The Competition Bureau's report hasn't been released on their website yet, but the Toronto Star has picked up
this story (we don't expect the TC to ever do so, but I digress).
the bureau has concluded the Canadian Real Estate Association (CREA) has anticompetitive rules and must change its ways
the bureau's findings are expected to have a profound impact on the real estate industry -- by permitting more innovative discount brokers into the market while allowing sellers to list their properties less expensively on the Multiple Listing Service
The Bureau is concerned that CREA's rules have restricted consumer choice and limited the scope of alternative business models
The Bureau's position is that if CREA does not remove these restrictions, the Commissioner of Competition will initiate an application before the Competition Tribunal
CREA decided not to go before the tribunal, which can administer penalties, but is pursuing a settlement agreement with the bureau
This is the gist of it so far: CREA has a monopoly on residential real estate buying and selling and admit that they do (by not elevating this to the Tribunal).
Here's where things get really interesting. This is the list of rules that the Bureau wants changed:
1.
Listing realtors must act as the agent of the seller
2. The listing realtor must receive and present all offers to the seller
3. No posting of property information is allowed on the Multiple Listing Service without an agent representing the seller for the term of the contract
Changes to these rules would mean offers could be sent directly to the seller without the involvement of the listing agent, and consumers could probably have their listings posted on the MLS for a small fee
The issue of agency doesn't really interest me as much as the issue of listing fees for MLS does. Good agents will innovate and adapt and continue to make great money. But the effective break on the MLS monopoly (where 90%+ of all homes sold are listed) is a landmark decision and will forever change real estate transactions in Canada should these changes come to pass. This is a very good thing IMHO.
192 comments:
What kind of sanctions or penalties can be invoked? Hopefully something better than writing a letter to tell the CREA how upset the Competition Bureau is with them, and if CREA do not change their ways they will continue to receive such letters...
I cannot stand realtors! However, a monopoly is one thing they certainly have. You can't blame them, buyers are ignorant. I've always tried to sell homes privately at Price minus realtors commission. Almost never works despite advertising and open houses! A buyer's agent is not going to bring a customer even if your house is 20% below market value and buyer's are hesitant to buy without an agent. Can someone explain this to me? Everything goes through lawyers, why are people afriad to buy privately? Agent is just a useless middle man in my opinion.
The last home I sold for $36,000 MORE via MLS than what I was ASKING for privately, and I had over 300 people see the home privately through open houses (had open houses at the same time as all the other houses listed in subdivision on MLS had them).
The one thing that really hurts private sellers like me is all the other private sellers. 90% of private sellers overvalue their property. They ask for market price + some. It should be market price minus at least half the comission that is being saved. In my opinion this is why sites like www.propertyguys.com are garbage. There are properties listed on there at 200% market value; therefore, this turns off potential buyers.
Marko, you are right on. Most private sellers are either greedy or idiots. A private buyer is not going to pay a premium, but should be happy to get a discount over a mls listing.
I have bought a number of my houses privately, but I always make a point of knowing the market better than the average realtor (not that hard), but most buyers cannot or are too lazy to do this.
The real reason that the monopoly works IMO is that the buyer believes he is getting his real estate agent for free. He/she pays no commission for the realtors service. Since most people are lazy, why not just take advantage of the free service.
If the rules changes and buyers had to actually pay for the service then I sense private sellers that are realistic with their prices would have no problem selling houses.
I personally don't think the rules need to change. This is a monopoly that could easily be broken if people weren't so naive. It isn't like people don't have other options, you can list privately any time you want, you can get a discount agent any time you want (I've been paying 1% and .5% for seller's agent comission with successful sales). On a $500,000 home, once you factor in GST on the comission (reg 6%+3%) it is approximately $20,000! For what? The lawyers do all the actual paperwork. People are paying $20,000 for someone to show them a home, and another person to enter in information into MLS which takes about 10 minutes. For $20,000 you could buy a nice car these days (Honda Civic, Mazda3, etc.). You could renovate a part of the home, you could have mortgage payments for a year. Boggles my mind.
This is what is wrong with our economy IMO, it is too much paper. The $20,000 in comission doesn't actually manufacture or create anything. Pure paper.
A buyer's agent is not going to bring a customer even if your house is 20% below market value and buyer's are hesitant to buy without an agent. Can someone explain this to me?
You answered your own question.
The one thing that really hurts private sellers like me is all the other private sellers. 90% of private sellers overvalue their property. They ask for market price + some.
Why would a buyer waste time dealing with a market made of these types of sellers? Even if people should make the time, to learn the market they are about to become indebted to the tune of $.5 Million dollars. They do not and will not.
Private sale buyers are looking for a deal. Private sale sellers are trying to pocket the realtor fee's. That's my take on it anyway.
People are also afraid to negotiate face to face. =)
Here's why I'm not a fan of private deals outside of developers:
Private sellers are emotionally attached to their homes. They believe their house is just as nice, if not more so, than every other house in their neighbourhood. They've sweat and bled in their homes, maybe conceived kids too. It creates a ridiculous emotional attachment to a "financial asset" during a transaction.
Private sellers are offended when they receive offers at fair market value (FMV), because they have no concept of FMV.
The one thing private sellers do understand is the amount of money it costs to sell a home, but what they mistakenly believe is that they are paying it. What they fail to understand is that they are in fact not paying the agents' commissions, the buyer is (no matter how hard the industry tries to spin the buyers pay nothing to buy nonsense the truth is without the buyer handing over the money, no one gets paid at all). Private buyers think they should get to keep the commission, not the buyer, so despite their intellectually dishonest claims of "saving the commission" in the FSBO ad copy, the reality is they've likely priced their property 10% over market then added another 6% on top to "save the commission."
The whole private buying process is such a pain in the ass, and they represent such a tiny segment of the market, that for the most part I'd never be bothered to search their listings in the first place.
Marko,
The monopoly on the MLS must be broken IMO, in so far as I shouldn't have to list with an agent to get my property on it, nor should I have to pay more than say $600-$800 to have my property featured there.
The best analogy I can come up with for how this system works is likening it to Microsoft's anti-trust cases that have caused them so much grief over the years. Obviously the CREA recognizes they will lose at the tribunal otherwise they'd be willing to fight their case.
Would be nice to open up MLS though. A big part of the reason that private sales are tough to do is that just finding them is a pain. Propertyguys is one thing, but if someone is completely private in their sale, then buyers need to see the For Sale sign in person, or scour newspapers, craigslist, etc, where the organization is poorly presented.
Just getting private deals on the same footing and website as the realtor properties would do a lot.
Totally agree on the overpriced private sales though. Went to look at that place opposite hillside mall (across N dairy) this weekend. Those idiots want 503k for some teensy cottage on a smallish lot with some superficial updates. Seems at least 50k more than the equivalent place on MLS.
IMO there aren't many options to some Microsoft applications. My customers, suppliers, tradespeople, home designer, city inspector etc. are all going to send me files using Microsoft Office applications. I can't open them if I don't have Microsoft applications myself.
MLS hasn't eliminated competition in my opinion. People have just chosen not to embrace competition. I have bought privately and sold privately in the last 3 years. It makes perfect sense to me. As a builder I prefer this method because I can meet the buyers face to face which is important when selling a new home with warranty.
When 300 people come through my open houses spanning 2 months listed for $549,900 with no interest, and it sells in 9 days on MLS for $586,000 I don't consider that a monopoly. That is just lack of research on the buyers part. In fact, I know the people who purchased my home had previously been in the subdivision to see a home across the street; therefore, they obviously saw my private for sale sign. However, I guess they felt more comfortable coming back 2 weeks later with their agent when the my home was listed on MLS for $594,900 and paying $586,000 or $36,000 more than I was asking for privately.
I don't consider that a monopoly on the part of MLS, I consider that lack of intellect on the buyers part. They had options! No one was preventing them from coming without their agent to see my home privately.
For those that care, the VREB data is out.
Money quote:
REALTORS® are working hard to find suitable properties for buyers Translation: your overpriced crap won't sell at your price, sharpen the pencils people.
October 2009
sales: 742
New listings: 1067
Total active listings: 3219
September 2009 (changes)
Sales: 776 (down 5% MOM)
New listings: 1129 (down 6% MOM)
Total active listings: 3419 (Down 6% MOM)
Marko,
You can open Microsoft office documents with OpenOffice, it's open source freeware.
I work for Chek News and interested in following the story regarding the Competition Bureau's investigation into real estate fees. Is there anyone on this blog who's currently buying or selling a property who might be interested in talking with me? I can be reached at mgriffin@cheknews.ca.
I agree with Marko that it is worth the effort to pursue private deals. I would much prefer to negotiate myself, understand the seller’s desires and know who I am buying from. Even though 90% of the private sales may be a waste of time, focus on the 10% that are reasonable; it is not wasted time. Even if a place turns out to be overpriced, if you like the house you an always tell the seller to call you before they list it as first off they are not going to sell an overpriced place privately and second by the time they list many of these sellers are more realistic.
Buyers can spend at lot of time on mls, going to open houses or even on this blog so looking a few private deals that appear reasonable is worth the effort IMO. You can quickly assess if you are dealing with a reasonable individual. When I have sold privately I have always given back some or all of the commission savings. IMO realtors like to make the deal more complicated than it really is. I have always concluded they do this to make you think they have really gone to bat for you.
Again I would far rather be at the table than any realtor I have met, but maybe I am not the norm.
"Marko,
You can open Microsoft office documents with OpenOffice, it's open source freeware."
- Not the experience I've had with OpenOffice. Last year I couldn't open Excel 2007 with OpenOffice. You first had to save it in Excel 2003 then open it in OpenOffice. OpenOffice can work in many applications, but it is time consuming. It is cheaper for me to buy Microsoft crap so I can run my business more efficiently rather then spending my time searching for OpenOffice drivers that convert stuff.
" IMO realtors like to make the deal more complicated than it really is. I have always concluded they do this to make you think they have really gone to bat for you."
- I couldn't agree more with this! The last home I sold privately. Buyer came, buyer made me an offer, I accepted, we filled out the offer on ONE piece of paper. Buyer arranged for a lawyer, his lawyer contacted my lawyer..rest is history. Mind you this was a new home so no inspection etc. But even if you have to arrange home inspection it isn't a big deal.
- Agents also advertise this crap about how they work with qualified buyers. I've had a MLS deal fail because buyer couldn't get financing.
Marko,
It's really a poor analogy. What if MS forced you to use IE on its OS? knowing there are significantly better browsers out there, as an windows PC user, wouldn't you be pissed? Considering the sheer volume of current PC users running windows, doesn't that seem like an anti-trust issue to you if MS decided to not allow other browsers to operate on it's system?
It's the same thing: CREA will not allow anyone other than a full service real estate brokerage to list on MLS (even the discount guys are considered full service because they have high charge points [1% or $5500min]). If anyone could pay a reasonable fee to list on MLS, the system would be fair and equitable instead of monopolistic.
MLS online is a crap product. But because realtors use it primarily, and sellers use realtors primarily, better products (Zillow and other map-based search interfaces) are at a competitive disadvantage because of the organizational decisions of a licensing body. This is the point of the competition bureau investigation.
Why would you sell for less than market value?
An agent facilitates a trade between buyer and seller - they don't make market value.
If the property has a market value of $586,000. Why would you sell for $566,000? You see, it sounds suspicious to me. And I think that is the number one reason why your not having success at selling the homes yourself.
It would have been better to go for the $586,000 and offer the prospective purchaser $10,000 to $20,000 towards their closing costs such as lawyer and appraisal fees or for them to bring in their own realtor, to help in closing the deal.
At least then the buyers would have had a choice.
It boils down to this - they don't know you and they don't trust you - as you are too closely involved with the transaction.
With an an agent, they don't know the agent. They may not trust the agent, but he/she is at least one step father away from the product than you are. The agent also spends more time with the prospective buyers to develop that trust, the agent can also help with the closing of the deal.
Is $20,000 too much to pay for this service. ABSOLUTELY, but the agency has a monopoly. The $20,000 is also financed with the home sale, so it adds another $75 a month to the mortgage for the next 35 years.
CREA spends a gigantic amount on advertising to ease the public's mind in trusting an agent. What did you spend?
Its all perception! A salesman is trained to sell perception and trust. They don't have to know the difference between a jack and a king stud, they just have to know who writes the cheque.
"If the property has a market value of $586,000. Why would you sell for $566,000?"
A number of reasons actually. I always offer my homes privately towards the end of construction and upon completion for less. Rational for this is carrying costs. If I can sell my home quickly I can quickly move onto the next project. Carrying a home each month is not only costing me interest, it is also costing me not being able to start another project. Therefore, I'll always take a substaintial amout less money if I can sell privately sooner. Walmart turns its inventory over every 5 days on average, The Bay takes 81 days, who do you think is more successful?
Secondly, I get to meet the buyer face to face, and I get to walk through the house with him or her. This is extremely important and carries a lot of value to me. I refused to sell a home once because buyers were extremely unrealistic in the quality they were expecting for a sub $450,000home. It was evident that they were going to be difficult and because homes come with a warranty it is really important to screen the buyer. They can be a real pain to deal with if they are unrealistic. I.E. They might want things fixed up that are out of the ordinary. Which consumes my time, and if I don't deal with it then they get the warranty company involved which is a pain even if the builder is in the right.
Personally, I think the realtor fee structure needs to change. Currently, it's a percentage of the selling price for both the buyer's and seller's agent. This not only doesn't reflect the amount of work done, it also creates an obvious conflict of interest for the buyer's agent.
What I'd like to see is for buyer's agents to be paid by the buyer, more or less a flat fee plus some sort of incentive to get the price lower. For seller's agents, I think they should price based on what they do rather than what the house is worth. So at the most basic rate, you get listed on MLS and provide your own pictures. For a little more you get professional pictures and a listing in the real estate paper, a little more and you get a quarter-page ad in the real estate paper, etc. And of course an incentive to get the selling price higher.
