Mortgage Rate Update

I received a new rate sheet effective January 7 from Spencer Close and Associates  (604-922-0424).

Variable: 5.4%

1 year: 5.75%

2 year: 6.10%

3 year: 6.1%

4 year: 5.95%

5 year: 5.89%

7 year: 6.25%

10 year: 6.3%

For more information contact Spencer directly at 604-922-0424 or at spencerclose@shaw.ca

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76 Comments

Filed under Mortgage Rates

76 responses to “Mortgage Rate Update

  1. Newcomer

    What kind of a change does this represent over the previous rates?

  2. -A-

    The rates are still artificially low. Eventually the cost of borrowing will find its true price.

    If inflation gets away, and it can’t be hidden any longer, then rates could double.

    For rates to stay this low, deflation will have to make its way back.

    If deflation becomes a factor, I doubt that central bankers will be able to inflate with cheap money again, it will be a 2oyr long recession.

  3. Dmello

    Here is the rate change compared to the numbers Rob posted in September.

    1 year = +0.50%
    2 year = +0.80%
    3 year = +0.80%
    4 year = +0.55%
    5 year = +0.54%
    7 year = +0.70%
    10 year = +0.45%

  4. vancondo

    Those rates are going up quite a bit, is that sweetspot at 5 years a new thing? Are there any options in Canada to lock into a rate for the entire term of the loan like they can in the US?

  5. robchipman

    Going up quite a bit? Man, I must be getting old, because I can’t see it that way. My first house we paid 12.5% and we were in a bad economy. We lost money building houses and couldn’t sell the damn things. I know, I know, it was uphill both ways. Now rates are cheap and we’re worried that they aren’t dirt friggin’ historical low cheap. Its the prices of the real estate that are the problem, not the price of the money.

    These are the September 2006 rates:
    1 yr. 5.25% (unchanged compared to Aug.9 [2006])
    2 yr. 5.3% (Was 5.35% Aug. 9)
    3 yr. 5.3% (Was 5.45% Aug. 9)
    4 yr. 5.4% (Was 5.5% Aug. 9)
    5 yr. 5.35% (Was 5.55% Aug. 9)
    7 yr. 5.65% (Was 5.75% Aug. 9)
    10 yr. 5.85% (Was 5.9% Aug. 9)

    Theses are the September 2007 rates:

    1 yr: 5.6% (5.75% today)

    2 yr: 5.65% (6.1% today)

    3 yr: 5.7% (6.1% today)

    4 yr: 5.95% (unchanged)

    5 yr: 5.74% (5.89 today)

    7 yr: 6.05% (6.25% today)

    10 yr: 6.15% (6.3% today)

    I’m not sure where Dmello is getting his numbers. Mine are from here:
    https://rireb.wordpress.com/2007/09/10/mortgage-rate-review-august-2006/

  6. Dmello

    oops. I was referencing to the 2006 numbers, my mistake.

    Rob, I’m guessing that you were paying that 12.5% on a $50k to $100k mortgage, right? 20+ years ago when you bought your first house, prices were reasonable and average income earners didn’t have to take out massive loans to buy into the market. In this environment rates could fluctuate more without having too much negative impact on mortgage holders or a persons buying power.
    In todays environment where prices are at record highs, that same average income earner now has to take out a loan 3+ times higher to buy into the market. Rate fluctuations today have a much larger impact on a persons buying power than they did 20 years ago.

    Maybe you are just getting old?

  7. Popeye

    Widely reported in the press was this statement: “Real estate market continues to soar; no slowdown seen”, says Royal LePage.

    “no slowdown seen”? If prospective purchasers believe this, they are being “…tenderly led by the nose as asses are”. Shakespeare, Othello, (I. iii, 393-6)…in my humble opinion.

  8. Dmello

    no slowdown seen?

    “Although starts for all of last year were the highest since 2004, the weaker-than-expected December results led one economist to suggest that Canada’s bustling real estate market has reached a turning point and will taper off significantly this year.”

    http://tinyurl.com/3d2ya6

  9. robchipman

    Dmello:

    I think the operative word in the quote is “one”; the same article also says:

    “Canadian housing starts defied repeated calls for a slowdown last year…”

    “Economists believe that Canada’s housing market will not follow the U.S. market and fall into a deep slump”.

