Buying without a REALTOR®
This topic comes up occasionally in the comments section on this blog, so I thought I’d clarify the situation around buying a house without using a Realtor after the new regulations came into effect last summer for the real estate industry. I’ve talked in the past about the different ways you can work with a real estate agent, but that article is now a little bit out of date since they have changed the terminology and killed the idea of dual agency (one agent representing both buyer and seller).
Normally if you hire a Realtor, you will be their client and they must follow your directions and try to work in your best interest. Then if you make an offer on a house you have your Realtor and the seller has their own to work out the deal and prepare the contract. But what if you don’t want to use a Realtor? That is definitely possible (that’s how we bought our current house) but I’ve found there are a few misconceptions that people have about this process.
If you approach a listing agent to view the property, the first thing you’re going to get is a copy of the mandatory Disclosure of Risks to Unrepresented Parties form which the listing agent will ask you to acknowledge. Want to view 10 properties through the listing agents? Get ready to sign 10 forms. Technically agents are supposed to go over it with you to explain it, but realistically most of these initial interactions are over email so most likely you’ll just get the form forwarded through an automated system and be asked to review and return it. The form itself is actually fairly clearly written so I would recommend reading it in detail at least once, but fundamentally it explains that the listing agent:
- Is loyal to the seller (who has competing interests) and not to you,
- Will share any relevant info he learns from you (like how motivated you are) with the seller, and
- Can only assist you in limited ways (basically just with providing facts and the mechanics of the transaction).
Pretty straightforward right? A lot of people have a visceral negative reaction to being asked to sign something by a stranger, but if you take the time to read it the form itself is only informational. Technically, you don’t have to sign it at all (only the agent does), but over the last year there has been a lot of paranoia around these new disclosure requirements amongst Realtors who fear the newly government controlled regulatory body will jump on any small misstep around disclosure to nail agents to the wall (which may well be correct). If you start off combative, the listing agent is only going to be less likely to want to work with you. As the market slows and buyers become more scarce, agents will be more motivated on that front, but real estate is still a relationship game played by humans so I would recommend not shooting yourself in the foot right off the bat.
When it comes to offers, some people are surprised when a listing agent doesn’t pass on a verbal or emailed informal offer to the seller. While the listing agent should still inform the sellers about any offer, it is not mandatory especially if the offer is a lowball and the agent assesses it as not serious. However if your offer is signed and in writing the listing agent is forced by the Real Estate Services Act to present it promptly to their clients. That’s the only way to guarantee that the sellers will review it (if not get back to you about it).
Be aware though, this is not a transaction to take lightly. If you make a written signed offer without subjects and the other party accepts then you are on the hook to complete the transaction. If you are going it alone, I strongly recommend doing your own due diligence and always consulting a lawyer to review an offer before sending it if you have any doubts. In the end, the decision of whether to use an agent or not is highly individual and comes down to the tradeoff between time and money as well as your risk tolerance, just like many other decisions in life. I liken it to working on your car’s brakes: not rocket science and a task many people can handle after doing some research, but with a low tolerance for error.
Will you save money without a buyer’s agent?
It’s tough to say, however I think it might be more likely now than it used to be. When we bought our house (before I was licensed), we got a good price on the place, but I can’t be sure that the listing agent didn’t just collect both ends of the commission. The commission is set in the listing contract between the seller and the listing Realtor, and that used to just be one number that was paid out regardless of whether the buyer was represented or not. That made reducing the commission for unrepresented parties cumbersome as it would require an amended contract. The new standard listing form lays out exactly how much commission is paid to the listing agent’s brokerage, the cooperating/buyer’s agent’s brokerage, and how much is due if the buyer is unrepresented. This encourages prudent sellers to ensure that they aren’t paying out two commissions if there is only one agent.
So on the one hand the new regulation discourages unrepresented buying by stressing the associated risks, while on the other hand forcing more transparency around commissions for sellers which might reduce double dipping.
What I find interesting is that there is a much larger percentage of people DIYing both the buying and selling side in lower priced markets. For example there are 44 listings on PropertyGuys for Victoria, but 222 in the much smaller Moncton. That’s despite the fact that Victoria sellers are paying a lot more in commissions than those in Moncton. My theory is that because our housing market has been so robust, sellers don’t really see the equity gains as real money and are less opposed to parting with it. It’s much easier to pay $30,000 to sell a place when 10 times that money magically appeared in your house than it is if you had to work 6 months for it.
I wonder if that will change in the future?
I feel as if the realtor aspect of purchasing any house is very overrated. Whenever and whatever house I’ve bought, I did so without the need of a realtor. It’s not that hard to get through like this.
