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LACKIE: More transparency would improve trust in real estate industry – Toronto Sun

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Eliminating blind bidding might help, but it won’t solve the biggest problems

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Ever the hot topic, it’s virtually impossible to discuss Toronto’s real estate market without people getting riled up.

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With prices rising at an alarming velocity a full two years into a global pandemic, the eternal questions seem to be why is it like this and how will this end?

And those are great questions.

The current state of things can most simply be understood as the culmination of low supply meeting high demand, buoyed by cheap borrowing costs that are fuelling speculation, and lifestyle shifts brought on by COVID.

The situation is nuanced, obviously, but simply put — we find ourselves facing a confluence of factors that have resulted in would-be buyers having no choice but to battle it out against one another for the limited number of houses and condos currently on the market.

One of the most widely scorned aspects of our current market is the central role blind bidding seems to play in the offer process. Between the seemingly endless demand for properties and the industry penchant for pricing below market value to drive multiple offers, nine times out of ten buyers will find themselves in competition.

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With strict rules restricting a listing agent from even intimating the content or nature of a competing offer, the buyer is then left to decide on their own what their bid should be based on recent comparable sales and their own personal opinion of value. Save for disclosure of the number of competing offers, it is an otherwise opaque process.

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The perception is that as a result of the blind bid process, buyers routinely pay substantially more in an attempt to outbid their competition than they actually need to.

An open auction format like they have in Australia has been put forward as a sensible alternative.

While I can understand the desire to shine a light and level the playing field, I’m not sure that eliminating blind bidding will do much to curb prices if that’s the goal. The open auction format is criticized on the basis that it drives bidders into a competitive frenzy — Australia has a market just as on fire as ours.

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The main benefit to cleaning up the way multiple offer situations are run would be adding transparency to the process. Added transparency will certainly infuse some more trust to an industry that could use some serious help with its PR.

But the reality is that getting rid of blind bidding still won’t eliminate the competition that’s driving today’s prices. Let’s say a typical offer night brings eight offers — even if four of the eight decide to sit it out once they realize they can’t compete, that still leaves four buyers to battle it out, and in my experience all it takes is two motivated people to push prices to record levels.

The idea that there is one bid way out ahead of the competition is simply not the norm. Yes, it can happen, but in my experience there are almost always groups within the offers: a few at asking price, a few conservatively higher than asking but still restrained, and then a few more that are aggressive and immediately out front. The notion that the prices we are witnessing are the outcome of one person bidding against their self is simply not the case.

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But prices are undeniably wild right now and it’s important to understand why. Once upon a time the price a home fetched on offer night was almost always in line with the comparable sales, give or take, no matter how sizeable the lift between list and sale price may have been. The eye-popping prices are more of a recent phenomenon and are indicative of a broader market environment.

The Feds promised to do away with blind bidding in the lead up to the last election. But once the process is cleaned up, what then? Blind bidding may feel frustrating and unsavoury, but it is absolutely not why the market is bananas.

If you ask me, low interest rates coupled with lending policies that encourage pulling equity out of existing homes to fund second investment properties are having much more of an impact on prices.

So yes, feel free to rail against blind bidding — I get it — but if your concern is how to keep housing accessible to people who actually need somewhere to live, it might be worth looking little closer at the other market forces currently at play, particularly the role speculation is playing and the policies empowering that segment of the market.

@brynnlackie

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Worry, buyer's remorse high as real estate market slowdown materializes – Ottawa Business Journal

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A wave of buyer’s remorse is taking shape in several heated real estate markets, after housing prices started dropping and the number of sales slowed over the last two months.

Realtors and lawyers in Toronto and Vancouver say they have noticed buyers looking at what options they have to get out of a purchase and sellers hoping to ensure one goes through because conditions have shifted dramatically from the previous highs and frenzied pace.

The country experienced a 25.7 per cent drop in the number of homes sold over the last year and a 3.8 per cent slide in housing prices between March and April, the Canadian Real Estate Association said Monday. The average home price last month totalled $741,517.

Such numbers have prompted some sellers to explore lawsuits to ensure transactions move forward and other purchasers to worry about the value of pre-sale properties they bought years ago but have yet to take possession of.

“With today’s real estate prices, there’s really no option but to go all in and if you’re going all in, and then suddenly you’re realizing that perhaps you made a bad bet and there’s a way out of that bet, you’re going to do whatever you can to get out,” said Mark Morris, a Toronto real estate lawyer.

In recent weeks, he has seen nine cases where buyers want to back out of deals but on Monday alone was approached by three sellers keen to use legal channels to keep purchasers from walking away.

Morris doesn’t call the encounters a trend because it’s unclear how many other lawyers are seeing the same spate, but three queries in a day is his new record. He used to see one case of that nature every few months.

“Purchasers are looking at the existing crisis, and in the best of times, they feel they overpaid, but now they have objective proof that they’ve done so because markets have started to pummel and fall and really shows no signs of slowing down,” said Morris.

“Many of those buyers are faced with the option of moving forward or upping and walking.”

