. If no one is bothering to view your home, you have no chance of selling it. Even if you are getting lots of hits online and the box of flyers out front keeps running empty, there is a reason no one is following through to see the home. Chances are itâ&#x20AC;&#x2122;s because your home may be priced too high.
2. No offers made So, youâ&#x20AC;&#x2122;ve made it over the first hurdle and people are coming to look at the home. But, there are no second looks and no offers coming in. While it may be due to poor design choices, wall and floor colors and outdated cabinets, much of that can be overcome if the price is right. Again, in todayâ&#x20AC;&#x2122;s market, it all comes down to money.
3. You have the highest priced home on the block With the current market, many people are looking for a great dealâ&#x20AC;Ś.or even a steal. Homes that are priced higher than those around them are tougher to sell, even if they are worth it. First, be sure your home is worth the extra money â&#x20AC;&#x201C;does it have more luxurious finishes or unique features that other homes lack? Is its curb appeal and condition significantly better than other homes in your neighborhood? If so, your home may be appropriately priced. Selling a higher priced home requires even more expertise and strategic planning than moderately priced homes for the obvious reason that youâ&#x20AC;&#x2122;re selling to a much smaller market. Your RealtorÂŽ
needs to be able to position and market your home in such a way that it will not only attract offers but the kind of offers you want!
4. Consistent criticism Hopefully, your agent from showings and is sharing that information with you. Are you seeing a trend in the feedback? Is there some aspect of your home that several potential buyers have disliked - maybe itâ&#x20AC;&#x2122;s the blue bathtub and toilet, or the worn-out carpet in the living room? In any case, your choices are to lower the price or fix the issues if you want to get the home sold.
5. Other homes in your neighborhood are selling Itâ&#x20AC;&#x2122;s easy to blame the current market for our home not selling, but is that really the case? Are other homes in your neighborhood selling while yours is sitting there? If so, the problem is not with the market. Consult your real estate agent on which homes are selling and how they compare to yoursâ&#x20AC;&#x201D;amenities, size, age, and price. Then, let your agent guide you in the best way to get the best possible price for your home. No one wants to sell their home for less than they think itâ&#x20AC;&#x2122;s worth. However, in todayâ&#x20AC;&#x2122;s market, home values are lower than they were 5 years ago. While small steps toward a market rebound have been made, there is still a large inventory of homes on the market - competing for the same buyers. In addition, this puts the buyers in the driverâ&#x20AC;&#x2122;s seat. In order for you to sell your Kamloops home quickly, you will need to listen to the advice of your realtor, look at the comparable sales around you, and price your home accordingly.
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Tan.gazine NEWS
Borrowers win clarifi
Vernon Clement Jones April 3, 2012
fter class-action suits and a lake of client tears, the federal government moved Sunday to force banks to clarify their prepayment and penalty terms. “The Code is to ensure that federally regulated financial institutions (lenders) provide enhanced information in respect of credit agreements secured by mortgages where a prepayment charge could apply (mortgages) to assist borrowers in making decisions about prepayment of their mortgage,” reads the Mortgage Prepayment Information section of the country’s new Code of Conduct for Federally Regulated Financial Institutions. “The information that will be provided under this Code is in addition to existing information provided by lenders to borrowers.” Under the terms of those new requirements, when borrowers tell a lender they are prepaying the full amount owing on a mortgage or even a specified partial amount, the lender must in writing provide the appli-
22 | penghocktan.com
cable prepayment charge, along with a description of how the lender calculated the prepayment charge. That responsibility goes beyond informing clients about whether penalty calculations rely on a certain number of months' interest or an interest rate differential. In fact, if the lender used the IRD to calculate the prepayment charge, it must inform the borrower of the outstanding amount on the mortgage, the annual interest rate on the mortgage, the comparison rate used for the calculation, and the term remaining on the mortgage that was used for the calculation. The code also means lenders must provide borrowers an annual update on prepayment terms and possible penalties. It will not apply to several non-bank lenders operating in the broker space.
Tan.gazine NEWS
fied penalty terms What it doesn’t mandate -- and what brokers continue to call for – is a standardized IRD formula for all lenders and not just the increased transparency law suits have faulted individual banks for failing to ensure. Most recently, lawyers spearheading twin class-action suits against CIBC over “vague prepayment terms” have fielded interest from hundreds of the bank’s mortgage clients. A Case Management Judge has also been assigned – a mandatory step in moving class actions forward in British Columbia. The twin lawsuits were filed in B.C. and Ontario last October, alleging some CIBC mortgage borrowers have been unfairly penalized by unclear prepayment terms giving rise to two substantive complaints. Aside from what Bridge terms “uncertain and unenforceable language” in contracts dating as far back as 2005, he also points to the mathematical formula CIBC used to determine those prepayment charges, calling them “invalid,” or in legal speak a “miscalculation.” It is unclear whether the government’s new code would fully address those concerns.
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Tan.gazine NEWS
Bank of Canada Governor Mark Carney has been earning of interest rates to come.
“It’s just too early to say,” says Colette Delaney, executive vice-president of mortgage, le
24 | penghocktan.com
Tan.gazine NEWS
Rising interest rates: The economic forces at play Canadians might be asking themselves â&#x20AC;&#x153;to buy or not to buyâ&#x20AC;? as they ponder whether now is their last best chance to jump into the countryâ&#x20AC;&#x2122;s super-heated housing market. Philip DeMont May 02, 2012
nding, insurance and deposit products at the Canadian Imperial Bank of Commerce.