Barrister, I agree 100% with your suggestion that realtors get paid by the hour! Way back when (1993) my husband and I listed a home with a realtor and notified our lawyer we would be selling, and it was our lawyer who told us about an issue he had with the typical form of offer the realtors used. So, he wrote up a form of offer for us to use. Our The realtor balked at his form and we terminated our relationship with her and sold privately using our lawyer as a guide, and paid no commissions. Since then, we have sold 4 homes, and not ever used a realtor, and have never once sold below the lowest valuation, including in two buyer’s markets.
People always ask our strategy, so here it is:
We typically get two or three opinions on value (which are usually they surprisingly close) and price at market Before you list, become familiar with your end of the market; get on a realtor autofeed using your home’s parameters, to see what is selling and for what price and go to open houses as well. ( “bcassessment.ca” is also a good resource as it not only gives you your tax assessed value, it also tells you what has sold nearby and for what, and what places have sold for if in the last three years. You can click on any property using the map, to get its info )
Stage (I do this myself). Can’t stress enough how important this is! Adds value in both sellers an buyers markets- you will get it back in spades, and sell quicker. I use Houzz.com as reference for decor, colours etc. (There are places you can rent furniture if necessary in both Nanaimo and Victoria) I also use Home Sense liberally. With their TJX member’s card you get a longer return period, so several times I have been able to take things back after selling, and I keep what I like which can also be reused in the future. Also, make sure to declutter- very important- box up your clutter and store it in your basement.
Take or get professional photos-we used Artez in Nanaimo for a luxury property we sold recently, but for lesser priced properties, a decent camera with a construction flood light does a good job. (Use lots of light! ) If you need ideas for getting good shots, go to any luxury realtor’s website and you’ll get the idea.
Do a mere listing ($500 or less) and get on both realtor.ca and your local mls. *Depending on how hot your end of market is, you may or may not want to offer buyers realtor’s commissions. If you are in a sought after price range, no commission necessary. If the market or your price rang is cool- offer the 1.5% (3%x.5). Write a good description – avoid spelling/ grammatical errors.
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Get a good lawyer who knows real estate law!!! and tell them you are selling by owner. IMO, they know more about law than any realtor. ( Think about it…who has a law degree and who took a course?) Have them draft a form of offer. You’ll be surprised what they recommend that you’d not have thought of.
Optional- most recently, have posted professional photography/ videos on websites we have made ourselves using WIX.
Love the avatar, Viola. I think I got drunk with her once at Celebrities, back in the 90’s.
Looking at the graph it appears that the declines span about 5 years every time before starting the climb back up. Does that make sense or am I reading it wrong?
The overall pattern is clear either way. It goes down, then goes up more than it went down, then down, then up more than it went down, and so on. I’m not sure how anyone could reasonably argue that it will go down and nowhere but down for any extended period of time. But I guess that’s not what bears are saying.
Not too many losers. Except those waiting for a crash.
“Bear” in mind, that graph reflects the gains realized over 60 years. How many people own a home for 6 decades? If you take any 10 year segment (roughly the length of time most people own any one home), it becomes pretty clear that there will be winners and losers, depending on personal circumstances.
Leo has made a new post…
https://househuntvictoria.ca/2019/04/15/april-15-market-update/
Lets see that graph in non adjusted inflation numbers and lets see the actually pullbacks. Don’t give a crap about inflation adjusted since most people borrow the vast majority of the purchase.
Bears keep the dream alive thinking for some reason house prices are done going up. Its about populating and supply. SFH ownership will fall as the years go on. People will be living more in Condos/TH or longer commutes. The top 20% wage earners will grow in numbers and they will be the ones buying core desirable SFH in Cities in the future.
This is the single largest determining macro factor, IMO. As more and more boomers become net sellers (i.e., die), the effect is deflationary. They will have to sell to someone, and that someone by in large, will be paying for it with their income generated from the local economy.
The even larger effect is the one seen from automation and to a lesser extent, the exportation of production to other areas. The US Fed has been fighting this for a while now – trying to keep assets rising despite these countering, deflationary forces.
Let’s take the numbers from Leo’s chart and calculate what home prices over the next 60 years will look like, presuming the 3.74% annual appreciation were to continue.
Let’s say that the average rate of Canadian inflation over that time will be the same as the last 100 years, which is 2.71%. Let’s also presume that the average homeowner household wage in 2018 is about $90,000 per year.
In 60 years, that household would be making just shy of $450,000 per year. Awesome… right? No, not when you compare it against what home prices would be.
