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Not the best time in real estate
By far, the past couple of years has been some of the worst times in real estate. The pandemic forced people to stay in their homes, and stay they did! The number of listings is the lowest it has been in many years. With interest rates incredibly low and many people wanting to get into the market, the demand on homes has gone sky high. A perfect storm generating a very strong seller’s market.
New buyers are quickly having their dream of home ownership pushed away from them as home prices rise. Without an adequate supply of homes to choose from, the ones that do show up are selling well above the listing price and are often subject to bidding wars. In just one year, the price of homes jumped over 20%. i.e. a $300k house at the beginning of 2021 would now fetch about $360k (or more).
It is disheartening to also learn that more than 30% of the active buyers are those looking to invest in rental homes. They usually have more than 2 homes in their possession and buy the homes strictly as rental properties. These buyers typically have a lot more buying power than a first time home buyer and are more able to bid on a house with no conditions – a very risky proposition for most people buying. There are some rumours that there will be some restrictions imposed upon these buyer by the Government shortly to help curb this activity and give others more of a chance. More to come on that.
Sellers find themselves in a catch 22 situation. Many sellers are looking to move up or down and not get out of the home market altogether. So, in order to sell, they need to have someplace to go to. So they find themselves in the buyer column, also struggling with competing offers where a condition on sale of their property will almost never be accepted when others are willing to buy with no conditions. So they must wait it out until their financial situation changes or they are willing to risk the sale without the condition on sale of their current home.
As an agent, we are ready and willing to help out both sides but there simply are not many opportunities available. We also must wait for the market to become more balanced before we can really be effective.
The good news is that things are always changing. This market will adjust and more opportunities will become available again. Policy changes, economic changes and the subsiding of the pandemic are all things that can and will change the market. Let’s just hope that those things that make positive change come soon! For everyone’s sake.
Who has “the file” on your house?
A colleague of mine shared a story the other day that I thought was too good not to write about. It is about a trick that a realtor used to secure the future sale of a home. Even more surprising is that the trick used resulted in my colleague’s own family member using a different real estate agent to sell her house.
It is definitely not a given that a seller will want to use a family member in real estate to sell their home. There are lots of reasons for this. Sometimes they feel like they don’t want their family member to know too much of their financial secrets or maybe don’t want them to know that they have property to sell. That can sometimes cause fights in families and the seller may want to avoid any problems. More often than not, the reason for them not choosing them as an agent comes down to the seller not understanding how the agent is paid. They assume agents receive a salary or other regular compensation and don’t want to be a bother to them. Granted, it is also the fault of the family realtor for not speaking to everyone about their job and asking them to support them for future home sales.In this case, when the seller had purchased the home, the agent said to her before leaving that if she ever wanted to sell the home, she should come to see him because he had “the file” on the house and it would make things much easier. That little phrase worked. She honestly thought that there was a file that only he had access to for the home. This, of course, was false as every realtor has access to all of the information on the home through the MLS system.
When selling your home, please don’t feel that you have to work with somebody that has sold your home in the past or that tells you a made up story so that they secure your business. You are free to work with whomever you choose. Hopefully that means you will select somebody that you get along with, someone that is honest with you, that you know has your best interests at heart, and that you actually like to work with! And if you have a family member in the business, then you might want to check in with them first.
Dates and times in contracts
How important are the dates and times in a real estate contract?
When you are going through the process of buying or selling a house, the dates and times that are listed in your agreements are very important. You must pay close attention to them. There is no wiggle room and you could easily lose the deal if you don’t respect them!
Here are two examples of why you need a professional real estate agent (like me) working for you. Especially if you are working with a private seller or if there are multiple interested parties or other complexities of the deal.
My first example involves a deal where the buyer delayed the purchase of a home as they needed more time to sell their home. This used to be a common scenario pre-pandemic where a buyer would make an offer to purchase a home conditional on the sale of their home. They need the money from the sale of their current home in order to purchase the new one.