Whether this report is a step toward that is anybody's guess. But breaking the monopoly on the MLS can only be a good thing.
I too have looked at private listings, but have found the sellers to be greedy fools. I watched a couple of them sell later through realtors for considerably less through a realtor. I wish there were some new homes in the areas we are looking at where we could buy direct from the builder. It seems like new homes are better deal than resale in this market. When i look at a home knowing what current lot value is and how much it costs to build a much nicer structure, it is usully the same or less than what the old 40s dump sells for.
As an alternate viewpoint, I know of a private sale recently that had a curious sequence of events.
The listing was originally a FSBO on CL and UsedVic (not a paid service) at a price I thought was slightly higher than the TMV. A realtor "friend" of the couple talked them into listing it with them after about 45 days on the market without an offer. The new asking price was almost $100K higher at the suggestion of the realtor.
Needless to say, the house didn't sell with the realtor. Not because the price was so far out of whack, but because the realtor did such a poor job of marketing the property (never showed up on new MLS map-based system because the realtor was technically incompetent and the brokerage was obviously neglectful).
After a combined 6 months on the market, the house was sold privately for realtor's suggested price minus what would have been the realtor's commission (graciously passed on by the couple [shock, awe]) which netted the couple more than $60,000 over their original asking price--they chalk this up to the "hot" market.
My real point is this: I view realtors like consultants. And if a consultant offered to work for free, I'd laugh at them. A good realtor will be worth their price, but I'd like the price to be transparent and competitive. Opening up the MLS for fee for service (with fees on an appropriate scale with levels of services) is a great idea.
Ryan said: "Personally, I think the realtor fee structure needs to change. Currently, it's a percentage of the selling price for both the buyer's and seller's agent. This not only doesn't reflect the amount of work done, it also creates an obvious conflict of interest for the buyer's agent."
I totally agree! Further to this, getting paid a % commission only goes to fuel the real estate bubble, because the higher the prices, the higher the commission and hence we get stupid cliches like "it's always a good time to buy". How in the world is that doing your clients a service when they can and often are turned into debt slaves for decades?
Also I do think realtors have a monopoly over real estate primarily because of the extremely restricted MLS system. If 90%+ of all transactions are happening over MLS, and only realtors have access to it, how can anyone conclude that this is not a monopoly?!?
I'd love to see MLS opened up for anybody to list for a small reasonable fee ($100? $200? Max $300).
I would bet you that if that occured, 30%+ of all sales would occur through private seller/buyers via MLS in less than 1 year, and likely grow over time. This would bring some truth to what people really think of the 'expertise' and especially the 'value' of a realtor.
If I recall correctly, it costs Realtors less than $75 to list a house on MLS, paying thousands to a realtor so they can in turn outsource that work for less than $75 is utterly ridiculous and a total money grab on behalf of the realtors.
I'm all for realtors to be paid a mutually agreed-upon flat fee for their advertising costs + a per hour fee for their labour costs. If you are a very experienced realtor, charge more, I'll gladly pay it!
Ultimately, I see little difference between a realtor and a consultant. If they claim to be experts... prove it, but don't try to tie me up for 6 months and charge me dozens of thousands for a single MLS listing, a couple of open houses $1,000 worth of advertizing costs, and *maybe* 50-100 hours worth of your time.
Lastly, and just so that you don't think that I feel 100% of the problems are with realtors; I also believe part of the problem are the ridiculous fees that realtors have to pay to be tied to some particular real estate agency for X time. The fees and limitations that some (all??) of these companies impose on realtors are just unreal and add a huge ammount to their operational overhead which of course they pass onto their clients. On a similar note, the number of 'little' yearly and other fees that realtors have to pay to other realty related agencies so as to legally operate as a realtor are also over the top and a money grab by several of the organizations whom add relatively little value (as compared to their fees) to the industry.
Real Estate in Canada is long overdue for some serious reform, and sadly, I think it may take a large bubble burst before it is even considered... and even then, I wonder if it would occur... just look at the States, what has really changed since the POP?
Mr.4AM
On a side note, it looks like this financial crisis hasn't totally gone to waste, Ontario is enacting a financial literacy program for kids from grades 4 to 12!
Now let's just hope that the curriculum isn't susceptible to lobbiests (i.e. National Association of Realtors, Pro-Keneasian illuminati (IMF, WorldBank, Central Banks,etc), Mutual fund organizations, Government parties that have horrible fiscal records (i.e. All of them!) etc.).
Mr.4AM
PS. Be sure to read the comments for that article. Canada is full of cynics... makes me feel right at home :)
And furthemore:
Mike Holmes can do TV show about bad builders. Do you think you would ever see a TV show about bad real estate agents along the lines of Mike's show?
CREA would be on those producers faster than fleas on a duck.
CREA are big lobbyists with truck loads of money. I remember in the 1980's they were lobbying the government to make it illegal to sell your own home!
That was a bit too much for the politicians - but to even think that they tried!
How is MLS a monopoly?
Nobody forces anyone to use a realtor or to use MLS (to different things, I should point out).
Anybody is free to buy or sell privately.
Being able to obtain potable water or electricity only from a government utility or government-regulated utility. THAT's a monopoly.
Canada Post has a monopoly in door-to-door mail.
Your city transit has a monopoly on bus service.
Shaw and Rogers have a duopoly on cable service.
There are plenty of options to MLS, including private sales.
Mr.4AM, you need to get more sleep, because your brain is damaged from misinformation.
You can't say it only costs a realtor $75 to list a house anymore than you can say it only costs Safeway 50c to sell that $1.50 chocolate bar. Where did you go to school? The Fort St. James School of Economics?
Do you know the MLS is a private database, paid for through realtor dues? If you would like to build and maintain a competitive database, you are free to do so. Call me when it's ready. I might patronize it with my next sale.
No realtor charges you anything you don't agree to. You sign the listing contract. You live with the terms. Now, if you would like to go before a judge and claim your were not mentally capable of signing that contract, well, you might have a case there.
The problem with organized real estate is too much government intervention has enshrined a system where brokers control entry into the market. Realtors are just the bottom rung on a huge pyramid scheme. Some make it out of the muck. That vast majority die broke.
If you want to open up competition in real estate, lobby for an end to government regulation and industry self-regulation. Let anybody who wants to help you sell real estate for a fee do so. And let the competent rise to the top
But NOOOOOOOOO, people want the government to wipe their bums from cradle to grave.
Learn some basic economics.
Art,
You just proved my point. The MLS is an effective monopoly because of government and industry self regulation. Regardless of how much it costs a realtor to use the service, it still accounts for 90%+ of all sales even though it's a crap consumer product.
It's also an effective monopoly because of the control the CREA asserts over its agents. If someone set up a competitive system that provided better listings presentation, the CREA would not share transaction information with the competitive system, making it useless to agents who "apparently" need access to more information than individuals.
Sure, alternatives exist. But this isn't a question of whether or not the MLS is a monopoly in the true definition of the word, it's a question of whether or not the CREA's control over the information contained in the MLS is anti-competitive. I argue it is. Sales-price history isn't "owned" by the CREA just because they collected it. That's the point. And they refuse to make that information publicly accessible.
The CREA is a protectionist organization, it always has been. And they are negotiating on this issue rather than face the competition tribunal because they now they would lose and face punitive charges. There is no shortage of dollars at the CREA, so this is purely a PR move on their part IMO. It will be interesting to see if the Competition Bureau sticks to their guns about the rules they want to see changed.
Garth weighs in with Carving the cartel
I wonder if Fred Carver will be upset with this news?
Art,
Perhaps a little more research and less insults would make your other statements sound more persuasive and your personality more balanced.
Here's a link to a 1% realtor explaining his costs & fees:
QUOTE:"and $100 MLS® fee to put your property on the MLS® system". So it looks like the costs went up some $25 since I last checked about 1.5 years ago.
The above was based on a 1 minute google search, less time than it took you to type up a bunch of silly insults.
Mr.4AM
This month the Times Colonist did not make the VREB real estate stats front page news. I wonder why?
Greater Victoria's housing market remains strong Regional sales numbers continue to rise but some prices declined in October
The average price for a single-family home dropped in October to $590,567, down from September's $619,936. The median, or midway price, also slid, to $536,000 last month from $550,000 in September.
Hmmm... Huge October sales but a 29K drop in average price and a 14K drop in median price.
News for the day...
Housing Bubble possible, not likely - Montreal Gazette
Carney Reiterates concerns about the housing market - CTV
Is a Condo a Good Investment - Globe and Mail
all via http://twitter.com/mortgagesbc
Zillow.ca
Coming soon.
"Here's a link to a 1% realtor explaining his costs & fees:
QUOTE:"and $100 MLS® fee to put your property on the MLS® system". So it looks like the costs went up some $25 since I last checked about 1.5 years ago."
OnePercent has a huge flaw to their business model. They CUT the buyer's agent commission. If you have a customer are you going to show them a home listed by OnePercent ($2000 buyer's agent commission) or are you going to show them a home where the buyer's agent commission is $10,000.
The best you can possible do is 4.0% + 2% total (aka you give you listing agent 1.0% and .5% and you KEEP the buyer's agent commission at 3% and 1.5%). This is the key to saving money and getting people brought through your house by buyer's agents.
means and averages don't really tell the true story on house sales. It tells the type of houses selling. In my price range it is crappy gordon head boxs going for extremely high prices and no movement in the mid to upper end of the market. No movement as ther is no inventory in the mid range. I would say that house prices are now higher than at the peak. An example would be 339 Moss street which couldn't sell in the spring/summer for $699k. Solution; relist at $799k now and it sold right away (same day) for $770k. All of the houses I am watching are selling at all time high prices.
Skeptic, IMO the main reason that prices dropped in October versus September had to do with where SFH's sold. There was a dramatic increase in the number of homes sold in Esquimalt and Langford (which sell at discount to average/medium price) over September combined with a dramatic decrease in the number of homes sold in North Saanich and on waterfront (which tend to sell a premium to average/medium price).
So I do not think house prices are getting cheaper, just the mix of homes selling has changed.
omc, the house at 339 Moss had been completely renovated - new roof, new basement reno, etc. That is why it sold higher - I'm not seeing all houses selling higher - I'm seeing SOME renovated houses selling fast to obviously inexperienced buyers purchase because they can't see past the flashy new granite counter tops. I agree 770000 for that house is insane but you do need to factor in the renovations somewhat...
Sorry Think,
Only the roof changed from the last time it was listed. The old MLS # is 260144 and clearly states the exact same renos and appliances. A moron bought this one.
Link to old listing Check it out, the realtor even used the same photos. I am seeing skyrocketing prices.
As I have mentioned before, the realtor I was talking to said this was an extremely poor time to buy and people were panicking about the low interest rates. There is no more decent listings for family type homes in my price range. We are looking up into the $800k range. I don't consider houses in need of alot of work listed well above assesment to be realistic.
omc,
wow you are right! crazy! gotta admit makes me panic a bit too...
OnePercent has a huge flaw to their business model. They CUT the buyer's agent commission.
If the buyers would just figure out that they actually ARE PAYING portion of that fee there wouldn't be a issue.
Yes OnePercent has a flaw, the same flaw Sam Walton (Walmart) had. Wait a minute.
Here's a well written story about a couple of slightly above average earning Canadians with 2 kids whom are doing nothing financially wrong, bought a house for under $300K and still can't save any money at the end of each month for a rainy day, let alone a basic vacation outside the province.
After you read the story, contemplate the insanity that is Victoria Real Estate at the moment and tell me you still think all will end well.
It's only a question of time folks, at some point reality will prevail and a lot of tears will be shed.
I continue to predict this will *start* to occur when the BoC starts to raise overnight rates Q3 2010 or a massive black swan event occurs (i.e. US dollar crisis) ... whichever comes first.
Mr.4AM
Mr. 4AM - Reading between the lines from the CTV link that Robert Reynolds provided earlier (Carney Reiterates concerns about the housing market - CTV) , it would seem that BoC is not planning to raise interest rates to solve the increasing household debt/mortgage issue, but instead is looking at other regulatory approaches.
Since people at his level don't speak on a subject without intending to do so (i.e. one does not signal regulatory intent in a certain direction without understanding that markets can and will price it in and not be happy if a completely different direction is taken without good reason), one can then ask the question about which regulatory approaches they might take.
Options
a - raise downpayment requirements
b - raise CMHC insurance rates
c - require banks to have some skin in the game (take some risk)
d - create a maximum insurable amount
e - reduce maximum amortization
f - require a minimum credit rating
g - require independent appraisals (not a bank appraisal)
h - lower and/or enforce maximum mortgage to income ratios
i - require all paperwork and statements of income to be present and properly checked
j - reduce the amount of securitization of mortgages that banks can use
k - any additional ones that I couldn't think of
l - any combination of the above
Lots of regulatory tools (from five minutes of thought from a non-expert in the field).
Any guesses on which, and any guesses on the effects on Mr. Housing Market? They'll want a go slow approach to try to de-inflate the bubble rather than bursting it. Unfortunately the animal spirits may (or may not) choose to differ.
On my post above, any bets that there isn't a huge lobbying push going on in Ottawa to maintain the status quo?
Should be making for some interesting discussions between politicians and senior bureaucrats!
And also a massive amount of modeling of scenarios about 'what if we take this approach and this one as well, what will happen'
In the States none of the models could actually determine what would happen ahead of time (therefore the 5 sigma event quote - and the lobbying blocked any signficant change until it was too late.
That was a good article, I hadn't read it. You make some very good points. Here's a few more points to consider:
1) The BoC will have to raise interest rates for reasons OTHER than to tame the housing bubble, which it sounds like they are very likely going to try other methods first (namely the ones you mentioned seem like great candidates)
2) Government suggesting it is concerned of a housing bubble and that it will likely take action is something that should scare the bajeezus out of any real estate bull. If there's anything I've learned from this recent economic crisis is that government can manipulate whatever market it wants to any extent it wants. In other words, don't bet against the government, you are nearly guaranteed to lose. This is thus great news for RE bears. The government may very well soon be on our side. Until this article, the government was manipulating the markets to help Mr.Housing bull with:
a. Artificially low interest rates
b. Allowing 90%+ of securitization of bank mortgages
c. Increasing CMHC insurable limits
d. Temporarily allowing for 0%/40 yr mortages
e. Housing reno tax incentive
f. Bail-outs for the banks so as to provide cheap credit.
etc.
