David McDonald says buying his first home in the latter half of 2021 was stressful — though maybe not for the usual reasons.
Even though he was working with a Realtor he trusted, he didn’t like that he couldn’t speak directly to the people selling their homes around North Bay, Ont., or that he’d repeatedly lost to other house-hunters in blind bids.
That’s partly why, when a friend forwarded a private listing in the area, he and his girlfriend jumped at the chance to view it.
“Being able to meet with someone, look at the house and make an offer and have a handshake agreement right off the bat … that was, like, so much more of a transparent, clear process that I definitely found pleasing,” said McDonald, 38.
He closed the deal without his Realtor, which McDonald estimates saved both sides roughly $15,000 in commissions.
And while that might be reason enough for some to entertain the idea, industry insiders warn that going without a Realtor comes with risks.
David McDonald of North Bay, Ont., bought a house privately with his girlfriend in 2022. He estimates it saved both sides roughly $15,000 in commissions. (Submitted by David McDonald)
“It was difficult to know where to find information about private sales,” said McDonald.
For most people, the buying and selling of any properties involves a Realtor or other agent. But there are those who go it alone — and ways to get help.
Rob Reay runs For Sale By Owner, a flat-fee platform for private-home sales where people can post and browse listings and get a breakdown about how such transactions work.
He says private sales might be particularly beneficial to people now, in light of inflation, a slowing housing market and steep interest rates. They just might not know where to look.
“Letting the consumers know that they have this option has not been easy for us,” Reay told CBC News.
The most popular tools available to buyers and sellers are controlled by the Canadian Real Estate Association (CREA) or local real estate boards and associations — including the Realtor.ca site and its Multiple Listing Service (MLS).
Rob Reay, president of For Sale By Owner, says private sales might be particularly beneficial to people now, in light of inflation, a slowing housing market and steep interest rates. (CBC)
CREA represents more than 160,000 licensed brokers, agents and salespeople through over 65 boards and associations in the country. Only its members are allowed to use the trademarked word “Realtor” in Canada and are subject to a “high standard of professional service and a strict code of ethics” according to its website. It declined to be interviewed for this story.
Even Reay has to use some of CREA’s tools. About 70 per cent of his customers opt to list their homes on MLS, even if they intend to sell privately.
While specific numbers are hard to come by, all indications suggest that private sales make up a tiny sliver of overall real estate deals in Canada. For example, For Sale By Owner recently had some 116 listings in all of Ontario, while some mid-sized cities in the province showed more than 1,000 on MLS.
Reay says interest in private sales has increased as technology has allowed people to browse the market themselves, and then accelerated once the COVID-19 pandemic started.
“There’s a couple of people that are not winning,” with private sales, he said. “I don’t need to say who they are.
“But the two winners are the buyers and the sellers — and they are both very happy at the end of the day.”
Broker Davelle Morrison says buying a home is typically the biggest purchase the average person will make in their lifetime. (Davelle Morrison/Facebook)
The other professionals most often involved in real estate deals are, of course, lawyers.
In a private sale, they can still co-ordinate funds and oversee the transfer of property, says Daniel MacAulay, a partner at McLeod Law in Calgary who specializes in real estate.
But, he warns, they can’t provide any insight on the value of a property, on market trends or a contract’s conditions — all things agents tend to do before the contract gets to the lawyer.
Lawyers are largely reliant on what clients present, MacAulay says, meaning it’s up to clients to make sure they’ve done their due diligence.
“Having a good Realtor and having a good lawyer, that’s a good situation for everyone involved,” said MacAulay.
He especially doesn’t recommend private sales for first-time buyers.
Ben Black, a software engineer in Squamish, B.C., bought a house privately for north of $800,000 with his partner in 2021. (CBC)
For Davelle Morrison, a Toronto-area broker for Bosley Real Estate, the thought of a buyer or seller being unrepresented makes her uneasy.
“It’s like someone walking around without any insurance, and I hope people wouldn’t do that,” she said.
She says good real estate agents can make the process easier for their clients by helping them net more when they sell and conducting thorough research on properties they want to buy.
“You don’t know if there could be something faulty with the house unless you get a home inspection done. You don’t know if a big train station is about to be moved in next door. You don’t know if the land is sinking. You just don’t know what you don’t know,” Morrison said.
Realtors also have access to a wide network of fellow agents that can increase traction on a given property, Morrison says, which could be the difference between getting a few eyeballs on a listing to getting dozens of offers on a house.
“Having boots on the ground and knowing what’s going on … is a big difference from just doing it yourself,” she said.
While commissions may be a pain point for some, she says they aren’t all pocketed by the same person. In Ontario, typically five per cent of the sale is split evenly between the seller and buyer’s agent, with a portion of that going toward their individual brokerages.
On top of that, making a sale is never guaranteed, and typically only top-performing agents get frequent sales. Many don’t make a sale at all in a given year, she says.
“It’s not just as simple as saying, ‘Oh, well, you guys are overpaid,'” said Morrison.
Ben Black, a software engineer in Squamish, B.C., bought a house privately for north of $800,000 with his partner in 2021. He says he tried working with an agent but found their price recommendations to be higher than what he thought the houses were worth.
“It’s like the default to go with the Realtor, but I don’t think it should be,” said Black, 31.
While he understands Realtors can put in a lot of work for each sale and can be handy in smaller markets, Black says he still can’t get behind a percentage-based commission model. He’s confident in contracting a lawyer or a notary to oversee the transaction while he does the research himself.
That’s what he says he’s doing with his second property. He hopes to sell it with the help of a flat-fee real estate service and says he’s more likely to sell to someone who also wants to buy privately.
“It’s more easier to bypass that whole process,” said Black.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
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.
