Real Estate Advice: A dozen things NOT TO DO before you buy a home!

The market has slowed down so you have some breathing space to shop for a home without a half a dozen people waiting behind you to offer over the asking price with no due diligence conditions.

However, the government has recently imposed “stress tests” for mortgage approval thereby making it more difficult to qualify for a mortgage.

In addition, some “experts” are predicting that prices will soften in the foreseeable future, although such predictions are wrong almost as often as they are right.

So if you can pass the stress test and have the cajones to buy when few others are (as Warren Buffett says, “Be fearful when others are greedy, but be greedy when others are fearful”), then your first stop is to get your financing in order.

To figure out your price range, talk to a mortgage broker or banker to get pre-approved for financing.

But before you even do that, AVOID THESE DOZEN “NO-NO’S” according to senior mortgage advisor, Karen Gibbard:

DON’T:

  1. Buy a car;
  2. Change jobs;
  3. Change banks;
  4. Open new credit facilities;
  5. Move your money around;
  6. Make a large deposit to your bank account;
  7. Buy anything new on credit;
  8. Authorize anyone to make credit bureau enquiries;
  9. Guarantee or co-sign anyone else’s mortgage or other debt;
  10. Stretch the truth on your mortgage application;
  11. Spend the money you were going to use for closing costs;
  12. Overextend yourself –even if you qualify for it;

Buying a home is a stress test in and of itself, but there’s no need in making it worse than it has to be by doing things that the banks don’t like.

 

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© 2018

https://www.pazderlaw.com

604-682-1509

Offices in Vancouver and White Rock

DISCLAIMER:  The foregoing is not legal advice.  It is for information purposes only. When undertaking a financially significant transaction such as a sale or purchase of real estate it is always recommended that you obtain professional advice to assist you to make the best decision. If you don’t know a good realtor, mortgage broker or banker, we can help you with that selection as well.

Ask a Vancouver real estate lawyer: is Canada’s real estate market ACTUALLY about to crash?

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Is Canada’s real estate market at extreme risk or out of danger?

Doug Porter, the chief economist at BMO opines in the above article that the worst is behind us and the “soft landing” that was hoped for has in fact materialized.

Forecasting and analytics company, Oxford Economics Group on the other hand still ranks Canada as the third riskiest real estate market in the world (“Our set of cross-country risk indicators points to housing market dangers being especially acute in Sweden, Australia, Canada and Hong Kong.”)

The BC Real Estate Association predicts a 12% growth in home sales next year, however the Canadian Real Estate Association is more pessimistic, predicting (“The market is held back by unprecedented decreases in sales activity in British Columbia, and weak (but stronger than expected) sales activity in Ontario. Both provinces are forecasted to see double digit declines by the end of the year.”)

Who is right?

Flip a coin –you will be about as accurate as the experts.

An interesting article from The Smithsonian entitled, “Why Experts are Almost Always Wrong” points out that expert predictions on everything from political events to technology trends to stock picking are only marginally better than random chance.

“In field after field, when it came to centrally important skills—stockbrokers recommending stocks, parole officers predicting recidivism, college admissions officials judging applicants—people with lots of experience were no better at their jobs than those with very little experience.”

So, getting back to our central question, is now the right time to buy a house in the Lower Mainland?

In our view, it is always the right time to buy a house in Metro Vancouver, notwithstanding the vagaries of interest rates, the provincial economy, the ineptitude of the current federal and BC governments, world energy prices, climate change, pipeline protests and the many other variables that can have an effect on real estate.

Metro Vancouver is one of the most desirable places to live in the world and tens of thousands of people are still moving here every year. That trend does not seem to be abating.

At the present time, the real estate market has slowed down, prices have come off their peak somewhat and inventory has increased.

Arguably, it’s now a buyer’s market, with even a few detached homes in Vancouver dipping below the $1M mark.

That means that a buyer can make an offer containing the normal due diligence conditions without having to bid against other buyers who are prepared to pay over the asking price with no conditions (as has been the norm for the past few years).

Unless one is a land speculator, a real estate buyer should be prepared to hold a property for five to ten years, in which case market fluctuations should have been ironed out and probably the home will have appreciated in value (although not necessarily at the blistering rate of the last ten years).

Is there still a risk that the prices could go down and stay down?  Of course, but what financial decision does not have any risk?

For instance, the decision NOT to buy also carries a risk.

Buyers who chose to rent for the last ten years have been literally priced out of the market –and rents have become sky high as well!  In retrospect, that decision proved to be a very risky one indeed.