People get “spooked” every time the market turns and explore what they can do about deals they signed, but few end up walking away because it’s hard to get out of such transactions, said Phil Soper, CEO of Royal LePage.

He thinks the exception to this pattern came in 2020, when the COVID-19 pandemic broke out and people wanting out of transactions had so many unknowns on their side.

Most buyers trying to end a deal this year won’t be successful because there is no legal way out, but such cases are also impractical for sellers, Morris said.

“Is a seller really willing to pursue a buyer that has no assets? Is the seller really going to go through three years of courts only to find that they have a judgment that can’t be pursued?” he pondered. “Are they really ready to put up the amount of money that it will take to pursue this to the ends of the earth if they’re able to resell? Perhaps not.”

In cases where the buyer has put money into a seller’s trust account, that money can only be released with a court action, the closing of the deal or a mutual agreement not to pursue the sale, said Morris. He’s seen buyers agree to give the seller the money, if the seller mutually agrees to end the deal.

If a deal ends, brokers can sue for their lost commission but not many explore this avenue because it’s “not a good look” to take legal action against a client, who might still turn to you when they try to sell the home from the failed transaction again, said Morris.

While Tirajeh Mazaheri hasn’t seen legal action in Vancouver, the Coldwell Banker Prestige Realty agent has seen buyer’s remorse and worry crop up among investors who purchased pre-construction homes a few years ago but have yet to take possession of them.

“A lot of those people are thinking, ‘Is the market going to be able to justify this price or keep up with the price I paid and can I get this money back if I want to sell in a year?'” she said.

The people who purchased in early rounds of pre-construction sales for a building are already ahead of the curve, but those who bought later will have to wait longer to break even or make a profit, she said.

Even though worry is at a high, Mazaheri and Soper agree the markets do rebound and homes are still a valuable investment.

“Anyone who bought a home in 2021 in this country, if they bought anywhere near market price, their home is going to be worth more in 2021,” said Soper.

“Will it be worth more one year from now? That’s harder to predict ? but even a year from now the likelihood of that home being worth less than it is today is smaller.”

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Vancouver real estate: 'Plush' new build for $7.5M | CTV News – CTV News Vancouver

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It’s new, it’s near the beach and it costs millions more than the benchmark for the area.

A newly built home for sale in Vancouver is listed at $7.5 million.

The sellers of the house on West 12th Avenue are asking more than $5 million more than the current benchmark in its neighbourhood of Point Grey.

They say it’s somewhat of a rarity for the tony region of the city, but it’s priced higher than some of the neighbouring homes because it’s brand new, and because of its features.

According to those behind the listing, the four-bedroom home has a total floor space of 4,189 square feet over two storeys and a basement.

It has a 564-square-foot rooftop deck with city, water and mountain views, the listing from realtor Faith Wilson with Christie’s International Real Estate says.

The home has “luxurious, high-end finishes, including a spa ensuite richly appointed in calacatta stone.”

It has a “spa-inspired dry sauna” on the ground floor, and its recreation and media rooms each have wet bars.

The grounds are landscaped and there’s a three-car garage past its gated entry.

The kitchen is described as “gourmet,” and the family room “boasts coffered ceilings (and an) exquisite waterfall Caesar stone cooking centre.”

Its future buyer would find themselves in walking distance of Jericho and Spanish Banks beaches.

Its property taxes are not for the faint of heart at an estimated $13,962. That estimate, however, is from 2020, before the new house was built.

Recent reports suggest Vancouver’s luxury real estate market is seeing a decrease in sales, but prices continue to climb.

The price is far out of reach for many, including most of those who live in the area.

Still, according to census data for the area, more than one-quarter of Point Grey residents have a total household income in the highest category – $200,000 and over.

The median for households of two or more people is $135,680, much higher than in many Vancouver neighbourhoods.

A quarter of those who live in the area work in “professional, scientific and technical services,” and nearly a quarter are in educational services, the data from Statistics Canada suggests.

Three-quarters of adults have at least some level of university education, from a bachelor’s degree to a doctorate.

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Canmore real estate developments back on after tribunal ruling | CTV News – CTV News Calgary

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A contentious proposed real estate development in Canmore got new life Tuesday.

One year ago, Canmore town council rejected the Smith Creek development and decided the Three Sisters Village proposal needed significant changes.

Three Sisters Mountain Village Properties Ltd., the project developer, appealed the decision to a municipal tribunal, and Tuesday the town was ordered to allow the projects to proceed.

Conservation groups fought the proposal, saying it didn’t provide enough space for wildlife to travel through the valley.

“Unless overturned, this decision will cause harm to the lands, and wildlife movement and habitat of an important part of the Yellowstone to Yukon region,” said a statement issued by Yellowstone to Yukon Conservation Initiative on Twitter. “Keeping these lands connected and intact is in the best interest of Albertans now and into the future. Connectivity provides the best chance for some of our most cherished and threatened wildlife to thrive.”

There was no word from the Town of Canmore on whether it will appeal the decision.

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