Connect with us

Real eState

A sinking real estate market requires fast appraisals – The Globe and Mail

Published

 on


Homes in Vancouver in 2019. For homebuyers needing a mortgage, appraisal risk creates anxiety, Robert McLister writes.JONATHAN HAYWARD/The Canadian Press

Welcome to Mortgage Rundown, a quick take on Canada’s home financing landscape from mortgage strategist Robert McLister.

You can’t get a mortgage without an appraisal and in most regions, appraisal values are dropping like a brick.

For homebuyers needing a mortgage, appraisal risk creates anxiety.

When home prices dive, people wonder about things like, what happens if I apply for a mortgage and get my appraisal today, but don’t close for three or four months? Will the lender still honour today’s value if prices nosedive before I close?

Soaring rates or diving home prices: which will affect your mortgage approval more?

After all, the last thing you’d want is to go firm on a purchase agreement and have a lender pull your mortgage approval because the home value plunges.

Some welcomed certainty

Usually, the appraisal is done at time of application, notes Olympia Baldrich, vice-president, real estate secured lending, at Toronto-Dominion Bank. Banks generally honour that appraisal for the duration of a customer’s rate hold, she says. And lenders typically hold (guarantee) mortgage rates for up to 90 to 130 days after you apply.

Having said that, with the national average home value dropping almost 1 per cent a week, time is of the essence when ordering appraisals. That’s especially true if you need a loan for up to 80 per cent of the current property value, the maximum allowed for a conventional mortgage.

“Get the appraisal done the day after you buy a home,” says Shawn Stillman, Mortgage Broker and co-founder of Mortgage Outlet. Ordering an appraisal as soon as possible eliminates the mortgage risk of prices deprecating before closing.

By the way, this is also imperative if you’re refinancing and want the maximum 80 per cent loan-to-value. If you need a $400,000 mortgage on a $500,000 property, for example, and a few panic sales in your neighbourhood push down its value 2 per cent before the appraisal, that lowers the maximum refinance amount to $392,000.

Remember, appraisers base their value estimates on sales of comparable properties. “With so many listings not selling, you just need one neighbour who’s getting divorced to drag down your comparables,” Mr. Stillman notes.

A parting tip: If you have a far-off closing and you’re using a more obscure lender (e.g., a small non-prime lender), be safe. Verify in advance that they won’t reappraise the property or ask for more equity if home values dive before your mortgage closes.

HELOC confusion

Almost four in 10 existing mortgagors (38 per cent) are not sure how a home equity line of credit differs from a mortgage, according to TD’s 2022 Real Estate survey.

But unawareness doesn’t imply risk, the bank notes.

“What gets them is the wording,” says Ms. Baldrich of TD. People believe they have a mortgage when they actually have a HELOC. At many large banks, the majority of conventional mortgages they sell are linked to a HELOC.

“I don’t see a direct link between default rates and understanding the product,” she says. Clearly, with only one in 1,000 HELOC borrowers 90-plus days behind on their payments, there’s virtually no connection between the two.

Slight near-term hope for mortgage rates

The country’s lowest mortgage rates didn’t budge one iota this week.

Some less competitive lenders followed bond yields lower and trimmed their longer-term fixed rates by five to 10 basis points. But so far, that’s it. (There are 100 basis points in a percentage point.)

Canada’s five-year yield dove 55 basis points in the past three weeks as recession fear (normally bearish for rates) overtakes inflation fear (normally bullish for rates). Most competitive lenders are now in a holding pattern, waiting to see what yields do after next Wednesday’s Bank of Canada meeting.

Speaking of the Bank of Canada, the market is pricing in an 85 per cent chance of an oversized 75 basis point rate hike at its July 13 rate meeting. That would take the prime rate to 4.45 per cent, its highest in 14 years.

An escalating prime rate will also stiffen the mortgage stress test. To date, borrowers have been able to qualify for a mortgage using the 5.25 minimum qualifying rate (MQR), if they choose a variable rate.

If the lowest conventional variable rate of 2.9 per cent jumps 75 bps next week to 3.65 per cent, that means its stress test rate will climb to 5.65 per cent. For borrowers on the borderline of getting approved – owing to high debt ratios – this could knock them out of qualifying range, further weighing on home prices.

