does low listing inventory signal even more price increases in 2019?

Listing inventory end Oct 2018

Ottawa listing inventory is a prime indicator of our seller’s market conditions this year. Chart shows the tremendous change in October month end listing inventory over the last 4-5 years. (from a buyers’ market in 2014/15)
Residential listings are currently 17.5% lower than last year, 35.5% lower than 2016 and 48.8% lower than 2015.
Condo listings are 34.5% lower than 2017, 45.5% lower than 2016 and 55.8% lower than 2015.

Why aren’t prices up even more?
Given these figures, one almost wonders why we have not seen even more upwards price pressure, with residential prices up (only) 5.7% in 2018 to $449,005 and condo selling prices overall essentially flat with an average selling price increase of only .6% to $271,350 at the end of October.

On the good news front, new listings appearing on a monthly basis are starting to level off somewhat, so the listing inventory situation does not appear to be getting any worse.  Many buyers however, are finding it very difficult to find and secure the property they want.  Low listings and quicker selling times have resulted in more multiple offers which typically generate a selling price above the listing price.

Now is great time to be planning a purchase or sale for 2019, as one can only see more scarcity and perhaps even higher prices in 2019.

Gord McCormick, Broker of Record

Oasis Realty Brokerage  613-435-4692

Ask about our amazing 2% exclusive listing fee!

 

Trends in legal services for real estate closings

Lawyers play a critically important role in closing real estate transactions and providing advice to buyers and sellers along the way.  At a recent legal seminar presented by Mark Weisleder of realestatelawyers.ca, we got a short update on several new trends in the closing process that are focused on making life simpler for both consumers and realtors.

Some lawyers will now come to you:
There are more than one lawyer around offering mobile services but it is certainly a great option for many buyers and sellers.  Having the lawyer (or representative) come to your office or home can be a time saver and very convenient.

Electronic funds transfer:
Lawyers can now do electronic funds transfer more readily in both accepting deposits and closing funds plus disbursing proceeds.  Super time saver for all concerned.  Saves trips to banks for certified cheques or bank drafts.

In the case of realtors, we receive commission funds immediately upon closing, along with notification that the deal has actually closed.  Age old system has relied upon lawyers mailing a commission cheque upon closing and the listing agent brokerage processing that cheque through their own banking network, while also cutting a paper cheque to the co-operating brokerage. Sellers of course, had to make another trip to the lawyers’ office to pick up a cheque for any net proceeds of their sale.

Multi-site closing locations:
Though interaction is minimal on real estate closings (1-2 meetings) many lawyers are now offering closing services in multiple locations across the city (or in the case of realestatelawyers.ca, at 35 locations across the Province)

House Key Management:
A cute and interesting timesaver for buyers and sellers, is that realestatelawyers.ca provides a lockbox to a seller which they install on or before closing day with a set of keys inside.  Once the transaction has closed, the sellers’ lawyer provides the lockbox code to the buyer and their lawyer and the buyer can gain immediate access to the property without having to drive to the sellers’ lawyers’ office or other physical location to pick up the keys.  The lockbox is gifted to the buyer, thus saving the necessity of a representative returning to the property to retrieve it.

Condo Status documentation package available electronically or on a rush basis:
Condo status certificate review is a critical function of a lawyer on a condo purchase.  Property Management companies have 10 days by law to produce these docs for a lawyer representing a buyer at a fee of approximately $100.  This is typically quite a pile of legal docs and schedules that have been photocopied numerous times but finally, these are being made available electronically.  (although most here in Ottawa still seem to require paper and a physical pick up or courier charge to get these to the buyer’s lawyer.

The 10 day allowable timeline for Property managers to produce the docs (though most are done within 5 business days) does drag out the conditional sales period for a condo sale.  This is not advantageous for a seller, as their property is pretty much “off the market” or suspended while awaiting these condo docs. Many property managers will provide an expedited service (24-48 hours) for double the typical fee (ie. Therefore $200) which becomes the buyer expense.

