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Oct. 1, 2021

Shut Down Home Intruders With These 7 Safety Strategies

Shut Down Home Intruders With These 7 Safety Strategies

A break and enter occurs every 90 seconds in Canada.1 Fortunately, there are some proven tactics you can use to decrease your likelihood of a home invasion.

Most burglars won’t go to extreme lengths to enter your home. They are looking for easy access with minimal risk. A monitored security system can be an effective deterrent—homes without one are 300% more likely to be burglarized—but it isn’t the only way to protect your property.2 The strategies below can help to maximize your home’s security and minimize your chances of being targeted by intruders.

Thinking about listing your home? We have some additional recommendations for you. Contact us to find out the procedures we use to keep our clients and their property safe and secure during the buying and selling process.

 

1. Check Your Doors and Windows

According to insurance company SGI Canada, the most common entry point for a burglar is through a basement or ground floor door or window.1 So securing these points of entry is essential.

  • Evaluate the condition of your doors and locks.

A steel door is generally considered the strongest, but many homeowners prefer the look of wood. Whatever material you choose, make sure it has a solid core and pair it with a sturdy deadbolt lock that is a minimum of 2.5 cm long when thrown.3

  • Add window locks and security film.

Aftermarket window locks are an easy and inexpensive upgrade that can provide an additional layer of protection for your home. Choose a lock that is compatible with your window frame material and a style that is appropriate for the window type. And consider using a specialty film on windows that are adjacent to a door. Security film holds shattered glass in place, making the windows more difficult to penetrate.4

 

2. Landscape for Security

When it comes to outdoor landscaping, many of us think about maintenance and curb appeal. But the choices we make can impact our home’s security, as well. Thieves target homes that they can enter and exit without being detected. Here are a few tweaks that can make your property less appealing to potential intruders.

  • Increase visibility from the street.

A privacy hedge may keep out nosy neighbours, but it can also welcome thieves—so trim overgrown trees and shrubs that obstruct the view of your property. According to police officers, they offer an ideal environment for criminals to hide.5

  • Place thorny bushes and noisy gravel below windows.

Don’t eliminate shrubbery altogether, though. Certain hedges can actually offer a deterrent to robbers. Plant thorny rose bushes or sharp-leaved holly beneath your first-story windows for both beauty and protection. Add some loose gravel that crunches when disturbed.

 

3. Light Your Exterior

When it’s dark outside, criminals don’t need to rely on overgrown shrubbery to hide. Luckily, a well-designed outdoor lighting system can make your home both safer and more attractive.

  • Install landscape lighting.

Eliminate pockets of darkness around your yard and home’s perimeter with strategically placed outdoor lights. Use a combination of flood, spot, well, and pathway lights to add interest and highlight natural and architectural details.

  • Use motion-activated security lights to startle intruders.

The soft glow of landscape lighting isn’t always enough to dissuade a determined intruder. But a motion-activated security light may stop him in his tracks. And if you choose a Wi-Fi connected smart version, you can receive notifications on your phone when there’s movement on your property.

 

4. Make It Look Like You’re Home

Motion-activated lights aren’t the only way to make an intruder think you’re at home. New technology has made it increasingly possible to monitor your home while you’re away. This is especially important since most burglaries take place between 10 am and 3 pm, when many of us are at work or school.6

  • Turn on your TV and leave a car in the driveway.

A survey of convicted burglars revealed that the majority avoid breaking into homes if they can hear a television or if there’s a vehicle parked in the driveway.7 If you’re away from home, try connecting your TV to a timer or smart plug. And when you travel, leave your car out or ask a neighbour to park theirs in your driveway.

  • Install a video doorbell.

In that same survey, every respondent said they would knock or ring the doorbell before breaking into a home. A video doorbell not only alerts you to the presence of a visitor, it also enables you to see, hear, and talk with them remotely from your smartphone—so they’ll never know you’re gone.

 

5. Keep Valuables Out of Sight

Few home invasions are conducted by criminal masterminds. In fact, a survey of convicted offenders found that only 12% planned their robberies in advance, while the majority acted spontaneously.8 That’s one of the reasons security experts caution against placing valuables where they are visible from the outside.9

  • Check sightlines from your doors and windows.

Don’t tempt robbers with a clear view of the most commonly stolen items, which are cash (think purses and wallets), jewelry, electronics, firearms, and drugs (both illegal and prescription).5 Take a walk around your property to make sure none of these items are easily visible.

  • Secure valuables in a safe.

Consider the possessions that are on display inside your home, as well. It’s always a good idea to lock up firearms, sensitive documents, and expensive or irreplaceable items when you have housekeepers or other service providers on your property.

 

6. Highlight Your Security Measures

While it’s prudent to hide your valuables, it’s equally important to advertise your home’s security features. In surveys, convicted burglars admit to avoiding homes with obvious protective measures in place.7,8

  • Install outdoor cameras.

Security cameras are the most common home protection device and for good reason.10 Not only do they help prevent crime (burglars are known to avoid them11), they can offer peace of mind for homeowners who want to sneak a peek at their property while away. And if you do experience a break and enter, security camera footage can help police identify your intruder.

  • Post warning signs.

Security system placards and beware-of-dog signs are also shown to be effective deterrents.8 Of course, you should back up your threats with a noisy alarm and loud barking dog for maximum impact.

 

7. Limit What You Share on Social Media

Social media platforms can be a great way to stay connected with friends and family, but it’s easy to reveal more than you’ve intended. Be thoughtful about what you’re posting—and who has access.

  • Delay posting photos or travel updates.

It can be tempting to upload a concert selfie or pictures from your beach vacation. But these types of photos scream: “My house is unoccupied!” Try to wait until you’ve returned home to share the photos on social media.

  • Set privacy restrictions on your accounts.

Think twice about connecting with strangers or casual acquaintances on social media. If you enjoy sharing family updates and personal photos, it’s safer to limit your followers to those you truly know and trust.

 

YOUR HOME IS SAFE WITH US

We take home security seriously. That’s why we have screening procedures in place to keep our clients and their homes safe when they are for sale. We also remind our buyers to change the locks before they move into their new homes and provide referrals to locksmiths and home security companies that can help. To learn more about our procedures and how you can stay safe during the buying and selling process, contact us to schedule a free consultation!

 

Sources:

  1. SGI Canada -
    https://www.sgicanada.ca/news?title=preventing-break-ins
  2. Bankrate -
    https://www.bankrate.com/insurance/homeowners-insurance/house-burglary-statistics/
  3. Square One -
    https://www.squareone.ca/resource-centres/home-personal-safety/preventing-break-ins
  4. SafeWise -
    https://www.safewise.com/blog/10-simple-ways-to-secure-your-new-home/
  5. Toronto Police Department -
    https://www.torontopolice.on.ca/crimeprevention/environmental.pdf
  6. Canadian Security Professionals -
    https://www.cspalarms.ca/blog/safety/home-robberies-by-the-numbers-when-you-should-be-the-most-alert/
  7. KGW News -
    https://www.kgw.com/article/news/investigations/86-burglars-say-how-they-break-into-homes/283-344213396
  8. Science Daily -
    https://www.sciencedaily.com/releases/2013/05/130516160916.htm
  9. org -
    https://www.security.org/home-security-systems/home-invasion-protection/
  10. SafeWise -
    https://www.safewise.com/resources/security-stats-facts/
  11. The Guardian -
    https://www.theguardian.com/business/2017/aug/18/former-burglars-barking-dogs-cctv-best-deterrent
Posted in Real Estate Tips
Sept. 1, 2021

9 Tips for Buying and Selling Your Home at the Same Time

9 Tips for Buying and Selling Your Home at the Same Time

Selling your home when you still need to shop for a new one can feel daunting to even the most seasoned homeowner––especially when the demand for new homes keeps rising, but the supply feels like it's dwindling.¹ You're not alone either if you're already feeling drained by the complex logistics of trying to sell and buy a new home all at once.

Searching for a new home can be exciting, but many homebuyers admit that it can also be stressful, especially if you live in an unpredictable market with plenty of competitors. Unfortunately, waiting out a competitive housing market isn’t always the best idea either since homes are in notoriously short supply across Canada, and listings are expected to remain limited in the most coveted neighbourhoods for some time.²

That doesn't mean, though, that you should just throw up your hands and give up on moving altogether. In fact, as a current homeowner, you could be in a better position than most to capitalize on a seller’s market and make a smooth transition from your old home to a new one.

We can help you prepare for the road ahead and answer any questions you have about the real estate market.  For example, here are some of the most frequent concerns we hear from clients who are trying to buy and sell at the same time.

 

“WHAT WILL I DO IF I SELL MY HOUSE BEFORE I CAN BUY A NEW ONE?”

This is an understandable concern for many sellers since the competitive real estate market makes it tough to plan ahead and predict when you'll be able to move into your next home. But chances are, you will still have plenty of options if you do sell your home quickly. It may just take some creativity and compromise.

Here are some ideas to make sure you're in the best possible position when you decide to list your home:

Tip #1: Flex your muscles as a seller.

In a competitive market, buyers may be willing to make significant concessions in order to get the home they want. In some cases, a buyer may agree to a sell and lease back agreement (also known as a "sell house and rent back" option) that allows the seller to continue living in the home after closing for a set period of time and negotiated fee.