From a starting point of $909,418 in 2018, and with an annual growth rate of 3.74%, we arrive at an average SFH price in excess of $8,200,000 in 2078. This will be about 18.2 times income. Of course, that’s just the average. Lesser housing would be less, better housing would of course be more. Technically possible? Yes. But not likely, and if it is, not for long.
I could draw the numbers out even longer to make it look even more ridiculous, but the point is this: Looking at history is a great tool, but looking back at it without the context of evolving social and economic dynamics or even a basic nod to the notion that people have to actually pay these prices with their incomes, can lead you sideways in a hurry. It’s true, you can’t really predict the irrationality of a market, but that’s no excuse to suspend all reason.
@sold out #58580
Best graph ever. Looking forward to the updated version.
Oh it will be different all right. Compare the interest rate cycles for starters. As well compare household debt. Also 60 years ago we were headed toward the largest increase in labour force participation ever, while today we’re headed toward a significant decline.
These factors directly affect how much money households can pay for a property. RE prices are not driven by some mysterious force.
For the visually inclined, here’s Leo’s graph from 3 years ago. It covers the last 60 years. Recency bias, it’s a thing.
https://househuntvictoria.ca/2016/03/17/a-brief-history-of-prices/
We’re all guessing. Some of us just have a lot more riding on being right.
Speculating on housing what can go wrong. Have fun.
Do you have a source for this assertion? Sixty years of housing data in Victoria would demonstrate a perpetually ailing market if so. Maybe Victoria will start on a new health kick…
It has become harder to buy in the core, and you did win a lottery of sorts, but unless you have a crystal ball your prognostications don’t seem all that different than all the rest – basically a guess.
@Totoro
Well, I think that last 10 years of asset inflation reflect the economy’s adjustment to persistently low interest rates. If we’ve reached a point of equilibrium, then it’s unlikely we’ll see any further, significant house price gains until wages catch up. Price increases in healthy markets typically track inflation. If some other factor, like foreign capital, enters the market at some point down the road we may see greater gains. I’ve already made my choice, I own my home. I consider it an indulgence, not an investment. Expecting a repeat of my astonishing good luck would be churlish, as it would mean those who want to get a foot on the property ladder are taking a boot to the face.
Yeah, well, the land is the major component and that appreciates. If you think the next 25 years will be markedly different than the last 60 I guess you will make a different choice.
Oops! Freudian slip, that’s “indicated” buyers, not indicted. Although we might hope a few are indicted, when all is said and done.
Everyone needs shelter; nobody NEEDS to buy it. My point is discretionary purchases can be delayed until conditions favour the buyer. Until recently, asset appreciation lured buyers; I can’t imagine there are too many people left who honestly think that buying a 60 year old depreciating asset with $4500 monthly payments, for next 25 years, is a good idea. Leo’s post yesterday that indicted Vancouver buyers are down 49%, so cash buyers are drying up, too.
@Local Fool
I agree that credit and financial metrics are the wheels on the bus, but market sentiment is the lube. I think if I were the bus driver, I’d be wondering what that grinding noise could mean.
Web traffic and/or specific search queries is usually the premise Juwai and similar platforms have for saying “X market is looking up”. Its close cousin is survey data. Both, IMO, don’t really foretell anything and is more an effect than a cause.
If you want to know whether prices are likely to trend up or down, you need to be looking at credit/financial metrics. Otherwise, it’s not much different than REBGV and their recent reporting of “increased foot traffic at open houses”.
Vancouver is not Victoria. Vancouver has been more speculative.
Congrats on getting out. Hope u are not going back cause as quick as it went down 15%. It can go right back up.
Well GWAC, I take no pleasure in the notion that I might lose 25% of my home’s value, but I’m also a pragmatist; getting out of our house in N. Van with maximum return just before the market pooped the bed still gives me shivers. Lots of people weren’t so lucky. Speculators got burnt, badly, including the dreamer who bought my place as a rental.
Patrick they don’t get it. They honestly believe some big crash is going to happen making a SFH all of sudden affordable. The SFH is just going to continue to get out of reach. Townhomes and condo will have to be the choice or the commute
Anyone been inside 1749 Davie? I went to the open house today. Very underwhelming for 1.2 million.
Thanks for your transparency, Leo. Let me run another wacky theory by you:
We sold a SFD in North Van, back in May 2017. I can say, with a pretty high degree of certainty, that our sale represented the high point for our little neighbourhood and prices seem to be down about 15% since then, if a house sells at all. Our house was fairly representative of an updated, entry-level detached home, and this drop would’ve reduced our selling price by $200,000. We wouldn’t have lowered our sights by a similar % in Victoria because it was our intention to retire, and we needed X amount invested to pull it off. So we would’ve had to lower our target purchase price in Vic to preserve capital. This lower price cap would equate to a 24% drop from current median SFD prices in the core areas, and a 28% drop everywhere else. If Vancouverites cashing out and coming here to retire are a significant driver of the market, wouldn’t something close to these numbers eventually come to pass?