    “… the sharp drop in housing starts shouldn’t be seen as the prelude to a U.S.-style meltdown in the coming year..” [Robert Hogue, senior economist at BMO Nesbitt Burns Inc.]

    “The slower building activity does not necessarily mean that housing prices are falling”

    The consensus in the mainstream is that Canadian real estate will continue to apprecaite next year. I’m not saying they’re right or wrong. I’m just saying that there’s always one guy who’ll buck the trend of prognosticators, and the fact that he gets quoted doesn’t so much prove anything as it lets the writer appear balanced.

  10. Dmello

    Very true Rob, however I do see more and more stories like this popping up lately and they must have some impact on people’s psychology.
    Up until this winter I’d say that close to 9 out of 10 stories were positive about the future of the local real estate market. Lately it seems to be closer to 50/50. Things just seem a bit different this year.

  11. Newcomer

    Let’s face it, there are thousands of prognosticators out there all saying various things. What is significant, when reading the press, is which ones are quoted. Newspapers profit from being believable in the eyes of their readership. In this sense, they are more led than leading as they ultimately decide to print the views that seem believable to the public. As Rob says, what individuals say is of little importance, but the fact a number of people are quoted as saying the opposite is equally unimportant.

    The headline is, “Housing market cools in December” and the first quote reads, ““The sharp decline in December housing starts suggests that a more significant downturn in housing activity may be in the cards for 2008.” This is the true reflection of what people find believable and, as we are in a speculative market that is fully disconnected from fundamentals, sentiment is everything.

  12. jesse

    Dmello: “Rate fluctuations today have a much larger impact on a persons buying power than they did 20 years ago.”

    Quite right. The sensitivity to rate changes is more with higher loan amounts. Of course rates have gone up over 1% across the board since ’05 and property prices have gone up 30% anyways.

  13. WoW

    Yes, I see the positive to negative ratio at closer to 3:1 right now, vs 10:.01 this time a year ago or so. If we get to 1:1, or even 1:3, wow, specuvestor psychology could change things pretty quickly, wouldn’t you agree Rob/Jeff?

  14. Anonymous

    At the end of the article:

    But Dr. Baen of the University of North Texas is optimistic about their futures. “These people are hustlers, hard workers.”

    Hustlers………is this a flattering word?

  15. Dmello

    Here is an article from today’s Sun:

    “Metro Vancouver housing starts at highest level since 1993”

    http://tinyurl.com/3xnsve

    The previous article I posted stated: “Declines were particularly heavy in B.C. — down 34 per cent”

    I find it interesting that BC is seeing a 34% decline in housing starts while Vancouver is at record levels.

  16. WoW

    Wonder how sales/listings look thus far this week….

  17. robchipman

    Tony:

    Real estate has always been a high turnover career. Most people who join the industry don’t stay – its simply too demanding. Here are a couple quick stats:
    10,299 active listings in December
    9,466 Realtors
    1.08 listing per Realtor
    if we go at a 75% average sell/list, that’s 3/4 of a listing per month to live on. Selling a house? Not bad. You probably clear $8,000 or so per month (before car, ads, promo, etc). Selling an apartment? More like $4000. Sounds like a lot, right? Except for every Realtor who sells 2 places in a month someone else goes without a sale. If you buy the 80/20 rule then most Realtors don’t sell. (The argument logically becomes that the succesful Realtors get paid more than they’re worth, but what’s the alternative? Give the business to non-hustlers? Let’s start with your house! 🙂 )

    The old story is that high producers will do better when the market goes down. Newer entrants will leave, and there will be more business for those who are left.

    Anonymous:

    Note that its a professor calling unsuccesful sales people hustlers. Perhaps the irony escapes him.

  18. WoW

    Rob – doew it seem as though prices have topped out? Or do you predict a continues strong run up from these levels?

    Thanks. Appreciate your views, as you are right on the front lines.

  19. robchipman

    Strong run up? Who knows? Who can tell? I expected drops in the December banchmarks, but all of them rose. Last year we had a longer reversal (I don’t think we got back on track until March). Price growth is slower now (11-13% YOY) Last year we saw 13-17% yoy. Based on that it looks as if this market is slowing slowly, rather than crashing quickly (and let’s not identify a trend after looking at one set of yoys). But, we have about 5 MOI right now. That’s low in the big scheme of things, but high compared to what we’ve been getting used to.