This can be a great option for sellers who need to tap into their home equity for a downpayment or who aren’t logistically ready to move into their next home. If you're dealing with an investor rather than a traditional buyer, you may even be able to negotiate a lengthy lease and lower rent payment than your current mortgage.³

However, leaseback agreements can be complex, with important legal, financial and tax issues to consider.⁴ At minimum, a carefully-worded contract and security deposit should be in place in case of any property damage or unexpected repairs that may be needed during the leaseback period.

Tip #2: Open your mind to short-term housing options.

While it can be a hassle to move out of your old home before you’re ready to move into your new one, it’s a common scenario. If you’re lucky enough to have family or generous friends who offer to take you in, that may be ideal. If not, you’ll need to find temporary housing. Check out furnished apartments, vacation rentals and month-to-month leases. If space is an issue, consider putting some of your furniture and possessions in storage.

You may even find that a short-term rental arrangement can offer you an opportunity to get to know your new neighbourhood better—and lead to a more informed decision about your upcoming purchase.

Tip #3: Embrace the idea of selling now and buying later.

Instead of stressing about timing your home sale and purchase perfectly, consider making a plan to focus on one at a time. Selling before you’re ready to buy your next home can offer a lot of advantages.

For one, you’ll have cash on hand from the sale of your current home. This will put you in a much better position when it comes to buying your next home. From budgeting to mortgage approval to submitting a competitive offer, cash is king. And by focusing on one step at a time, you can alleviate some of the pressure and uncertainty.

 

 “WHAT IF I GET STUCK WITH TWO MORTGAGES AT THE SAME TIME?”

This is one of the most common concerns that we hear from buyers who are selling a home while shopping for a new one, and it’s realistic to expect at least some overlap in mortgage payments. But unless you have a large enough income to comfortably carry two mortgages, you may not pass Canada's beefed up mortgage stress test until you have a contract on your first home. (You can use the Financial Consumer Agency of Canada's Mortgage Qualifier Tool to check your odds.⁵)

Assuming you can secure financing, however, it's still a good idea to examine your budget and calculate the maximum number of months you can afford to pay two mortgages before you jump on a new home. Potential stopgap solutions, such as bridge financing, can also help tide you over if you qualify.

If you simply can’t afford to carry both mortgages for any amount of time, or if you are concerned about passing the mortgage stress test, then selling before you buy may be your best option. (See Tip #3 above.) But if you have some flexibility in your budget, it is possible to manage both a home sale and purchase simultaneously. Here are some steps you can take to help streamline the process:

Tip #4: As you get ready to sell, simplify.

You can condense your sales timeline if you only focus on the home renovations and tasks that matter most for selling your home quickly. For example, clean and declutter all of your common areas, refresh your outdoor paint and curb appeal and fix any outstanding maintenance issues as quickly as possible.

But don't drain unnecessary time and money into pricey renovations and major home projects that could quickly bog you down for an unpredictable amount of time. We can advise you on the repairs and upgrades that are worth your time and investment.

Tip #5: Prep your paperwork.

You'll also save valuable time by filing as much paperwork as possible early in the process. For example, if you know you'll need a mortgage to buy your next home, get pre-approved right away so that you can shorten the amount of time it takes to process your loan.⁶

Similarly, set your home sale up for a fast and smooth transition by pulling together any relevant documentation about your current home, including appliance warranties, renovation permits, and repair records. That way, you're ready to provide quick answers to buyers' questions should they arise.

Tip #6: Ask us about other conditions that can be included in your contracts.

Part of our job as agents is to negotiate on your behalf and help you win favourable terms. For example, it’s possible to add a contract condition known as a "subject to sale" or "sale of property" (SOP) condition to your purchase offer that lets you cancel the contract if you haven't sold your previous home.⁷ This tactic could backfire, though, if you're competing with other buyers. We can discuss the pros and cons of these types of tactics and what’s realistic given the current market dynamics.

 

 “WHAT IF I MESS UP MY TIMING OR BURN OUT FROM ALL THE STRESS?”

When you're in the pressure cooker of a home sale or have been shopping for a home for a while in a competitive market, it's easy to get carried away by stress and emotions. To make sure you're in the right headspace for your homebuying and selling journey, take the time to slow down, breathe and delegate as much as possible. In addition:

Tip #7: Relax and accept that compromise is inevitable.

Rather than worry about getting every detail right with your housing search and home sale, trust that things will work out eventually––even if it doesn't look like your Plan A or even your Plan B or Plan C. Perfecting every detail with your home decor or timing your home sale perfectly isn't necessary for a successful home sale and compromise will almost always be necessary. Luckily, if you've got a good team of professionals, you can relax knowing that others have your back and are monitoring the details behind the scenes.

Tip #8: Don't worry too much if your path is straying from convention.

Remember that rules-of-thumb and home-buying trends are just that: they are estimates, not facts. So if your home search or sale isn't going exactly like your neighbours' experience, it doesn't mean that you are doomed to fail.

It's possible, for example, that seasonality trends may affect sales in your neighbourhood. So a delayed sale in the summer or fall could affect your journey––but not necessarily. According to the Canadian Real Estate Association, the housing market used to be more competitive during the fall and spring and less competitive during the winter. But it's not a hard and fast rule and real estate markets across Canada have seen major shifts in recent years.⁸ Every real estate transaction is different. That's why it's important to talk to a local agent about your specific situation.

Tip #9: Enlist help early.

If possible, call us early in the process. We'll not only provide you with key guidance on what you should do ahead of time to prepare your current home for sale, we'll also help you narrow down your list of must-haves and wants for your next one. That way, you'll be prepared to act quickly and confidently when you spot a great house and are ready to make an offer.

It's our job to guide you and advocate on your behalf. So don't be afraid to lean on us throughout the process. We’re here to ease your burden and make your move as seamless and stress-free as possible.

 

BOTTOMLINE: COLLABORATE WITH A REAL ESTATE PROFESSIONAL TO GET TAILORED ADVICE THAT WORKS FOR YOU

Buying and selling a home at the same time is challenging. But it doesn't have to be a nightmare, and it can even be fun. The key is to educate yourself about the market and prepare yourself for multiple scenarios. One of the best and easiest ways to do so is to partner with a knowledgeable and trustworthy agent.

A good agent will not only help you evaluate your situation, we will also provide you with honest and individually tailored advice that addresses your unique needs and challenges. Depending on your circumstances, now may be a great time to sell your home and buy a new one. But a thorough assessment may instead show you that you're better off pausing your search for a while longer.

Contact us for a free consultation so that we can help you review your options and decide the best way forward.

 

Sources:

  1. Canadian Real Estate Association (CREA) National Statistics -
    https://creastats.crea.ca/en-CA/
  2. Scotiabank Global Economics Housing Note - https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-note.housing-note--may-12-2021-.html
  3. CBC News -
    https://www.cbc.ca/news/canada/toronto/housing-real-estate-toronto-market-sell-stay-rent-1.4075093
  4. Appraisal Institute of Canada - https://www.aicanada.ca/article/possible-valuation-issues-with-life-lease-housing/
  5. Financial Consumer Agency of Canada -
    https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx
  6. Government of Canada - https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preapproval-qualify-mortgage.htm
  7. RBC Bank - https://www.rbcroyalbank.com/mortgages/selling-buying-home.html
  8. Canadian Real Estate Association -  https://www.realtor.ca/blog/are-spring-and-fall-housing-markets-a-thing-of-the-past/20405/1361
Posted in Real Estate Tips
Aug. 1, 2021

5 Factors That Reveal Where The Real Estate Market Is Really Headed

5 Factors That Reveal Where The Real Estate Market Is Really Headed

In a July release, the Canadian Real Estate Association reported that home sales had fallen for three months in a row after reaching an all-time high in March.1 So could one of the world’s hottest real estate markets finally be headed for a downturn?

We wouldn’t bet on it. That’s because even though sales have slowed, it was still the strongest June on record—and 13% higher than last year.1  

"Don't be fooled — this is still an extremely strong level of demand," Bank of Montreal Economist Robert Kavcic told CBC News. "Home sales have backed off extreme levels seen in recent months, but demand is still historically strong and driving strong price growth."1  

And this is what we have experienced in our local market with home sales up over 38% year-over-year and, according to the Cambridge Association of Realtors, the average sale price is up over 27% since July 2020 from $610,119 to $779,975.

So what can we expect from Canadian real estate? Here are five factors that illustrate where the housing market is today and is likely heading tomorrow.

HOME PRICE INCREASES MAY LEVEL OFF NEXT YEAR

The Canadian Real Estate Association predicts the national average home price will reach $677,774 by the end of 2021, which would be a 19.3% increase over last year. “While market conditions have eased a little in recent months, they nonetheless continue to favour sellers to some extent in virtually all local markets,” the association says.2

But for the remainder of 2021 and into 2022, the association anticipates pricing trends will head toward more normal territory. “Limited supply and higher prices are expected to tap the brakes on activity in 2022 compared to 2021,” according to the association.2

That translates into the association’s forecast of only a 0.6% uptick, to $681,500, in the national average home price for 2022.2 If that happens, it could prompt some buyers who had been reluctant to make purchases this year to enter the market next year.

What does it mean for you?

If you’re a homeowner, now might be the time to look at selling. That’s because the number of available homes continues to be relatively low, and, though price appreciation has begun to slow, many homes are still selling in competition. We can help you prepare and market your home to take advantage of the current seller’s market.