While the past is not a reliable indicator of the future, the graph below shows that over the last forty years in Greater Vancouver, the general trend has been for prices to increase and when they have declined, that correction has not lasted long.

Greater Vancouver Residential Real Estate Sales 1977 to 2017 graph

No one –certainly not the “experts,” can predict when the present market slowdown will end (or whether prices will continue to decline further).

Given that fact, if you have the financial wherewithal to buy and are prepared to hold the property for five to ten years, then your chances of a financial loss would seem to be slim and your chances of a gain likely.

In this highly desirable part of the world this old real estate bromide still seems apropos:

“Don’t wait to buy real estate.  Buy real estate and wait.” (Will Rogers)

pazder law corporation logo

 

 

© 2018

https://www.pazderlaw.com

604-682-1509

Offices in Vancouver and White Rock

DISCLAIMER:  The foregoing is not legal advice.  It is for information purposes only. When undertaking a financially significant transaction such as a sale or purchase of real estate it is always recommended that you obtain professional advice to assist you to make the best decision. If you don’t know a good realtor, mortgage broker or banker, we can help you with that selection as well.

Protecting condo buyers

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Kenneth Pazder was recently interviewed by Canadian Lawyer Mag on the topic of condo buyers’ protection. Here is the full article:

A series of condo cancellations and failures across the country have pre-construction investors crying foul. And while there are some protections in the ever-evolving condominium legislation, the rules vary from province to province and they don’t always apply to the principle investment and any lost interest or opportunities.

The number of condo buyers continues to increase, resulting in more Canadians living in condos — 13.3 per cent of households live in a condominium unit, according to Statistics Canada’s 2016 census figures. With the increased interest and construction of condo projects, there is concern that purchase and sale agreements for units not yet built place a great deal of risk upon the purchaser.

It is a lament Toronto condo lawyer Denise Lash has heard repeatedly. In Ontario, the principal is protected and returned to the purchaser in the event of a failure, but there are no other remedies. “That is the concern that I’ve had expressed by many people. And people have come to me for advice and I say: ‘Sorry, there’s nothing you can do.’ And they say: ‘Now to get into the market, it’s a whole other thing. I’ve lost the appreciation in value.’ And that’s where they’re at a loss. And I don’t think that’s going to change.”

 

While the condo investor waits for their condo to be built, the market can continue to climb beyond the price the purchasers had secured. Even with the deposit returned, they’ve lost any appreciation or interest the money used for the deposit might have gleaned had it been invested elsewhere when the project doesn’t materialize. It’s been enough of a concern for Ontario’s Condo Owners Association to argue for the establishment of an insurance program for appreciation lost when a condo project fails or is cancelled.

The purchase and sale agreement of a condo unit in Ontario typically includes a condition that the development achieves a certain threshold of sales within a certain period. Failure to reach those goals gives the developer the right to pull out of the project, says Barrie, Ont. real estate lawyer Andrew Ain of Ain Whitehead LLP, who represents both developers and purchasers.

But developers are required to register under Tarion, Ontario’s new home warranty corporation, which has a protection plan for deposits. And the deposits the builder receives must go to an escrow agent or the builder’s lawyer to be put into trusts, which the builder can only access when they satisfy the Tarion requirements.

While there are levels of protection in place for the purchaser of a pre-construction condo in Ontario, only a deposit of up to $20,000 is protected — although Ain anticipates that will increase.

Tarion went under the microscope last year, resulting in 37 recommendations presented by Douglas Cunningham, former associate chief justice of the Ontario Superior Court of Justice. Among the recommendations is increased regulation for developers and builders and sufficient protection for the consumer. That could include developing a record of builders who have had problems and perhaps preventing them from building in the future.

There are similar insurance programs across the country, including the Alberta New Home Warranty Program and the Atlantic Home Warranty Program. But no such program exists in Quebec, leaving purchasers to search for private insurance for their deposits.

Given that consumer protection legislation doesn’t apply to real estate purchase and sale transactions, there are limited protections for Quebec condo investors who don’t get insurance for their investment, says Jonathan Franklin, a real estate and commercial litigation lawyer with Franklin & Franklin Attorneys in Montreal.

The deposit can go to a notary in trust, but purchasers sometimes write their cheques directly to the developer to go toward construction costs. “It’s not regulated and it should be, like residential leases are regulated,” he says. “The real estate brokers have an excellent contract, which everybody uses on offers to purchase a building.”