3) From the article: "Government stimulus will add about one per cent to gross domestic product next year...Once government stimulus is withdrawn, the bank expects at the beginning of 2011 that corporate investment, private investment will increase"
Sadly, this is either PR BS, or pure ignorance that boarders on dillusion. Granted we are not the USA, but look at what happens when Bernanke tries to stop QE... the US dollar TANKS nearly *instantly* .
The problems with expecting the corporate sector & private investors to step up to the plate and provide ever increasing growth is that:
a. 70% of GDP growth is consumer driven. Consumers are experiencing increased unemployment, and even if that starts to decrease due to government stimulous, guess what will happen the second the stimulous is withdrawn? Consumers with no cash, can not spend it.
b. Consumers with no cash and no job, can't get credit.
c. consumers who don't consume impact corporation's bottom lines.
d. Corporations who can not sustain profitability, downsize (lay offs), which in turn brings us back to step a.
e. The other line of reasoning is that on average consumers are also in too much (all time high historical) debt, in great part BECAUSE of ridiculous mortgage debt, but also lines of credit and credit cards and student loans, for those who may not even have mortgages.
f. Oh yes, and the USA, to whom we export some 70-80% of all our goods will still be totally screwed by 2011, if not in an outright depression... so how's the Canadian government going to compensate for that doozie?
Now, please note I am NOT suggesting here that we will be going into a deflationary spiral a la US 1930's great depression - that is a near impossibility these days due to Central Bank Keneasian rule books. My suggestion is that with interest rates at near 0%, their only other tool is Quantitative Easing which coincidentally aids in CAD dollar depreciation and aids (temporarily) with the economy (at the cost of consumer world buying power), but also increases our national debt... I'm stopping here, this topic is too lengthy to discuss here.
So what is the foundational reasoning for anyone to expect that Mr.consumer / Corporations will step up to the plate to fill in that 1% of missing GDP?
There is no new Internet-like technology miracle to fill the gap. Sure there's Alternative Energy initiatives popping up all over the place, but nothing mature that is a finished product that can be sold by 2011 and expected to make up a whopping 1% of GDP.
(to be continued)
Mr.4AM
Then the article goes on to state: "Overall, there will be a subdued recovery, but there will be a recovery."
A recovery of what exactly? If this is anything like the current "recovery" that the MSM is touting every chance they get, it sure as heck aint't a recovery of Mr.consumer, they are in as much debt as ever, with a pension crisis looming, increased taxes on the horizon, government switching teams to the real estate bear camp, high unemployment rates, (and just watch what will happen to the stock markets in the next 4 months).
The only recovery they can claim now is the recovery of GDP at the cost of historical high deficits due to Government intervention. I call that a FAKE recovery, because it is not driven by capitalism (Mr.consumer + Mr.Corporation), but rather Mr.Government. Sooner or later the proverbial cards will come crashing down. When the stimulous and QE dissapears and nobody wants to buy Canadian bonds at 0.4% /yr interest... GDP will walk off a cliff... only it won't because government will keep on intervening as per above, and that my friends is the problem . Like the USA, only to a lesser extent, if this keeps up and there is no easy way out, expect to become a government managed country. It will no longer be capitalism and it wont quite be fully socialism, but somewhere in between with a lot of nationalization of too big to fail corps, and tax-payers and their children to pay for the ever growing debts.
The next 2 or 3 years are going to be a hell of a ride.
Mr.4AM
Animal Spirits,
I would like to make one more post, or rather a re-post of Roger's Sept 3rd comments on interest rates which contradict what the aforementioned Carney article concluded on BoC potentially NOT raising interest rates next year. Pay special attention to his last paragraph:
********************
September 3, 2009 9:38 AM, Roger said...
*******************
I see a number of posts talking about interest rates being held low by governments for some time.
The only rates that governments directly control are short term rates.
In Canada this is the Bank of Canada rate (.25%) and in the US the FED rate (.25%). The Bank Rate is used by the Canadian banks to set their prime rate which is currently 2.25%. The major banks are offering five year closed variable mortgage rates at prime + .4% or 2.65% and rates near prime can be had from other financial institutions. If the Bank of Canada changes their rate this ripples through to the variable rate mortgage holder at the end of the month.
Fixed mortgage rates are NOT set by the Canadian government or the Bank of Canada. They are based on the rates that the banks have to pay in order to get money for the mortgages. The benchmark 5 year government of Canada bond yield is one factor that the banks use to set their mortgage rates. The spread between their borrowing rate and lending rate varies depending on how they feel about future bond market direction and current operating costs.
It is the open and freely traded bond market that determines long term government issued bond rates. When the stock market is doing poorly investors flock to the safety of government bonds driving up bond prices which pushes down yield. The inverse happens when the stock market shows sustainable growth and investor confidence is restored. Governments may try to indirectly control the bond market by quantitative easing which involves massive purchases of bonds financed by printing money in an attempt to keep yields low. Most experts agree that this only works for a short period because of the massive size of the bond market.
In a nutshell the Cdn. government or BOC will not be able to directly influence fixed mortgage rates. When the economy improves, gov't. bonds will fall out of favour and fixed mortgage rates will rise (so will GIC's BTW). A heated economy will result in an increase in CPI and this will result in the BOC raising the bank rate and then variable rates will rise too.
What happens to house prices when fixed and variable mortgage rates increase
PS. We miss you Roger, hope you come back at some point!
Mr.4AM
Mr.4AM - thanks for your various e-mails. I'm not as bearish as you on the long-term economy, however in the short to medium term there is an elephant in the room for Canada.
We have escaped the U.S. consumer (intentional use of word consumer) downturn because (in part) we had CMHC insuring and underwriting the over-inflated mortgages. In the U.S., the various banks, sub-prime lenders and investment houses did not have the same level of underwriting (i.e. the public body taking on what should be private bank risk). CMHC did not (yet) fail, so no call occurred on the housing market - as occured when sub-prime first hit in the U.S. (and was followed by equally poor Alt-A, liar loans and now prime). Since we haven't had a call (there almost was one last fall/early winter), people have continued to bid things up.
So bids go up, the wealth effect continues and consumers continue to spend despite unemployment rates rising and the news south of the border. Interestingly this could have also being politically driven as a result of the extra regulation of banks and the market in place in Canada (which saved an initial bust but could have been manipulated to create a larger bubble).
Now CMHC and the BoC have a massive headache on their hands. Bids (and their books) have gone so high that there aren't too many players left standing and people are getting antsy. Are they going to call themselves or leave it to a random animal spirit to do so?
When the call occurs, look for the consumer economy and its excesses to go into tatters here. Economically what has happened is that we have avoided an intial big crash, to potentially have a slower, longer deflation (of the overall economy).
Garths blog tonight...
$299,000
if in Vic done, sold, if only... *sigh*
Really good post on Mish today
A Canadian says to "Short Canada"
some highlights:
Canada’s home prices have skyrocketed in this recession. When the dollar was at 97 cents US a couple weeks ago, average Canadian home prices hit roughly $320,000 US – an all-time high. Residential mortgage debt has over doubled since 2002. We will surpass the US in per capita residential debt within the next year. In 2009 alone, we will add 100 billion in fresh residential mortgage credit (equivalent of about 1 trillion in the US on a per capita basis)
--
CMHC mandate is to help provide affordable housing. Yet it has only served to fuel the credit markets, increasing the price of homes well beyond affordable levels.
--
In 1985 we borrowed 45% of our gross salaries and wages to pay for housing. By April of 2009 we borrowed 110%. This of course is an average of our entire country including those without mortgages.
--
Good reading
Good article over at Mish's Robert, thanks for sharing.
Mr.4AM
FROM A REALTOR'S PERSPECTIVE
For those that say Realtors make too much money,they should first find out what the average realtor earns in a year after expenses and I'm sure they would then shutup.
There are those that say they can't stand realtors. They begrudge having to pay 15-20,000 approx commission even though the Agent only gets half and pays out 2-3,000 a month in expenses.
The Agent brings an offer,negotiates it to the highest price possible which the seller decides on his own is acceptable.Agent through extensive training and education ensures Seller is legally protected,paperwork is done properly so there are no loopholes or future lawsuits. The seller then walks away with anywhere from half a million or more begrudging he has to pay the realtor.
I ask, who's being greedy here?
The MLS system is OWNED by the CREA and paid for by it's members who are licensed Realtors.
Who's the next target for the Competition Bureau to go after?
Maybe, those wanting to sell their Cars privately can now complain and go park them at their local car dealership. For just a small fee they can deal with the Buyers that come to the dealership.You can then get all the benefits without fully doing business with the dealership. The owner of the dealership can't do a thing about it since they've been accused of being a monopoly long enough by the Competition Bureau and they are being anti-competitive.
Then perhaps all the Hotels and Motels will then be forced to give partial services. Those that refuse to pay the full service cost of a room can now for a small fee request a cot and sleep in the lobby or hallway. The Owner can't do anything about it since he has to offer choices and not be restrictive in his own establishment in order to be competitive with the YMCA.
Next,to save money we will be able to request partial services every where at every business no matter how ridiculous.For a reduced fee we can cook our own meal in a restaurant to compete with fast food chains. To Refuse those partial services means you have to answer to the Competition Bureau.
Those that go to buy a new home from a builder can now have a partial service contract. Meaning for a much reduced price for the home the Buyer can bring his buddies on the weekend to help build it.This according to whatever design they choose without any professional consultation with the builder who they don't think they need or want to pay for.
It really makes you wonder whats happening to Canada when a Government agency can strip Businesses of their fundamental rights of ownership. Dictating to them what they can do with what they own and pay for. Also watering down their services to the point of being detrimental to all concerned all under the guise of being anti-competitive.
so, here's my story. I found a house that I could live with and "my" agent says, "Make an offer". so while I'm working this out, he says is it going to be low? I say it won't be the asking price by which I mean it will be lower. "My" agent and the seller's agent decide together they don't want to waste their time, or excuse me as "my" agent corrects himself, "my time" (how is it a waste of my time, I wonder?) so they don't want to bother the seller with my offer, they'll wait for a serious offer (read higher). the house in the end sells in my price range. I'm stuck in another (insert expletive here) mouldy rental. Since when did real estate agents become gatekeepers to the "hallowed" (read hellish) housing market. No wonder the market never drops...sellers have no idea what most buyers can prudently pay because RE agents don't tell them. So, wow, too bad agents are only making half the commission then paying expenses after that...welcome to my world. The big difference? I own a 1986 Corolla outright..."my" ex-agent makes payments on a Lexus. What's that? Is that the sound of my heart weeping?....nope, just indigestion.
Hey Rebel,
Great post! I loved the strawmen comparisons to other businesses! They're why realtors are so well respected by the public at large.
I could leave it at that but let's decompose your post.
So a realtor can make $10K per deal but might have expenses up to $3K/mo? So if they sell 8 houses per year that would give them an income of $44K. Not exactly chicken scratch for selling less than 1 house per month.
So sellers are greedy because they don't want to pay out $20,000 when they sell a million dollar home? This a pure appeal to emotion, ergo, it's a completely invalid argument. But a snide response would be: How much do I pay my bank to sell a million dollars worth of stock? $10 not $10,000 dollars.
Yes, the MLS system is owned by the CREA and given that the only way to use the MLS is via a realtor and it drives most of the sales in Canada that means that realtors exert an undo amount of control over real estate sales. It is perfectly within the purview of government to correct and remedy imbalances in the market. For example, forcing the MLS system to be more open to non-realtors. I suppose the government could go further and just could just require that the MLS be run an independent 3rd party or even a crown corporation.
Your comparisons are easily the dumbest thing I've read today. Not only are they profoundly stupid but they're all stupid in the same way. None of the businesses you have described are anything like a monopoly, as such the competition bureau does not need to get involved.
Quite frankly, it's the CREA's fault that the government came to these actions. If they had opened up the system earlier this wouldn't have happened. More to the point, the purpose of government is to improve the lives of Canadians and if weakening the CREA monopoly on real-estate transactions does that... then so be it.
Rebel,
You won't receive much sympathy here. You chose your profession, your profession chooses to serve itself poorly through protectionist methods and media spin, and your profession will continue to get a bad rap because, as your post demonstrates, your profession continues to publicly demonstrate that it just doesn't "get it." All of your examples are proof of this.
Sure the CREA owns the MLS. Fine. But in a free and competitive marketplace it cannot and should not own the transaction information that it currently refuses to openly share with buyers and sellers in the marketplace. If this transaction information was open, any other organization could come along and beat you at your own game because let's face it, the CREA's MLS system/website sucks. The only thing keeping it alive is the hoarding of should-be-public data.
Real estate professional organizations believe the only way they can operate is through withholding information that is necessary to all actors in an open and transparent marketplace. That's what the complaint is about and why the CREA will fail to win the case.
Here's an example: I want to buy financial asset A, I go to the TSX or the OTC or the Bond market or wherever I can see the bid, the ask, the last sale price etc... That's called "free market." Those numbers exist openly and transparently because the regulatory environment demands it be so. I still have to buy through a licensed professional (or at least a licensed professional transaction service), so your argument about various levels of services is moot. If your industry refuses to adapt to the changing business environment, you should be pushed out of the way. The only reason why it hasn't failed is because it's impossible to compete against. That is the definition of anti-competitive.
The real estate industry has transformed to being much more than just a group of people helping others buy and sell homes. As long as the real estate industry continues to market its products with investment language, then I will continue to demand that it be held to the same standards as other "free markets" with mandatory financial disclosures and disclaimers etc.
Oh but wait, the real estate industry just helps people buy and sell "homes" and that can only work if it's "full service" whatever that is.