HOME SALES ARE TAPERING OFF

If the 2021 home market in Canada is a wildfire, then 2022 could be more like a campfire. The Canadian Real Estate Association anticipates a slowdown in home sales activity in 2022 following an extremely busy 2021.3

An estimated 682,900 properties are expected to trade hands through Canadian Multiple Listing Service systems in 2021, which would be an increase of 23.8% from 2020, the association says.3

“This easing trend is expected to play out across Canada,” the association says, “with buyers facing both higher prices and a lack of available supply, while at the same time the urgency to purchase a home base to ride out the pandemic continues to fade alongside the virus itself.”3

“One of the world’s [most active] housing markets appears to be slowing down,” the Bloomberg news service proclaimed in June in a report about the Canadian home market.6

What does it mean for you?

Are you struggling to buy a home in today’s highly competitive market? If so, 2022 might be a good time to pursue a purchase because you may face less competition. However, one drawback of waiting is that mortgage rates are expected to go up. We can help put you on the right path toward homeownership, whether you want to buy now or next year.

SUPPLY OF HOMES REMAINS LOW

The housing shortage in Canada persists.

Before the pandemic, the number of available homes nationally sat at a 14-year low and the number of months of inventory had fallen below four months, according to the Canadian Real Estate Association.3

Inventory below four months puts the supply in “seller’s market territory,” the association says.3 Inventory refers to the number of months it would take for the current supply of homes on the market to be sold at the existing pace.7

In June, the Canadian Real Estate Association reported the national inventory of available homes was close to two months, reflecting an “unprecedented imbalance of supply and demand.”3 National inventory hit a record low of 1.7 months in March, compared with the long-term average of more than five months.7

“At a time where so many markets are struggling with historically low inventory, sales activity depends on a steady stream of new listings each month,” the association says.7

What does it mean for you?

A tight supply of available homes puts sellers in a strong position as long as demand stays high. So, if you’re a homeowner, placing your home on the market when demand exceeds supply could bring you a higher price. We can help you figure out when to sell so that you extract the maximum value from your home.

HOME CONSTRUCTION ON THE VERGE OF STABILIZING

Newly built homes add, of course, to the supply of homes available to buyers. And it appears that home construction in Canada is on the upswing.8

For all of 2021, construction is projected to begin on as many as 230,000 new homes in Canada, up from a little over 217,800 in 2020, according to the Canada Mortgage and Housing Corp. (CMHC). Even more homes could get underway in 2022 (as many as 234,500) and 2023 (231,900).8

“Housing starts will stabilize at levels consistent with household formation by the end of 2023,” according to CMHC.9

What does it mean for you?

More newly built homes coming on the market could mean an opportunity for buyers, as construction boosts the supply of available properties and eases the strain on demand. Bottom line: An influx of new homes may open more doors to homeownership. We can give you a hand in locating a new or existing home that fits your budget and your needs.

MORTGAGE RATES ARE SET TO RISE

Low mortgage interest rates help entice buyers to make a home purchase. That’s certainly been the case in Canada in recent months. However, mortgage rates are poised to creep up this year and next year, and even into 2023.10

An analysis from Mortgage Sandbox indicates five-year Canadian mortgage rates are expected to remain low by historical standards, but they are expected to continue rising in 2022 and 2023. The analysis indicates the fixed rate for a five-year mortgage could climb to 3% in the third quarter of 2022.11

Low mortgage rates typically make it easier for homebuyers to qualify for a mortgage, as well. But on June 1, the Office of the Superintendent of Financial Institutions raised the mortgage “stress test” qualifying rate from 4.79% to 5.25%.12

According to the Toronto Sun, “It was intended in part to slow down the overheated housing market and likely in part because inflation (and higher interest rates) are on the horizon.”12

In a recent report, the British Columbia Real Estate Association forecast, “rising Canadian inflation — and the extent to which that inflation is a temporary phenomenon — is set to shape how rates evolve over the next year.”13

What does it mean for you?

Given the prospect that Canadian mortgage rates may go up during the rest of this year and into 2022, now might be the right time to think about borrowing money to buy a home. When interest rates rise, you pay more to borrow money. Whether you’re buying a new home or up for a renewal, you can lower your risk by locking in a fixed-rate rather than variable-rate mortgage.

ARE YOU THINKING OF BUYING OR SELLING?

It can be tough to sort out the Canadian housing market—where are home prices heading, are mortgage rates going up, is it the right time to buy or sell? We can help you answer all of those questions, and more. We then can work with you to come up with a plan tailored to your unique situation. Let us be your partner in the homebuying or home-selling journey.

 

Sources:

  1. CBC -
    https://www.cbc.ca/news/business/crea-june-stats-1.6103715
  2. Canadian Real Estate Association -
    https://www.crea.ca/housing-market-stats/quarterly-forecasts/
  3. Canadian Real Estate Association - https://www.creacafe.ca/quarterly-forecast-housing-activity-to-continue-easing-over-second-half-of-2021-and-into-2022/
  4. Global News -
    https://globalnews.ca/news/7868251/canada-home-sales-down-april/
  5. Global News -
    https://globalnews.ca/news/7950863/canada-home-sales-may-crea/
  6. Bloomberg - https://www.bloomberg.com/news/articles/2021-06-15/canada-housing-worlds-second-bubbliest-market-starts-to-look-fatigued
  7. Canadian Real Estate Association -
    https://creastats.crea.ca/en-CA/
  8. Canada Mortgage and Housing Corp. - https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/market-reports/housing-market/housing-market-outlook/2021/housing-market-outlook-61500-spring-2021-en.pdf
  9. Canada Mortgage and Housing Corp. - https://www.cmhc-schl.gc.ca/en/blog/2021/housing-markets-expected-moderate-risks-remain
  10. Global News -
    https://globalnews.ca/news/7962282/rising-interest-rates-canadas-housing-market/
  11. Mortgage Sandbox -
    https://www.mortgagesandbox.com/mortgage-interest-rate-forecast
  12. Toronto Sun -
    https://torontosun.com/opinion/columnists/wild-new-stress-test-rate-makes-it-more-difficult-for-home-buyers-to-qualify-for-mortgage
  13. British Columbia Real Estate Association - https://www.bcrea.bc.ca/wp-content/uploads/mortgagerateforecast.pdf

 

 

Posted in Market Updates
July 1, 2021

How to Bridge the Appraisal Gap in Today’s Real Estate Market

How to Bridge the Appraisal Gap

 

If you’re searching for drama, don’t limit yourself to Netflix. Instead, tune in to the real estate market, where the competition among buyers has never been fiercer. And with homes selling for record highs,1 the appraisal process—historically a standard part of a home purchase—is receiving more attention than ever.

That’s because some sellers are finding out the hard way that a strong offer can fizzle quickly when an appraisal comes in below the sales price. Thus, many sellers favour buyers who can guarantee their full offer price—even if the property appraises for less. For the buyer, that could mean a large down payment or extra cash on hand to cover the gap.

Whether you’re a buyer or a seller, it’s never been more important to understand the appraisal process and how it can be impacted by a quickly appreciating and highly competitive housing market. It’s also crucial to work with a skilled real estate agent who can guide you to a successful closing without overpaying (if you’re a buyer) or overcompensating (if you’re a seller). Find out how appraisals work—and in some cases, don’t work—in today’s unique real estate environment.

APPRAISAL REQUIREMENTS

An appraisal is an objective assessment of a property’s market value performed by an independent licensed appraiser. Mortgage lenders use appraisals to lower their risk of loss in the event a buyer stops paying their loan. It provides assurance that the home’s value meets or exceeds the amount being lent for its purchase.

In certain circumstances, an appraisal can be avoided. For example, when a buyer purchases mortgage insurance because they have a down payment of less than 20%. In that instance, the mortgage insurance would cover the lender’s loss in a case of default. Or, if a buyer makes a large down payment, a lender may waive their right of appraisal.2

Additionally, sometimes a lender will use an automated valuation model (AVM) to estimate a property’s value. According to the Appraisal Institute of Canada, “AVMs are computer programs that provide real estate market analysis and estimates of value.” If the sales price falls comfortably within the AVM’s range of value, a lender may skip the formal appraisal.3

However, in the event a formal appraisal is required, it will need to be conducted by a licensed and authorized appraiser. In most cases, the appraiser will analyze the property’s condition and review the value of comparable properties that have recently sold. Using this information, they will determine the home’s current market value. Mortgage borrowers are usually expected to pay the cost of an appraisal.2

APPRAISALS IN A RAPIDLY SHIFTING MARKET

Problems can arise when the appraisal comes in lower than the sales price. And while low appraisals are not common, they are more likely to happen in a rapidly appreciating market, like the one we’re experiencing now.4 That’s because appraisers use comparable sales (commonly referred to as comps) to determine a property’s value. These could include homes that went under contract weeks or even months ago. With home prices rising so quickly, today’s comps may be lagging behind the market’s current reality. Thus, the appraiser may be basing their assessment on stale data, resulting in a low valuation.5

According to Kevin Lonsdale, Executive Director of the Canadian National Association of Real Estate Appraisers, the best valuations should be based on “data, not emotion. This emotional process where people are outbidding each other creates a disconnect and that then becomes a comparable six months down the road. It’s very difficult to value properties based on what the market wants to pay for them.”6

HOW ARE BUYERS AND SELLERS IMPACTED BY A LOW APPRAISAL?