Not a bad theory. After several years of 25% YoY traffic gains, traffic this year is down about 5% compared to last year. Maybe that’s because I’m less interesting, or maybe it’s because there is less interest in real estate out there, or maybe a bit of both.
Sorry if this a little off topic, but perhaps the realtors on this site could comment on their respective website hits by month or year. The theory being these numbers are reflective of interest in local homes, whether by locals or foreign buyers. If interest is still high, it would stand to reason that sales and prices are unlikely to fall in a dramatic fashion.
You are not allowed to give the unrepresented party any advice. That’s the point.
I know, but it creates for so much non-sense. Unrepresented party comes to me and says write up x,xxx,xxx and for deposit write in $5,000 (I can’t provide any advice) and I know seller will likely want $50,000.
If they have a REALTOR® representing them his or she would likely know that $5,000 won’t fly on a $1.5 million transaction and their REALTOR® could give them the appropriate advice versus wasting time for everyone.
DIY or near-DIY (cash back)
I played around with this for years….i.e. “xx% cash back if you view less than x amount of houses, etc.” just doesn’t work in real life applications.
I think at one point the cut-off for the cash back level I had was 25 houses….well I don’t want to go back to my client and be like “sorry, you’ve seen 26 houses you get the lower amount.” Plus, counting houses was super annoying and more administrative non-sense I don’t need.
Yes, other cities have dealt with it. But, unfortunately the solution didn’t result in lower prices for the same quality of housing, which is what many bears here are waiting for.
The solution is typically more high-rise apartments, lower home ownership rates, higher prices, smaller units.
That’s the thing. The way to get taken seriously as an unrepresented buyer is to be a serious buyer.
You are not allowed to give the unrepresented party any advice. That’s the point.
I am in favour of one of two options for real estate transactions:
There is no point in paying full price for bad representation. Problem is, in general the agents that aren’t good charge the same as the agents that are good and most people can’t easily tell them apart. Experience is one part of the equation but not the whole part. Most problems that people have with agents are more about their approach and less about the experience. Good example with the oil tanks though.
110% agree with Totoro on this. Some agents, like Marko and Grant’s, do have longer vision for returning business. But think about it, business needs to make money, if an agent truly put clients’ interest first and treats every buying/selling as his/her own, would he/she has enough time to earn a good living?
oh no … we are severely over populated .. what will we do with our insanely high population density? … too bad big cities around the world does not have to deal with the lack of workable land….
http://www.victoriabuzz.com/2019/04/victoria-realtor-searches-for-suspect-who-keyed-his-vehicle-on-bc-ferries-trip-photos/?fbclid=IwAR0c9Hzf9S3G_duioADEgO7UaOEGUUP1B4pCMt1stQreKCXDRmXTtTJk4tc
You can estimate commissions using the online calculator here, among other places: https://www.mikestewart.ca/commission-calculator-for-realtor-fees-in-vancouver-with-net-proceeds-for-sellers/
You only have incentive to think outside the box if you are a buyer who does not qualify for financing in this market. Zero reason for a seller to think this way and provide financing for a non-family member imo.
Actually it does. That is why they don’t meet the stress test.
It certainly would entice an unqualified or high risk buyer. What seller in their right mind would do this? Are they even going to be alive in 30 years? Who is going to monitor this mortgage over this time period?
How about you can get this in the stock market for zero hassle and less risk if you have 30 years, or just rent the home out and gain appreciation. Private mortgages are going to be more in the range of 8% because of the hassle and risks. There are just way better uses for your capital than locking it in for 30 years at 4% with the risk of default.
As I have said before Victoria real estate is in its own little world. Little buildable land/ expensive to build. Government town which creates stability.
Affordability is not going to be SFH but the townhomes being created by bringing down a few houses.
Near as I can tell things seem to be selling for the same silly prices as last year (give or take a tad). Nor does there seem to be a flood of properties on the market contrary to some predictions on the effect of the spec tax. maybe by next spring.
The stress test is based on the nature of common Canadian mortgages which are variable in rate over time. They want to insure that a buyer can afford potential increases in mortgage rate. The current Bank of Canada qualifying rate (as of April 2) is 5.34%. So what if the buyer qualifies for 3 or 4% but at 5.34% does not? Does that make the buyer someone to be majorly concerned about? What if that buyer’s career path puts them on a trajectory for solid salary increases over the coming years? Think outside the box – a seller wants a price, a buyer wants the property but can’t pass the stress test — could there still be a deal to be done which is not high risk? Maybe.