For that reason, we may see a disproportionate number of fringe borrowers applying for mortgages in the next six days.

Lowest nationally available mortgage rates

TERM UNINSURED PROVIDER INSURED PROVIDER
1-year fixed 4.29% RBC Royal Bank 3.99% True North
2-year fixed 4.54% RBC Royal Bank 4.39% True North
3-year fixed 4.99% Tangerine 4.49% True North
4-year fixed 5.09% National Bank 4.59% True North
5-year fixed 5.09% HSBC 4.84% Nesto
10-year fixed 5.84% HSBC 5.75% First National
Variable 2.90% Alterna Bank 2.45% Nesto
5-year hybrid 4.09% HSBC 4.16% Scotia eHOME
HELOC 3.55% HSBC N/A N/A

Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.

Adblock test (Why?)



Source link

Continue Reading

Real eState

Real estate as a wealth creator – Ottawa Business Journal

Published

 on


Who is the wealthiest person you know? Almost without a doubt they will tell you that they have substantial real estate holdings inside their portfolio.

If you’ve been toying with the idea of purchasing an income property, now is the perfect time to jump in. You might be asking yourself, “Why now?” Well, because there is an opportunity in the marketplace that I have never seen in my 20+ year career and will likely never see again.

Over the last two years, the value of your home has increased, on average, 40 per cent. The market has peaked and we are having a bit of a soft landing thanks in large part to the Bank of Canada raising the overnight rate four times already this year.

How is this an opportunity?

First, we have a cohort of first-time buyers with solid incomes and the best of intentions that simply cannot break into this market. They are your new tenants. The average home in Ottawa purchased today would require a household income of $137,050, assuming you had 20 per cent down. A six-figure income is now needed to buy the average home in Ottawa!

Secondly, the new found equity in your current home could be your ticket to getting into investment real estate. You may be eligible for an up to 80 per cent loan on the current market value of your home; equaling the down payment for your first investment property.

There are so many reasons why real estate is a wealth creator, but let’s start with this: Say you buy a $1 million property with 20 per cent down—in other words you invest $200,000 to buy a $1 million investment—but which number do you earn your return on? You earn a rate of return on the value of the building, not on the value of your down payment. Your tenants pay the mortgage and expenses, and you reap the rewards!

Ottawa has an average 5.6 per cent rate of return over the past 50 years. With 20 per cent down, you have a 5x multiplier on the market rate of return on your initial investment. Your down payment has earned a 28 per cent rate of return over the last 50 years! Do you know anyone in the stock market that can say the same?

Now, this is an oversimplification. To determine your actual rate of return you have to subtract the interest cost on the mortgage you are carrying and utilities, taxes, and maintenance. Individual results will vary, but real estate is a solid winner in any case.

Reason number two that real estate is a winner: Real estate values in Ottawa rarely go down on a year-over-year basis, and when they do the losses are quite small. In fact, Ottawa has recorded a contraction in average sale price only three times in the last 50 years.* The biggest one-year drop was 2.9 per cent. The second biggest was 1.9 per cent, and the third was 0.4 per cent.

American business magnate, investor, and philanthropist, Warren Buffet has famously said, “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.” Why is this so important? It’s important because it is very difficult to recover from losses.

If we return to the $1 million purchase example above: Imagine you had $1 million worth of stock and the market crashed… You probably owned Nortel stock around the 2000’s or bought Shopify at its peak recently. Your million dollars becomes $500,000 overnight. But what happens when there is a corresponding increase of 50 per cent in the marketplace? Are you back to $1 million? Unfortunately, you are not… Your $1 million crashed to 50 per cent, and when the market rebounds by 50 per cent you are left with $750,000 and a $250,000 loss. Ouch…. Now do you see the wisdom in Warren’s words?

This is merely the tip of the iceberg here, and a deeper dive into your particulars would be recommended. Reach out to a professional to help guide you through the process of starting your real estate empire one door at a time.

*According to Ottawa Real Estate Board historical trends stats.

About Sean McCann

It’s not about me. It’s about you and how your home tells your story. Far too often real estate can feel transactional. I’m not interested in transacting. My singular interest is in guiding you and your family to your best possible outcome. It’s about building meaningful connections, in an increasingly disposable world, and understanding how your home is the epicentre of your world. Let’s be honest, my family’s well-being and future success lies in the experiences I create and the advocacy that I earn with you today. I appreciate you and I intend to honour the trust that you place in our relationship. Let’s have some fun and do something special together!