In a balanced market, a financing condition is a standard inclusion in a home purchase offer. It enables the buyer to make the closing of the transaction dependent on their ability to secure a mortgage. And in many cases, the loan is contingent on a satisfactory appraisal, wherein the value of the property is at or near the purchase price.

But in today’s market, sellers often hold the upper hand because the current demand for homes exceeds the available supply. That’s why many buyers are choosing to exclude the financing condition altogether, as a way to sweeten their offer in a competitive bidding process.5

However, this approach can leave a buyer vulnerable if the appraisal comes back lower than expected. Without a financing condition, the buyer will be obligated to come up with enough cash to bridge the gap between the contract price and the appraised value—or be forced to walk away from the transaction and potentially lose their deposit.

It may seem, then, that a buyer carries the sole risk of a low appraisal. However, the sellers will have wasted time and money with little to show for it. And they run the risk that the market may have cooled or interest in their home may have waned by the time they relist.

Sellers should keep this in mind when evaluating offers. The offer price should never be the sole consideration. We weigh a range of factors when advising our clients, including a buyer’s conditions, mortgage qualifications, financial resources, and deposit size, among others.

According to Lonsdale, overheated blind bidding in Canadian real estate means that there is additional pressure on everyone involved in the transaction. With a tight timeline, there’s not always enough time for proper due diligence, putting stress on the transaction and on the buyer and seller involved.6

MITIGATE YOUR RISK WITH THE BEST REPRESENTATION

There’s never been a market quite like this one before. That’s why you need a master negotiator on your side who has the skills, instincts, and experience to get the deal done...no matter what surprises may pop up along the way. If you’re a buyer, we can help you compete in this unprecedented market—without getting steamrolled. And if you’re a seller, we know how to get top dollar for your home while minimizing hassle and stress. Contact us today to schedule a complimentary consultation.

 

Sources:

  1. Financial Post -
    https://financialpost.com/real-estate/canadian-home-sales-prices-surge-to-new-record-in-march
  2. Mortgages.ca -
    https://mortgages.ca/what-you-should-know-about-home-appraisals
  3. Appraisal Institute of Canada -
    https://professional.sauder.ubc.ca/re_creditprogram/course_resources/courses/content/452/AVMPositionPaper.pdf
  4. Teranet–National Bank House Price Index™ -
    https://housepriceindex.ca/#maps=c11
  5. The Globe and Mail -
    https://www.theglobeandmail.com/business/article-rapid-increase-in-home-prices-puts-buyers-in-bind-when-appraisals-dont/
  6. Personal Interview: Kevin Lonsdale, Executive Director, Canadian National Association of Real Estate Appraisers. 4 Jun 2021
Posted in Market Updates
June 1, 2021

Could Rising Home Prices Impact Your Net Worth?

Could Rising Home Prices Impact Your Net Worth?

Learn how to determine your current net worth and how an investment in real estate can help improve your bottom line.

Among its many impacts, COVID-19 has had a pronounced effect on the housing market. Low home inventory and high buyer demand have driven home prices to an all-time high.1 This has given an unexpected financial boost to many homeowners during a challenging time. However, for some renters, rising home prices are making dreams of homeownership feel further out of reach.

If you’re a homeowner, it’s important for you to understand how your home’s value contributes to your overall net worth. If you’re a renter, now is the time for you to figure out how homeownership fits into your short-term goals and your long-term financial future. An investment in real estate can help you grow your net worth, build wealth over time, and gain a foothold in the housing market to keep pace with rising prices.

What is net worth?

Net worth is the net balance of your total assets minus your total liabilities. Or, basically, it is what you own minus what you owe.2

Assets include the cash you have on hand in your chequing and savings accounts, investment account balances, salable items like jewelry or a car and, of course, your home and any other real estate you own. 

Liabilities include your total debt obligations like car loans, credit card debt, the amount you owe on your mortgage, and student loans. In addition, liabilities would include any other payment obligations you have, like outstanding bills and taxes.

How do I calculate my net worth?

To calculate your net worth, you’ll want to add up all of your assets and all of your liabilities. Then subtract your total liabilities from your total assets. The balance represents your current net worth.

 

Total Assets – Total Liabilities = Net Worth

Ready to calculate your net worth? Contact us to request an easy-to-use worksheet and a free assessment of your home’s current market value!

 

Keep in mind that your net worth is a snapshot of your financial position at a single point in time. Your assets and liabilities will fluctuate over both the short term and long term. For example, if you take out a loan to buy a car, you decrease your liability with each payment. Of course, the value of your asset (the car) will depreciate over time, as well. An asset that is invested in stocks or bonds can be even less predictable, as it’s subject to daily fluctuations in the market.

As a homeowner, you enjoy significant stability through your monthly real estate investment, also known as your home mortgage payment. While the actual value of your home can fluctuate depending on market conditions, your mortgage payment will decrease your liability each month. And unlike a vehicle purchase, the value of your home is likely to appreciate over time, which can help to grow your net worth. Right now, your asset may be worth significantly more than it was this time last year.3

If you’re a homeowner, contact us for an estimate of your home’s market value so that you can factor it into your net worth calculation. If you’re not a current homeowner, let’s talk about how homes in our area have appreciated over the last several years. That way, you can get an idea of how a home purchase could positively affect your net worth.

How can real estate increase my net worth?

When you put your real estate dollars to work, it’s possible to grow your net worth, generate cash flow, and even fund your retirement. We can help you realize the possibilities and maximize the return on your investment.

Property Appreciation

Generally, property appreciates in one of two ways: either through changes to the overall market or through value-added modifications to the property itself.

1. Rising prices

This type of property appreciation is the one that many homeowners are enjoying right now. Buyer demand is at an all-time high due to a combination of record-low interest rates and limited housing inventory.4 At other times, rising home prices have been attributed to different factors. Certain local conditions—like a new commercial development, influx of jobs, or infrastructure project—can encourage rapid growth in a community or region and a corresponding rise in home values. Historically, home prices have been shown to experience an upward trend punctuated by intermittent booms and corrections.5

2. Strategic home improvements

Well-planned and executed home improvements can also impact a home’s value and increase homeowner equity at the same time. The type of home improvement should be appropriate for the home and in tune with the desires of local buyers.

For example, a tasteful exterior remodel that is in keeping with the preferences of local home buyers is likely to add significant value to a home, while remodeling the home to look like the Taj Mahal or a favorite theme park attraction will not. A modern kitchen remodel tends to add value, while a kitchen remodel that is overly expensive or personalized may not provide an adequate return on investment.

Investment Property

You may be used to thinking of investments primarily in terms of stocks and bonds. However, the purchase of a real estate investment property offers the opportunity to increase your net worth both upon purchase and year after year through appreciation. In addition, rental payments can have a positive impact on your monthly income and cash flow. If you currently have significant equity in your home, let's talk about how you could put that equity to work by funding the purchase of an investment property.

1. Long-term or traditional rental

A long-term rental property is one that is leased for an extended period and typically used as a primary residence by the renter. This type of real estate investment offers you the opportunity to generate consistent cash flow while building equity and appreciation.6

As an owner, you don’t usually have to worry about paying the utility bills or furnishing the property—both of which are typically covered by the tenant. Add to this the fact that traditional tenants translate into less time and effort spent on day-to-day property management, and long-term rentals are an attractive option for many investors.

2. Short-term or vacation rental

Short-term rentals are often referred to as vacation rentals because they are primarily geared towards recreational travellers. And as more people start to feel comfortable travelling again, the short-term rental market is poised to become a more popular option than ever in certain markets. In fact, with travellers continuing to seek out domestic options in lieu of international travel, this may be the perfect time to consider an investment in a short-term rental property.7

Investing in a short-term rental offers many benefits. If you purchase an investment property in a top tourist destination, you can expect steady demand from travelers while taking advantage of any non-rented periods to enjoy the home yourself. You can also adjust your rental price around peak demand to maximize your cash flow while building equity and long-term appreciation. 

To reap these benefits, however, you’ll need to understand the local laws and regulations on short-term rentals. We can help you identify suitable markets with investment potential.

WE’RE HERE TO HELP

Ready to calculate your personal net worth? Contact us for an easy-to-use worksheet and to find out your home’s current value. And if you want to learn more about growing your net worth through real estate, we can schedule a free consultation to answer your questions and explore your options. Whether you’re hoping to maximize the value of your current home or invest in a new property, we’re here to help you achieve your real estate goals.

 

The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.

 

Sources: 

  1. Financial Post -
    https://financialpost.com/real-estate/canadian-home-sales-prices-surge-to-new-record-in-march
  2. Forbes -
    https://www.forbes.com/advisor/investing/what-is-net-worth/
  3. Global Property Guide -
    https://www.globalpropertyguide.com/North-America/Canada/Price-History
  4. Canadian Real Estate Association -
    https://creastats.crea.ca/en-CA/
  5. Trading Economics -
    https://tradingeconomics.com/canada/housing-index
  6. Canadian Apartment -
    https://www.reminetwork.com/articles/hopeful-outlook-for-canadas-rental-market/
  7. MoneySense -
    https://www.moneysense.ca/spend/real-estate/is-now-the-time-to-buy-a-vacation-home/
Posted in Market Updates
May 1, 2021

Finding a New Home for Your Next Stage of Life

Finding a New Home for Your Next Stage of Life

Imagine the first place you lived as a young adult. Now imagine trying to fit your life today into that space. Not pretty, right?  

