buyer tips for tough 2019 seller’s market

With listing inventory at millennium lows (-25.3% vs 2017 and -42.5% below 2016 levels at year end 2018) it is more important than ever for Ottawa buyers to have a strong team in place and a plan for success in 2019.

Have an updated plan:
Make sure you have a plan and update it, if one is up to date with everyone on your buying team then a purchase will definitely go more smoothly with fewer surprises:
Here are just a few things to do to be ready for that dream home:
If you have been looking for a home for a while, it is also a good idea to revisit and update your plan.
-check with your mortgage broker to make sure there is no change in your prequalification level or mortgage rate and see if you can get a rate hold guarantee
-review with your mortgage broker whether a fixed or variable rate is best for you.  70% of mortgages are still fixed rate but variable has been most advantageous over the long run.  Understand the pros and cons for each and plan based on what works for your circumstances.
-speak with your lawyers office and make sure you are up to date on all fees, and other disbursements the lawyer will make on your behalf, including land transfer tax (LTT), title insurance, mortgage insurance (if less than 20% down)
-check with your insurance broker, so you know what information they will require to provide appropriate insurance coverage and if there are any potential issues with a  property under consideration.

Price range:
If you have not been successful in finding an appropriate property, do you need to bump your price search range up to a higher level?

Focus on specific housing type:
Have you evaluated all options in potential housing and narrowed down your criteria to those that suit best?  There is an old saying that home buying is as much a matter of elimination as it is of selection and this is quite true.  The more one can focus on the type of house they are looking for within their financial plan, the better

Geography:
-do you need to add to or subtract from your geographical area of search?  Again, the more focused one is on a particular area or region, the easier it is to stay on top of new listings.

Are partners on the same page?
Being one the same page with a spouse or partner is critical in a successful home purchase.  If there are differences of opinion, try to get these ironed out before you start seeing homes and making offers.  If priorities are too far apart, getting a successful deal done will be painful.

Do you have your buying team in place and up to date?
Do you have a mortgage broker? Realtor? Lawyer? Inspectors? Does your financial planner need to be in the loop?  Are they all available right now if your dream home gets listed tomorrow?

How are you funding the down payment and deposit?
First time buyers will want to review this, especially if these funds are coming from an RSP or TFSA.  Typical deposit on a deal is about 1% of purchase, so $3,000-$5,000 paid at time of sales agreement for the average priced property.  Buyers may wish to offer more though, if they feel it adds strength to your offer, particularly in potential multiple offer situations.

Builder new home deposits are much higher, generally in the 10% of purchase price range, although buyers will have about 60 days to provide these funds in installment payments.

New construction vs resale:
If you are considering a new construction purchase, please make sure your Realtor knows, as they can help immensely in co-ordinating visits and providing advice on lot selection, features, upgrades and builder recommendations.  Realtors are involved in 85-90% of resale transactions but probably only 25%-30% (or less) of new construction transactions, so many of these buyers are purchasing without anyone directly representing them.  (…kind of like going to court without a lawyer…)

Multiple offers and bully offers?
Have a strategy for dealing with multiple offers or “bully” offers.

With our low listing inventory environment, these types of situations occur more frequently, especially for those shopping in the $250-$500K range.  Understanding how these work and determining if and how you will participate, is good to discuss in advance.

Be an ‘active” buyer:
-keep an eye out for new For Sale signs in your area of interest.  Especially look for those that say “coming soon…” or “Exclusive Listing” as these will not immediately appear on MLS® and may even be sold prior to an MLS® public listing being posted. Give your realtor the name of the listing agent and the address of the property and they can follow up for you and get you in to see the property.
Ditto, watch for online postings in facebook groups or kijiji or other online real estate sites that may show listings that have not yet made it to MLS®.  Some buyers and agents are advertising future availability, too and while these can be tricky and not that often successful, they may well could be an opportunity.

Be aggressive and decisive: don’t fret overpaying
Don’t wait for an open house, try to get in to see a newly listed property as soon as possible.
If you have a good market knowledge and see a property that ticks all your boxes, be ready to make a decision and go for it.  Many buyers can be a little nervous about overpaying but remember that if our upward market continues, this property is likely to be worth $20-$30K more next year and you want to get in to the market as soon as possible.  Your Realtor will help guide you in appropriate pricing strategy.

2019 is expected to be another challenging year for buyers, so have a good plan and work closely with your Realtor for success this year.  If you do not already have a Realtor, we strongly suggest you engage one now to improve your chances in finding and securing your dream property this year.