  20. ObserverX

    Rob: In what way are professors ‘hustlers’?

  21. jonjacob

    It looks like the yield curve is inverted in the mid-term, indicating recession. Also, note that the 3-year fixed at 6.1% is almost double what it was in 2004. I personally secured a 3-year mortgage @ 3.25% in Q2 2004.

  22. Garbage

    Quick note: every sale provides commission to two agents (in general) – one to the selling and one to the buying agent.

  23. Pearl

    “With the overall average [Multiple-Listing-Service] price of a single detached house over $800,000 in Greater Vancouver, buyers have shifted their expectations towards more affordable higher density style housing,” CMHC analyst Richard Sam said in a news release.

    I find this type of observation irritating. The cost per sf is roughly constant whether house, townhouse or condo. So how is high density housing more affordable?

  24. Pearl

    Incidentally, question for Rob or the forum. Does anyone know the typical rent for a nice 2BR in Burnaby or East Van? It looks like $1400/month, but is that too high?

  25. robchipman

    Dmello:

    You’re guessing wrong. The mortgage was well in excess of $100,000, and we had a 2nd as well. Because we had much stricter mortgage rules I really had to be creative to pull it off. Qualifying for the mortgage was a huge challenge in itself. We ended up being well under 25% down, yet avoided CMHC insurance. That wasn’t an easy task in those days, but at the same time, it was a bad economy and places weren’t selling. There were deals to be made. And trust me, in those days moving to the extreme eastern edge of Maple Ridge was regarded as throwing in the towel in some circles. Say good-bye to where you grew up, etc. 🙂

    Anyway, there are two things you can depend on. Real estate was always really tough for people to buy in the old days (just ask them) and its always over-priced today (just ask the guy next to you).

  26. robchipman

    ObserverX: Its not that professors are hustlers. Its that if the people he’s talking about were hustlers they wouldn’t be out of work.

    Garbage: check the math. I didn’t split the commission into 2 ends. If there are 100 listings and 100 agents, they have a listing each. But, every listing generally means a selling end as well, going to a selling agent, so that’s 100 double end commissions cut in half. But, each listing agent also gets a sales end as well, so…100 listing commissions x .5 + 100 sales commissions x .5 equals the same as what I did.

    That assumes all 100 listings sell, and that none are over-priced or over 90s.

    Here’s the other killer. 80/20 means that 20% of the Realtors do 80% of the business. It doesn’t end there. Use the same 100 deals. 80 get taken care of by 20. That leaves 20 to be split between 80 Realtors. But of the 20 deals, 16 get done by 4 Realtors (80/20). That leaves 4 deals for 64 Realtors. You can see where that’s going. Even if its not 80/20, but more like 65/35, its slim pickings from the majority of people.

    Pearl:

    High density means you get less and pay more per square foot, but less overall, hence more affordable. Instead of raising kids in a $600,000 sfh you raise them in a townhouse or apartment. What you save in price you pay for in product.

    I question Sam’s analysis. If he’s right we should see much higher sales in the lower levels and weakness in SFHs, no? Yet we don’t see that.

    I have a very low quality 2 bedroom for rent in East Van for $875 now. That’s the bottom. I’ve rented some nice main floors for $1400, but I also have a few I’m renting for less, and nice ones, too.

  27. Cympl

    “It looks like the yield curve is inverted in the mid-term, indicating recession.”

    Actually an inverted yield curve just means there’s a higher chance of recession within the next 4 quarters – maybe 40% chance vs. 20%. The slope of the inversion also matters – and there are exceptions to the inverted yield curve rule. There’s some sort of recession predictor tool on the Federal Reserve website that uses all this info to give a % chance of recession.

    Interesting side note: The Economist magazine found the best predictor of recession was how many times the word ‘recession’ appeared in news articles, and based on that the chances of recession have gone up recently I guess…

  28. -A-

    Rob who is not a bear or a bull but just a neutral party says:
    Real estate has always been a high turnover career. Most people who join the industry don’t stay – its simply too demanding.”

    Or could it be that some people are just to honest to pull off these tactics?