Unless the contract specifically states that the deposit will be returned if the development isn’t completed within a window of time, investors and their money could be held in limbo or lost if a development is repeatedly delayed or when there is no activity on the project, he says.

Franklin sees benefit in the implementation of a common purchase and sale contract like those used by real estate brokers for pre-existing buildings. Vancouver real estate lawyer Kenneth Pazder agrees such an approach would help to level the playing field for purchasers in British Columbia as well.

While British Columbia does have protections in place for deposits, there are concerns in that often-hyper-inflated housing market that there are no further protections. A purchaser waiting for a condo after several years has lost the interest they might have achieved elsewhere and perhaps the opportunity to purchase again has vanished because of the ever-increasing housing values.

Contracts for purchase and sale of pre-construction condos, Pazder says, are heavily weighted in favour of the developer and shifts the risks to the purchaser. One of those risks is when the builder extends the closing dates when life goes on for the purchaser who may, in that period, have lost their job, become sick, divorced or subject to higher interest rates, impacting the viability of the condo purchase.

The test for further remedies beyond the return of a deposit has yet to be heard by a court, he says. “The buyers are not united … it’s very unlikely one person is going to take the developer to court and challenge this.” Developers also generally create a new company for each individual project, and if that project fails, the likelihood is that it has no money with which to pay damages.

Pazder thinks standard-form contracts would help to divide the risk more equally between the builder and the purchaser and he’s made that suggestion to the last two provincial governments. But it’s an idea he feels is unlikely to gain traction given the construction industry’s large contribution to the country’s GDP and the relatively low incidence of condo failures and bankruptcies in B.C.

A big problem with pre-construction projects is delays. Time schedules are rarely met, although provinces generally legislate limitations on extensions that developers are allowed. Extended delays can be cause for concern for the buyer for fear that the project will never be completed or that the final timelines extend beyond their moving plans, which may have involved the sale of their previous home.

In Nova Scotia, builders can extend closing by 360 days. “We did have people who were looking to get out of their agreements to purchase their units. The Nova Scotia legislation gives developers basically a full year of extensions without having to get the permission of the purchasers,” says Lauren Randall, an associate lawyer in the BoyneClarke LLP real estate practice in Dartmouth. “They’re selling units long before there is a product. I’ve never been involved in one that has actually closed when it was originally expected to close.”

She tells clients that they can ask for their money back when a project is delayed but the developer has no obligation to provide any remedies. If the project is delayed beyond the 360 days allowed, purchasers have the right to demand their deposits be returned, but they are unlikely to get any interest or other compensation.

Roberto Noce, a partner at Miller Thomson LLP in Edmonton and a specialist in condo law, says condo law is relatively new in Canada. “In fact, Alberta was the first province in Canada to adopt condo legislation in 1966,” he says, adding that Canada’s first condominium plan was registered in Edmonton.

But it wasn’t until Jan. 1 this year that Alberta’s condo laws were amended to provide greater clarity to developers in terms of their expectations and provide protections for buyers, ensuring their deposits are held in trust by a lawyer and returned in the event of a default by the builder.

“Today, I would say to a potential buyer that your money and position are much safer today than they were last year,” Noce says. But even with the deposit returned, the buyer loses out on any appreciation or interest their investment may have earned during the time they were waiting for the condominium to be built.

Noce says buyers are often swayed by the emotional attachment to the purchase and don’t always look at it objectively. The result is that they could end up signing contracts that provide them with few protections. Important factors often overlooked at the time of purchase are a certain move-in date and any remedies the builder might offer if that’s delayed.

And although the developer retains the right to cancel development if a certain threshold of sales isn’t achieved by a certain date, the contract could possibly include damages that can flow to a purchaser in the event of a cancellation.

“People have the freedom to contract,” but the market demand could dictate the buyer’s bargaining power, Noce says. “The chances of you having any clout to suggest any changes are on the low end.”

Visit Canadian lawyer Mag for more topical information about Canadian law and legal culture.

Vancouver Real Estate : Prices Begin to Lower (August 2018)

This August, sales in the Lower Mainland are continuing to drop to their lowest level this year. As Buyers are being less active in today’s market, we are finally seeing the impact of this inactivity on prices as prices for all housing types in the Lower Mainland begin to edge down.

Condition free offers are becoming a thing of the past, as Buyers have less competition and are afforded more time in making informed decisions. If you are waiting for the market to simmer down to jump in, now might be a good time!

Greater Vancouver

In August, sales were down 6.8% from July of this year, but down 36.6% from August 2017. There were 3,881 New Listings, an 8.6% decrease from August 2017 and down 18.6% from July of this year.