I'd love to know why you think I shouldn't be able to Google what a house sold for and when without your help. Why can't I do this? What could possibly go wrong for any homeowner if I was able to know the price history of a financial asset? Your product is the only financial product that I know of that I can't Google to get the sales price history information I need to make an educated decision about.
Why should I be forced to subject myself to the influence of a commission based salesperson in order to get information that I absolutely need in order to make an educated and rational assessment of value? I am not forced to do so in any other financial market. Why is your market different?
First off I apppreciate Rebel's point of view and I hope you continue to post.
However, I disagree.
-A better comparison to the MLS monopoly would be if microsoft didn't have to allow any other software on a computer.
-You mention the average wage of the realtors. This is because there is a massive over supply. This racks up your expenses to sales ratio. The pyramid scheme where the office takes crazy amounts of money is criminal. You have how much training? Compare yourself to a teacher's salary (who is far more trained). Even the average realtor makes far too much for the amount of training and hours worked.
-As an idustry realtors have almost no professional standards. Insider deals. in office deals double ending types of behaviour would get you credentials instantly removed in my proffesion. I could fill pages of examples of dishonest realtor stories, that I personally know of. If they get caught they get a small fine.
oops forgot; my wages haven't doubled in the last few years.
If I want to go to a restaurant I am free to choose any. The prices and services aren't regulatated.
If one hotel is too expensive i am free to choose another that can set its own price.
none of your examples are in the least bit relevant.
Let's examine the CREA's code of ethics:
• Professional competent service
• Absolute honesty and integrity in business dealings
• Co-operation with and fairness to all
• Personal accountability through compliance with CREA’s Standards of Business Practice.
If the REALTOR® were a true profession in the sense, there would be much more professionalism demonstrated in their work.
In regards to competent service, that is lacking due to the misguiding that I have observed. How many REALTORS® do you know disclose the risk involved in purchases? Have any warned their clients the risk of increasing mortgage rates? I doubt it because all we hear is the continuous "buy it now or be priced out forever" pitch. There are many more competencies we could recommend to REALTORS®.
I have never observed absolute honesty or integrity in many of my dealings with REALTORS®. From the moment I meet one, I know that I'm being sized up and profiled. Comments like, "this house is very popular and I'm expecting several offers tonight" erode any sort of visible integrity they might have started with.
REALTORS® are not professionals. They are salespeople.
Compare to some actual professions' COEs.
Professional engineers: http://www.apeg.bc.ca/resource/publications/actbylawscode.html
Physicians: http://www.bcma.org/about-bcma/code-ethics
Chartered accountants: http://www.ica.bc.ca/kb.php3?catid=209
Bob ...you nailed it. Real estate is no more a profession than used car sales.
A profession is a body governed by ethics that hold each member to a higher level of moral reasoning than self-interest. I'm required to hold the interests of those I serve above my own which means I can't misrepresent or spin the facts, I have to protect the vulnerable by disclosing what is not necessarily in my best interest, I can't claim caveat emptor and I am required to correct harm done even where it might cost my license to do so.
Let's use the terms "real estate profession" in the most liberal way. Or better, let's call it the real estate industry instead and ask questions like exactly what does this industry produce?
Sorry to be so blunt Rebel with a Reason. I appreciate your courage in posting on this blog and I'm sure you're a very nice person, but your comments make me realize that the colour of the sky in your world is not the same in mine....
ian
Just wondering what industry you are in?
Robert,I'd never have the courage to ask Ian who admits to living in a mouldy rental and blames Realtors for it, and drives an 86 Corolla that question.
Ian, in view of the fact you're obviously not a professional yourself, do you really think you're in a position or qualified to give a judgement on a whole Profession?
Rebel: Ian has not judged you, yet you feel it's in your right to judge him. You're a bigger person than that. Let's not resort to personal attacks.
To MSR,
I like your math and now lets go with it.
So if the average Realtor after expenses makes $44,000 per year.
Don't you agree that those that accuse Realtors of making too much money should shut up!!
I don't know what profession you're in or if you even are in one,perhaps that's the problem. One things for sure. $44,000 a year before taxes in any profession these days isn't much. Try qualifying for a mortgage with that income!!
Meantime, everyone begrudges having to pay $15-20,000 on a half a million dollar sale and up.
I guess no one will ever be happy until they see the average Realtor make less and live below the poverty line.
rebel,
That is more than many teachers make, and they have far more trainning than you do. Booo hoo. There is a vast glut of realtors that causes you guys to have far higher costs per sale. Yes I have a problem handing over $20k for the sale of a house, you didn't earn it.
BTW my wife and I are BOTH professionals, real ones not pseudo like a realtor, and we live in a crappy rental and pay cash for cars.
Bob Leftcoaster,
Don't be so hypocritical you and your Buddie Ian judge a whole industry of people. The vast majority being caring,dedicated,hardworking,trained professionals who go the extra mile and have to live by a strict code of ethics. Meanwhile they have to take a lot of krap along the way by ignorant people who don't have all the facts.
What's your profession? Or do you have one?
OMC,
Funny, there are different kinds of teachers out there. In fact I have many teachers as loyal clients.They really appreciate my services.
Then there are other teachers who are completely out of touch with the real world.
You sound like the 2nd category!
See, I don't judge a whole profession all into one group like people who are ignorant do.
Instead of getting your steady pay check,going home every evening,getting weekends off and enjoying every holiday that comes along.
Try working day and night,working weekends and holidays,being on call constantly and not have a steady paycheck but be on commission. Then have to listen to people like yourself begrudge paying you the positive results you worked very hard day,night,weekend, and holiday to bring them.
Rebel...
I didn't say average realtor. I said a realtor who sold 8 houses a year. Is selling about 1 house per month average? That sounds low to me.
But, $44K per year is about what a new teacher would make.
So, I was curious and looked up what is required to become a realtor. You need to take one (1) course, 20 multiple choice assignments and a 3 hour final. Wow...
The problem with the 'feel-sorry-for-me' realtor *average* earnings is that it is exactly that, an average. Surely the top 5 or 10% make $70K to $200K and way beyond.
Like others have stated, it's a sales 'profession'. If you're a better sales person you should make more - that much I agree with, but it needs to be within reason.
From a customer perspective, the amount of money handed over to realtors based on the complexity of the work they perform as well as the length of time they spend on performing that work, does NOT equate to $15K to $30K and beyond most of the time. It didn't equate to that only 5-7 years ago, and neither should it now.
Further, when that amount is double, tripled or quadrupled based on the same number of hours of effort performed against million+ dollar properties, then that pay structure is a complete joke. It reminds me of those three or so twenty year olds on TV selling multi-million dollar beach houses in Malibu, and making 6 digit commissions a pop. Are they exceptionally better at their jobs than the top 1% Victoria real estate agents? I seriously doubt it, they just happen to be selling higher asset houses and making killer commissions on that.
In other words, the pay reward is NOT mostly based on professionalism.
Lastly, just because realtors get gouged by the structure of their organizations (yearly fees for this, that and every other thing), doesn't justify them turning around and gouging the customer base to cover their excessive overhead costs. That's like saying, I got robbed, so that's why I'm robbing you, and it's ok, right? NO!
Reform the industry so that nobody is gouging anyone else INTERNALLY first, and then I think we would see sensible pay structures that customers wouldn't feel like they just got mugged from completing a real estate transaction.
Heck, steps already have been taken by realtors themselves. 1% realtors exist and are surviving quite well; however, the other side of the industry wants to carry on charging silly amounts for pretty much DOING THE SAME JOB, and on top of that don't show customers listings from these 1% realtors and a slew of other tricks. That is an anti-competitive monopolistic immoral practice - no professionalism in any of that, and why the anti-competition bureau should step in.
Mr.4AM
MSR,
One more thing, I can appreciate that you think my analogies are the dumbest thing you ever heard.That's only because you don't fully understand what the real issues are.
The Real estate Industry has no problem with people trying to sell their own homes privately.Theres plenty of sites out there which allows them to do so.
However, MLS is owned by CREA and paid by licensed member Realtors.As such we should be allowed to have the rights that come with ownership. Also the right not to allow persons who want to encroach on it by only selecting partial services for a small fee and not fully doing business with Realestate.
Rebel,
Niether my wife or I are teachers. I am positive we are far more educated than yourself. I see the post reorganized realty industry as about 1/3 of the total # remaining giving far less to the office. Less money out the dorr for the customer and the remaining realtors will make a more comfortable living. Better off for all involved. Realtors will have to act like any other profession and offer a fee for service that is within reason and has true value.
The users of this site have a far better grasp of the issues than you.
Rebel,
Waiting for you to respond to my questions. Until you do, it seems like you're preferring to go back and forth with silly jabs and defensiveness.
I'll repeat them here to make them easy for you:
1. Why shouldn't I be able to Google what a house sold for and when without a REALTOR?
2. What could possibly go wrong for any homeowner if I was able to know the price history of their home?
3. If the real estate industry markets homes as investments, why shouldn't your "profession" be subject to the same rules and ethics of other investment dealers?
Rebel,
I called your analogies dumb because they're wrong. CREA controls MLS which funnels approximately 90% of all real-estate transactions. Ergo, the CREA can and does exert excessive control over the real estate market. Therefor, to improve competition in the market the competition bureau decided to open it up.
Specifically, your analogies are faulty because all the markets you mentioned have significant competition from many players. A more apt comparison would to be compare the CREA to Microsoft. There are other operating systems but they control a massive 90% of the market.
OMC,
I see something similar to what you do. I don't really see a huge drop in the number of realtors, atleast from historical numbers, but I do think we'll see a change to more local offices or loose associations of realtors. Why pay RE/MAX $3K every month when you can form your own office? Maybe we'll see things like doctors' offices where a group of realtors will jointly own a practice.
Rebel,
When are you going to stop with your baseless defense of your job and answer my questions?
For the record, I have 4 degrees including a Ph.D. in a provincially and nationally regulated health profession recognized under the Health Professions Act.
HOUSE HUNT VICTORIA
I haven't got time for someone who says my defense of Realtors is baseless.
In answer to find out how much a home sold for and it's history.
Have you ever heard of a registry office?
Otherwise become a licensed Realtor.
Rebel,
You're a troll and will be treated as such.
Rebel is just expressing the uneasiness that many real estate agents are feeling now that the government is going to reform the real estate industry.
Simply put - the gravy train is running out of steam and will soon slow to a crawl. Sniff - there goes the easy money. In a few years they will have to get a real education in order to make big bucks.
HOUSE HUNT VICTORIA
And what's your profession?
Expert Troll Identifier?
^ No, I do that for free. It's a "value added service" that comes with your CREA dues.
Skeptic,
I wouldn't say that the gravy train is ending. I think some of the easier sales would be taken up by lowe(er) cost realtors but I still think there will be enough money to keep the competent and dedicated realtors around.
The singing and gimmicky realtors might have some trouble though.
Rebel,
Nice to see that you are now referring to real estate as a "business" instead of a profession.
Now as far as ethics go let's take a look at the disciplinary actions in 2009.
Real Estate Council of BC
What a joke. Fines under a $1000 and a refresher course. Any other profession would have suspensions, huge fines and possible license loss for these type of ethics and corrupt practices
HOUSE HUNT VICTORIA
In view of the fact you gave such a good comeback.I'll answer your third question.
In order to sell investments other than realestate you need to have a securities license.
In order to sell realestate you need a real estate license.
You can't have two licences.
However the realestate industry is very regulated especially in Alberta. When RECA investigates something serious they don't fool around. Over the years I've seen many Realtors have their licenses suspended and or hefty fines levied.
Rebel,
You didn't answer the question.
SKEPTIC
I've survived 26 years as a Realtor. I know how to sell homes in all markets and recessions. I'm also a realestate auctioneer and have auctioned several homes.
At this point of my life I'm not too afraid of what the future holds.
HOUSE HUNT VICTORIA
Sorry, I had to read your question again. What rules and ethics in particular do you think Realtors don't follow that those in the securities have to follow?
At this point of my life I'm not too afraid of what the future holds.
Then you should have no reason to care about the opinions of a small bunch of future homeowners who plan to enter the real estate market with caution.
Skeptic
I'm not ashamed to call the Realestate Profession a business. It's certainly not a charity. Not so far.
I can't comment on BC realestate council. However in Alberta RECA is self regulated and not by the Government.All I know is that they really come down hard on bad agents. I've seen a lot lose their licenses and having even lifetime bans from the industry given.Which is good for the Industry and the public.
BOB LEFTCOASTER
Selling Realestate has been my life for the past 26 years. I love the profession and I like helping people.I work mainly as a Seller's Agent. I take pride and get real pleasure in not only getting their homes sold but negotiating for the sellers the highest price possible for their home.
I know a lot of Realtors,granted there are some I don't care for. However there's a lot that are decent and caring and work long hours for their clients.
It really bothers me when the public has no concept or appreciation for the good we do or the service we provide.
Rebel said "It really bothers me when the public has no concept or appreciation for the good we do or the service we provide."
I hear the same comment from people with all sorts of occupations. Nurses, doctors, engineers, lawyers, accountants, firefighters, politicians, etc. Most of the general public do not have a good appreciation for the services that these occupations provide.
You appear to be a dedicated person who has committed an entire career to represent home sellers. Nothing dishonouable in that and I'm sure many have benefitted from your 26 years in the field.
However what we were discussing is the ability to have choices when it comes to levels of service from realtors. There are some who want an agent to simply upload their home onto the MLS system for a reasonable fee. There are some who want an agent to represent them in all matters related to their home sale/purchase for a full fee. Then there are some who will want something in between. This is the uncharted territory that is causing so much fear in REALTORS today. Up to now, the CREA has a system where it's all or nothing. We'd like that to change.
In my opinion, REALTORS will always have a role in the matters of real estate. When the time comes for me to purchase my next house, I'd probably elect for the full service of an agent but in a system where agents charge for the amount of work they perform, rather than a commission.