For most of us, our housing needs are cyclical. A newly independent adult can find freedom and flexibility in even a tiny apartment. That same space, to a growing family, would feel stifling. For empty nesters, a large home with several unused bedrooms can become impractical to heat and clean. It’s no surprise that life transitions often trigger a home purchase. 

While your home-buying journey may not look like your neighbour’s or friend’s, broad trends can help you understand what to keep in mind as you house hunt. No one wants to regret their home purchase, and taking the time now to think about exactly what you need can save a lot of heartache later.

 

The Newly Married or Partnered Couple

The financial and legal commitment of both traditional and common-law marriage has provided a springboard to homeownership for centuries. And while the average age of first marriage in Canada is around 30, the average age of first home purchase has shifted even later to 36.1,2 No matter your age, there are some key factors that you should consider when you are ready to enter into your first home purchase together.

Affordability is Key

There’s no doubt about it—with home prices that just keep climbing, many first-time buyers feel that the deck is stacked against them when it comes to homeownership. But stepping onto the property ladder can be more doable than many realize, especially in today’s low mortgage rate environment. 

While many buyers are holding out for their dream home, embracing the concept of a starter home can open a lot of doors. In fact, that’s a popular approach for first-time homebuyers to take. Fifty percent of first-time Canadian buyers report that they plan to eventually upgrade to a larger home.3  

Chosen carefully, a starter home can be a great investment as well as a launchpad for your life together. If you focus on buying a home you can afford now with strong potential for appreciation, you can build equity alongside your savings, positioning you to trade up in the future if your needs change.3

Taking Advantage of Low Mortgage Rates

Canadian mortgage rates hit record lows in summer 2020, and while they are gradually creeping back up, now is still an ideal time to purchase your first home together.4 A lower interest rate can save you a bundle over the life of your loan, which can significantly increase the quality of home you can get for your money. 

But what if both halves of a couple don’t have good credit? You still have options. First, boosting a credit score can be easier than you think—simply paying your credit cards down below 35% of your limit can go a long way.5 But if that’s not enough to raise your score, you might consider taking out the mortgage in only the better-scoring partner’s name. The downside is that applying for a mortgage with only one income will reduce your qualification amount. And if you take that route, make sure you understand the legal and financial implications for both parties should the relationship end.

Commute and Lifestyle Considerations

Whether you’ve lived in a rental together for years or are sharing a home for the first time, you know that living together involves some compromises. But there are certain home features that can make life easier in the future if you identify them now. The number of bathrooms, availability of closet space, and even things like kitchen layout can make a big difference in your day-to-day life and relationship. 

Your home’s location will also have a significant impact on your quality of life, so consider it carefully. What will commuting look like for each of you? And if you have different interests or hobbies—say, museums vs. hiking—you’ll need to find a community that meets both your needs. Need some help identifying the ideal location that fits within your budget? We can match you with some great neighbourhoods that offer the perfect mix of amenities and affordability. 

 

The Growing Family 

Having kids changes things—fast. With a couple of rowdy preteens and maybe some pets in the mix, that 1,600 square foot home that felt palatial to two adults suddenly becomes a lot more cramped. Whether you’ve just had your first child or are getting to the point where your kids can’t comfortably share a bedroom any longer, there’s plenty to consider when you’re ready to size up to a home that will fit your growing family. 

The Importance of School Districts

For many parents, the desire to give their kids the best education—especially once they are in middle and high school— surpasses even their desire for more breathing room. In fact, homebuyers report that school district is one of their top concerns.6 Of course, homes in the best-rated districts tend to be more expensive and harder to nab. But when push comes to shove, many buyers with kids prefer to sacrifice a bit of space to find a home in their desired location.

When you’re moving to a new community, it can be tough to figure out what the local schools are actually like—and online ratings don't tell the whole story. That’s why talking to a local real estate agent can be a gamechanger. We don’t just work in this community; we know it inside and out. 

Lifestyle Considerations

For many families, living space is a key priority. Once you have teenagers who want space to hang out with their friends, a finished basement or a rec room can be a huge bonus (and can help you protect some quieter living space for yourself). 

A good layout can also make family life a lot easier. For example, an open plan is invaluable if you want to cook dinner while keeping an eye on your young kids playing in the living room. And if you think that you might expand your family further in the future, be sure that the home you purchase has enough bedrooms and bathrooms to accommodate that comfortably. 

Functionality

Try to think about how each room will fit into your day-to-day. Are you anticipating keeping the house stocked to feed hungry teenagers? A pantry might rise to the top of the list. Dreading the loads of laundry that come with both infants and older kids (especially if they play sports)? The task can be much more bearable in a well-designed laundry room. Imagine a typical day or week of chores in the house to identify which features will have the biggest impact.

Chances are, you won’t find every nice-to-have in one home, which is why identifying the must-haves can be such a boon to the decision-making process. We can help you assess your options and give you a sense of what is realistic within your budget.

 

The Empty Nesters 

When we talk about empty nesters, we usually think about downsizing. With kids out of the house, extra bedrooms and living space can quickly become more trouble than they’re worth. While the average buyer with young kids is most likely to trade up to a larger home, older buyers often sell the family home and move into a smaller, less expensive home. In fact, more than half of Canadian Baby Boomers consider the area where they live too expensive for retirement.7

Maintenance and Livability

What factors are driving your decision to move? Identifying those early in the process can help you narrow down your search. For example, do you want to have space for a garden, or would you prefer to avoid dealing with lawn care altogether? What about home maintenance? In many cases, a newer home will require less maintenance than an older one and a smaller one will take less time to clean. It’s not surprising that condos are among the most popular types of homes for Baby Boomers given they require less upkeep than single-family homes.7

Lifestyle Considerations

Many empty nesters have retired or are nearing retirement age. This could be your chance to finally pursue hobbies and passions that were just too hard to squeeze into a 9-5. If you’re ready to move, consider how you’d like to spend your days and seek out a home that will help make that dream a reality. For some, that might mean living near a golf course or a beach. For others, being able to walk downtown for a nice dinner out is the priority. And with more time to spend as you wish, proximity to a supportive community of friends and family is priceless. 

Ability to Age in Place

Let’s face it—we can’t escape ageing. If you’re looking for a home to retire in, accessibility should be top-of-mind. This may mean a single-story home or simply having adequate spaces on the first floor to rearrange as needed. While buying a home that you plan to renovate from the start is a viable option, being forced into renovations (because of the realities of ageing) a few years down the road could seriously dig into your nest egg. Location matters, too—if your family will be providing support, are they close by? Can you easily reach necessities like grocery stores and healthcare? While it’s tempting to put it out of our minds, a few careful considerations now can make staying in your home long-term much more feasible.

 

Finding the Right Home for Right Now

One thing is for sure—life never stands still. And your housing needs won’t, either. In fact, the average Canadian homeowner will own 4.5 to 5.5 houses over their lifetime.8 At each milestone, a careful assessment of your housing options will ensure that you are well-positioned to embrace all the changes to come.

Whatever stage you’re embarking on next, we’re here to help. Our insight into local neighbourhoods, prices, and housing stock will help you hone in on exactly where you want to live and what kind of home is right for you. We’ve worked with home buyers in every stage of life, so we know exactly what questions you need to ask. Buying a home—whether it’s your first or your fifth—is a big decision, but we’re here to support you every step of the way.

We support the Fair Housing Act and equal opportunity housing.

 

Sources:

  1. The Canadian Encyclopedia -
    https://www.thecanadianencyclopedia.ca/en/article/marriage-and-divorce
  2. Mortgage Broker News -
    https://www.mortgagebrokernews.ca/news/sorry-gen-z-the-average-firsttime-buyer-in-canada-is-36-years-old-335685.aspx
  3. Savvy New Canadians -
    https://www.savvynewcanadians.com/starter-home-vs-permanent-home/
  4. Mortgage Broker News -
    https://www.mortgagebrokernews.ca/news/are-the-days-of-low-interest-rates-coming-to-an-end-for-canadian-homebuyers-338140.aspx 
  5. Government of Canada -
    https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/improve-credit-score.htm
  6. Housing Sentiments and Trends Report 2017 -
    https://marketing.zoocasa.com/zoocasa-housing-trends-report-2017.pdf
  7. Royal LePage -
    https://www.newswire.ca/news-releases/more-than-14-million-boomers-across-canada-expect-to-buy-a-home-in-the-next-five-years-690334391.html
  8. Zolo -
    https://www.zolo.ca/blog/how-many-homes-will-you-buy

 

Posted in Real Estate Tips
April 1, 2021

Can I Buy or Sell a Home Without a Real Estate Agent?

Can I Buy or Sell a Home Without a Real Estate Agent?

Today’s real estate market is one of the fastest-moving in recent memory. With record-low inventory in many market segments, we’re seeing multiple offers—and sometimes even bidding wars—for homes in the most sought-after neighbourhoods. This has led some sellers to question the need for an agent. After all, why spend money on a listing agent when it seems that you can stick a For Sale sign in the yard then watch a line form around the block?

Some buyers may also believe they’d be better off purchasing a property without an agent. For those seeking a competitive edge, proceeding without a buyer’s agent may seem like a good way to stand out from the competition—and maybe even score a discount. Since the seller pays the buyer agent’s commission, wouldn’t a do-it-yourself purchase sweeten the offer?