I’m not arguing for / against private lending – I’d just asked a question based on what I’d seen in other markets.
Would the total commission on a 650,000 house be about 23,000?
On a 650k sale the commission is around 9k.
On average it is more than 11k on $650k. A cooperating commission you may see if 3%100k+1.5%balance. COMMISSIONS MAY VARY
re vendor take back mortgage my thought is if the buyers can’t qualify through regular avenues with a A or B lender, I would have some major concerns about lending to them.
There is a reason the stress test is in place.
But the Buyer’s realtor also gets paid a percentage of the sell price. And again, the higher the sell price, the higher the commission. But the job description is to get the best deal possible for the Buyer (the lowest possible price). So it’ s a real dichotomy sometimes.
No one is thinking about the commission in relation to the price….that is like 2% of the equation. The other 98% is actually closing the deal. With buyers, who knows, maybe they change their mind and buy in Nanaimo without you and you make $0 or they look at another 20 houses before the next offer. With sellers maybe they dump you and go with someone else and you also make $0.
The problem is “closing the deal” is extremely short sighted. If you want to make real estate a career without have to advertise yourself, you have to put your client’s best interest in mind if it means losing the deal. It pays off in the long run. Since the New Year my four easiest sales have been listings where I helped those clients purchase the property in the last 9 years. The reason they are super easy is I know the sellers and I know the house and hopefully when they bought, I steered them into a half decent purchase that is an easy re-sale.
Out of approx. 300+ buyers I’ve represented I’ve been called back for a listing presentation on all 100% that have re-sold and I’ve secured about 90% of the listings. I have lost a few for various reasons….for example, I helped a young military couple buy a home in the core for $516,000 in 2015 and they decided not to go with me on the re-sale as the military was paying all the transaction fees so they thought Re/Max would be better. One of my big selling points is my commission is lower, but some people can interpret that as you pay less you get less. It kind of sucked as I suggested $799k, Re/Max agent suggested $799k and it sold in one day unconditionally for $799k 🙂
Maybe – maybe not. You have to think outside the box. What about that young couple who just missed on the stress test? The self employed? That doesn’t mean they are higher risks than anyone else. What if the seller offered a 30 year amortization – that would certainly entice some. How about a 30 year fixed at 4%? The seller is looking for guaranteed money each and every month and the buyer is looking for stability each and every month.
Totoro: basically you are saying that the real estate agent, whether you are buying or selling is not on your side.
Maybe real estate agents should be paid by the hour just like lawyers are paid.
Thought this was a cool perspective. Map of equal thirds of the population.
From https://m.facebook.com/sarahandcompanycommunications/
On a 650k sale the commission is around 9k. The buyer’s realtor gets about 500 dollars more or less on a 50k difference in sale price. The real incentive is getting the sale at all so the buyer’s realtor has incentive to encourage a competitive offer and the seller’s realtor has incentive to encourage acceptance of a low offer.
In the case of seller financing, this is a private mortgage and there is no government stress test. Unless you are in an extremely strong buyer’s market and have a very hard to sell property and are in unusual financial circumstances there is no good business case for offering this at anything near insured mortgage rates imo. This is why private mortgage rates are typically double bank rates. If you need seller or private financing to buy you are probably a higher risk buyer.
Can you imagine Crown Prosecutors getting paid according to how many years in jail they get the criminal sentenced to? And the defence lawyers getting paid pursuant to the exact same formula? Well that’s kinda how realtor commissions work.
The Seller’s realtor gets paid a percentage of the sell price. The higher the sell price, the higher the commission. Makes sense. But the Buyer’s realtor also gets paid a percentage of the sell price. And again, the higher the sell price, the higher the commission. But the job description is to get the best deal possible for the Buyer (the lowest possible price). So it’ s a real dichotomy sometimes.
The Buyer’s realtor has to be a very principled person. There are some. But some are not. This is the problem. Too bad the RE Board couldn’t come up with a more principled way of paying realtors.
Personally, I think everyone should have their own representation. I am probably one of the very few agents that has always hated double-ending and especially dual agency. Even before dual agency was banned 90% of my double-enders I made one party unrepresented.
The reason I hate double ending is I have so much more knowledge than everyone else involved in the transaction. Not because I am a high level intellect but at 700 transactions, for example, I’ve had every oil tank scan company in Victoria miss a buried tank and I know why they missed it. If there is a large concrete patio I’ll recommend my buyers use one company and if I have reason to believe there might be an inert tank I’ll recommend a different company.