    Comment by jesse
    2008-01-09 12:22:51
    Buying presales is full of high pressure sales tactics. Toronto has some crazy practices though I’m not sure if they happen in BC.

    The story I heard was from someone who bought a presale condo on the Toronto waterfront. The showroom had an open house but had a “pre-open house” for Realtors only. When the rest of the public could go in, many of the places (with the views) were already sold. Suddenly 2 days later my friend gets a call saying that one of the units with the view was back on the market but $50K more than the original price. After putting in an offer, the deal “fell through” but, lo and behold, there was another smaller unit that just “came available” for an additional $30K more than the larger place.

    Holy crap. From the outside it seems crazy but I can imagine that reality changes when it’s the heat of the moment. In the end it was all shady verbal contracts with invisible owners and flippers, all going through the developer’s sales office. Back the f%&# away.

  29. coco

    50% of Canadians Expect Their Household Income to Fall Behind Cost of Living in 2008

    http://tinyurl.com/38mvs7

  30. coco

    Odds of recession hitting Canada and U.S. increasing, forecast suggests

    http://tinyurl.com/3yf295

  31. jesse

    “Does anyone know the typical rent for a nice 2BR in Burnaby or East Van? ”

    For a 0-5 year old 2BR condo, $1300-$1400 sounds about right. Units that are older should be a few hundred less than this. If you present yourself as a reliable and sensible tenant you can probably negotiate for a bit less on some places but it depends on the landlord.

    Not sure about main levels of houses or basements but I think they are usually less per sqft than condos.

  32. coco

    Canada due for downshift in job growth – analysts

    http://tinyurl.com/2llm2v

  33. -A-

    We are probably in a recession, however as I have pointed out many times before, inflation is under-reported so it shows up as growth.

    The unemployment rate is low, because there is a tim horton and a starbuck at every corner, so the stats don’t show high unemployment.

    By the time the recession is here “officially” many high rolling realtor types will have marital problems.

    Ps could we have the numbers please Rob.

  34. coco

    California condos go to Canadians
    Real estate agents tap new market created by strengthened Canadian dollar

    http://tinyurl.com/2mrsvl

  35. coco

    Canadians Snapping Up American Homes

    http://tinyurl.com/ypw3lr

  36. coco

    Goldman Sachs Downgrades Canadian Growth Prospects After U.S. Recession Call

    http://tinyurl.com/3ywkgr

    (Goldman Sachs has not been wrong predicting what is happening with the economy yet, they called subprime problem before it happened)

  37. coco

    The US consumer has hit yet another new low. Besides mortgage defaults and astronomical credit card debt, the U.S. consumer is stretched so thin that he can no longer afford to pay his phone bill.

    AT&T Inc.’s stock slipped 4.5% yesterday after the phone company’s chief executive blamed the weak economy for a rash of landline and high-speed Internet customers not paying their bills.

  38. Peter

    The real estate of Vancouver will be determined by government policy. Much of the property overvaluation comes from land price overvaluation. Why? Because this is the only way the govt can massively increase tax without changing any policy. The reason why there are more high rises is because of the same principle. The gov’t tax a $800,000 house approx $5000. However, if this piece of land can build 40 x $300,000 units = $75000. Easy money!

  39. patenttranslations

    >>The unemployment rate is low, because there is a tim horton and a starbuck at every corner, so the stats don’t show high unemployment.<<

    Actually, the article says that 90% of the new jobs in the past three months were in the public sector and that growth in private sector hiring (which includes Timmy’s) was less than half normal levels. That’s considerably worse than having a bunch of MacJobs created because MacJobs at least generate money for industry, which goes out into the economy as investment. Government jobs represent dead money.

  40. -A-

    better yet, patenttranslations, but with views like yours, you won’t be welcome on this board for long.

    You may be invited out for “coffee” buy the host.

  41. BOBBYBEAR

    ya CMHC aint dead money. It is dead waste.

  42. Britanny Speares

    $1000 bet bulls?
    10% + decline in Gvrd RE in 2008. Come on you pussies. Money where your mouth is.

  43. ceejay

    Hey Patenttranslations, I bet most of those public sector jobs are in teaching and health care. Without those kinds of expenditures, the outcome is dead stupid and dead.