OMFG! I can't believe #1 you people continue to engage this realtor clown! and #2 some of you are actually defending the "profession"
Here's the thing, realtors used to work for their money.....remember the days when they would pick you up (in their car) armed with a dozen tear sheets of properties that they spent time researching on your behalf and spent an entire Saturday with you. Remember when they used to actually have a thorough knowledge of the property they were showing you, the neighbourhood, the schools etc....
Ok fast forward to 2004 - 2009....the number of these "professionals" goes up ten fold at least in old sleepy town. Former used car sales men, life insurance salesman and countless bartenders and waitresses with boob jobs pile in, take the silly course and are now professional realtors.
You do all the due dilligence because the internet is an amazing thing. No longer is the realtor having to do much in the way of research on your behalf. You meet the realtor at the property (pray he isn't late again) and then proceed to walk through a property that clearly he/she knows nothing about! How many times has this happened to you where the realtor knows less than you do about the property he is showing?
So up until now what has this professional done for you. You did the research, you spent the gas to get to the property and you probably had to work around his very busy schedule to boot!
While all this is happening you are hearing the standard rhetoric that the market is hot it will never go down.....only going up up up!!!! and that this is the best investment you could ever make. By the way don't think about the total price paid (spelled over paid) valued customer, look only at your low monthly payment @ 3% for 35 years. And don't worry rates aren't going up anytime soon. I know this because I am a professional and I know what I'm talking about.
LOL....now comes the hilarious part. They talk you into paying a premium over asking price because that's the only way you will be able to own this jewel of a crack shack in Fernhood!
Oh my how things have changed. If for 1 minute any of you think realtors are "profesionals" or have your best interest at heart OR are anywhere near as hard working or as smart as they would have you believe you are sadly mistaken.
Don't even get me started on listing agents......free ads on usedvictoria, craigslist etc and zero effort in a phsycho market where every piece of crap sells itself.....PLEASE! I have a great story about a realtor that was supposed to do an open house for me. I cleaned up, vacated for the day only to return hope to find the place strangely unchanged. No trace of traffic....Hmmmm. So I call this professional and get him on his cell. Turns out he went fishing! Failed to tell me and gave me the excuse that open houses are a waste of time on sunny days! LOL......true story folks. My responses to this clown.....YOU'RE FIRED!
In the end all the bartenders, used car salesmen and the like will end up back where they belong and the system will change....thank you Govt of Canada :o) A few will survive, making less (and deservedly so) and maybe just maybe this market will go back to where it belongs (30-40% lower).
Realtors are salespeople, nothing more. let's stop kidding ourselves. They are all about the commission and rarely have your best interest at heart. At least the unrealistic amount of money they have been making for doing so little will be cut but I doubt that their attitudes change. They will still be all about the $$$$$.
"However there's a lot that are decent and caring and work long hours for their clients."
I find this long hours bullshit really hard to believe. I use a seller's agent who works for 1% and .5% (we keep the buyers commission at 3% and 1.5%). He is more than happy to do it for 1% and .5%. I build a quality home, he puts on a lockbox and takes 5 minutes to upload it MLS. The home is vacant so he doesn't have to arrange any views, buyer's agents just walk in and out until someone makes an offer. I do the neogtiation essentially on my own and basically ingor my realtors advice (he just puts counteroffers on paper) because their advice has screwed me over in the past. Even at 1% and .5% for the seller's agent I think I am overpaying. Buyer's agent brings the customer 97% of the time.
I agree with HHV that if a real estate agent even uses the word "investment" they should need to be regulated like any other securities dealer.
I do partially agree with the troll that the CREA did build invest and pay for the MLS system, and that if I had built a similar system in my industry and the govt. tried to take it over I would be pissed off. If I was the CREA I would just "open" the MLS system for a fee for service of $100,000 per listing. Problem solved, if you want on the MLS you can pay the fee. If you don't want to pay, that is your choice. An extreme example I know but if this happened to my business I know I would react similarly.
That being said, if the result of the competition board is simply that the information held in MLS becomes open source or public domain then the market will open for competing sites like zillow zoocasa etc. more choice is always a good thing, if the MLS continues to be the best system fine, but I bet other providers will quickly have a better product and soon overtake MLS.
There is a lot of hate for Realtors, especially on this blog. True, many are inept but some of the big players in town are obviously big for a reason. I think, we need to think of career Realtors in a different light than the aforementioned bartenders and bimbo's who just got the license.
Barriers to entry like stricter regulation and licensing would go a long way to improve this situation. I also think that the simple step of making a Realtor ONLY be a Realtor would go along way. As an insurance advisor I CAN'T have another job, if I moonlight doing something else I loose my license. The dropout rate for new agents is something like 80% because of this. Only the 20% that can cut it and make a living stay in the business for more than 3 years. This means most that stay in the business tend to be the best. I also have to do a tonne of continuing education every year (do Realtors?) to keep my license. We are expected to improve ourselves constantly.
Anyways, I'm starting to ramble...
I don't care who the realtor is...etablished, bartender, bimbo etc. My point is that they are all overpaid given the service they do/don't provide.
The business has changed and people do their own research. Realtors do very little to earn their commission compared to the past was my main point.
MLS is a monopoly no matter how you look at it.
Insurance is a tough racket, I know cuz I friends in the Biz. That said very few of them sell products they don't believe in or truly believe a prospective client needs.....can the same be said for realtors who are putting young couples into 600k houses with less than 5% down and a 35 yr amortization????
Do they truly believe they are providing a service to these people? I would say that they are doing a huge disservice!
Now I know there are questionable life insurance people out there as well (like all sales people)but realtors are overpaid hypesters and shills....established or otherwise.
They helped create this bubble and they will be the ones that are hit the hardest when the thing bursts. Say goodbye to the leased mercedes and the fancy duds boyz!
Personally I don't give a shit what RE does in Victoria but I sure hate the scam that these realtors, mortgage brokers, bankers etc have created and continue to pump.
A lot of people will be hurt and these "professional" won't lose a wink of sleep.
Competition is good, MLS is a monopoly and commissions are not inline with what realtors do for a client. Things have to change regardless of whether the prices come crashing down.
Mark,
I agree with your comments in both posts.
The sooner the government changes the rules the better.
What realtors charge for their "service" is ridiculous. Why are sellers paying twice the commission that they did 8 years ago for the same house? House prices have doubled but the effort and costs for the realtors to process a listing have gone down.
- less advertising in the newspaper
- PCS/Matrix means buyers do all their own research and drive themselves around.
Skeptic I think that is a great point you just made. Why are they making twice as much to sell the same house?!
Are there any fee for service agents in Vic? I think Rob Chipman tried it once and it worked for him.
I dont't know how to link to a newspaper article, but it would be a good idea to check out the Financial Post for November 3. You could also google news CMHC boost and flip.
Perhaps HHV could provide the link
But, remember you heard it fist right here on this blog.
Posted by Zoogle on Albertabubbleblog:
http://calgaryrealestatereview.com/2009/11/03/list-for-less/
Very interesting. An agent in Calgary is putting his ideas out about future billing tiers. I wonder what his fellow RECA colleagues think about that.
For interest sake, here is the link to a successful non-MLS FSBO system.
http://www.grapevine.ca
I estimate that over 10% of the Ottawa market is sold through this system. Most of the sellers are realistic with asking prices.
"Very interesting. An agent in Calgary is putting his ideas out about future billing tiers. I wonder what his fellow RECA colleagues think about that."
This is already offered by a number of agencies in Victoria. People just don't bother do their research. Here is an example...
http://www.smartmoverealty.com/sellers_smart.php
The problem isn't listing. You can easily find a realtor to list a home for $2000-$3000. The thing that it is impossible to get around is the buyer's agents commission. I once tried offering 2% and 1% and I had NO agents bringing customers through the home. As soon as it was raised to 3% and 1.5% volume of realtors bringing customers skyrocketed.
If a buyer's agent doesn't see 3% and 1.5% he is not going to show it to her or his clients.
Marko said,
"If a buyer's agent doesn't see 3% and 1.5% he is not going to show it to her or his clients."
That is perfectly understandable. Even if the property is a perfect match for the buyers the "professional" realtor will pass it by. It is all about the commission.
Real estate industry could face millions in fines if it won't lower fees.
The Competition Bureau of Canada is playing its cards close to its vest, but it confirms it is leaning on the real estate industry nationwide to "voluntarily" ease rules that impose high costs on sellers who use the ubiquitous Multiple Listing Service.
And the bureau has some big sticks to wield if it doesn't get its way. A spokesman notes it can impose administrative penalties of $10 million to $15 million, or it can directly order a change in the practices that force home-sellers to choose between paying five-figure commissions or having their listing excluded from MLS, which is by far the largest point of contact with potential buyers.
Blogger Skeptic said...
Marko said,
"If a buyer's agent doesn't see 3% and 1.5% he is not going to show it to her or his clients."
That is perfectly understandable. Even if the property is a perfect match for the buyers the "professional" realtor will pass it by. It is all about the commission.
Shouldn't this be grounds for a complaint to the board and disciplinary action?
Good discussion on realtors. My two bits on this is that most business and services over the past few decades have become so much more efficient with technology, improved processes and application of best practices. These improvements have resulted in faster results, more accurate information and cheaper services right across all industries.
There are few professions today that have benefited from technology more than realtors. The internet and data management options available today has resulted in the delegation of a very high percentage of the traditional realtor work load to the buyer. Yet these same buyer agents demand to get paid the historical service fee. This is a total joke.
A realtor today can do far more transactions per month simply because they have less work and the fees should reflect that. The monopolistic nature of the industry has prevented that.
The high fees have also resulted in way too much fat across the system:
• There are simply too many realtors
• The desk fees are too high
• The realtor fees are too high
The entire system needs to be turned upside down like many other professions/business have experienced. But that change is not coming from within the real estate industry. It will have to be forced on them.
Strong dislike for Realtors,certainly reveals itself in many of the derogatory,insulting,namecalling comments made against me personally and the Realtor profession on this site.
People should never do business with people they don't like leave alone have a revulsion for.
Don't like Realtors?
Don't value their services?
Absolutely and positively do not do business with them!
Sell your own homes!!
Stop doing business with people you can't stand!!
Stop trying to just use Realtors and at the same time screw them out of their already negotiable commissions!!!
Either use the full services of a Realtor at a negotiated commission or don't use them at all!!
What do you think a lawyer would say if you came to him for partial services. Wanting him to do the paperwork and etc but you want to represent yourself in court and do all the talking.
The lawyer would say either you take my full representation or go it alone on your own. Don't try to use me because you're cheap and because you think you are so much smarter than I am.
Licensed Realtors over the years have been trained and educated with non-stop courses to properly represent both buyer and seller in realestate transactions.Thus protecting the public from unnecessary lawsuits that could have been avoided.
Commissions in the Realestate Industry are always negotiable. There is no such thing as a standard commission.
If an Agent refuses to charge less and you don't see the value in his or her services.Call another Realtor!!!
Or if you think you're so much more smarter than a Realtor and you don't value them and their full representation and services and you don't need them.Please, do Realtors a favour,
SELL YOUR OWN HOME WITHOUT US!!!!
Rebel, you should take some valium. For someone with 26 years experience and financially stable you sure come across stressed out.
I do not hate realtors, but I do believe their fees are far too high. Yes I can negotiation them, but as has been mentioned here the vast majority of buyer agents do not show up unless they can earn a "full" commission. For these realtors their money comes first; that is fact based on my history of selling numerous homes.
That Rebel dude cracks me up....what a moron!
Hey Rebel you haven't addressed many of the questions posted on this forum about you and your "profession" Seems to me like nothing but whining, deflecting and a whole lot of defensiveness.
The simple truth is most people don't like your kind but guess what, you are a necessary evil in this system that you and your minions have created and protected so dearly.
Low life realtors do not work for the client....EVER! How else do you explain them not even showing a house (that is perfect for their client) but is only paying a partial commission?
It's a game folks and realtors are their own team. Come on Govt of Canada let's shake this shit up!
When is the last time you called your "full service stock broker"?
Realtors are dead meat.
Theres nothing like throwing a realtor to the bears to spice the blog up a bit. Thanks Rebel.
You are getting flack because you won't acknowledge the issues are bringing forth, instead you try diversionary and cry baby tactics.
Just answer to;
*people feel there are too many realtors in the "profession". This causes realtors to spend too much time and money on self promotion and a large amount of each sale on office fees.
*office "fees" are a joke. It is a big pyramid scheme where tonnes money gets passed up to the select few.
* Fees are ridiculous. When we re-enter the market we will not be very happy to fork over $30k for almost nothing. Any idea how long it takes a physician or lawyer to make $30k, and I mean actual hours worked and billed. The mythical $45k a year is simply dividing the # of sales by licences, and a number of licences are maintained for selling ones own product, such as if Marko was to get his licence so he could sell his own homes. I have known many to do this. Lots of people will also take out a licence and quickly leave the profession. Be honest, how much did you earn last year? Betcha it wasn't $45k. See next point.
* Realtors are not a profession. You can get your licence in a week. Don't bother arguing that you have to do so many courses in alberta. I point you again to teachers, far more qualified and hard working, they have to do constant upgrading. Pretty well any white collar I know has to do constant upgrading.
And last: QUIT CRYING. You don't have it hard, get over it! To point to anyone at all and say you have it so much harder as a realtor is absolutely hillarious.
I don't know about this gov't and reeling in the realtors. It wasn't too long ago that carney was quoted that the longer term mortgages just increased house prices. Just look at us now! This gov't caves to big business.
When is the last time you called your "full service stock broker"?
Realtors are dead meat.
Excellent analogy. The MLS monopoly and industry protectionism are the last gasps of an irrelevant middle-man trying to maintain its position as gatekeeper to the entire market.
Once MLS is opened up, buyer's agents will mostly disappear, because they don't provide much value anymore. The buyers themselves do most of the legwork nowadays, and the main value of a realtor is providing earlier access to MLS. That is blatant protectionism. Remove that and you remove the need for a realtor. You can hire someone to find a used car for you, but most people don't see any reason to when they can just search Autotrader themselves.