In this case, the buyer was having a hard time selling their home. They had a few deals come in and fall apart due to the condition of their for sale property. The sellers of the home were getting impatient as the buyer had already asked and been granted an extension to their condition of sale. While waiting for the condition to be met, the seller continued to have showings of their home and accepted a back-up offer.
A back-up offer is one where the offer would only come into effect if the current accepted offer fell apart. If it fell apart, due to many possible reasons (like a missed date/time), then the back-up offer would take its place as the primary offer.
In this real life example, the buyer actually did get an accepted offer on their home, a day after the deadline. There was no extension in place. So, even though they now had an accepted agreement to sell their home so they could buy the new one, the new one was no longer available. It was now being sold to the buyer with the backup offer.
The dates and times are in the contract for a good reason and do often cause deals to crumble. Right away, agreements of purchase and sale have irrevocable date and times that are very important. If the time passes and the offer has not been accepted and signed, then that offer becomes dead and unenforceable. Another critical date is the deposit acceptance date. Usually this is setup for 24 hours or earlier from when the agreement is accepted. If the deposit is not received within that timeline, then again, the deal could be considered dead and no longer binding. A second example of the importance of dates and times and contract oversight I see a lot is when a buyer and seller try to strike a deal by themselves with no help at all. I have seen it where the seller says that they have the forms that they can use to make the agreement. Sometimes they get them from a kit or a previous sale. Usually they are out of date but mostly can still function to get a deal in place.
The most recent case I saw of this activity had the buyer and seller not actually sign the section of the agreement that stated that they had accepted the offer. There were a lot of other errors as well and a lot of omissions. But the scary part of this is that the buyer thought that they had everything in place and was going to go and sell their home and move up to the new home when in reality, they didn’t have an agreement at all! The seller could have easily sold the home to another party if they chose to do so as this agreement that they had would never have held up in court. Fortunately for the buyer, I assisted them and worked with the seller to get a proper agreement in place.
When you are making a deal where several hundreds of thousands of dollars are on the line, the impact of an error could have gigantic repercussions.
13 April 2022
Winter Selling Tips
If you haven’t noticed by now, Sudbury now has a lot of snow on the ground. We have been fortunate this year with the snow coming a little later than last year. Now that it is here, there are some important things to consider when buying and selling homes.
There was a horrific story in the paper last year about a couple who purchased a house in the winter. The house had a fairly large property that had some green space behind and looked very serene in the winter snow. Once the spring came and the snow melted, they found that the snow was covering a giant junk yard of years of garbage that had been discarded into the woods. The cost to remove that was incredible and not in their budget. A home inspection would have never discovered it as the snow covered it all up from view. The sellers never disclosed that the junk was there. As a seller, you should disclose everything about a house when selling it. If the buyer can prove that you knew of a problem and didn’t disclose it, then there could be some legal repercussions.
A good way to put buyers at ease is to provide them with summer pictures
of the house and property. If you are buying, ask your agent to get you these from the seller.
Summertime pictures usually help to show off the home, especially if it has some nice gardens and curb appeal. You want to showcase the home at its best so that the buyer can dream of their life in that space. If you are selling waterfront, include a picture of the dock, boating, fishing, or whatever else they might be doing outside. Buyers will want to see the condition of the roof, the driveway and walking paths. You can leave the pictures on the kitchen or dining table for the buyers to check out when they do a tour.
Summertime pictures usually help to show off the home, especially if it has some nice gardens and curb appeal. You want to showcase the home at its best so that the buyer can dream of their life in that space. If you are selling waterfront, include a picture of the dock, boating, fishing, or whatever else they might be doing outside. Buyers will want to see the condition of the roof, the driveway and walking paths. You can leave the pictures on the kitchen or dining table for the buyers to check out when they do a tour. Here are a couple of other winter time selling points to consider. Be sure to do a great job of clearing the snow when selling your home in the winter! Get rid of all icy spots with salt and sand. Make it safe for buyers to come in and explore your property. It is also a good idea to keep the heat set at a comfortable room temperature so that it is nice and cozy for the buyers looking at the home. Turn on the fireplace. If you are selling in December, make sure your holiday decorations are out and well positioned to make the home feel warm and welcoming. And if you can, have your garage clean and open so that they can imagine driving their cars in out of the snow.