  44. WoW

    Press – I (based on what I read) seems to have more negative tinged articles (more everyday) – is it just me? OR, does it seem different now?

    Rob – any increasing signs of fear out there, or are teflon buyers completely immune to what’s going on globally? With all this sunshine, its a wonder that the whole world does not live here…

  45. WoW

    How have the numbers looked thus far this week?

    zzz

  46. WoW

    Is this BULLISH for vcr RE?

    Virtually everyone believes Canada is headed for slowing growth this year though opinions differ on the degree of the slowdown. The economy will still expand in all regions of Canada, but at a more tepid pace, one report said Thursday.

    This year “is likely to be marked by a meaningful downshifting in growth in virtually all parts of the country,” said TD Financial Group economists Derek Burleton and Pascal Gauthier.

    “Put simply, no region – including the long-outperforming west – will be fully immune to downside risks emerging outside of Canada’s borders.

  47. WoW

    Are they for real?

    UK House Prices

    London and the South East led the way during the 1980’s Boom, rising much further than the rest of the country, with the rest of the country continuing to rise as London peaked.

    Similarly today, the South of England has risen to a much greater extent than the rest of the country, and thus is expected to fall especially hard given the credit crunch in the city of london.

    The resulting bear market will undoubtly seek to contract the spread between London and the rest of the country by at least 50%. Which implies a decline of 30% in the Greater London Area, and an overall UK decline of some 14%. however the decline in real terms when inflation is taken into account will be much greater.

    UK Housing Market Conclusion: The UK Housing market is expected to decline by at least 15% during the next 2 years. Despite the 2012 Olympics, London is expected to fall as much as 25%. UK Interest rates are either at or very near a peak, as there is an increasingly diminishing chance of a further rise in October 2007. After which UK interest rates should be cut as the UK housing market declines targeting a rate of 5% during the second half of 2008. The implications for this are that the UK economy is heading for sharply lower growth for 2008.

    What to Do ? 1. Home Owners – If you are thinking of selling your home then the time to act is now ! Waiting whilst the credit crunch continues to tighten is a big mistake, especially given the fact that further sharp falls are in the financial markets are just around the corner.

  48. beach

    coco, great articles on Canadians buying in the US.

    This sums up my position exactly, although I am waiting till the end of the year to purchase (but acquiring US dollars now). I am not alone either, 2 of my firends are doing the same and we are all looking for places within a 4-5 hour flight from here.

    Frankly, I am suprised the local real estate agents aren’t teaming with US and other international agents to facilitate these types of deals.

  49. WoW

    BREAKING
    NEWS American Express to take a $440 million charge in 4th quarter due to a slowdown in cardmember spending. More soon.

    Bullish or Bearish?

    Good for Vancouver RE? Isn’t everything!:))

  50. Annon

    “NEWS American Express to take a $440 million charge in 4th quarter due to a slowdown in cardmember spending. More soon.”

    How does that make sense? Shouldn’t slowdown just mean less income/profit? Why is there a charge?

  51. Anonymous

    Missed payments.

    NEW YORK – “American Express Co. expects slower spending and more missed payments on credit card bills to hamper its profit throughout 2008, the company said Thursday.

    The company plans to reserve $440 million for the fourth quarter, preparing for loans that are currently overdue.”

  52. Snick

    I hope that many of you “pre-construction” condo fans got a good look at CBC’s “Condo Crunch” program last night.

    Ugly. Breaches of contract every which way you looked, from square footage shrinkage, design changes, price changes to changing completion/move-in dates. The poor shmucks didn’t realize they were being led like sheep to the slaughter by wily RE agents.

    Speaking of RE and agents etc., what is cookin’ with that shack Aaron Best STILL has listed on King Albert in Coquitlam for the princely sum of 510K since November?

  53. M-

    Snick: I used to do a lot of work on contracts in my last place of work. The CBC feature was pointing out how contracts can be written that quite clearly indicate that the developer isn’t under any obligation whatsoever to provide what the buyer was expecting.

    Unethical: yes.
    Breach of contract: no.

    As the lawyer said, from a contractual perspective, it’s a matter of coincidence if the delivered unit bears any semblance to the pre-sale sales literature.