Benchmark prices:

Single Family Detached: $1,561,000, down 3.1% from August 2017 and down 2.8% from May of this year.
Apartments: $695,500, up 10.3% from August 2017, and down 1.6% from May of this year.

Fraser Valley

In August, sales in the Fraser Valley were down 38.5% from August 2017 and down 10.5% from July of this year. There were 2,575 New Listings, an 11.8% decrease from July 2018 and a 2.2% decrease from August 2017.

Benchmark prices:

Single Family Detached: $1,008,700, down 0.9% from July 2018 and up 2.9% from August 2017.  Apartments: $443,200, down 1.6% from July 2018 and up 26.9% from Aug 2017.

Chilliwack & District

In August, sales were down 35.8% from August of last year. There were 432 New Listings. The total number of listings reached 1,404, a 36.3% increase from August 2017. Most of the units sold in July were in the price range of $350,000 to $599,000.

Want to Buy or Sell your property or looking to refinance and have questions? Feel free to call us 24/7.

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Vancouver, BC V6C 2V6
Tel: (604) 682-1509 Fax: (604) 682-3196
Email: plc@pazderlaw.com

Vancouver Real Estate: Will Prices Ever Go Lower? (July 2018)

This July, sales in Greater Vancouver reached their lowest point for the month since the year 2000!

Even though inventory levels are continuing to grow, demand continues to be impacted by the skyrocketing prices and interest rates. In this slow market, Buyers are afforded more opportunity to explore their options in a more relaxed environment. However, it’s clear that Buyers are not taking action and instead have opted for a wait and see approach. The $64,000 question is when sellers will jump!

Greater Vancouver

In July, sales were down 14.6% from June of this year, but down 30.1% from July 2017. There were 4,770 New Listings, a 9.2% decrease from July 2017 and down 9.6% from June of this year.

Benchmark prices:

Single Family Detached: $1,588,400, down 1.5% from July 2017 and down 0.6% from June of this year. Apartments: $700,500, up 13.6% from July 2017, and down 0.5% from June of this year.

Fraser Valley

In July, sales in the Fraser Valley were down 33.4% from July 2017 and down 11.2% from June of this year. There were 2,921 New Listings, a 7.0% decrease from June 2018 and a 11.5% decrease from July 2017.

Benchmark prices:

Single Family Detached: $1,017,400, down 0.1% from June 2018 and up 5.3% from July 2017. Apartments: $450,400, up 0.7% from June 2018 and up 32.0% from July 2017.

Chilliwack & District

In July, sales were down 33.2% from July of last year. There were 459 New Listings. The total number of listings reached 1,390, a 31.2% increase from July 2017. Most of the units sold in July were in the price range of $350,000 to $599,000.

This is a real estate driven economy top to bottom – and it’s hard to see that changing. Don’t wait to buy; buy and wait!

 

Inventory in the Lower Mainland reaches the highest it’s been in the last two years

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Buyers Take Your Pick

This summer, buyers are getting more of a selection to choose from. Prices and sales may be gradually increasing month to month but in comparison to last year the real estate market is slowing down. Sales throughout Metro-Vancouver, Chilliwack and the Fraser Valley are starting to increase as we head into the busy season, but the demand is much lower than last year.

Greater Vancouver

In May, sales were up 9.8% from April of this year, but down 35.1% from May 2017. There were 6,375 New Listings, a 5.5% increase from May 2017 and up 9.5% from April of this year.

Benchmark prices:
Single Family Detached: $1,608,000, up 2.4% from May 2017 and up 0.1% from April of this year. Apartments: $701,700, up 20.2% from May 2017, and up 0.1% from April of this year.

Fraser Valley

In May, sales in the Fraser Valley were down 35.1% from May 2017. There were 3,965 New Listings, a 15.6% increase from April 2018 and a 6.8% increase from May 2017. Fraser Valley is experiencing the most inventory they’ve had since 2015!

Benchmark prices:
Single Family Detached: $1,020,800, up 1.1% from April 2018 and up 11.6% from May 2017. Apartments: $452,900, up 1.2% from April 2018 and up 42.4% from May 2017.

Chilliwack & District

In May, sales were down 36.6% from May of last year. There were 715 New Listings, an increase of 18% from May 2017. Most of the units sold in May were in the price range of $400,000 to $700,000.

Want to Buy or Sell your property or looking to refinance and
have questions or concerns? Feel free to call us 24/7.

So far we have closed over 30,000 purchase and sales in BC!