For example, 3 years ago there was a house for sale taking offers Sunday at 6 pm. My clients wanted to go unconditional so we did all the due diligence beforehand. Saturday morning I get a phone call from listing agent noting “oil tank has been discovered” by another buyer and I am like wtf, we just got a written report back from XYZ that there is no tank. Anyway, turns out someone filled the tank with native soil (not sand) and the technology XYZ uses gets tripped up by that. This type of experience and 100s of others every year go into my data bank that give me a significant advantage over the average Joe. Just a few weeks ago I recommended clients scan a 90s build for an oil tank which I would normally never do but I had this gut feeling (character homes surrounding the 90s build which was likely an in-fill) and sure enough property ended up having a buried tank.
How on earth am I supposed to give any sort of advice being in-between two parties with competing interests? Even with unrepresented parties I feel bad for them. I feel like if I am representing my clients and the other party has their own representation, I can actually do my job properly.
Poly-b plumbing only really any issue 1988-1992. 1993 onwards they went to copper fittings which typically is a non-issue with insurance companies.
If you start off combative, the listing agent is only going to be less likely to want to work with you.
You nailed this one……if an unrepresented party starts off combative, I put them through a lot of hoops before a showing is booked. If the person is really crazy I’ll just call the seller and ask for permission to ignore the unrepresented party….had to do this two weeks ago.
When it comes to offers, some people are surprised when a listing agent doesn’t pass on a verbal or emailed informal offer to the seller.
Received an email offer from an unrepresented party last week and it literally read “we would like to offer xxx,xxx subject to financing and inspection”. I laughed, the seller laughed, and we didn’t bother replying. Sold to someone with a REALTOR® a few days later.
My mere posting sellers always call me when there is an unrepresented party interested in writing an offer to get me to send them the offer forms and I reply each time with the same….”I’ll send you the forms, but a much better idea to ask the buyer to have his or her lawyer draft the offer. If they are willing to spend $100 to $200 on the offer preperation you know they aren’t kicking tires.” Works amazingly well.
We are on the edge of Oak Bay! I walk in Rockland now.your hood I believe. Face a quiet dead end street and look out to trees. We really lucked out with this place. There are so many crappy apartments in this beautiful city finding a solid reasonably priced one isn’t easy. This is a condo and we rent directly from the owner.
And our neighbours are all super quiet. We are very happy.
Nice to have you back in town Grace. Which part of town did you find a rental?
As other posts have suggested, sellers accept vendor financing to get a higher price. No more to it than that really.
As for rent-to-own, every scheme I’ve seen involves paying above market rent in return for an option to buy at some more of less fixed price in the future. If prices go down you lose both ways.
The house we were looking at was a 4 bedroom. Just replacing the piping was on the high end of the numbers you post, and then there was all the drywall work and painting that would have to be done. Plus the disruption.
Let me shove the $ in my agent’s palm.
Congratulations Grace!
I did just a quick google search and got this:
https://home.costhelper.com/replumbing.html
So on the high side, nearly as much as hiring the realtor.
I have never felt good about giving realtors a ridiculous amount of money but for our latest sale I don’t feel TOO bad about it. The two we used gave us great advice and when there was an issue about a permit for a garage being changed to a room ( done years ago) our agents spent hours at city hall etc. and sorting it out and dealing with the buyers and their agent. It was really a nonissue but we would have hated to deal with the buyers on our own. The buffer was nice and the way they handled it much better than we would have done.Of course it probably wasn’t worth the amount of the commission but it sure was nice to leave it in their hands.
We are settled in our rental and loving it. So happy to be back in Victoria.
As a part-time cheapskate, I get the desire to save $ especially when we start talking thousands or tens of thousands of dollars. And I’ve always been annoyed at how much the typical deal costs when agents are involved. However, unless you have ample time, fortitude and interest, I don’t think most people should do real estate transactions without a really good agent, of which you can always find several in a given market. From past posts it seems Marko of all people doesn’t agree with this, but he knows the business inside out, and when you know it like he does, it seems pretty simple.
Prior to purchasing our current house, we were seriously considering another house. On walk-through with our agent, he immediately noticed the PolyB plumbing in the house. For those that don’t know, PolyB is a plumbing material used in the 90s which, if it was subject to any significant amount of UV (either during shipping, sitting outside during construction etc.), it was at high risk of springing pin hole sized leaks at some undetermined point in the future. Any house with PolyB should have it replaced because you can’t tell if it might fail and needless to say replacing the entire plumbing in a house is seriously expensive. Now, if we didn’t have an agent, I would have had no idea about this issue. After putting in an offer, would a follow-up house inspection have found it? Probably, but by then with no agent I’d be responsible for handling all the fallout with the offer. No thanks.