On the seller's side, there is more value but as I said earlier the fee structure is completely broken. For a nice house in a good area and priced appropriately, it doesn't require much more than listing MLS and a couple of showings to sell. Once people can list on MLS themselves, the cost of a realtor will seem unjustifiably high in comparison.
hmmm...I quite often hire lawyers to give me advice or opinions without hiring them to represent me. They seem pretty happy to do whatever amount of work I need from them at the time, although they are often aware I am handling something directly that I could just as well hire them to do. I guess that wasn't such a great example after all.
I think it was Robert Louis Stevenson who said, "Sooner or later, we all sit down to a banquet of consequence."
Changes in the the real estate industry are a consequence of the economic and financial fallout from the CREA's monopoly on MLS.
I think Rebel was gutsy for pursuing his/her point on this blog and I give credit for that, but regarding partial services if a lawyer doesn't want to do the job then he/she doesn't take the work on. If a realtor doesn't want to provide partial services then he/she doesn't. When a person chooses not to take work on, they experience the consequences whether they are positive, negative or both. The reason for Rebel's over-reaction is probably the realization that without exclusive access to MLS, the real estate industry will have to retool its product to maintain their industry.
When I was studying law, the big scandal was when big firms started gobbling up small firms, but the profession reorganized and everyone moved forward. My current profession reorganizes every time there are health care cuts and changes to credentialing requirements. Real estate will do the same, reconfigure services and move on.
Contrary to what some might think, I don't hate realtors and I can tell you of one agent in Saskatoon who was one of the most honest, hard working and sincere people I have ever met (picked us up in a white Caddy, spent 3 days showing us houses, took us to lunch and was upfront about disclosure...that was 18 years ago and she was in her seventies) but my recent experience with the industry was negative enough to make me want to build a tar paper shack on the beach at Sombrio.
For me, the problem with working with an agent now is broken trust and no amount of retooling or reconfiguring will help that. No matter what that agent tells me, I don't trust him/her because they might price my house low to make a fast sale or high to make a fat sale or as a buyer, there might be a better offer being presented that night, but I don't trust them to tell me the truth.
While I welcome the opportunity to inject some competition into the real estate industry, I don't believe it will help me enter into an agency agreement with any confidence.
"What do you think a lawyer would say if you came to him for partial services. Wanting him to do the paperwork and etc but you want to represent yourself in court and do all the talking.
The lawyer would say either you take my full representation or go it alone on your own. Don't try to use me because you're cheap and because you think you are so much smarter than I am."
That is a total crock. I have used a few lawyers (family law issues), and I have never gotten any attitude from them because I wanted to pay for their time to do the things I felt I needed help with, but did EVERYTHING else (including court) by myself. They don't mind at all (and will often tell you point blank - "You can do this part yourself").
Chickinvic
Ian,
Your story about an Agent refusing to present your offer to the seller. Then later the home sold for the same price you offered can most likely be explained this way.
First of all, an Agent is under obligation to communicate to the seller all offers made on the sellers property regardless of the price.
Secondly, I've never known a good agent to refuse working with a low offer and negotiating with it until it becomes acceptable to the seller.In fact most offers we receive these days are low and need to be worked up in price and terms to be acceptable to the sellers.
After all lets reason on it,if the Agent can put the transaction together he or she has accomplished the goal of selling the seller's property and earning a commission.
The only way I can see an Agent refusing to take your offer, is if the Agent didn't believe you qualified to purchase the home.Since most good Agents have their buyers pre-approved before they bring an offer to the seller.
The Agent obviously tried to be polite by saying he didn't want to waste your time,when he or she should have in a nice way told you the truth.
In future,go to a Mortgage Broker first and get a written mortgage pre-approval. Then select an Agent that is referred to you by someone that has had a good experience with their Agent. Preferrably one that is a good negotiator and will really work hard for you.
Most of us at one time or another have had a negative experience with a profession of some kind. Whether Doctor,Dentist,lawyer you name it.To paint all in a profession with the same brush is very narrow minded and extremely unfair.
Chickinvic,
Have you ever heard of the saying,
"Only a fool represents himself in Court"
It's a real saying,I never made it up, and I'm sure it is said for a very good reason.
Rebel,
Seems like you have a lot of time to surf the net defending your "profession" I guess that is because you are a listing realtor with lots of time on your hands. After all once you take the listing, write up the glowing MLS description and take a few pictures there is not much work left to do. Just sit back and let the buyers agents show the place and wait for offers. Then a few hours of negotiation and a trip to the bank to deposit the commission cheque.
Thanks for spicing up the blog. Bears are always grateful when a real estate pumper enters their cave wearing a pork chop around his neck.
OMC,
You are, according to yourself, a highly educated person more so than me and you claim your wife is also. That both of you are a professional couple.
What, I don't understand by your own admission,is why are you forced to remain in crappy rentals and have to pay cash for cars?
Furthermore despite what goes on in the realestate industry. Do you really think it's going to have an effect in changing your own circumstances???
The difference between winners and losers are the following:
Winners accept responsibility and accountability for their own actions and do something about it.
Losers blame others for their lot in life, make excuses, and are in denial.
If I were you I'd stop focusing on and being jealous of the Realestate profession. Focus on your own profession and if it's not paying enough, have the good sense to leave it.Get in to something that if you work hard and smart at, it pays.Like Real estate!
Skeptic,
I'm on the late shift. I didn't get home last night until close to midnight and I didn't get to bed until 1AM.
Don't worry I'll be going to work in a few minutes to work another profitable day.
Thanks for your concern.
Skeptic,
One more thing, I not only live on commission, I live on excitement in fact I thrive on it!!!! Insults,namecalling and all.
A good Realtor lets rejection run right off their back. That's what make us so successful and make so much money!!!
What I find interesting about real estate “professionals” is how they can sleep at night with the information that they communicate to their clients. I am a professional and have spent my entire career putting the interests of my clients/employers first. That was drilled into me with years of low/no paid education/training, but that is expected of me and I can always sleep at night.
But anyone with extensive training in real estate, mortgages and the market would clearly understand the heavy risks associated with buying a property today in BC or most of Canada for that matter. If anyone actually spent a few hours with an unbiased view, they would see the serious risks facing real estate in this country.
I have been a real estate bull for many years including when many on this blog were bears, but in recent years I have changed my outlook based on the facts in front of me. I am even more concerned today given the economic outlook and longer term interest rate increases.
I was talking to a realtor the other day who told me that Victoria real estate can only go up. He had his reasons, but was not willing to listen to my logic, but he kept focusing on “current” inventory levels. He simply would not address or discuss my longer term concerns, but rather would change the topic of discussion.
How can professional realtors actually really believe real estate is a good investment today and that their clients can expect to realize price appreciation? How can they let their clients take out 35 year mortgages with 5% down given these risks? How can they possibly sleep at night knowing many of their clients will pay for their real estate purchase the rest of their lives? No true professional could.
They are either:
• In it for themselves and could care less about their clients
• Totally in denial over the realties in the real estate market which simply makes then stupid
"Chickinvic,
Have you ever heard of the saying,
"Only a fool represents himself in Court"
It's a real saying,I never made it up, and I'm sure it is said for a very good reason."
You are, quite simply, being ridiculous. I have represented myself with great success on the occasions I did so. We aren't talking criminal defense type stuff here. This was straight forward, family law stuff. You were completely inaccurate in saying that lawyers won't take on a client and only provide partial services - and you are totally wrong about that. Period. There are PLENTY of instances when an INTELLIGENT person can represent themselves in court (and yes, this was also the advice that lawyers have given me).
Chickinvic
PS - I wouldn't recommend you ever try to represent yourself in court over anything - even a parking ticket, since you are clearly an idiot.
Rebel said:
One more thing, I not only live on commission, I live on excitement in fact I thrive on it!!!! Insults,namecalling and all.
A good Realtor lets rejection run right off their back. That's what make us so successful and make so much money!!!
You have clearly outlined why you are a salesperson and NOT a professional.
A true professional is concerned about their reputation and will always endeavour to conduct themselves in a manner that does not lead to insults and namecalling. They consider ethics and professional integrity to be cornerstones when dealing with current and potential clients. Should a problem arise they resolve it an a professional manner and don't let it "run right off their back".
A true professional does NOT believe that being successful only entails making lots of money. Many make modest incomes but take great pride in dealing honestly with others and abiding by the principles of their profession.
All that said I have known several realtors that deal fairly and honestly with their clients and strive to put clients interests first. They do this even if the individuals are difficult to deal with.
Your postings and rants on this blog have clearly shown that you are not one of them.
But just keep on posting!! The more you do the more the readers will be convinced that the government needs to change the rules in the near future. Overpaid sales people that require a closed MLS database in order to make a buck are in a for a rude awakening.
Wow Rebel you are a piece of work. You will not answer a simple question.
How about I answer to your insinuations. We don't have to pay cash for cars; we choose to. 2 years ago when we bought a new car we did the math on financing; we paid cash instead.
We live in a rental at this time as we invested in education, this has greatly paid off. We can very well afford to re-enter the market but we are sane. I wouldn't call where we live moldy either.
I am certainly not jealous of realtors and I don't think many would call us losers. I used to be a contractor, like Marko, who has had lots of interactions with realtors in the past. If I wanted to be a realtor, I could just as easilly take that 1 week course.
When I was younger I had a friend who worked at future shop. He said they would have little pep rallies before the doors opened. I think you are one of the few people who actually believes in that kind of stuff.
Wrong again Rebel. I was pre-approved by my bank not a broker for over 700 large. Maybe my agent didn't believe it or maybe he wanted me to make a higher offer or maybe he thought he could squeeze me for a bigger sale. Either way, I'm not easily suckered. I walked away from the sale and from him.
Like many on this list, I live within my means, I pay down my student loans, I support children with special education needs and help out aging parents. I give to various charities and do pro bono work. I might not be rich but I'm satisfied my integrity is in tact. And if you walk through my door I will apply myself to your diagnosis and treatment with the same compassion I have for anyone else even if, by chance, I know you are the Rebel blogger.
In many cultures, wealth is not defined in monetary terms. I choosen to define wealth as having the love of my family, the respect of my colleagues, and the wisdom to know that I know very little. This is my final post to you until you quell the vitriol.
Realtors are hard working individuals who deserve EVERY dime they make. The word of the day people is "CHOICE". And the Real Estate industry provides plenty of choices. It’s simple, if you can’t afford or not willing to pay 5 or 6% commission, then find a 1% Realtor. And if you don't want to pay 1% then sell it yourself damn self and STOP the whining.
Personally, I think the people that are hating on agents are simply jealous or perhaps Real Estate wannabees.
If the word of the day is "choice", was last week's word of the day "Canada’s Competition Bureau concludes CREA’s rules are anti-competitive"?
These REALTORS are unbelieveable. You try to reason with them and they reply with irrelevant answers and ridiculous assumptions. The more they act like immature goofballs, the more they hurt their industry.
Isn't the word of the day "bubble"?
Wow, Tonya the realtor sure isn't very well informed. This whole discussion was about the realtors blocking 1% and alternative realtors access to the mls service. That is until a bunch of realtors who didn't quite make thge debating team showed up.
omc - Realtors who make the debating team are lawyers.
I always see post about/by crap Realtors, enough is enough. here are two realtors i know ho give damned good service.
Geoff Field, DFH Realty, he is my realtor, he has put up with my nagging, emails, phone calls, bitching and countless showing over the last 2 years. He has never once offered financial advice which is EXACTLY what I want from a realtor; show me the property do not give me stock tips.
Diana Devlin, Remax Camosun, she is a true real estate believer, but, she has been around almost 30 years, has been VREB president and is very professional. She knows her stuff, knows Victoria, and will give you her opinion point blank, no holds barred. Every time I have talked to her she has focused on real estate as a home, not an investment, and we all pretty much agree that if you are buying for a home, with the long term in mind, price doesn't matter. *disclosure* I am in her BNI chapter but I think she is a good realtor I am not biased based on an expectation to pass referals. I don't even think I have given her a referral ever as whenever I am in a position to recommend a realtor I always recommend Geoff Field.
If you are in a buying mood, talk to Geoff or Diana, why not both? I think they will be worth the commission.
*hopes that Rebel is not Geoff or Diana*
Robert: It's funny how human nature guides us to voice complaints more than praise. Thank you for sharing your realtor recommendations. It helps people like myself who are relatively new to the city.
If anybody else wants to name a responsible realtor, please do so. Give credit where credit is due. Let the weak perish and find work in other industries.
If there are realtors on this blog, I encourage them to speak up also. Realize that the people on this blog will put food on your table after the upcoming market correction; a time when the mainstream media scares off your typical clients.
Great story about a Home Inspector that didn't quite get it right.
http://www.cbc.ca/consumer/story/2009/11/11/bc-home-inspection-lawsuit.html
Home inspectors provide peace of mind for purchasers by looking for the obvious items that can go wrong in a home. They have slightly better knowledge than the layman with a working understanding of house construction. They are not experts in any one aspect of home construction, but are a jack-of-all trades.
Home inspectors exist because they provide comfort to a purchaser, eliminate liability to an agent and are substantially cheaper than hiring qualified trades people for all of the items that make up a home.
In otherwords, you are paying $450 for someone to hold your hand and state the obvious to you. For $50 more, you can have sex with their cat.
An honest building inspector can make $75,000 a year. A dishonest inspector can make over $150,000 a year.
Accountability and responsibility are things that are not taught in class, they are learned in court.
When this market collapses, your going to hear of buyers blaming realtors, inspectors, bankers, lawyers, appraisers, etc. Because they can not believe that they could be that stupid to buy real estate - it had to be the fault of someone else.
Accountability and responsibility are things that are not taught in class, they are learned in court.
INDEED!
Not all realtors are shallow sales jerks. Some really understand the real estate market and warn their clients about downside risks.