We would be happy to discuss if our approach and philosophy is appropriate for you, if you would like to discuss, please give us a call at 613-435-4692 or check us out at oasisrealtyottawa.com or our facebook or twitter platforms @oasisrealtyOTT or https://www.facebook.com/oasisrealtyottawa/

Gord McCormick, Broker of Record
Dawn Davey, Broker Oasis Realty Brokerage
oasisrealtyottawa.com

Key questions for Ottawa real estate 2019

Will mortgage rates continue to rise?
Rates have been creeping up but it is hard to say what we may see in 2019.  Another .25% probably wouldn’t hurt the real estate market too much but anything beyond that will certainly have an impact, when one also considers the mortgage stress test provisions.

 

Will listing inventory stabilize/improve?
We have seen very low listing inventory conditions throughout 2018, making life difficult for buyers and their agents.  Will this continue in 2019?  The number of new listings has flattening out somewhat in latter 2018 so we are not falling further behind on listing inventory but this will continue to be a critical factor.

Builders have had very strong sales in both 2017 and 2018, so it is possible there may be a backlog of resale properties to hit the market, once these new home (or condo) buyers are getting closer to taking possession of their new properties.

At what pace will prices grow in 2019?
If there was an anomaly in our market in 2018 it is the fact that resale prices did not increase as much as they might have, given the low listing inventory and supply/demand imbalance in favour of sellers.  The average residential selling price was up 5.1% to $446,415 through the end of November and the average condo sold for $278,330, up 2.8% vs last year.  Nice improvement but not the runaway sellers’ market some of the headlines would suggest has been occurring.  It is possible that the balance of sale % shifted towards lower price condos and townhomes which could have the effect of buffering overall % selling price increases.

What government action could impact our market this year?
Potentially long list here, with a Federal Government election pending, a new Provincial government in Toronto and a new city council in Ottawa.

Ottawa employment and general economic activity should be pretty stable with the current government or a minority government post-election but all bets are off, if a fiscally conservative government gets elected on a promise to balance the Federal books.  This would result in Ottawa government and private sector job losses and would chill the housing market.

Our biggest concern is what the Provincial government may do in terms of downloading, should Premier Ford decide it necessary to try and get the disastrous Provincial books in order.  Delays or cancellations to funding big projects like LRT2 or other infrastructure projects (Civic Hospital, Library) all could take a bite from the local economy.

Is MLTT coming this year?  We are fully expecting that at some time in the next couple of years, the City will join Toronto in the implementation of the Municipal Land Transfer Tax (MLTT), as this would add up to $150 million annually to the city tax revenues, without impacting most taxpayers.  Since only 5 or 6% of homeowners buy or sell each year, it is almost the perfect tax, since those not concerned with buying or selling are less likely to get hot and bothered over this type of tax.  The impact of an MLTT would be pretty significant for a buyer:  on an average residential property this would mean an additional Land Transfer tax (on top of the existing Provincial amount) which would total $10,950 for the buyer of the average $450,000 property and $18,950 for the buyer of a $650,000.

This tax has been in place in Toronto for almost a decade now, without destroying the Toronto real estate market and generating something like $800M a year in tax revenue, so don’t be surprised if this is coming our way!  When you think about it, the revenue from such a tax would almost be enough to be able to offer free transit or at the very least, half price transit which would help boost declining ridership.

Will LRT be a success?
The long awaited LRT will be pretty exciting but also nerve wracking in 2019. How well the system launches and is accepted by commuters will have an impact on the “transit oriented development” meme and developer plans/timing to populate high density condos and rentals along the transit route.  If we don’t see ridership meet projections then many things could change or be delayed.

What now for Lebreton?
The recent gyrations at Lebreton Flats and the poor sales to date at Zibi, may simply be indicative of the market overall appetite for high end urban condos but there is no question that the recent “failure to launch” will slow sales of any project in that immediate area.  After all:  who wants to plunk down a pile of dough for a condo that may get built in 3 or 4 years, next to you-don’t-know-what?  We think most consumers (and their realtors) will be hesitant to jump headlong in to pre-construction purchases, given the Lebreton saga and current status.  Unfortunately, we can’t expect the Feds to be too engaged on this file going in to an election, especially with a new Chairman at the helm of the NCC.