When is the best time to sell?
We get asked this question a lot. The answer is a lot simpler than you might be expecting.
Everyday I see articles in the big papers about real estate. The newspapers job is to get people to read their articles. More eyes on their articles, the more they can charge for advertising. So they like to make their headlines as dramatic as possible to attract viewers. The real estate topic is always of interest, even more so if you are thinking of selling or buying. The articles opinions are usually heavy to one side. Either it is saying the housing market is in a giant bubble that is about to burst or that there is no bubble and everything is as expected. So which is it? Only time will tell but in my opinion, prices are set to continue to rise for the next year at least and no bubble will ever be bursting.
In the recent election, the liberals and conservative parties had different approaches to how they would approach the housing problem in Ontario. There is no doubt that the price of homes is out of control. Many people will never be able to afford a home on their own now and the pricing is just continuing to go up and up. The Liberal plan had a focus on banning blind bidding and introducing an auction system. Honestly I don’t think that will fix anything except maybe save some buyers from overspending. In my experience, the current competition model is not seeing many buyers bid dramatically over the next highest bidder. Buyers know what their limit is and what the house is worth from advice given by their realtors. Seeing what the current highest bid is might actually result in buyers bidding over what they were comfortable stopping at in the blind model.
The real problem is the lack of inventory. There aren’t enough homes for sale. Everybody is staying put, settling into their homes where they all now work from as well as live in. Uprooting to pursue new jobs is not as necessary as before as many jobs can be done remotely. And generally speaking, people do not like to upgrade to a larger home in times of uncertainty.
So when is the best time to sell? That depends on where and when you are going. If you are selling to buy and move into another home, the answer is always going to be now. There is no reason to wait. In fact, with the current conditions, you will have no problem selling your home. The challenge will be finding the new one. Best to find the new one first and then put yours up for sale, knowing that it will also sell quickly. Price isn’t much of a factor as the change amount is more or less the same now as it will be in the future. Your current home will adjust with the market as will the destination home.
If you are looking to sell and move away or not move into another home, then I would also recommend to sell now. The market can turn at any moment. Right now it is a strong seller’s market still with lots of buyers and few sellers. Come spring, there will be more sellers and possibly less buyers. Interest rates will be rising and home prices have already priced many out of the market. Selling in the winter with less on the market can also make your place more desirable. Especially if your home has some challenges that buyers might not be as willing to live with if there are other options on the market to choose from.
If you are not in a rush to sell and can wait 6 months or more before you are ready to seriously think about selling, then by all means wait it out. Home prices historically have only risen about 3% per year. It is only in the past year and a bit that we have seen gigantic gains. What we haven’t seen in a long time are losses. Home prices did not drop when the pandemic hit, mostly due to the financial support given out by the government. If they didn’t drop then, then I doubt there is anything that will make them drop in the near future. Outside of natural disasters, man-made disasters or an alien invasion, which you can never predict when one might occur, it is unlikely that your home will lose any value anytime soon.
So, in short, if you are ready now, then now is as good a time as any to get your home on the market and take advantage of the conditions now before they shift and even out. That will happen! It always has and will again level out. We just don’t know when.
How do real estate agents get paid?
There seems to be a lot of confusion and misinformation out there around how a real estate agent is paid. Hopefully this blog post will clear that up.
First off, real estate agents are 100% commission based. They do not get a salary or a weekly pay cheque. The only time they are paid is when a sale is closed. If the transaction falls apart, then they are not paid for that sale.
Usually, an agent is paid a certain percentage of the sale amount. This varies by location and also by how much the property’s sale price is. The amount can be negotiated when selling a home and when buying, the amount is usually set prior to the home being listed. This is set prior because it is the seller that is paying the buyer’s agent to bring a buyer for the sale. Since the seller is the one who is paying for the service, the agent will have the buyer sign a buyer representation agreement that formalizes the fact that the agent is working for the best interests of the buyer and not the seller.