Adblock test (Why?)



Source link

Continue Reading

Real eState

Real estate: Canada home prices and sales fall again – CTV News

Published

 on


TORONTO –

The Canadian Real Estate Association says home sales fell for the fifth consecutive month between June and July, but the latest drop was the smallest of the five.

On a seasonally adjusted basis, the association says sales in July fell 5.3 per cent compared with June. The actual number of sales last month was 37,975, down 29 per cent compared with July last year.

“That leaves activity back in the pre-COVID range, or roughly 40 per cent below the peak of the demand-side blowout seen last year,” said Robert Kavcic, BMO Capital Markets senior economist, in a note to analysts.

“Unadjusted, it was the quietest July for sales since the financial crisis in 2020.”

July’s drop in month-over-month sales was the smallest of the past five months. Market watchers said it’s too soon to say whether that trend will continue.

Still, economists and CREA chair Jill Oudil said it is a continuation of the market cooling from the torrid pace seen last year and early this year, when bidding wars were the norm.

Much of the cooldown has been attributed to the Bank of Canada increasing its key interest rate by one percentage point to 2.5 per cent in July in the largest hike the country has seen in 24 years.

Mortgage rate changes tend to mirror such hikes, impacting buying power.

As the rates have risen and sales plummeted, many buyers have sat on sidelines, predicting better deals will come in the fall and frustrating sellers, who have had to come to terms with the fact that they likely won’t fetch as much as neighbours who sold in the winter.

“There’s definitely a lot more people who are waiting until September before they list properties and they’re trying not to list in August, if they don’t have to,” said Davelle Morrison, a Toronto broker with Bosley Real Estate Ltd.

As a result, new listings in July totalled 73,436, down six per cent from last July and on a seasonally adjusted basis, down five per cent from June.

When homes were flying off the market earlier this year, people could buy before they sold their own place and have little risk of their property not selling.

Now, Morrison is telling people to sell their place first because of how long properties are sitting.

She’s also telling her clients to “buckle up” if prices fall more and interest rates continue to rise.

The average sales price was $629,971, down five per cent from $662,924 last July and on a seasonally adjusted basis amounted to $650,760, a three per cent drop from June, CREA said.

Excluding the typically heated Greater Vancouver and Toronto Areas from the calculation cuts $104,000 from the national average price.

Kavcic feels the drops constitute a market correction that is playing out “almost everywhere, but to varying degrees.”

“Southwestern Ontario is feeling it hardest, with markets like Kitchener-Waterloo and London down roughly 15 per cent from their high already,” he said.

He’s noticed Vancouver prices have now fallen over four consecutive months and Montreal has been more immune to but is not escaping the downturn with drops in the last two months.

“We view Alberta as the market most able to weather this storm because it had already stagnated for a number of years before the pandemic, never saw the same froth as Ontario, and is now supported by near-$100 oil and population inflows from other regions,” Kavcic wrote.

“But, in a demonstration of the power of higher interest rates, even Edmonton and Calgary have been subject to a flattening (Calgary) or decline (Edmonton) in prices despite still-solid sales activity.”

This report by The Canadian Press was first published Aug. 15, 2022.

Adblock test (Why?)



Source link

Continue Reading

Real eState

BC's Home Buyer Rescission Period: Your Questions Answered – British Columbia Real Estate Association – BCREA

Published

 on


The Home Buyer Rescission Period (HBPP), previously known as “Homebuyer Protection Period” and “cooling-off period,” is expected to be implemented province-wide in January 2023. With many details yet to be determined by the BC Government, we have been hearing from REALTORS® with questions. In this post we answer some of those questions.  

Bookmark this page since we’ll be updating this post as we learn more details from the BC Government. In addition, if you are interested in subscribing to BCREA’s regular advocacy newsletter, please email [email protected].  

What is the Home Buyer Rescission Period (HBRP)? 

The HBRP, commonly known as a “rescission period,” gives buyers the right to withdraw from a purchase agreement within a specified period of time after an offer is accepted. Without a rescission period, if a buyer wishes to terminate a contract, they would need to negotiate with the seller and would typically face significant financial penalties or legal ramifications.  