We all like to save money. However, when it comes to your largest financial asset, forgoing professional representation may not always be in your best interest. Find out whether the benefits outweigh the risks (and considerable time and effort) of selling or buying a home on your own—so you can head to the closing table with confidence.

 

SELLING YOUR HOME WITHOUT AN AGENT 

Most homeowners who choose to sell their home without any professional assistance opt for a traditional “For Sale By Owner” or a direct sale to an investor, such as an iBuyer. Here’s what you can expect from either of these options.


For Sale By Owner (FSBO)

For sale by owner or FSBO (pronounced fizz-bo) offers sellers the opportunity to price their own home and handle their own transaction, showing the home and negotiating directly with the buyer or his or her real estate agent. While Canadian statistics on FSBOs are limited, according to data compiled by the US-based National Association of Realtors (NAR), approximately 8% of homes were sold by their owner in 2020.1

In an active, low inventory real estate market, it may seem like a no-brainer to sell your home yourself. After all, there are plenty of buyers out there and one of them is bound to be interested in your home. In addition, you’ll save money on the listing agent’s commission and have more control over the way the home is priced and marketed.

One of the biggest problems FSBOs run into, however, is pricing the home appropriately. Without access to information about the comparable properties in your area, you could end up overpricing your home (causing it to languish on the market) or underpricing your home (leaving thousands of dollars on the table).2

Even during last year’s strong seller’s market, the median sales price for FSBOs was 10% less than the median price of homes sold with the help of a real estate agent.1 And during a more balanced market, like the one we experienced in 2018, FSBO homes sold for 24% (or $60,000) less than agent-represented properties.3 This suggests that, while you may think that you’ll price and market your home more effectively yourself, in fact you may end up losing far more than the amount you would pay for an agent’s assistance.

Without the services of a real estate professional, it will be up to you to get people in the door. You’ll need to gather information for the online listing and put together the kind of marketing that today’s buyers expect to see. This includes bringing in a professional photographer, writing the listing description, and designing marketing collateral like flyers and mailers—or hiring a writer and graphic designer to do so.

Once someone is interested, you’ll need to offer virtual showings and develop a COVID safety protocol. You’ll then need to schedule an in-person showing (or in some cases, two or three) for each potential buyer. In addition, you’ll be on your own when evaluating offers and determining their financial viability. You’ll need to thoroughly understand all legal contracts and contingencies and discuss terms, including those regarding the home inspection and closing process. 

While you’re doing all of this work, it’s likely that you’ll still need to pay the buyer agent’s commission. So be sure to weigh your potential savings against the significant risk and effort involved. 

If you choose to work with a listing agent, you’ll save significant time and effort while minimizing your personal risk and liability. And the increased profits realized through a more effective marketing and negotiation strategy could more than make up for the cost of your agent’s commission.


iBuyer

iBuyers have been on the Canadian real estate scene since around 2018, providing sellers with the option of a direct purchase from a real estate company rather than a traditional direct-to-consumer sales process.4 iBuyer companies tout their convenience and speed, with a reliable, streamlined process that may be attractive to some sellers.

The idea is that instead of listing the home on the open market, the homeowner completes an online form with information about the property’s location and features, then waits for an offer from the company. The iBuyer is looking for a home in good condition that’s located in a good neighbourhood—one that’s easy to flip and falls within the company’s algorithm.

For sellers who are more focused on speed and convenience, an iBuyer may offer an attractive alternative to a traditional real estate sale. That’s because iBuyers evaluate a property quickly and make an upfront offer without requesting repairs or other accommodations. 

However, sellers will pay for that convenience with, generally, a far lower sale price than the market will provide as well as fees that can add up to as much or more than a traditional real estate agent’s commission.4 According to a study conducted by MarketWatch, iBuyers netted, on average, 11% less than a traditional sale when both the lower price and fees are considered.5 Other studies found some iBuyers charging as much as 15% in fees and associated costs, far more than you’ll pay for a real estate agent’s commission.6

In a hot market, this can mean leaving tens of thousands of dollars on the table since you won’t be able to negotiate and you’ll lose out on rising home prices caused by low inventory and increased demand. In addition, iBuyers are demonstrably less reliable during times of economic uncertainty, as evidenced by the halt of operations for most iBuyer platforms in early 2020.6 As a seller, the last thing you want is to start down the road of iBuying only to find out that a corporate mandate is stopping your transaction in its tracks.

If you choose to work with a real estate agent, you can still explore iBuyers as an option. That way you can take advantage of the added convenience of a fast sale while still enjoying the protection and security of having a professional negotiating on your behalf.

 

BUYING YOUR HOME WITHOUT AN AGENT

According to the most recent statistics, 88% of home buyers use a real estate agent when conducting their home search.1 A buyer’s agent is with you every step of the way through the home buying process. From finding the perfect home to submitting a winning offer to navigating the inspection and closing processes, most homebuyers find their expertise and guidance invaluable. And the best part is that, because they are compensated through a commission paid by the homeowner at closing, most agents provide these services at no cost to you!

Still, you may be considering negotiating your home purchase directly with the seller or listing agent, especially if you are accustomed to deal-making as part of your job. And if you are familiar with the neighbourhood where you are searching, you may feel that there is no reason to get a buyer’s agent involved.

However, putting together a winning offer package can be challenging. This is especially true in a multiple-offer situation where you’ll be competing against buyers whose offers are carefully crafted to maximize their appeal. And the homebuying process can get emotional. A trusted agent can help you avoid overpaying for a property or glossing over “red flags” in your inspection. In addition, buyer agents offer a streamlined, professional process that listing agents may be more likely to recommend to their clients.

If you decide to forego an agent, you’ll have to write, submit, and negotiate a competitive offer all on your own. You’ll also need to schedule an inspection and negotiate repairs. You’ll be responsible for reviewing and preparing all necessary documents, and you will need to be in constant communication with the seller’s agent and your lender, inspector, appraiser, title company, and other related parties along the way.

Or, you could choose to work with a buyer’s agent whose commission is paid by the seller and costs you nothing out of pocket. In exchange, you’ll obtain fiduciary-level guidance on one of the most important financial transactions of your life. If you decide to go it alone, you’ll be playing fast and loose with what is, for most people, their most important and consequential financial decision.

 

SO, IS A REAL ESTATE AGENT RIGHT FOR YOU?

It is important for you to understand your options and think through your preferences when considering whether or not to work with a real estate professional. If you are experienced in real estate transactions and legal contracts, comfortable negotiating under high-stakes circumstances, and have plenty of extra time on your hands, you may find that an iBuyer or FSBO sale works for you. 

However, if, like most people, you value expert guidance and would like an experienced professional to manage the process, you will probably experience far more peace of mind and security in working with a real estate agent or broker. 

A real estate agent’s comprehensive suite of services and expert negotiation skills can benefit buyers and sellers financially, as well. On average, sellers who utilize an agent walk away with more money than those who choose the FSBO or iBuyer route.3,5 And buyers pay nothing out of pocket for expert representation that can help them avoid expensive mistakes all along the way from contract to closing.

According to NAR’s profile, the vast majority of buyers (91%) and sellers (89%) are thrilled with their real estate professional’s representation and would recommend them to others.1 That’s why, in terms of time, money, and expertise, most buyers and sellers find the assistance of a real estate agent essential and invaluable.

 

QUESTIONS ABOUT BUYING OR SELLING? WE HAVE ANSWERS

The best way to find out whether you need a real estate agent or broker is to speak with one. We’re here to help and to offer the insights you need to make better-informed decisions. Let’s talk about the value-added services we provide when we help you buy or sell in today’s competitive real estate landscape.

 

Sources:

  1. National Association of REALTORS -
    https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers
  2. Washington Post -
    https://www.washingtonpost.com/business/2020/12/09/factors-consider-when-determining-whether-use-an-agent-buy-or-sell-home/
  3. National Association of REALTORS -
    https://www.nar.realtor/blogs/economists-outlook/selling-your-home-solo-to-save-money-you-ll-actually-make-less-than-you-think
  4. CBC -
    https://www.cbc.ca/news/business/canadian-startup-properly-offers-new-way-of-buying-and-selling-homes-in-calgary-1.5032771
  5. MarketWatch -
    https://www.marketwatch.com/story/selling-your-home-to-an-ibuyer-could-cost-you-thousands-heres-why-2019-06-11
  6. Forbes -
    https://www.forbes.com/sites/nataliakarayaneva/2020/03/19/billion-dollar-real-estate-businesses-ibuyer-suspended/?sh=c7f59f921747
Posted in Real Estate Tips
March 1, 2021

Is the Real Estate Market Going to Crash?

Is the Real Estate Market Going to Crash?

While many areas of the economy have contracted, the housing market has stayed remarkably strong. But can the good news last?

When COVID-related shutdowns began in March, real estate brokers and clients scrambled to respond to the shift. Record-low interest rates caused some lenders to call a halt to new underwriting, and homeowners debated whether or not to put their houses on the market. However, those first days of uncertainty ushered in a period of unprecedented growth in the Canadian residential real estate market, which currently accounts for a record-setting 9% of the country’s overall economic output.1

Now, as the spring market approaches, you may be wondering whether the good times can continue to roll on. If you’re a homeowner, should you take advantage of this opportunity by putting your home on the market? If you’re a buyer, should you jump in and risk paying too much? Below we answer some of your most pressing questions.

 

Why are home prices rising during an economic downturn?

