Real eState

Barry Choi: Real estate mistakes you should avoid – Financial Post

Published

2 years ago

May 15, 2022

Harry Miller

The landscape has changed, and you need to be aware when making decisions

MoneyWise

Barry Choi

And-One/Shutterstock

With inflation at record highs, the Bank of Canada has increased interest rates much faster than many expected.

Now that the cost of borrowing money has increased, real estate market sales and prices are increasing at a lower rate, and in some cases, dropping. These types of market conditions haven’t been seen in Canada in years, and some people are getting caught making huge financial mistakes.

Not factoring in market changes before selling

In a hot real estate market, homeowners looking to upgrade would typically buy a new home before listing their current one. Since homes in desirable areas would sell quickly, most homeowners would be confident that they’d be able to unload their homes for the price they need before their new home closes.

With current market conditions, buyers have become cautious. Getting multiple bids over asking is not as common, and it may take longer to sell. This presents a huge problem for sellers who need the proceeds from the sale of their current home to fund their new one.

Unfortunately, there’s no easy solution. Waiting things out likely won’t make things any better since the markets won’t turn around overnight. Plus, you’re on a deadline since you need to close on the home you agreed to buy.

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You could just accept the highest offer and try to find a way to make up the difference. For example, you could see if an alternative lender is willing to loan you more money. If you went this route, you’d probably have to pay a higher interest rate since the lender is taking on more risk.

Alternatively, you could forfeit your deposit on the new home and walk away with the loss. That said, that seller does have the right to sue you for damages if they can’t sell the home again for what you agreed to pay. If the house sells for less than you offered, you could be legally on the hook for the difference.

To avoid this mess completely, you should include a financing condition that gives you time to sell your current property with a minimum set price. Sellers may criticize that condition, but it’s in your best interests to protect yourself as sale prices are no longer certain.

Not getting an appraisal for your buying price

Many lenders will require an appraisal on the home you’ve purchased before releasing the funds for your mortgage. Basically, appraisals are based on current market values, not what you offered for the home.

In some situations, the appraiser might say that the property is not worth as much as you agreed to pay. Suppose you paid $700,000, but the appraiser says your home is only worth $650,000. You’d be short $50,000 on your mortgage. Coming up with that amount is no easy task.

During a hot market, buyers would often ask for another appraisal. This may seem like a pointless exercise, but it wouldn’t be unusual for new sales in the area to be higher than what you paid. The new appraiser could then justify the price you paid, which would allow you to get all the funds you need.

With current market conditions, appraisers and lenders are likely to be more cautious. There’s no guarantee that your appraisal will come back at the price you paid. To minimize your risk, consider bidding well below what you’ve been approved for. So, if your lender says you’ll qualify for a $1,000,000 home, consider not bidding more than $900,000, as it gives you a buffer to work with.

Getting pre-qualified instead of pre-approved for a mortgage

Just about every lender has an online calculator where you can estimate the mortgage you’ll be approved for. These calculators also allow you to adjust the interest rate to see how any changes would affect your payments.

While this is a convenient and quick way to calculate affordability, it’s simply a pre-qualification and is essentially meaningless since you haven’t been approved for anything yet.

With a pre-approved mortgage, lenders will formally run your numbers. They’ll look at your income, credit score, debt loads, and more to determine precisely how much they’re willing to lend you. They’ll also share the interest rates they’re willing to extend you for fixed and variable mortgages. Since this is a formal approval process, lenders will be able to hold the rate for 90 to 120 days. This will allow you to shop in confidence, knowing that you have the financing in place.

Some people assume that a pre-qualification is the same as a pre-approval, but that’s simply not the case. Getting pre-approved is basically a promise from the lender. The last thing you want is to buy a home and then find out you don’t have the financing in place. That could leave you scrambling to find an alternate lender.

Not factoring in higher interest rates

If you were looking to buy a home last year, it wouldn’t have been uncommon to find a fixed-rate mortgage for around two per cent. Suppose you were looking to get a $700,000 closed mortgage on a five-year term with a 25-year amortization (payment) schedule. Your monthly payment would be $2,964.16.

However, these days, fixed-rate mortgage rates are hovering around four per cent. That would make your monthly payment $3,682.14. That’s more than a $700 difference. You could go with a variable-rate mortgage, which will change based on market conditions. At the moment, you would pay less interest than a fixed-rate mortgage. However, with interest rates expected to keep rising, you might end up paying more than a fixed-rate mortgage in the long run.

If you haven’t gotten a pre-approved mortgage or updated your budget recently, you might be shocked to see your monthly carrying costs with the higher rates. The amount you may have been able to afford a year ago may no longer be the case now. That’s why many potential homeowners have become more cautious when bidding, which has resulted in the current market slowdown.

While the real estate market will sort itself out eventually, it may be time for caution, due to all the money on the line. That doesn’t mean you shouldn’t buy or sell real estate during this time, you just need to take some extra steps to protect yourself from a major financial mistake.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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Real eState

Two Quebec real estate brokers suspended for using fake bids to drive up prices

Published

4 days ago

September 11, 2024

Anne Joseph

MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.

Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.

Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.

She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.

The two brokers were suspended in May 2023 after La Presse published an article about their practices.

One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.

This report by The Canadian Press was first published Sept. 11, 2024.

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Real eState

Montreal home sales, prices rise in August: real estate board

Published

1 week ago

September 6, 2024

Anne Joseph

MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.

The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.

The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.

The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.

QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.

Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.

This report by The Canadian Press was first published Sept. 6, 2024.

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Real eState

Canada’s Best Cities for Renters in 2024: A Comprehensive Analysis

Published

2 months ago

July 24, 2024

Harry Miller

In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.

Here are the top 10 cities that emerged as the best for renters in 2024:

St. John’s, NL

St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.

Sherbrooke, QC

Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.

Québec City, QC

Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.

Trois-Rivières, QC

Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.

Saguenay, QC

Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.

Granby, QC

Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.

Fredericton, NB

Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.

Saint John, NB

Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.

Saint-Hyacinthe, QC

Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.

Lévis, QC

Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.

This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.

Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.

Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.

For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.

While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.