Bottom line:
Short of any major worldwide economic event, we see another pretty good year ahead for Ottawa real estate, despite the “cooling” reports you may be seeing throughout the national media.  Real estate is very local and all indicators look pretty good as we open the doors for 2019.  Our view is that those considering plans will want to move on those sooner rather than later, as prices continue to rise.  It is never too early to start both buying and selling plans and getting your Realtor team together, is always a good start!

Best wishes for a happy and prosperous 2019!

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage
613-435-4692  oasisrealty@rogers.com
www.oasisrealtyottawa.com

Clublink plan to develop Kanata GC site a reminder for buyers and homeowners

Could there be more towers at Kanata GC?

Two of Ottawa’s long time builders (Minto and Richcraft)  are teaming up with Clublink, the owners of the Kanata Golf and Country Club (and about 50 other courses) to develop the site for residential purposes.  The course sits on prime real estate in Kanata Lakes and with the golf business sagging somewhat in recent years, Clublink is continuing down the road of trying to cash in their real estate investments.  Here is a link to the Ottawa Citizen article on this news: https://ottawacitizen.com/news/local-news/clublink-wants-to-bulldoze-kanata-golf-and-country-club-and-redevelop-with-two-home-builders

Déjà vu all over again?
Those thinking this is “déjà vu all over again” are correct, as we recently had news of a similar proposal for the Stonebridge GC in South Barrhaven that is owned by Mattamy Homes.  Mattamy has apparently backed off for the time being, after significant community backlash.  Clublink has also already been working on plans to develop the famous Glen Abbey golf course in Oakville, for several years-so they have been down this path before.

“Highest and Best Use”
The key principle of real estate value in appraisal is called “highest and best use” which basically means “what use would maximize the value of this piece of property?  In the case of many golf courses, the land value for development purposes clearly outweighs the value as a golf course.

Community backlash, for sure…. but will it be enough?
There will most assuredly be a vigorous community campaign to stop this proposed development and one hopes it succeeds but don’t count on it.  The builders and developer have done their homework and at the end of the day, have more resources, should they choose to get this done.

Stark reminder for all homeowners and buyers (and their agents!):
This is a compelling example of what may happen in any neighbourhood and buyers and homeowners have to keep this in mind.  The only constant is change and just because something is so today, does not mean it will always be.  We constantly see examples of listings where there are “no rear neighbours” (at least today)  and we always do our best to research what could conceivably get built on any nearby vacant land or if in fact, something is already proposed.

What could get built here some day?
Today’s farmers field or vacant lot, could be tomorrow’s gas station, mall, office building or condo tower, so buyers and their agents will want to do their homework and also weigh this intangible in their analysis of property suitability.

Even a couple of blocks away, property that is zoned or could easily be rezoned could mean a tall condo building soaring over your back yard someday.  Not easy to predict but worth thinking about nonetheless.

 

Gord McCormick, Broker of Record

Oasis Realty Brokerage 613-435-4692

Findlay Creek bungalow and a heck of a listing deal!

New construction bungalow in Ottawa Findlay Creek MLS 1126904 $669,527

Builders have been racking up sales records for the last 2 years or more and possession lead times are growing for buyers.  One great option for buyers is to consider builder “quick occupancy” homes, spec homes, model homes or other inventory homes and your Realtor can help you shop for these.

We have a fabulous bungalow listing in Findlay Creek (MLS 1126904 at 602 Rockrose Way $669,527) that offers the best of all worlds: a relatively short delivery window (26 weeks) for a brand new construction home.  This home is built to the drywall stage and the exterior is complete, including sod, driveway paving and partial fence.  Designer upgrades have been ordered as of Jan 18th, 2019 and include over $68,000 in upgrades and extra features (ie AC) These should be installed an the property available for possession late summer.  This would allow a buyer to sell an existing property in the peak spring market.

For additional listing details and photos, please check out the MLS® listing here: https://oreb.mlxmatrix.com/matrix/shared/JwDGzRm50m/602ROCKROSEWAY

Another bonus of this buying approach, is that construction is essentially completed on this street, so buyers are getting to move in to a finished block without the inherent annoyances of ongoing construction.

In a seller’s market with limited inventory and upwards price pressures, those buying new construction can tend to benefit from both their existing property and their new construction property appreciating in value, as they wait for the new home to be built.

Best listing deal in town if you buy this home with us!
Buy this home directly with our firm and we will sell your existing property for only 2.5% +hst total commission!  (not intended to solicit those with existing representation agreements, some conditions apply)  This saves the average seller in Ottawa over $12,500 in commission and HST, compared to a typical 5% MLS® listing fee program.