James Wong in Richmond BC
Low interest rates will not last
It’s a matter of time that the current ultra-low interest rates will spike up, resulting in home prices less affordable to home buyers.
Home owners with high level of consumer debts and overly-leveraged are vulnerable to a down turn in home prices.
High home prices not supported by fundamentals. Whether it is a detached home, townhome or a condo, the rental return is not enough to cover mortgage payment, property tax and maintenance
Should you sell now?
This may be the best time to sell when others are buying. If everyone is thinking of selling, it may be too late. Home prices can easily fall 15% to 20% when market sentiment turns, and home sellers are rushing to sell.
Some of the comments that have been made on this site are so prejudiced, ignorant and just plain stupid!!
For example, that Realtors do a dis-service by telling people that Realestate is a good investment???
Everyone knows there has always been a big difference in those that have rented all their life and those that have paid a mortgage.
Compare the prices of realestate in the 60's,70's,80's,90's,2000-2009,from 14,000 for an average home in the 60's up to 500,000 today.
True,Realestate does have it's ups and downs but in the longterm it always comes out the winner!!
Everyone needs to live in a home.
Do I believe people should go way over their head? Of course not!!!
But if your'e paying rent which is in reality paying your landlord's mortgage.If you can afford to pay a little more per month, pay your own mortgage.
It's a whole lot smarter than renting and paying cash for a new car!
Also,even if you end up paying higher interest on a fixed term than a variable. For peace of mind and security from your mortgage going up over night, lock-in!! At least you know you can afford to keep living in your home and you won't lose it.
Will Realsetate continue to rise?
If not sooner definitely later!! Have we hit the highest prices we will ever see? Doubt it!! Look how expensive Realestate is in Europe and other areas!!!
Buying a home is smart! Always Renting is stupid!
Rebel,
At least you are consistent! Lots of armwaving with no facts. As a newcomer to this blog you have not seen the hundreds of other posts that refute most of your baseless claims. No one here disputes that real estate will be worth more in nominal (not real) dollars in twenty years. The point is should one buy now or wait and buy later?
Here are a few things for you to chew on.
- Variable interest rates are at record lows. Fixed rates have nowhere to go but up. Ownership costs will rise.
- The first time buyer pool is nearly drained. Low interest rates rates have brought many future buyers forward. Not many will be left when rates rise.
- Affordability is very poor in BC. Real wages have not increased much in the last 10 years. When rates rise it will be worse and prices will drop.
- Homes are not an "investment" but a place to live in. The year over year gains in recent years are abnormal. This investment spin has only been pushed by the RE industry in recent years. However, homes do provide a long term hedge against inflation.
- It is much cheaper to rent a house in Victoria than it is to buy it. The money saved can be placed in real investments like stocks, bonds etc.
- Renters are not throwing their money away. They are getting a service for their monthly payment. Owners with a mortgage are renting too. In their case they are renting money in the form of interest.
Try reading the blog archives before you post drivel. Your baseless claims have been debated countless times in the past. When you are able to make sound arguments people will listen to you. Now you just sound like a typical real estate shill with emotionally charged rants.
If you keep calling the renters that pay your mortgage stupid. They may all go out and buy a home, leaving your suite vacant and you unable to make the mortgage payment.
Ahh, who's stupid now.
P.S. Ooops, I guess they are doing that now - have you looked at how many rentals have been listed on craigslist in the last couple of days.
Rebel does not like to answer questions or respond to specific comments but I will reply to his.
For example, that Realtors do a dis-service by telling people that Real estate is a good investment???
Yes they do a disservice to clients. They are not trained or licensed to sell investments - only real estate. Most like Rebel do not believe or understand what risk and performance disclosure mean. For example: "Past performance does not imply or guarantee future gains" is foreign to most realtors.
Everyone needs to live in a home.
True. But one can have a very nice home and still be renting. This claim is meant to seed inadequacy in a renter and is a common ploy by agents.
But if your'e paying rent which is in reality paying your landlord's mortgage.If you can afford to pay a little more per month, pay your own mortgage.
It's a whole lot smarter than renting and paying cash for a new car!
This argument is so full of holes I don't know where to begin. Paying cash instead of buying on credit is almost always a good idea. Buying a house when you can barely meet the payments today is not very prudent. In 5 years, at renewal time, the interest rate and payments will be much higher. The "paying the landlords mortgage" argument has been discussed countless times in this blog and does not bear repeating.
Also,even if you end up paying higher interest on a fixed term than a variable. For peace of mind and security from your mortgage going up over night, lock-in!! At least you know you can afford to keep living in your home and you won't lose it.
Here is another financial suggestion from someone not trained in the field. A mortgage broker would tell the homeowner that several studies have shown that a variable mortgage, with extra payments, yields big savings for homeowners. The "peace of mind" expression is another emotional statement without any financial footing.
Some of the comments that have been made on this site are so prejudiced, ignorant and just plain stupid!!
That is correct. Why do you keep making them?
Some of the other posters have mentioned that there are good realtors out there that give sound advice and do not use emotional manipulation to make a sale. If you are an informed consumer you should use one of them. Those that need to be held by the hand and are swayed by emotional rhetoric will use Rebel's services.
I wonder where on the "warning signs of eminent real estate bubble collapse" is:
-Realtors start trolling bear blogs in a desperate attempt to prevent intelligent discourse on the subject matter....
I think it's somewhere between #1 - "people generally know that now is not the time to buy real estate" and #3 "First time buyers get creative to purchase 50's shacks by creating 2 bachelor suites in their basements and sharing the main floor with their friends..."
That was 19 exclamation marks from Rebel.
!!!!!!!!!!!!!!!!!!!
That would be nineteen more reasons for people like me to further dislike real estate agents.
Only problem is that most agents probably don't like the negative energy created by other agents like Rebel.
I wonder if the RE codes of practice include maintaining a positive image of the 'profession'?
Cameron Muir is reported in the TC today. Similar to what he said in Kamloops, he comments about the slow economic recovery and home prices in the upcoming year.
“Recovery in the B.C. economy will unfold gradually next year,” Muir said. “With sales prices in some markets flirting with record highs, affordability constraints will limit home price inflation over the next year.”,
Unfortunately his comments can only be found here in the LAST PARAGRAPH, after the cheerleading:
Greater Victoria real estate on a big rebound
Calgary's rents are very close to what one would pay for a mortgage on a home. No one knows how much their rent will be increased over the next 5 years. When I tell 1st time homebuyers to lock in at 3.90% for 5 years at least they know they can afford their home without losing it. I don't feel that's bad advise since no one knows the future when it comes to interest rates.Realestate in Calgary has not been a bad investment for anyone in the past decade. Everyone that has invested and stay for a while always come out ahead.Those that bought in 2005 resold in 2007 doubled their money and didn't have to pay any tax on it since it's their principal residence. Also, they never complain about paying a Realtor's commission either since they appreciate Realtors and respect their profession.Realestate in Calgary is booming this year with record sales.
For all you on the Island that hate realtors,stay on the island and keep that rent mentality you have. Outsiders will eventually move in and gobble up the realestate you don't own. They,then will end up being your landlords raising your rents.
Why would I bother answering your questions since most of you are renters who are already know it alls about realestate even though you don't own any.
Keep paying cash for your cars and keep renting and you'll really get ahead and end up with a lovely retirement.
I'm done with your intolerant,insulting,name calling,prejudiced know it all about nothing, blogs.
I'm sure glad Calgarians are so progressive and openminded and in fact very nice people to do business with. They are winners not the least bit afraid of investing in realestate.They also have the money to show for it.
Rebel, you talk so much cherry picked nonsense lacking even basic investigation, it's actually funny. Thanks for the laugh.
On a side note, looks like Garth is coming to Victoria Nov 19th. I won't bother going, the guy is far too arrogant for my liking, but it might be funny to give a couple of tickets to your bullish real estate friends... they'll be walking out pale I'm sure.
Mr.4AM
I just popped over to the Calgary Herald/Business/Real Estate section and here are some of the headlines:
Calgary's new home price decline third highest in Canada for September.
Downturn helps unmask mortgage fraud in Alberta
Downtown office vacancy continues to rise while suburban market has "peaked"
Calgary CMA's housing starts continue to rise - CMHC (this one is the best because of the comments)
S2
So now we know that Rebel is a real estate shill living in Calgary. He knows nothing about Victoria real estate but comes on this blog spouting his nonsense.
Rebel said:
Keep paying cash for your cars and keep renting and you'll really get ahead and end up with a lovely retirement.
Thank you. That is the most intelligent thing you have said so far.
I'm done with your intolerant,insulting,name calling,prejudiced know it all about nothing, blogs.
Another troll slinks away. Don't let the door slam your butt on the way out.
How Mortgage Fraud works
The purchase price of a house is, say $100,000. Usually the bank will advance 80% ($80,000) and the borrower must contribute 20% ($20,000).
If the borrower does not have the amount ($20,000), a false sale and purchase agreement is created (usually by the seller or the broker) showing the purchase price of the property at say $135,000 and not at the genuine amount ($100,000). Often the false purchase price is supported by valuation of the property from a valuer (who may have no idea of the intended fraud).
The purchaser applies for a bank loan of $108,000 (80% of $135,000) stating that he or she has $27,000 (this is false). Such applications are usually made with the assistance of some mortgage brokers and/or real estate agents.
Based on the false information, the bank lends $108,000 as it believes this is 80% of the purchase price, but in fact is actually more than the genuine purchase price.
The borrower receives the $108,000 and the funds are used to purchase the property ($100,000) with surplus funds ($8000) distributed amongst the unscrupulous participants.
In addition to the false purchase price, other false documents are sometimes used. These include a false valuation report and a false employment letter showing that the borrower has a job with sufficient income to honour the mortgage repayments and to meet living costs.
If the borrower has a bad credit history, the borrower’s name or date of birth is changed slightly so that this fact is not detected when a credit report is obtained.
Source: Serious Fraud Office
Interesting post JJ.
Theres one more side effect from that scam that affects those who haven't purchased yet. Because the house was purchased at a higher than average value it pushes the real value of houses in the neighbourhood up. The next guy that buys a house in the neighbourhood has to 'legitimately' pay extra that he normally shouldn't have.
Mortgage fraud requires a "hot" market, where those that should be conducting due diligence are pressured by time constraints. A quick glance through the phone book reveals the large number of brokers and realtors in Victoria. To say that there is no mortgage fraud in Victoria would be ludicrous.
The fraud only is noticed when prices decline and people take a step back and think and then question paying a million dollars for a 1,600 square foot town house in Victoria, or how a 25 year old student can get a half million dollar mortgage based on renting out the rooms in the house to other students.
As a bank depositor, I would hope that we could demand responsible lending with our life savings.
I love the "winners" quote from rebel. I guess "winners" do what they are told. Or at least told to by people like rebel. Kind of sounds like that clown vancouver realtor who posts on youtube.
Now I don't know about calgary real estate so I don't post on their blogs. But Victora real estate is quite easy to predict. If you look at the last 3 decades, if the market defies gravity it always corrects. In the 80s it was a drop in prices and in the 90s real estate didn't move for 7 years while inflation caught up. So buying at these extreme prices in an extremely tight sellers market probably isn't the best idea. Rebel did you know that the respectable realtors over here will tell you this?
Even if prices don't drop much at least we will have left this crazy sellers market. Buying a shack in a frenzy (people aren't always able to get inspections now) is what "winners" do.
As far as your comments on our paying cash for cars and your concern for our retirement, we really appreciate that. But, we will continue to live within our means, diversify investments and save for a rainy day. I know that isn't what "winners" do in your book, but I am sure we will be fine.
Is anyone actually seeing the effects of this "recession?" Resturants, malls, everything is busier then ever. I have a paid off home, rental income, successful business, and my wife is a RN. We drive a 2007 Honda Civic and 1992 Acura Legend. Today at Mayfair Mall I saw a 09 BMW M6, 09 750i, X5, X6, Porsche GT3, Audi S5 (my dream car). Even leasing some of these cars is $2000/month. Not to mention how many teenagers I saw at Mayfair packing blackberries, iphones, isn't like a plan for an iphone at least $70/month?
When I was a teenager I was mixing mortar for my old man who is a stone mason. Life seems easier these days.
Marko,
I think the recession is more in the numbers than directly visible. For instance, if there was an 8% seasonal decline in shopping traffic would you be to tell by looking at the mall for 2 hours? I certainly couldn't.
Even if people are at the mall, that doesn't mean they're buying as much.
Marko,
This is all because of:
a) Credit
b) ~30 years of declining costs to pay back credit (USA stat)
I strongly recommend people read this article, because it sums up how:
a) A real credit crunch is about to hit the FAN
b) Interest rates will need to increase So the gov can pay back the $$$ it had to borrow to buy up billions in MBS, bail-out $$, etc.
It won't be long now, Q3 2010 will be just the beginning of it.
Mr.4AM
PS. When interest rates start rising, the real "winners" will be those that are debt free and have $$$ saved up to buy up cheap assets.
I don't know what the retail numbers are going to be like this shopping season; however, sales of BMWs, Audis, Benzs, Porches are all up this year in Canada. Some people have way too much money.
Marko,
Just a week or so ago there was a release by stats can showing that debt was far out stripping incomes, and gaining steam. Flaherty and Carney were both quoted for comments. Warnings were uttered. But to hell with being reasonable, full steam ahead!
"This is all because of:
a) Credit
b) ~30 years of declining costs to pay back credit (USA stat)"
I agree, a lot of people are way in over their head. I know a couple with three kids, only the husband works and makes approximately $70,000 yet they bought a brand new 2800sq/ft home 4 years ago, have an Audi and SUV. That is called overextended.
However, there is a portion of the population that just has ridiculous amounts of money. My brother works for TD investments and you would be shocked at some of the accounts people have and we aren't talking huge well know business people here.
Two years ago I built a house in Gordon Head for a doctor from Yellowknife. He has been to Victoria a total of three times for maybe one week each time! His two daughters that go to UVIC live in a 3700 sq/ft home.