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Tan.gazine NEWS
Rising Interest Rates: The Econ nterest rates look to be heading north, the federal government is tightening up on rules that should make it harder for consumers to borrow and banks to lend more money for new homes, and Canada’s economy is expanding at a lower rate of growth, capping individual incomes. In addition, in its April interest rate decision, the Bank of Canada signaled pretty clearly that its analysts have flagged soaring individual debt as the country’s “biggest domestic risk” in 2012. All these factors mean the national housing market, which had experienced strong growth until recent months, could be in for a short burst of buying and selling as buyers try to beat rising mortgage rates and tightening eligibility restrictions and then in for a general slowdown in home transactions for the rest of 2012. Rates up In recent months, international capital markets have started expecting Canadian interest rates to climb, economists say. “We have seen a weakening in the bond market,” notes Doug Porter, deputy chief economist at BMO Capital Markets. According to the Bank of Canada, the yield for five-year Government of Canada bonds reached 1.57 per cent in March 2012 compared to 1.28 per cent in December 2011.
Nader Kanaan Mortgage Specialist Scotia Bank
Tel: 416.543.1145
Fax: 416.744.8928 Email: nader.kanaan@scotiabank.com Web: www.mdm.scotiabank.com/nkanaan
(A bond’s yield refers to the rate of return investors receive from buying it. As the yield rises, the market price for the bond falls.) While the absolute level of the change might appear small, the percentage gain in yields was actually 25 per cent over the past three months. And this jump in bond returns basically means money markets are cutting the price they pay for these medium-term bonds, because they believe interest rates are set to rise. “There are mounting signs that the tide is, indeed, turning for rates,” Porter says. Regulatory squeeze A factor dampening housing enthusiasm is the promise by Federal Finance Minster Jim Flaherty in the March federal budget to monitor the level of mortgage lending by the Canada Mortgage and Housing Corp., the federal agency that helps potential homeowners get into the market. The Finance Minister expressed concerns that CMHC was providing insurance backing for too many mortgages just as borrowing costs are set to surge presumably with a resultant rise in the default rate among homeowners. Also, Ottawa wants to put in place new rules about covered bonds, a financial instrument banks use to lower
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nomic Forces At Play the cost of mortgages for buyers. All these factors have led many experts to believe Canada’s home market is set to slow towards the end of 2012. On the other hand Not everyone, however, is on board with the ‘cloudsforming-on-the-horizon’ theory of Canada’s current housing market. “It’s just too early to say,” says Colette Delaney, executive vice-president of mortgage, lending, insurance and deposit products at the Canadian Imperial Bank of Commerce. Delaney is not disputing the thinking that Canadian interest rates are headed higher later in 2012. Back in March, CIBC conducted a survey of Canadians in which more than 85 per cent of respondents say they expect interest rates to rise in the coming 12 months. “I think they have already priced higher interest rates into their buying decision,” she says. So any rise in borrowing charges will not result in a panicky burst of buy-sell activity in the real estate market, Delaney notes. Instead, the upward movement of interest rates will trigger a different discussion among homebuyers: Whether to lock in the interest rate on their mortgages.
Fixed versus variable Historically, many borrowers have stuck to a variable rate when they negotiate bank borrowings. That is because adjusted-interest-rate mortgages usually come with a lower rate than fixed-rate loans. That sentiment is changing. That CIBC poll indicated that one in two Canadians would borrow money at a fixed rate, up from 39 per cent, who, in the similar poll in 2011, answered “yes” to the question. That shift should not come as a surprise, BMO’s Porter indicates, as mortgage rates have been at very low levels for many months now. “Current offers on long-term mortgage rates and the recent shift in bond market sentiment tilt the balance heavily in favour of locking in at this stage,” he wrote in a March 23 note. If the CIBC’s Delaney is correct, rising rates might not be force Canadians into a life-changing Shakespearean debate about buying a new home. Instead, they might wind up discussing the decidedly more mundane question of whether to cement the rates on offer into a new mortgage.
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t h e f irst e xcl usi ve real est
12.1
Are You Ready “Why hasn’t any other real estate agent ever thought of this?”
“Every perso benefitting
- James Claudeu, home owner
- Stephanie Dubli
28 | penghocktan.com
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ate c li e n t ne x u s ever created
2.12
For The Picking ?
on should be from this”
“Why benefit just once when you can benefit for life?”
in, home owner
- Robert Shelton, home owner
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DIY - Recipe For June 2012 Check out food.chatelaine.com for more cool recipes
June 20, 2012
Tarrago recipes
P Preparation time: 10 minut Cooking time: 10 minutes C Makes 4 to 6 Servings M
I Ingredients 5500 g trout fillets 1 tsp olive oil 11/2 tsp each dried tarragon a 11/8 tsp cayenne (optional) 11/8 tsp salt shallots N Nutrients per Serving 1183 calories 225 g protein 8 g fat 992 mg sodium
Roberto Caruso
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on -dill trout
tes
and dill
First Things First... 1. Preheat barbecue to medium. Using a ruler, measure thickness of trout. It will need to cook about 5 min for every 1/2 in. of thickness. Stir oil with herbs, cayenne and salt. Brush over fish to lightly coat. 2. Oil grill. Barbecue trout, skin-side down, with lid closed, until skin is lightly crisp and a knife tip inserted into thickest part of fish and held for 10 sec comes out warm, about 5 to 10 min. Don't turn. 3. Remove fish with a long, wide metal spatula. If you wish to serve without skin, slip spatula between skin and flesh, then carefully lift off fillet, leaving the skin on grill. Slide onto a large platter or cutting board. Garnish with lemon wedges.
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