If this particular home is not the right one for you, then we are happy to help find that dream home in 2019 and also optimize your equity proceeds from the sale of your existing property.

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage  613-435-4692
oasisrealty@rogers.com  oasisrealtyottawa.com

 

Is a “shallow” well a concern when buying a country property?

would you know what this is ?

 

We had a very interesting experience when showing a country property recently and thought it a worthwhile note for those considering the purchase of a country property which is served by a private well and septic system.

We noticed the item shown in the photo and originally assumed it was the lid and riser for the septic system and in fact, the green lid is identical to those that can be found on a septic “riser”.  However, as we continued our tour of the property exterior, we noticed the septic tank area was behind the house.

With able assistance from Moe Rayyes of Canadian Water Inspection Services https://www.waterinspection.com/services  and with confirmation from the seller, we confirmed that the equipment in the photo was in fact, the cap for the “shallow” well system which serviced the property.

So what is a “shallow” well and how does it potentially affect a buyer?

A “drilled” well is by far, most common:

The listing for the property indicated that the property had a “drilled” well which is the most common type of well used to service country properties.  These are drilled to a depth and location that provides the best possible quality and quantity of water available to that particular property.

Shallow, dug and sand point wells: Pros and cons

Other types of wells are also out there and many provide reasonable and cost effective sources of water in areas with springs, high water tables and where drilled wells may be costly or otherwise problematic.  One such problem might be that the underlying aquifer does not have good quality water. ie too much salt or other mineral.

The potential disadvantage of the above type of wells is that by being closer to the surface, they are potentially more subject to bacterial contamination. (often one may see a UV light system to mitigate this potential issue) They can also be prone to water limitations during drier years, especially between May and October.  Sometimes these can even run dry and require tanker trucks full of water to replenish them until ground water levels get back to normal levels.

Should a buyer avoid a home with these less common water systems?

Many country homes are well serviced by such wells but in addition to some of the potential issues noted above; these type of systems make a property somewhat unique and generally speaking, unique features and systems may not be well understood by future buyers (and Realtors) and therefore, market value and marketability may not be as good as more standard homes.  We also know of several homeowners have been forced to truck in loads of water in dry summers to keep their well supplied for household requirements.

In the case of our buyers in this instance, they chose to pass on this property-even though it seemed to have very good value at the price.  In addition to the shallow well, it also had an original septic system which was 40+ years old which represented another risk and near term financial cost to our buyers.

As always, buyers should always get both a septic inspection and a well and water inspection from qualified professionals, (in addition to a general home inspection) when purchasing a country property.

If you are considering a purchase of a country property, we would be happy to you navigate the bumps and potholes that may be encountered along the way.

For additional information to consider before shopping for a country home, check out an archive article on our previous blog here:  https://www.oasisrealtyottawa.com/blogs/gord_mccormick/archive/2014/01/31/what-we-city-slickers-need-to-know-about-country-properties.aspx

 

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage
613-435-4692  oasisrealty@rogers.com

Oasisrealtyottawa.com

Optimizing real estate fees for sellers

 

 

 

 

 

 

 

 

 

Why Ottawa will have the best winter sales in a decade or more

sales should help “warm” Ottawa winter

Ottawa real estate normally pretty much hibernates from late November to late February but this may not be the case this year.  Buyers and sellers will want to consider the following factors and consider whether they wish to move up their buying or selling plans accordingly:

 

Listing inventory at decade lows:
The level of available properties to purchase continues to be extremely low and the number of new listings coming on the market, shows no signs of reversing this trend. Supply/demand alone would suggest that this has to put more upward pressure on selling prices.

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.

Even rental listings are down quite significantly, 31.6% lower than last for MLS rental listings.

Beat the price increase!  Your next house is going up $2-3K a month!

With residential prices on the way up (+5.7% through Oct 2018) that dream house is getting more expensive day-by-day.  For example:  a $500,000 property today may well be $525,000 or even $530,000 by the end of 2019 peak selling season.  That’s an increase of $2,000 to $2,500 per month and with mortgage rates also headed north, the cost of servicing a mortgage is also increasing.  The mortgage “stress test” which is typically 2% above the mortgage rate being offered is also moving upwards as rates rise thus making approvals more challenging for some buyers.