At the beginning of the pandemic, fears of an economic recession were top of mind for homeowners all across the country. Overall, credit product origination declined across a variety of sectors, including car loans and credit cards, and government forbearance programs were put into place to cushion the blow of anticipated economic hardships. However, strong demand —coupled with ultra-low inventory and interest rates—caused real estate prices to continue to rise. The national average resale price soared 17% during 2020, and mortgage originations showed year-over-year growth of almost 30% on the strength of renewals and refinancing in response to record-low interest rates.1,2

According to the Bloomberg-Nanos Consumer Confidence Index, confidence in Canada’s real estate industry reached its highest level on record during the thick of the pandemic.3  Montreal Chief Economist Douglas Porter attributes much of the ongoing strength of Canada’s real estate market to a simple matter of consumer choice and priorities while noting that the downside of the resulting rise in home values is increasing consumer debt.1

 

Are we facing a real estate bubble?

A real estate bubble can occur when there is a rapid and unjustified increase in housing prices, often triggered by speculation from investors. Because the bubble is (in a sense) filled with “hot air,” it pops—and a swift drop in value occurs. This leads to reduced equity or, in some cases, negative equity conditions.

By contrast, the current rise in home prices is based on the predictable results of historically low interest rates and widespread low inventory. Basically, the principle of supply and demand is working just as it’s supposed to do. 

Effects of low interest rates

The Bank of Canada projects continuing low interest rates until sometime in 2023, aiding in economic recovery and increasing affordability.4 This helps offset the effects of high home costs even in markets where real estate might otherwise be considered overpriced. These low interest rates should keep the market lively and moving forward for the foreseeable future.

Effects of low inventory

Continuing low inventory is the primary reason for higher-than-average home prices in many markets.5 This should gradually ease as an aggressive vaccination rollout and continuing buyer demand drive more homeowners to move forward with long-delayed sales plans and as new home construction ramps up to meet demand.6

 

Aren’t some markets and sectors looking particularly weak?

One of the big stories of 2020 was a mass exodus from attached home communities and high-priced urban markets as both young professionals and families fled to the larger square footage and wide-open spaces of suburban and rural markets. This trend was reinforced by work from home policies that became permanent at some of the country’s biggest companies.

Not surprisingly then, one of the hardest-hit sectors of the residential real estate market has been the rental market, especially in population-dense metropolitan areas. The rise in vacancies has been fueled by several factors, including less international migration, fewer student renters, and less tourist demand for short-term rentals.7

Interestingly, landlords have not responded to these vacancies with lower rental rates, which have actually risen nationally. Instead, most have used incentives like lower deposit fees, free utilities, and move-in bonuses to attract renters. This suggests that most property owners expect demand to return to normal quite quickly as the vaccine rollout begins to take effect.7

Some analysts predict a decline in the Canadian housing market at large due to the impending end of government emergency measures and lender deferrals. However, others point to the increased demand for homes in smaller markets and lower-density areas outside of the country’s urban centres as an optimistic indicator, especially since these distant suburban and rural enclaves don’t normally benefit from increases in home values or an influx of new investment.8 As many of these new residents set up housekeeping in their rural retreats, they’ll revitalize the economies of their adopted communities for years to come.

According to Susan Hosterman, a senior director at Fitch Ratings, another strength that may help to alleviate the effect of financial pressures brought about by the ending of emergency measures is the relationship lenders in Canada have with their borrowers. Canadian lenders tend to be proactive in offering modifications to make loans more affordable for struggling homeowners.8

 

How has COVID affected the “seasonal” real estate market?

Frequently, the real estate market is seen as a seasonal phenomenon. However, the widespread shutdowns in March 2020, coming right at the beginning of the market’s growth cycle in many areas, has led to a protracted, seemingly endless “hot spring market.”

The Canadian Real Estate Association (CREA) revised its 2021 Market Forecast based on more robust than usual figures for the second half of 2020. The new projection anticipates improvements even over 2020’s record-setting market figures, with potential sales limited only by the availability of inventory in most markets.9 Thus, we could be looking at another longer-than-usual, white-hot real estate market.

 

What’s next for the Canadian real estate market?

Projections vary widely, with some economists predicting a market correction and others predicting continuing strong growth. Overall, low inventory and lack of affordability appear to be the more negative factors applying downward pressures on the market, while pent-up demand and a return to normal employment and income levels, along with anticipated higher-than-average growth in the economy, point to ongoing good news in the sector.10

According to most indicators, the real estate news looks overwhelmingly positive throughout the rest of 2021—and possibly beyond. Pent-up demand and consumer-driven policies, along with a continued low-interest-rate environment and rising inventory, should help homeowners hold on to their increased equity without throwing the market out of balance. In addition, the increase in long-term work-from-home policies promises to give a boost to a wide variety of markets, both now and in the years to come.  

 

STILL HAVE QUESTIONS? WE HAVE ANSWERS

While economic indicators and trends are national, real estate is local. We’re here to answer your questions and help you understand what’s happening in your neighbourhood. Reach out to learn how these larger movements affect our local market and your home’s value. 

 

Sources:

  1. Huffington Post -
    https://www.huffingtonpost.ca/entry/house-prices-canada-bmo_ca_600c7a98c5b6d64153ac675b
  2. Global Newswire -
    https://www.globenewswire.com/news-release/2020/08/18/2079742/0/en/COVID-19-Pandemic-Drives-a-Decline-in-the-Use-of-Credit-as-Canadian-Consumers-and-Lenders-Brace-for-Uncertainty.html
  3. Weekly Bloomberg Nanos Canadian Confidence Index -
    https://www.nanos.co/wp-content/uploads/2021/01/2021-01-08-Bloomberg-Weekly-Report-with-Tabs.pdf
  4. Bank of Canada -
    https://www.bankofcanada.ca/2021/01/fad-press-release-2021-01-20/
  5. Toronto Star -
    https://www.thestar.com/business/real_estate/2021/01/27/supply-of-new-homes-in-the-gta-dwindling-amidst-sales-boom.html
  6. Bank of Canada Monetary Policy Report -
    https://www.bankofcanada.ca/wp-content/uploads/2021/01/mpr-2021-01-20.pdf
  7. CTV News -
    https://www.ctvnews.ca/business/cmhc-rental-vacancies-prices-edged-up-as-covid-19-spread-across-canada-1.5286012
  8. Huffington Post -
    https://www.huffingtonpost.ca/entry/housing-forecast-canada-2021_ca_5fec942cc5b64e4421082979
  9. Canadian Real Estate Association -
    https://www.crea.ca/news/crea-updates-resale-housing-market-forecast-7/
  10. Canadian Mortgage Trends -
    https://www.canadianmortgagetrends.com/2021/01/canadas-energizer-bunny-housing-market-2021-forecasts/
Posted in Market Updates
Feb. 1, 2021

5 Inspiring Home Design and Remodelling Trends for 2021

5 Inspiring Home Design and Remodelling Trends for 2021

We’ve all spent a lot more time at home over the past year. And for many of us, our homes have become our office, our classroom, our gym—and most importantly, our safe haven during times of uncertainty. So it’s no surprise to see that design trends for 2021 revolve around soothing colour palettes, cozy character, and quiet retreats.

Even if you don’t have immediate plans to buy or sell your home, we advise our clients to be mindful of modern design preferences when planning a remodel or even redecorating. Over-personalized or unpopular renovations could lower your property’s value. And selecting out-of-style fixtures and finishes could cause your home to feel dated quickly.

To help inspire your design projects this year, we’ve rounded up five of the hottest trends. Keep in mind, not all of these will work well in every house. If you plan to buy, list, or renovate your property, give us a call. We can help you realize your vision and maximize the impact of your investment.

1. Uplifting Colours

Colours are gravitating toward warm and happy shades that convey a sense of coziness, comfort, and wellbeing. This year’s palettes draw from earthy hues, warm neutrals, and soothing blues and greens.1

While white and gray are still safe options, expect to see alternative neutrals become increasingly popular choices for walls, cabinets, and furnishings in 2021. For a fresh and sophisticated look, try one of these 2021 paint colours of the year:

  • Aegean Teal (coastal blue) by Benjamin Moore
  • Urbane Bronze (brownish-gray) by Sherwin-Williams
  • Soft Candlelight (muted yellow) by Valspar

On the opposite end of the spectrum, indigo, ruby, sapphire and plum are showing up on everything from fireplace mantels and floating shelves to fabrics and home accessories. These classic, rich hues can help bring warmth, depth, and a touch of luxury to your living space.

To incorporate these colours, designers recommend using the “60-30-10 Rule.” Basically, choose a dominant colour to cover 60% of your room. For example, your walls, rugs, and sofa might all be varying shades of beige or gray. Then layer in a secondary colour for 30% of the room. This might include draperies and accent furniture. Finally, select an accent colour for 10% of your room, which can be showcased through artwork and accessories.2

 

2. Curated Collections

After a decade of minimalism, there’s been a shift towards highly-decorative and personalized interiors that incorporate more colour, texture, and character. Clearly-defined styles (e.g., mid-century modern, industrial, modern farmhouse) are being replaced by a curated look, with furnishings, fixtures, and accessories that appear to have been collected over time.3

This trend has extended to the kitchen, where atmosphere has become as important as functionality. The ubiquitous all-white kitchen is fading in popularity as homeowners opt for unique touches that help individualize their space. If you’re planning a kitchen remodel, consider mixing in other neutrals—like gray, black, and light wood—for a more custom, pieced-together look. And instead of a subway tile backsplash, check out zellige tile (i.e., handmade, square Moroccan tiles) for a modern alternative with old-world flair.4

 

3. Reimagined Living Spaces

The pandemic forced many of us to rethink our home design. From multipurpose rooms to converted closets to backyard cottages, we’ve had to find creative ways to manage virtual meetings and school. And designers expect these changes to impact the way we live and work for years to come.