Being on my fourth house now there’s lots of ways that a deal can start going sideways. Buying a house is a stressful enough decision I don’t know why you’d want to roll the dice on possibly making it that much harder.
That was my first thought in opening up to an additional pool of potential buyers.
As for the risks Totoro mentions – one would normally still require a significant downpayment of say 20%. One would not have to be mortgage free to offer the financing and could use the downpayment to payoff their mortgage. Contract terms would be as for any other mortgage and require the buyer to maintain the property and keep insurance on it. When someone invests that much money to buy a property, they are much less likely to let it go into disrepair. Foreclosure is always a possibility but less likely than say a loan with a 5% downpayment. There is a large segment of the population with an aversion to the stock market. Securing an income stream at a guaranteed percentage would be palatable to those who are highly risk averse. It also plays into the role of diversification.
I agree that in general reasonably priced homes are selling well now but with things slowing down, I wonder if sellers may look at other options to get their desired price.
*Teranet adjusted so that 2005 = 100 to match MLS HPI
I have a friend that bought a house in their mid-20s because their realtor aunt basically shoved them into it.
With the overall Vic market being flat, I’m curious to see a map of where prices are under ask / over ask. Did we ever confirm various theories of suburbs or the core being the first correct?
“No sign of the 10-40% price drop anecdotes from the bears showing up anywhere in Teranet data. Since assessments were done based July 2018, the assessments were done at about peak prices. So according to Teranet we should be selling on average 3.5% below assessment now.”
March numbers show that single-family house prices fell by 17 per cent in West Vancouver, the steepest drop in the region. The drop is even steeper for specific segments of the market: Homes priced in the “high end” (above $5 million) have dropped by between 22 and 30 per cent, Soprovich said, while homes in the “low end” ($1.5 million to $5 million) have dropped by 15 to 22 per cent.
https://www.thestar.com/vancouver/2019/04/11/developer-admits-hes-desperate-as-multimillion-dollar-west-vancouver-home-prices-tumble.html
I see it occasionally but very rarely. One would think there would have been more of it after the stress test to enable buyers to still get in, but I am unclear if the mortgage stress test can actually be sidestepped that way.
Currently, sellers aren’t that desperate, despite wishful thinking.
Just set up a PCS account with any realtor.
Nice to quote the Teranet release, but in the interest of full disclosure, you might want to print the other part of their message too.
“Despite the recent downtrends, only two markets are down from a year earlier – Calgary (−2.8%) and Vancouver (−2.1%). For Edmonton the 12-month gain was 0.1%, for Winnipeg 0.5%, for Victoria 0.7%, for Halifax 3.0%, for Hamilton 3.2%, for Toronto 3.3%, for Quebec City 3.9%, for Ottawa-Gatineau 5.2%, for Montreal 5.5%. The composite index was up 1.5% from a year earlier.”
So, stats suggesting Victoria is still ‘up’ (flat would be most accurate), YoY, based on their 3-month running mean of sales pairs methodology.
Introvert, where do you get access to pending sales?
Risks
1. Failure to maintain the property with risk of default and having to foreclose with the expense and time that takes and perhaps overall losses.
2. This plan likely hinges on the seller not having a mortgage themselves, so that is a lot of equity to tie up at a very low rate of return. We are talking about a loss between the rate you provide and 6% average returns on invested capital in the market, which would one viable long-term alternative – keeping money in the bank is a losing proposition.
3. Loss of appreciation on equity invested in other real estate and then potential need to pay for a home as a renter or with a mortgage if equity remains in the home. Very few are in a position to pay for the next home in cash while having 100% equity the home they are offering financing on.
It is still easy to sell in this market for a good price. Why would a seller take on all this risk and low reward for a non-family member? Rent-to-own is a better option with fewer downsides.
And what would these risks be? As the banks pay a paltry 1% on savings, 3% or better isn’t quite paltry. Granted the returns are not what one could do on the stock market but the risk is significantly lower.
There is no incentive in this market and at these interest rates for ordinary arms-length folks to offer owner financing given the risks.
Rent to own is being offered in Langford: https://www.vicnews.com/news/new-rent-to-own-units-attracting-attention-in-langford/ and this model might be more attractive to a seller who could manage the paperwork if they believe prices are going to fall and they don’t need the equity.
What I haven’t seen here in Victoria is the offers of seller financing. When the markets turned in the late 80’s and also in the 2005-2008 timeframe in the U.S., it was not unusual to see sellers offer financing options to help sell their home. Those who had significant equity in their property could offer financing to a buyer (backed by the home) and earn a reasonable & secure rate of return. With the number of “grandma houses” that I’m seeing hitting the market, I wonder if any sellers would entertain the idea? Are there issues I’m not aware of for seller financing here in BC / Canada?