What properties will be subject to the HBRP? 

The policy will apply to the following types of structures: 

  • detached homes, 
  • semi-detached homes, 
  • townhouses, 
  • apartments in a duplex or other multi-unit dwelling, 
  • residential strata lots, 
  • manufactured homes that are affixed to land, and 
  • cooperative interests that include a right of use or occupation of a dwelling. 

What are REALTORS®’ requirements to inform their clients? 

All real estate licensees must provide general information on the HBRP to all consumers through a form approved by the Superintendent. Licensees must also provide an additional mandatory disclosure at the time of preparing an offer on behalf of a buyer and presenting an offer to a client, containing all of the following notices: 

  • the HBRP cannot be waived, 
  • the rescission period time length, 
  • the dollar amount of the rescission fee, 
  • the deposit handling, and  
  • HBRP exemptions.  

Are brokerages required to retain a copy of a rescission notice? 

Yes, brokerages must retain a copy of rescission notices that it prepares and is served to the seller or that the brokerage receives.  

How are sellers supposed to receive rescission notice? 

Buyers must serve rescission notice on the seller through one of the following methods: registered mail, fax, email with read receipt, and personal service. Rescission notices must contain: 

  • address, PID or description of the property, 
  • names and signature of the buyers, 
  • name of the seller(s), and 
  • date of notice. 

What is meant by “three business days?” 

For the HBRP, “business day” means a day other than a Saturday, Sunday or a statutory holiday. The rescission period is three business days, beginning the day after a contract is signed. 

How much is the rescission fee? 

Buyers who use their right to rescind will have to pay a fee of 0.25% of the purchase price. For a $1,000,000 home, this would result in a $2,500 fee paid to the seller.  

How does a HBRP impact other subjects in my contract? 

Other subjects are unaffected by the HBRP.  

What about For Sale by Owner (FSBO) properties? 

The HBRP applies to all residential real estate sales, which includes FSBO. 

Can the HBRP be waived? 

The HBRP cannot be waived. 

Are there any exemptions?  

. There are narrow exemptions, including: 

  • sales of residential real property located on leased land, 
  • sales of leasehold interest in residential real estate, 
  • sales at auction, 
  • sales by way of an Assignment of Contract,  
  • pre-construction sales of multi-unit development properties, which are already subject to a seven-day rescission period, and  
  • sales under a court order or supervision of a court. 

Will the termination fee be taken from the deposit? 

If a deposit is held in trust, brokerages must release the rescission fee to the seller upon rescission. The balance, if any, is returned to the buyer, despite what may be provided in the contract.  

Who will receive the termination fee? 

The rescission fee amount is provided to the seller. 

How can I learn more about the HBRP’s details when they are available? 

This blog post will be updated as we learn more about the HBRP from BCFSA and the Ministry of Finance. In addition, you can follow BCREA’s advocacy news, which will include updates on the HPRP, by subscribing to our Advocacy Update. To do so, please email [email protected].  

What are the next steps for BCREA?  

BCREA staff are updating and creating new Standard Forms and updating professional development courses to ensure REALTORS® are equipped with the tools needed to serve effectively clients. Staff are also meeting regularly with BCFSA to try and answer outstanding questions.  

Will the Ministry of Finance implement additional consumer protection measures? 

In May, BC’s real estate regulator, the BC Financial Services Authority, published an independent report, “Enhancing Consumer Protection in BC’s Real Estate Market,” which offered advice and recommendations to the Ministry of Finance to improve consumer protection. There was significant overlap between BCFSA’s advice and BCREA’s “A Better Way Home” paper. 

The Ministry of Finance has not indicated whether they will implement additional consumer protection measures within the coming months.  

What policies do BCREA recommend to improve consumer protection? 

Earlier this year, BCREA has published a white paper, “A Better Way Home,” which included more than thirty recommendations to improve consumer protection. BCREA does not support a HBRP, because it is not likely to have a meaningful impact on consumer protection and may have unintended consequences on affordability. 

If you have any additional questions, we encourage you reach out and share them at [email protected].  

Below are a list of other resources on the HBRP: 

To subscribe to receive BCREA publications such as this one, or to update your email address or current subscriptions, click here.

Adblock test (Why?)



Source link

Continue Reading

Trending