  54. Snick

    Well, technically, you are correct. Let’s just call it an “unethical” breach of contract, although I’m not sure why any breach of a “verbal contract” wouldn’t be relevant and worth pursuing.

  55. Reknab

    Rob,

    Any chance of some numbers soon?

    Thanks.

  56. Peter

    Just curious. For ppl currently buying in the US, are their mortgages in Canadian dollar? How does it work?

  57. Strataman

    Reknab; Really good numbers on Pauls site!
    No offence Rob! 🙂
    http://www.northshoreproperties.ca/aPage.jsp?aPageId=2

  58. WoW

    Are the job cuts and reduced growth expecations for alberta and bc bullish for vcr RE?

  59. Unreal

    Snick,
    I think if there is a dispsute on contract. Courts usually side with what is written. What is the legal term for this? Any lawyers here?

  60. Dude

    Snick,

    I totally agree with your point. But the developers have not even breached a verbal contract. When a new contract is agreed up (the writtten one), the old one (verbal one) has been superceeded. Therefore the written one has taken its place of the verbal one. As such, the verbal one is no longer in place. If the verbal one is no longer in place, there is no breach of contract. I cannot see the life of me, why anyone would buy a pre-sale condo. Just crazy!!!

    R/E is one of the biggest purchase people make, if not the biggest. Make sure you know exactly what you are buying and take some time to think about it. You should always see what you are buying.

  61. jesse

    “Courts usually side with what is written.”

    In the end yes but within reason. There is precedence for reasonable expectations. The example on Marketplace was a “walk-in closet” that was just a closet even though the contract could have had a weasel clause to make such a closet valid on paper.

    In the end, for minor disputes, most developers will try to settle to avoid tying up their legal departments (often inserting non-disclosure clauses that are occasionaly breached on national TV).

  62. tofino bear

    rate cut coming!

    http://tinyurl.com/378d6u

    blueskies

  63. BOBBYBEAR

    Has anybody ever seen a bull market that lasted forever?

    Has anybody ever seen a bear market that lasted forever?

  64. coco

    I’m off to a couple high foreclosure areas. Should be an interesting trip seeing things first hand.

  65. coco

    I will leave you with this shocker….Fraser Valley hospitals, ICBC and UBC in financial trouble due to bad subprime investments.

    http://tinyurl.com/3bmjxc

  66. robchipman

    M wrote:

    “The CBC feature was pointing out how contracts can be written that quite clearly indicate that the developer isn’t under any obligation whatsoever to provide what the buyer was expecting”.

    Snick agreed:

    “Well, technically, you are correct. Let’s just call it an “unethical” breach of contract, although I’m not sure why any breach of a “verbal contract” wouldn’t be relevant and worth pursuing”.

    I have to ask: should the developer be under some sort of unclear obligation to to provide what the buyer expects, with the understanding that the buyer’s expectations won’t be written down, and based on their impressions of the sales material? Great system, snick. Contracts are written in order to clearly define the intentions of both parties. Since not all buyers are good with contracts, its worth retaining an agent and paying for their services.

    BTW, if anyone took the time to read an agency brochure (there’s a link here to it), they’d understand that in many cases they aren’t receiving any agency representation when they purchase a pre-sale. In other words, they don’t have a Realtor working for them and explaining what’s going on, which contributes to the problem. Agency is one of the most important and least understood parts of real estate.

  67. WoW

    Ouch! Well, at least it does not impact vcr RE?

    West 49 says holiday sales hurt by strong loonie

    11/01/08

    OTTAWA (Reuters) – Sporting goods retailer West 49 Inc said on Friday that sales during its five-week holiday season fell 0.3 percent from the same period last year, hurt by a strong Canadian dollar and cross-border shopping.

    The company, which sells clothes and accessories for skateboarders, snowboarders and surfers, said net sales for the five weeks ended December 29 dipped to C$36 million from C$36.1 million last year.

    Sales at stores open for at least a year fell 5.4 percent from last year, with sales at its core West 49 banner down 3.9 percent. Excluding stores in Ontario, West 49 sales rose 3.3 percent.

    The company also sells under the banners Billabong, Off The Wall, Amnesia/Arsenic, D-Tox, and Duke’s Northshore.