For example, some home builders are predicting the end of open-concept floor plans as we know them.5 Instead, buyers are searching for cozier spaces with more separation and privacy. Cue the return of walls and, in some cases, alcoves and sliding partitions that enable homeowners to section off rooms as needed.6

The necessity of a home office space is also here to stay. But what if you don’t have a dedicated room? Alternative workspaces have become increasingly popular. In fact, one of the biggest trends on Pinterest this year is the “cloffice”—essentially a spare closet turned home office. Searches for “home library design” and “bookshelf room divider” are on the rise, as well.7

 

4. Staycation-Worthy Retreats

With travel options limited right now, more homeowners are turning their vacation budgets into staycation budgets.8 Essentially, recreate the resort experience at home—and enjoy it 365 days a year!

Bedrooms should provide a soothing sanctuary for rest and relaxation. But this year, minimalist décor and muted colours are giving way to bolder statement pieces.3 To create a “boutique hotel” look in your own bedroom, start with a large, upholstered headboard in a rich colour or pattern. Layer on organic linen bedding and a chunky wool throw, then complete the look with a pair of matching bedside wall lights.9

Carry those vacation-vibes into your bathroom with some of the top luxury upgrades for 2021. Try a large, zero-entry shower for two, a floating vanity with hand-free faucets, or a radiant-heated floor for the ultimate spa-like experience.10

 

5. Outdoor Upgrades

From exercise to gardening to safer options for entertaining, the pandemic has led homeowners to utilize their outdoor spaces more than ever. In fact, backyard swimming pool sales skyrocketed in 2020, with many installers reporting unprecedented demand.11 But a new pool isn’t the only way homeowners can elevate their outdoor area this year.

Composite decks have become a favourite upgrade for their low-maintenance and durability. And in 2021, creative design elements are on the rise, including unique inlays, wider planks, and multiple deck board colours. Add stair or bistro lights for a touch of ambiance while enhancing safety and visibility.8

 

DESIGNED TO SELL

Are you contemplating a remodel? Want to find out how upgrades could impact the value of your home? Buyer preferences vary greatly by neighbourhood and price range. We can share our insights and offer tips on how to maximize the return on your investment. And if you’re in the market to sell, we can run a Comparative Market Analysis on your home to find out how it compares to others in the area. Contact us to schedule a free consultation!

 

Sources:

  1. HGTV Canada –
    https://www.hgtv.ca/decorating/photos/home-design-trends-for-2021-1942419/#
  2. The Spruce –
    https://www.thespruce.com/timeless-color-rule-797859
  3. The Kit -
    https://thekit.ca/life/home/home-decor-trends-2021-inspiration/
  4. Houzz –
    https://www.houzz.com/magazine/36-home-design-trends-ready-for-takeoff-in-2021-stsetivw-vs~142229851
  5. Zillow -
    https://www.prnewswire.com/news-releases/the-end-of-open-floor-plans-how-homes-will-look-different-after-coronavirus-301080662.html
  6. HGTV Canada -
    https://www.hgtv.ca/shows/family-home-overhaul/photos/the-top-design-trends-for-2021-according-to-hgtv-canada-design-experts-1943092/#currentSlide=5
  7. Pinterest -
    https://business.pinterest.com/content/pinterest-predicts/more-door/
  8. Canadian Contractor -
    https://www.canadiancontractor.ca/buildwire/decking-trends-for-2021/
  9. Homes & Gardens –
    https://www.homesandgardens.com/spaces/decorating/bedroom-trends-224944
  10. Canadian Interiors -
    https://www.canadianinteriors.com/2020/11/26/top-trends-to-impact-kitchen-and-bathroom-design-over-the-next-three-years-nkba/
  11. CTV News -
    https://toronto.ctvnews.ca/backyard-pool-sales-surge-during-the-covid-19-pandemic-1.4957596
Posted in Real Estate Tips
Jan. 27, 2021

Canada Housing Market Heading for another record year - Is it a good time to buy? Is it a good time to sell?

Canada Housing Market Heading for another record year - Is it a good time to buy?  Is it a good time to sell?

In the end, the rollercoaster that was 2020 left Canada’s housing market more or less where it started the year: full of bidding wars, escalating prices and exasperated buyers unable to find a home they can afford. The pandemic changed some dynamics—it drove many buyers to the suburbs, exurbs and beyond, ground immigration to virtual halt, triggered a downturn in big cities’ rental markets and caused households to build up their savings—but it didn’t dial down the market’s heat. We expect this to largely continue in 2021. We see little that will stop activity or prices from reaching new heights in the year ahead. We forecast the national benchmark price to rise 8.4% to $669,000 and home resales to increase 6.5% to 588,300 units with almost all provinces showing gains. Yet we also expect cooling signs to emerge, which will come into fuller display in 2022. The main restraining factors will be a lack of supply, waning pandemic-induced market churn, a modest creep-up in interest rates and an erosion of affordability. Call it a 2022 soft landing. Of course, we can’t exclude the possibility of a rougher landing—either in 2022 or earlier—so long as the pandemic remains a threat to our economy though large-scale vaccination campaigns should mitigate that risk.

Not only did home price increases stay on track throughout the pandemic, the pace quickened. The aggregate benchmark price increased 8.5% in Canada in 2020, or almost five times the rate of 1.8% in 2019. We expect this solid momentum to be sustained in 2021 with a gain of 8.4%, underpinned by tight demand-supply conditions in most regions of the country. We see price support softening gradually over the course of the year, though, setting the stage for a more modest 3.9% appreciation in 2022.

Low available supply is the reason property values will continue to go up. Strong demand pre-pandemic and the historic market rally since summer have cleaned up inventories in many parts of the country. Relative to the 10-year average, active listings had plummeted between 50% and 61% in Ontario, Quebec and most of Atlantic Canada, and 29% in BC by the late stages of 2020. And that’s despite a surge in downtown condo listings since spring in Canada’s largest cities. With so few options to choose from (outside downtown condos), buyers will continue to compete fiercely. Buyers in the Prairie Provinces, and Newfoundland and Labrador, however, will feel less pressure to outbid each other given supply isn’t quite as scarce in these markets.

Supercharged demand to drive up home resales to a second-straight record

Despite the pandemic virtually stalling activity last spring, Canada’s housing market likely had its strongest year ever in 2020. We estimate home resales rose nearly 13% to 552,300 units nationwide, surpassing the previous record of 539,100 units set in 2016. The spring setback was more than made up by surging activity in the summer and fall. We project resales to be even stronger overall in 2021, reaching 588,300 units. Historically low interest rates, changing housing needs, high household savings and improving consumer confidence will keep demand supercharged.

Cooling signs will emerge…eventually

The strong annual tally will mask a gradual cooling in the market through the year, however. We believe the lofty levels of activity attained at the end of 2020—nearing 700,000 units on an annualized basis in the fourth quarter—won’t be sustained, and some moderation will set in over the course of the year. We expect low supply to become a growing constraint, pandemic-induced market churn (resulting from changes in housing needs) to wane, and a slight rise in longer-term interest rates and material erosion of affordability to cool demand by a few degrees. Low immigration levels could also play a role. Our view is these factors will rein in resales to something closer to 515,000 units by the end of the year—still solid but down from the stratosphere.  All provincial markets but one (PEI) to stay in growth mode

Home resales rose in all provincial markets in 2020—the last time this happened was in 2004. We expect a near-repeat performance in 2021 with only PEI bucking the trend (with resales remaining unchanged close to a record level). Still, rates of increase will generally slow. We project activity in BC and Alberta to grow the most, at 17% and 12%, respectively. In both cases, this will reflect further recovery of ground lost years earlier. These provincial markets had slumped prior to 2020. Forecasted gains are more modest for most other provinces, ranging from 1.2% in Manitoba to 5.8% in Nova Scotia. We believe supply constraints will be a particular issue holding back the pace in Central Canada and most of the Atlantic Provinces.

High sensitivity to interest rates poses a potential risk…

The decline in interest rates since last spring gave a sizable break to buyers by lowering debt service costs. This has undoubtedly attracted more buyers into the market. We expect interest rates to stay low though we see long-term rates starting to creep slightly higher this year. It’s important to remember that when rates are at rock-bottom levels like they are today, it doesn’t take much of an increase to jack up debt service costs. So the slightest rate increase could compel many buyers to exit. Any sudden, larger increase would pose a risk to the market…and so do low immigration levels

There are several other risks to be mindful of. The pandemic is obviously a top one, having the potential to severely disrupt activity. The good news is mass immunization is in sight, which should mitigate some of that risk. Slumping immigration, if it continues, could sap housing demand. To date, the plunge in immigration has primarily affected the rental and, to a lesser extent, condo markets in Canada’s largest cities though the impact could spread to other housing categories and markets. Strong immigration has been a huge source of housing demand over the past decade. Finally, should signs of market overheating emerge, this could prompt policymakers to intervene by tightening rules or imposing new restrictions in order to cool things down.

Click here to view Source Article.

 

Posted in Market Updates