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Advice For Buyers

Feb 07
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Modern house with garden swimming pool and wooden deck

There Needs To Be More Transparency with Real Estate Bidding Wars

By Advice For Buyers, Advice For Sellers, Video Blog

We need to change the bidding war process in Toronto! If you’ve tried to buy a home in recent years, you know how backwards the current process is…If you haven’t, let me explain.

The Current System

A seller will list their property below market values to create a frenzy amongst buyers.  After roughly 7 days of market exposure, they’ll review and all offers that come to the table.  The problem is that each buyer is going in “blind” not knowing anything about the other offers.

Current rules, as set by the Real Estate and Business Broker Act, say we can not disclose the motivation, offer, or price of a competing offer. Thus creating a blind bidding system full of suspicion and mistrust.

The winning buyer always feels like they paid too much, the losing buyers feel like they could have paid a bit more and the sellers could regret the highest bid if the winning buyer can’t secure the financing. Plus it artificially increases values as going in blind can create an over inflated offer.

How We Can Fix It

Simple – get rid of the blind bid system and open up the process. Let each party know the Price, Deposit and Closing date of the other offers. This levels the playing field. There still will only be one winner and several losers, but atlas both parties would fairly know what they were up against, in a more transparent system and enjoyable process.

Good News

OREA is seeking feedback on whether it should push the provincial government into modernizing the real estate industry to make it more transparent. Australia is already doing this – and even opening up their MLS to sold prices (more on that in another video). In Melbourne, they littering gather infront of the house on a offer day and each party bids infront of each other. This is the most transparent way to know what you’re up against.

Oct 24
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How Will the B-20 Mortgage Guidelines Impact Your Purchase?

By Advice For Buyers, Video Blog

For the second time this year, new guidelines are being introduced that will impact how Canadians get approved for a mortgage… and for the second time this year, a lot of people are confused by what these changes mean! I’ve put together a short video to better explain who IS and ISN’T affected by it, and what it all means.


 

10 Ways The New Changes May Impact You

  1. The new guidelines would introduce “STRESS TESTS” for all purchasers taking out a mortgage with MORE than 20% of a downpayment.
  2. If you’re putting LESS than 20% down, taking a VARIABLE mortgage, or a term of less than 5 years – you’re already subject to qualifying under a stress test. No change to this segment of the market.
  3. If you’re putting down MORE than 20% – you too will also be subject to the test.
  4. The guidelines will require purchasers with more than 20% down to qualify at the Bank of Canada Rate OR the Contract Rate + 2% (which ever is higher)
  5. For Example: Say the banks are offering you a 3% fixed rate for 5 years.  In order to be approved for it, you must actually qualify at 5% (3%+2%).  
  6. Because purchasers are qualifying at a higher rate, many will see their max budget amount reduced by roughly 15-20%
  7. The new guideline ONLY apply to those lenders that are deemed a Federally Regulated Financial Institution (currently 85 in Canada).
  8. Those that don’t fall under Federal Regulations are not subject to the new guidelines.  The most popular alternative is CREDIT UNIONS like Duca or Meridian… although there is some discussion that they may adopt similar measures to the B-20 Guidelines. 
  9. Although many will see their MAX budget reduced – it’s important to remember that NOT EVERYONE wants to spend the max a lender can make available for them.  I know of many clients who chooser to only spend 60, 70 or even 80% of their max budget on a purchase.
  10. Like all changes in the market, there will be an adjustment period of probably 4-6 months for people to adjust to the changes.

More Reading:

Final Revised Guideline B-20: Residential Mortgage Underwriting Practices and Procedures

Canada’s banking watchdog sets tougher rules for mortgage lending

New mortgage stress test to hit ‘move-up’ home buyers