I have seen many times in the past bears posting price drops and selling under ask – Introvert did the same thing just on the flip side of the coin. And for what its worth Patrick, while i do expect to see prices come down more i don’t believe we will see anything close to 40% – i’m hoping that we see around 15% (no mathematical reason to back that up). Median price goes from 780k to 675k and i can pick up a fixer upper a little ways out of town with a suite for 675K i’ll be a happy man.
Perhaps certain segments and/or areas are bucking the overall trend this spring.
What I did yesterday was post most of the pending sales I could find (in GH), not including the ones I already posted a couple of weeks ago.
Rush4life,
Excellent summary of the Teranet data (March index based on house sale price on closings), it looks like Teranet is now a favorite of yours too, not just “Leo and Patrick”.
We are drifting away from peak prices, should be interesting to see which way it goes…
Victoria -3.5% from peak (sep 2018)
Vancouver -4.3% from peak (July 2018)
No sign of the 10-40% price drop anecdotes from the bears showing up anywhere in Teranet data. Since assessments were done based July 2018, the assessments were done at about peak prices. So according to Teranet we should be selling on average 3.5% below assessment now.
We’ve never used a buyer’s realtor. As a result, the buyer’s realtor commission was deducted from the selling price, or there was no commission as it was a private sale. In all cases I believe we did save money. I do think there is value to using a realtor if you don’t understand the process, what to watch out for, or the market well.
The one time we used a seller’s realtor I was not impressed but that was partly about the individual we used.
Rush4life, your data goes against Introvert’s post where the sold home she picked were almost all sold for above assessment.
You’re welcome !
Watch RE sales volumes and HH credit growth. Both leading and suggestive to prices.
Thanks Local – much appreciated!
Love the relatives (well for the most part) but I would never choose the relative over someone who is more competent and capable as my realtor. Buying real estate is a very expensive proposition for most people. Why take the chance on someone who might not get you the best deal or provide the best advice for your situation? If you want to use a realtor, find the best fit for you.
Double asterisk on either side of the word or sentence you’re bolding.
ie ** bolded ** – just remove the spaces between the asterisk and the letter.
Thank you for a really informative post. I had wondered how the new rules would affect the individual buyers. I sold a house in Calgary a few years ago without using a realtor but I did check all the documents with my lawyer. I saved money with just a little more leg work but it was a great experience and I would do it again.
Probably #1 cited reason why people chose a given realtor. 🙂
PS thanks for the information on realtors Leo – as always it is helpful. Too bad my cousin became a realtor and now i am obligated to use her – normally i would have tried to get some legal fees paid for etc but i would feel bad taking food off her table given the circumstances…
Also how do i make text bold etc in my comment: i tried some html but either i suck or it doesn’t work…
[b]this text is not bold[/b]
Well Leo and Patrick’s favorite house price index just posted new numbers and Victoria is down again. 3% for the year, 1% for the month (almost leading the pack again for price drops) – March is a time where prices should be going up (article states that this is the first march decline in 20 years in the index’s history if you exclude 2009) The fact that prices are not going up may indicate even larger price drops later this year when prices are actually supposed to be trending down seasonally. Here are some details you may find interesting:
https://housepriceindex.ca/2019/04/march2019/
“April 12, 2019
The Composite Index down for a sixth month in a row in March
In March the Teranet–National Bank National Composite House Price IndexTM was down 0.3% from the previous month. Apart from the recession year 2009, it was the first March decline in the 20 years of index history. It was also the sixth consecutive monthly decline, for a cumulative drop of 1.7%. Indexes were down on the month for seven of the 11 metropolitan markets surveyed – Ottawa-Gatineau (−1.5%), Victoria (−1.1%), Vancouver (−0.5%), Calgary (−0.5%), Toronto (−0.3%), Winnipeg (−0.3%) and Hamilton (−0.1%). Four markets were up: Halifax (0.8%), Quebec City (0.5%), Edmonton (0.4%) and Montreal (0.1%).
Most of the markets in the composite index have been trending down for months. For Calgary it was the ninth straight month without a rise (cumulative decline 3.7%), for Vancouver the eighth (cumulative −4.3%),]for Victoria the sixth (−3.5%). The March rise of the Edmonton index had been preceded by six consecutive months without a rise (cumulative −3.2% over the seven months)…. These markets are all in striking contrast with Montreal, which has declined in only one of the last 12 months (cumulative +5.5%). The Halifax index has advanced in each of the last five months (cumulative +2.0%).”
Could be a lean years for the bulls. Without those out of towners artificially pushing our prices up who is gonna step up? Not me…