Condo docs good for 90 days:
We think a better idea all around, is for sellers to order the condo Status documentation package at time of listing and make it available to buyers and their agents to review when in advance of making an offer to purchase and thus shortening the need for an extended conditional period.  These are normally 5-7 business days for residential properties and 10 business days for condos. Condo status document packages are good for legal purposes for 90 days from date of issue, so as long as closing is within 90 days of the package date, they are very useful.

Multiple offers:
Having condo docs immediately available greatly facilitates multiple offers.  In Toronto, approximately 50% of sellers invest in condo doc package at time of listing, although it is still fairly rare here in Ottawa.  Some are doing it but probably less than 5%.  This is an idea worth pursuing for anyone selling a condo.  Buyers will want to make arrangements with their lawyer to review these docs ahead of making a purchase, as what is contained in those docs may determine whether or how much they wish to offer for the condo.

Fees and Disbursements:
A reminder for both sellers and buyers to be sure to ask for the cost of legal fees (the lawyer fees)  and disbursements necessary to process a specific transaction.  These fees include land transfer tax, mortgage registration, title insurance, courier fees, govt fees and other services necessary to complete a transaction.

Fees are usually slightly higher for a buyer than a seller. (+$200)

Gord McCormick, Broker of Record
Oasis Realty Brokerage
Ottawa 613-435-4692

oasisrealty@rogers.com  oasisrealtyottawa.com

 

 

 

 

 

 

Conditional sales falling like autumn leaves

As most know, we have a seller’s market here in Ottawa as we close out 2018.  Sales and prices are up and listing inventory is pretty scarce in most market segments.
One statistic that seems almost out of line with the strength of the market and lack of listings is the number of conditional sales that are terminated by buyers and do not go firm.

The numbers: (such as are available) 
We don’t have a regular report mechanism on the amount of such sales but for the last 12-18 months, this ratio has more than doubled from 4-5% of sales to as much as 10-15%.  We offer as evidence a current 7 day period where new listings have been 406 and conditional sales 304 and firm sales 370.  The number of “back-on-market” listings during this period is a significant 74 or almost 20-25% in relation to the sales.  This is extraordinarily and we feel the overall level is probably in the 10-15% range noted previously.

So what is causing this massive number of sales cancellations?
There are several reasons why sales fall through in any market, these including: Inspection, financing and good old fashioned buyer remorse.  All 3 of these factors are enhanced in the current market.

Inspection:
Sellers feel they are in a strong position in this sellers’ market, so may not be as amenable to making price adjustments or fixing issues identified by inspectors, knowing there are a lot more buyers out there for their home.

Buyers accordingly, are often buying at their maximum and often feel they are paying a premium (even over paying) and therefore, some may try to renegotiate the deal price wise, without reciprocity from the seller.

Financing:
Mortgage rates have risen and the new mortgage “stress test” may still be catching some buyers unawares thus resulting in buyer inability to obtain satisfactory financing.

Hurried purchase decisions:
Buyer remorse can always be a factor in the termination of conditional sales.  Often caused by either irrational enthusiasm by one or more of the buyers or most likely where one buyer loves the property and the other merely likes it.

In the current environment of listing scarcity and multiple offers, buyers don’t get as much time to research a property (many only get a chance to see it once, before having to decide on an offer) and then once they have longer to think about it, they are not as enamoured with it as originally thought.

Unfortunately, a hasty purchasing decision in a rushed and stressful environment, leaves plenty of room for error and many buyers may be re-thinking the suitability of the property or re-evaluating the purchase price being paid or both.  Conditional sales agreements are written in way that favours the buyer significantly and that conditional period can often end up being a “cooling off period” and buyers can be pretty subjective in their decision making on whether to firm up the deal or not.

Sellers are adversely affected by such cancellations, as they may lose some of the other buyer interest during the conditional sales period when their property is pretty much “off the market” while a buyer does their due diligence and attempts to complete their conditions.  Other buyers may wonder if “ something is wrong” with the property and may therefore lose interest in it.  Still others may have gone on to buy something else.

The best solution to this problem is for buyers who are well prepared and well coached with appropriate financing in hand and a good knowledge of current market value.  If all of these are in place, we can hopefully optimize the current high level of sales cancellations.

Gord McCormick
Broker of Record
Oasis Realty Brokerage
Ottawa  613-435-4693
oasisrealty@rogers.com