    “Cross border shopping and an especially challenging retail environment in Ontario continue to impact our top line in the fourth quarter,” Chief Executive Sam Baio said in a statement.

  68. Peter

    But with or without an agency, isn’t it just the same. At the best, the agency can tell you that the developer is under no obligation whatsoever to provide what the buyer was expecting.

    The problem is because the industry is not properly regulated. Even if you have your contract drafted up perfectly and the developer breached the contact, what can you do about it?

    Do you have enough money to go through the legal process? It’s still a civil suit, it means nothing. Even if you win the lawsuit, there is not way you can enforce it. If the industry is properly regulated, the developer will be going into court with the gov’t.

  69. jesse

    “In other words, they don’t have a Realtor working for them and explaining what’s going on, which contributes to the problem.”

    You need a competent Realtor. As always, check references and backgrounds of the builder and your agent. One of the marketers interviewed on Marketplace said salespeople will purposefully try to sell the “junk” suites to those without representation. I think it’s a good point that someone with good experience of the presale business can be a real asset (there are probably Realtors out there that specialise in it).

    Rob, how does the commission structure work with presales? How do agents get paid — does it mean the negotiated price is higher, the developer absorbs the cost, or what?

  70. jesse

    “The problem is because the industry is not properly regulated.”

    Even with regulation you will still have shady developers and in the case of fraud you still need to sue. That said, tightening up disclosure is probably long overdue. Also I think public awareness should be an ongoing effort, either by government, the BBB, or some other independant body.

    A provincial election is not too far away. But far enough away that a few more presale blowups could result in a commission that would force some changes. Write your MLA!

  71. Strataman

    Rob”Since not all buyers are good with contracts, its worth retaining an agent and paying for their services” This is true in a normal market but BUT if a bunch of people are lining up two days before a pre-sale isn’t it pretty well a waste of my time and yours (you being my agent) to start negotiating with the seller? My feeling is they (the seller)would point to the idiots behind us and that would be the end of our negotiations!

  72. robchipman

    Strataman:

    There is negotiation, and then there is agency representation. I can take you to a pre-sale and explain to you that a) they aren’t going to budge on price and b) we’re going to use their contract so there really is no room for negotiation.

    However, I can also explain exactly what the contract means, and I can try to promote and protect your interests. That’s representation. If you still want to buy that pre-sale, what’s the problem? The advantage is that if I, as a Realtor, represent you through an agency agreement and I make a boo boo, you can sue me. I’m covered by mandatory errors and ommissions insurance. You sue me, it goes to my insurer, and if you have a case they’ll settle. Perfect? Maybe not. But if you don’t have an agency agreement with a Realtor you don’t even have that.

    I guess the bottom line is this:buying real estate is complex, and if you don’t know what you’re getting into you should retain professional help. Remember, commissions are negotiable. (Thanks for the lob, btw).

    Jesse:

    There are many levels of disclosure required of Realtors. The consumer should make themselves aware of them and make sure they receive them. I’ve got two links on this page to agency diclosure and commission disclosure. How many ahve read either one? Public awareness should be increased (I’ve said it myself, and include the links for that reason), but let’s face it: most people don’t want to know.

    Generally there is a referral or cooperating commission offered, but disclosure and agency duties can be muddy. May I suggest that when you buy a pre-sale you a) read the blue brochure b)ask for disclosure of remuneratiuon, and c) negotiate a small fee for explaining the contract, and pay the fee out of the referral/co-op commission offered by the developer.

    Peter:

    “At the best, the agency can tell you that the developer is under no obligation whatsoever to provide what the buyer was expecting”.

    That’s a pretty good at best, frankly. Instead of getting something you hadn’t bargained for you make an informed decision. You also understand what you’re signing, and what it means. Remember, the starting point was a buyer signing a contract based on a false belief and a misunderstanding, and receiving something he hadn’t wanted to buy.

    “The problem is because the industry is not properly regulated. ”

    I think its important to make clear what industry we’re referring to. I don’t develop land and sell pre-sales. I sell real estate advice and marketing and negotiating expertise. I’m very regulated, licensed and insured (if you sue me you go after my insurer – yes, you need an actual case, but they will pay out if you have one).

    That said, civil disputes won’t go away, and you’re belief that the result of more regulation is that the government would sue the developer is, I think, a little naive.

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