New construction price and availability:
Builders are also facing limited availability, after two record years of sales and also are facing some labour shortages and price pressure.  All of these factors will also continue to push up the price of new construction.

Mortgage rates:
Rates are pretty well guaranteed to rise a half point in the next 6 to 12 months, with an outside chance of going up a full % point.  This adds challenge to the approval process (mortgage stress test) and monthly cost for buyers and homeowners, so buying now and locking in at a lower rate will have some advantages. *new construction buyers will have to make sure they get a guaranteed rate from their mortgage broker or bank to cover them for the longer new build timelines.

Local economy is strong:
The local economy seems pretty solid regarding employment and there appears to be no signs of the Federal Government doing any significant belt tightening in advance of next year’s election. (Though one never knows?)  So our market should continue its current moderate upward path in the immediate future.

Provincial and municipal budgets:

A “new” city council in Ottawa is in place and we also have a relatively new Provincial government in Toronto.  The Provinces’ fiscal challenges are well noted and there are also signs that the City of Ottawa has its own issues.  Here are a few things that could happen that might add cost for buyers and sellers:

  1. If Ottawa council feels really in a budget pinch, is it possible that a Municipal Land Transfer Tax (MLTT) could be implemented here? This would add $5,000-$10,000 to the typical residential purchase transaction cost here and would cause a bubble and price run up in advance of implementation.   To put this in perspective: the total land transfer tax on a $500K home would jump to almost $13,000 and $21,000 for a $700,000 home purchase.
  2. What is the Provincial government going to do to fix their huge fiscal problem? Could they raise the level of the Provincial Land Transfer Tax? Add some other “luxury” or other tax on housing?
  3. Could Ottawa raise development charges which once again adds to the cost of new construction homes and condos?
  4. What effect will “inclusionary zoning” have on costs of new construction? This principle requires builders and developers to include provision for lower cost housing in their new projects but will certainly affect the cost of new properties, as it becomes more prevalent in the near future.
  5. Do the Feds have any plans in their National Housing plan that might affect buyers, sellers or homeowners?

 

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage

613-435-4692 oasisrealty@rogers.com

Optimizing real estate transaction costs

 

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

Smoking cannabis at home compromises market value and marketability of real estate

how does cannabis smoke affect home sellers?

As Canada starts a brave new world with the legalization of cannabis, we have to remind all property owners about the dangers of residual smoke and its impact on market value.  Here are a few things to think about:

Most buyers aren’t smokers: Only about 20% of adult Canadians smoke tobacco and non-smokers are very sensitive to residual smoking odours and shun properties that exhibit a long term smoking habit.  We have had buyers enter properties for showings or open houses, who immediately turned around and left the property after smelling cigarette smoke.  These non-smokers will be equally not interested in a property with a heavy cannabis smoke residue.

Ambient odour often unknown to owners: As with many other household odours, the degree of smoke smell may be under appreciated or even unknown to those who live there every day, as one gets accustomed to it.

This is why buyers entering a property for the first time should “listen to their nose” upon first entering a property, as this is the best time to detect potentially out of bounds smells.  A damp basement is usually a giveaway from the first moment of entering, for example.  After a few minutes, however, our perception adjusts and the odour is not as prevalent at a cognitive level.

Hard to remove: Long term smoking in a property is not easily or inexpensively remedied and buyers will either walk away completely or very much de-value a potential property, to facilitate the remediation.

Growing personal marijuana: 4 plants per household should not create a major mould worry but will people stop with 4 plants? The “grow op” stigma created over the last few decades will be a tough one to shake and even if legal, we suggest those selling remove any and all plants and materials from their property prior to listing.  Why turn off even one buyer?

Don’t think it is OK to smoke in the garage: Many wisely smoke outdoors but just as many feel that smoking in the garage is OK.  Doesn’t help much with most buyers in our opinion, so smoke outdoors or better yet, not at all.  This applies equally to tobacco and cannabis.

Stigma remains: Hopefully, your neighbours are not big smokers, either-as this may scare away many buyers also.  Though this may fade as legalization moves forward, the stigma attached to cannabis smoke odour will impact sellers and buyers for some time.

Renters and medical marijuana users: These are two legal battlegrounds we can expect to see unfold in the coming months/years with legalization.  This will be an interesting challenge for both investor owners and corporate rental building owners and managers.

Gord McCormick, Broker of Record
Oasis Realty Brokerage
613-435-4692 oasisrealty@rogers.com
Ottawa, Ontario.