The fact that an agent is not paid unless the sale is complete might make you think that they will pressure you into a sale. Please know that it is against the real estate agent’s code of ethics to behave in such a manner. They have a fiduciary responsibility to provide you with the best advice possible so that you can make the decision on whether or not you proceed.
Real estate agents are not employees. They are contractors working for a brokerage. As such, they have to track their own HST collections and submit that back to the CRA every year at tax time. They also have to put away a percentage of the money they earn as income tax. This varies by the revenue coming in but is somewhere around 35%. An agent works for themselves. There is not a company benefit package, no pension and no paid vacation time. We have to track all of our expenses and pay out of packet for all of our business activities with the hopes that we will sell something to bring in some money.
In order to act as an agent, we have to register with the Ontario Real Estate Association and pay into an annual insurance policy and pay registration fees There are mandatory continuing education requirements where we must pay for and attend classes on a regular basis to keep our skills up to date. We also have to pay the brokerage a hefty monthly fee to work there. This covers off some essential items like access to the software and MLS listing data. Lastly, not all of the money received goes to the agent on a sale. There is an agreement with the brokerage for a split of that income where a good part of that goes to the brokerage. At the end of the day, the agent does not take home nearly as much as you might think.
So there you have it. A job where you have to pay someone else for the privilege to work where you might not see a pay cheque for several months at a time. When you do get some pay, the brokerage takes a bunch of it and you have to save almost half of the rest to give to the government. When the market is well balanced then yes, it can be a very rewarding occupation. When the market is ridiculous with not much for sale and crazy competition for the homes that do miraculously hit the market, then it is a struggle to put it mildly.
Deposit vs Down Payment
The deposit is different from a down payment. Often buyers get these two items mixed up or confused. A down payment is at least 5% of the purchase price, sometimes 20% or more depending on how you want the transaction to go and if you want or need to pay for mortgage insurance. The down payment is handled by your mortgage broker / bank when the house is closed.
A deposit is a sum of money that the buyer will send to the listing brokerage to be held in their trust account until the house is closed or returned to the buyer if a condition is not fulfilled. It is usually transferred within 24 hours of an offer being accepted.
A deposit is not returned to the buyer if the buyer backs out of a deal without a good reason for doing so. A seller may also choose to sue a buyer for damages if the buyer backs out of a signed and accepted deal. It is never a good idea to walk away from a deal once it has all been accepted.
If a condition of the offer is not met, then the deposit will be returned to the buyer. Usually this is done without any interest earned. Typical conditions are home inspection and mortgage financing. If the buyer is not satisfied with what the home inspection discovers or if the bank will not provide the buyer with the financing they need, and there were conditions in the offer stating that these must be done, then the buyer can back out of the deal and have the deposit returned.,
The amount of the deposit is entirely up to the buyer making the offer. The amount of the deposit will be subtracted from the sale price, with just the remainder being due upon closing. Example: Sale price is $100. Deposit is $1. $99 is due on closing. The deposit could be $100, it could be $50,000 or more!
The deposit is an insurance to the seller that the buyer is serious and committed to buying the property. The more the deposit amount, the less likely the buyer will walk away from the deal before it is closed. They will be less inclined to leave a deal if they leave behind a large deposit! When comparing competing offers, if two are more or less the same in all aspects except the deposit amount, the seller will almost certainly choose the one with the higher deposit amount.
13 April 2022
Canadian Mortgage App
Before you start looking to buy a home, it is best to have your finances in order so you know the price range to look in. A pre-approval with your mortgage agent is always a good idea. If you want to know what your monthly costs, land transfer fees, rebates and closing costs might be, then I highly suggest that you check out and use the “Canadian Mortgage App”.
This really is a great tool. You can play with mortgage details like interest rate, term, payment schedule, and come up with what your monthly payments will be based on your purchase price.
When you buy a home, there are some costs that you might not be expecting,. Real estate fees are paid for by the seller (in most cases) but there is a land transfer tax that needs to be paid by the buyer. This is based on the price of the home. In some cases, you might qualify for a rebate on this cost. The app help you determine what that cost will be. It also includes things such as lawyer fees, moving costs, HST (if applicable) and adjustment estimates for property tax/utilities giving you a really good idea of the money you will need on hand come closing time.
Once you figure out what your monthly mortgage payment will be, the tool also lets you budget other costs to give you a full monthly picture of your home owning expenses. Things like property tax, heat, condo fees.
Banks will be happy to set you up with a mortgage that the stress test says you can afford. Their tests don’t look at all of your monthly expenses and leave many people struggling to make ends meet. Some pre-planning ahead of time will help you to look within your realistic budget when buying your next home.
Is Co-Owning a home an option for you?
The price of owning a home is quickly becoming out of reach for many living in Ontario. In just one year, prices have increased over 20% and the pressure for increases is still on. Depending on who you follow or what article you read, the market is either going to crash hard or not at all and continue to climb.
At the moment, my point of view is that home prices are going to continue to rise. I do not believe this is a "bubble" that is going to pop sending home prices falling. They will stay where they are or go up, not down.
So this is a real predicament for those people looking to get into their first home. The quality and size of home that they could afford last year may be out of reach now.
In the Toronto area, where the average home price is more than double the prices up here in the north, buyers are coming together to buy homes and live together! This might be a good option here in Sudbury as long as the buyers are willing to live under the same roof.
There are definitely lots of options. Sudbury is FULL of homes that are either legal duplexes or ones that have been converted to be used as a duplex style building. These are usually priced to account for the rent that could be obtained from renting the units so might still be expensive but likely more doable if there is increased buying power.
There are also many homes that have been setup with separate living areas. Usually called an in-law suite, it is possible to find a home where two families can co-habitat with considerable privacy.
If you are considering this option, speak with your lawyer and mortgage advisors to get a good understanding of the agreements you will need to make prior to heading out searching for homes.
Attached is a guide from the province that provides more information on this option.
Home Sale Preparations
What to focus on when preparing your home for sale
In order to maximize buyer interest, you want to do what you can to make your house look its best. Here is a list of things to focus on.
1. Curb appeal
If your house looks bad from the outside, buyers will not be motivated to see what is inside.
Keeping the yard properly maintained by cutting the grass, tending to the garden and keeping the walkway clean will go a long way in helping you sell your house. If there is anything in need of repair that can be tackled, then consider doing it. Buyers love to look for any reason to not buy your house. If you can fix the problem before showings start, all the better.
2. De-clutter
When your house is full of furniture and other household items, it can often make your house look smaller than it is. Consider moving extra furniture and items out of the house while it is being shown. You can rent a storage bin to temporarily place these items in. The cost of a rental can save you a lot of time and money when it comes to selling. You might also take this time to sell or junk items in your house that you no longer need. Reducing and simplifying your “stuff” makes a lot of sense and also reduces how much you will need to move once your place sells.
3. De-personalize
Nobody wants to come into a house and see pictures of the family that lives there. They want to imagine themselves in the house. They don’t want to be reminded that somebody else has already and is living there now. Buying a house is an emotional journey and picturing themselves living there is an important part of buying a house.
4. Remove all signs of pets
Pets are great. They are cute and cuddly. They also shed, drop dander, chew baseboards, have a strong smell and occasionally have accidents in the house. Some buyers dislike pets so much that they won’t view a house that they know has pets. Put the dog toys away and move the cat litter somewhere that is well out of the way. Clean up the yard of any debris.
5. Paint and touch-ups
This is one of the cheapest and most effective tools at your disposal to help you sell your house. Freshening up the paint in the house makes it feel new again. Keep paint colors neutral and simple. Drastic colors or murals/graffiti will turn many customers away.
6. Staging
If you have the budget, consider hiring a professional stager to help you with organizing your home’s furniture and decorations. They have a great eye and can tell you what needs to go and what can stay and how best to layout your stuff.
7. Clean, clean & clean
A dirty house will never sell quickly and likely not for the price you want. Strange smells, dirty floors and a messy kitchen will have buyers running away. Get a professional cleaning done and then keep the place clean until it is sold.