This 'recession' does not feel nearly as bad as the 1990's in Victoria.
Marko said - This 'recession' does not feel nearly as bad as the 1990's in Victoria.
Unemployment is up considerably in Victoria in the last year. Visit the job search offices or the Mustard Seed and you will see the recession up close and personal. You won't see this at the mall which is the entertainment mecca for many people.
In previous recessions people that lost their jobs tried to survive on on EI, savings and part time jobs. Credit was harder to get and the mentality was not to go deeply into debt (i.e. financial responsibility). Today most families have next to nothing saved for a rainy day. The reason the recession does not appear to be as bad this time is easy credit. People are maxing out their credit cards and drawing on home equity lines of credit. If things don't improve many will hit the wall in 2010.
As far as fancy cars, blackberries and cellphones these are all on credit. Only about 10% of people buy a car for cash; the others are on lease or easy payments. Visit the Mustard Seed food bank and take a look at the cars and cellphone users in the lineup.
Sure there are wealthy folks in Victoria but there are many in way over their heads. If the recession deepens or interest rates rise you will see the prosperity illusion disappear before your eyes.
Well said Skeptic.
This is a little blurb from the Times Colonist
"It seems strange to be writing about Christmas just days after Remembrance Day, but we are kicking off the Times Colonist Christmas Fund a little earlier than usual this year to respond to unprecedented requests for help this holiday season."
They mention the single parent, the diasbled, the working poor. They don't mention the over-extended on credit but I'm sure they are in there.
S2
Re Calgary. A friend of mine just moved here from Calgary and sadly was not able to sell the house he purchased in the past couple years because he is underwater. He is stuck with tenants with bouncy rent cheques. I understand there is a glut of rentals in Calgary right now, so you can't be too choosey either about your tenants.
Recession: The job ads on Usedvic are FULL of people looking to do any type of work.
Here is a Canadian banker that "gets it" - President and CEO of ING Direct Canada.
Toronto Star - Mortgage lender warns of housing bubble
Low interest rates have caused some Canadians to act "irrationally" in the housing market, potentially taking on too much debt that could lead to economic difficulties down the road, says the president and CEO of ING Direct Canada.
"You have situations in some markets such as Toronto where people are making multiple offers for homes, they are paying thousands more and waiving conditions. It gives me concern they may not be thinking rationally, and this could lead to problems," Peter Aceto said in an interview Wednesday.
"Canadians are also paying their homes off slower and slower, and the concern for me is that they are buying more house than they can really afford."
"It's almost as if Torontonians feel very concerned they are missing something with such low rates." said Aceto. "The problem is: can they afford to pay for their mortgage five years from now, when interest rates go back up?"
Up in Campbell River this weekend. Driving from Courtenay to south Campbell river (willow point) there were exactly 60 properties for sale on the old island highway. That's 2 per Km on average. The volume of stuff for sale up here is huge
"Only about 10% of people buy a car for cash"
I've always bought used cars and always paid cash. However, why would anyone pay cash for a new car? Doesn't make sense, most manufactures worth buying (i.e. Honda, Toyota, Mazda etc.) offer 0% financing for 36 to 60 months, while cash incentives are only like $500 - $1500 (or $10,000 and up if you are buying garbage ~ aka GM, Chrysler). I would always take the 0% financing and invest the cash I would have used to purchase it. I am surprised that even 10% pay cash considering financing rates on cars these days.
"Recession: The job ads on Usedvic are FULL of people looking to do any type of work."
The majority of people posting ads for work on UsedVictoria.com are bullshitters. I posted an add on there looking for a carpenter and got 14 replies from people who think because they have worn a tool belt at some point in their life they are a "carpenter."
"why would anyone pay cash for a new car"
Because you bought a new car from the states when the dollar was over par and saved a bundle. That is the way you had to do it. BTW there is no more ultra low financing up here any more for cars. I know someone who just paid cash for a new car up here because the best interest rate they could get was too high.
"It's almost as if Torontonians feel very concerned they are missing something with such low rates." said Aceto. "The problem is: can they afford to pay for their mortgage five years from now, when interest rates go back up?"
The MSM and the real estate bizz are brain washing them to think they are missing out.
Did you see the new REMAX commercial where the one girl kicks the other in the ass on the beach and the couple sitting there watching says "they're kicking themselves for NOT buying". Talk about totally lame marketing.
Yeah,I am so mad for not going into hock for life. It's ads like these that make the blow hard realtors live up to their reputation as we have just witnessed.
"BTW there is no more ultra low financing up here any more for cars"
2010 Mazda3
48 months - 0%
72 months - 2.9%
2010 Corolla
36 months - 0%
72 months - 2.9%
I understand the point you are trying to make. People are overextending themselves by financing everything; however, even if you have tons of cash it is better to finance if it makes sense. Why would you take a $500 cash discount on a Mazda3 when you can finance it for 0% for 4 years?
Debt isn't a bad thing if you are making it work for you. For example, right now you can take on margin for as low as 3% interest. On the other hand you can buy a lot of soild companies (Telus or Rogers, TransCanada Pipeline, Canadian Banks, list goes on...) that pay dividends in the 5-6% range. Even if the market is flat for the next 2 years you are making 2-3% off the debt you have incurred.
Is it a questionable choice to overextend yourself right now when buying a house? Impossible to know for sure, but in my opinion it is a very questionable decision. I can't see prices going higher, and there is definitely the risk of a correction.
What about someone who overextended themselves in 2001 and bought a $300,000 home when they could only realistically afford $220,000. I would say they are laughing now because their home is worth $750,000 versus $500,000 the $220,000 home would have been worth now.
"What about someone who overextended themselves in 2001 and bought a $300,000 home when they could only realistically afford $220,000."
You could not over-extend yourself back in 2001 like you could in 2006/07. The lending rules didn't relax til the last few years. Back in 2001 mortgage brokers managed risk like Mr. Scrooge. I know because I tried and that was with a healthy down payment and a solid job. CMHC ? You wouldn't even think of going there. It came down to the 30% rule and what they think I could afford and THEIR risk if I lost my job.
Turn the clock ahead 5-6 years and the Canadian system turned 180 degrees so any clown with a pulse, as in the US, can borrow far beyond their means and they are still doing so. Your missing the fact we had a major shift on the massive gutting of Canadian lending values.
As the T.O. Star article said, it's now all about banks making their quarterly numbers,not about their risk to lend you. It's a whole new ball game and the loser is the over-extender/sucker/sheep which we know is a very high percentage and will end in a very ugly manner.
"What about someone who overextended themselves in 2001 and bought a $300,000 home when they could only realistically afford $220,000."
That person that overextended themselves was saved from defaulting on their mortgage because of the falling interest rate over this time period.
This person has now become the poster child for success in real estate. They bought a home for $150,000 back in 2001 and the property has escalated to $350,000 today. At the same time their payments have dropped from $1,200 to $600 a month. A success story of how to get rich in real estate.
Now, if they didn't fall into the wealth trap then real estate has been good to them. But, they have shown themselves to be risk takers and the probability is that they have used the paper equity in the home to buy more real estate and/or more toys.
Today, that person could have a million dollars of real estate where they rely on the rents to cover most of the payments. And this person has been back several times to the bank to re-finance the loans as interest rates dropped. The last time, however, the bank declined them, and this person is now using an "equity lender" (An equity lender does not care about your ability to pay as munch as the value of the property).
A slight change in the interest rate and/or an increase in the vacancy rate and this person's real estate empire collapses.
There's a lot of real estate millionaires in Victoria, that can't afford cablevision.
One of the key problems Vic, is that most banks & credit unions (except perhaps really small ones), don't hold the majority (80 to 90%) of the mortgages they sell on their books. They get securitized, and sold off (currently mostly to our government) as "investments".
If the banks & credit unions had to actually hold most of these mortgages in their books, it would radically change their approach to mortgage qualification and credit limits.
The volumes of securitized mortgages in Canada are so high now, that when this whole thing goes bad, you can bet the losses will be socialized. Just like in the USA. Ticks me off because it translates to a system that ends up rewarding out of control speculators & spenders and punishes savers.
From: CANADA'S SUB-PRIME MORTGAGE TIME-BOMB
"Even bank economists admit to being concerned about a housing bubble. In a September research note, Scotiabank economists Derek Holt and Karen Cordes said, “…lenders have been scrambling to get enough product to put into the federal government’s Insured Mortgage Purchase Program over the months, and that may have translated into excessively generous financing terms.” Holt suggested that in two or three years -- or whenever the Bank of Canada increases interest rates -- many of these mortgages would be at risk.
The banks themselves have taken on virtually no new risk. According to CMHC numbers in the two years from the beginning of 2007 to January 2009 Canadian banks increased their total mortgage credit outstanding by only 0.01 per cent. Fully 90.5 per cent of all growth in total Canadian mortgage credit outstanding since 2007 has been accounted for by Mortgage Backed Securities. Of course, the banks have no interest in saying no if you have qualified for a securitized CMHC loan -- because they bear no risk if you default.
If that sounds like sub-prime mortgages, it should. Sub prime is any loan below prime. If a bank refuses you a loan, and CMHC gives you one, the loan is sub-prime. As Lepoidevin says in his warning letter, “Every single U.S. lender specializing in sub-prime has gone bankrupt. The largest sub-prime lender in the world is now the Canadian government.”
Oh and btw, here's the potential future in Canada once the foreclosure rates get out of control...
New Deed-for-Lease
After the government bails out CMHC with our tax dollars, they will play landlords to the forclosed.
"Fannie Mae is introducing the Deed-for-Lease Program (D4L), a program designed to minimize family displacement, deterioration of neighborhoods caused by vandalism and theft to vacant homes, and the effect these have on families, communities and home price stabilization. D4L allows qualifying borrowers of properties transferred through deed-in-lieu of foreclosure (DIL) to remain in their home and community by executing a lease of up to 12 months in conjunction with a DIL."
I give it 3-4 years before we see a Canadian version.
Mr.4AM
Marko,
The point I was trying to make is that I bought a car for $26k cdn in the states that sells for $42k cdn up here. The $42k was the best I could find through a broker. I also paid the taxes on $26k, instead of $42k so there is even more savings. There was no financing available across the line. This was for a brand new semi luxury japanese car with full warranty.
With those price differences you will never make up the difference with a low rate financing.
1134 Dallas finally sold last week - only a year and a half on the market...
Anybody know how much for?
$1,095,000, which was asking. The market is moving up to the houses with higher asking prices
correction - which was current asking - started at 1.79M mid last year.
That said, I am amazed that the market is moving at the high end, that it is moving up.
Could mean quite a spike in median and average this month if the distribution changes.
"One of the key problems Vic, is that most banks & credit unions (except perhaps really small ones), don't hold the majority (80 to 90%) of the mortgages they sell on their books. They get securitized, and sold off (currently mostly to our government) as "investments"."
Agreed,but the mortgage broker I was dealing with worked within LePage's office and any defaults would come back to him somehow effecting his "reputation" within the broker lending bizz. If I was to default he has a tougher time selling clients to lenders who are on the qualifying bubble.
I even followed up with the bank and got the same result. Looking back it was insane to not lend to me because the place had a suite but it was "illegal" and to circumvent that I had to have a renter signed to a one year lease which is impossible to pull off when buying on a short notice deal. Shows how fast and loose the rule have changed.
In my case it was a total joke as I would have had the suite rented within a reasonable time which would have covered 2/3 of my mortgage. But back then lenders actually cared about their reputations and couldn;t bend the 30% rule.
Today you are just another quarterly number and not a person and they could give two craps if you go under.
"Marko,
The point I was trying to make is that I bought a car for $26k cdn in the states that sells for $42k cdn up here. The $42k was the best I could find through a broker. I also paid the taxes on $26k, instead of $42k so there is even more savings. There was no financing available across the line. This was for a brand new semi luxury japanese car with full warranty.
With those price differences you will never make up the difference with a low rate financing."
This makes sense on some cars, mostly Subarus, Infinitis, more expensive Nissan and Toyota models, Audi, BMW. If you search usedvictoria.com more than half of Nissan 350z are ex-imports.
However, the best selling cars in Canada are the Honda Civic, Toyota Corolla, and Mazda3, and it didn't make sense to import these even when the dollar was at parity.
"But back then lenders actually cared about their reputations and couldn;t bend the 30% rule."
I know a lot of people who bought with 5%-10% down back in the early 2000s.
Your right animal spirit. I have heard also that houses over 2mill are down over 20% from the peak.
anybody know what novembers numbers are looking like so far? seems to me that I'm seeing a lot of for sale and for rent signs around town...just wondering if total active listings are going up??
Active listings are actually going down. Total Number of Active Listings was 3149 on November 9th, and dropping.
"I know a lot of people who bought with 5%-10% down back in the early 2000s."
Then they must have went CMHC and paid the extra rate when rates were already at 8% or a 3 year mortgage or they had a high dual income. I was a single income and didn't want to be held hostage by CMHC,the rules were much more stringent on income etc than they are now.
"Is anyone actually seeing the effects of this "recession?" Resturants, malls, everything is busier then ever. "
90% of people still work in a recession. I don't recall any past recessions where the malls were boarded up. But then again you went on a Saturday the busiest day of the week and the start of people beginning Christmas shopping so doesnt seem too abnormal.
As far as the expensive cars goes,I am sure there weren't 20 in a row,but this town has money and many old people are dying leaving large inheritances to buy those dream cars.
"Why would you take a $500 cash discount on a Mazda3 when you can finance it for 0% for 4 years?"
You might want to do some homework there Marko. They make you pay a downpayment on the 0% financings. They will ding you like they do on leases with a (roughly) $2000-3000 down payment depending on what model. They always get you paying something,nothing is ever free, zero is never zero.
"You might want to do some homework there Marko. They make you pay a downpayment on the 0% financings. They will ding you like they do on leases with a (roughly) $2000-3000 down payment depending on what model. They always get you paying something,nothing is ever free, zero is never zero."
My daughter bought a 2010 Mazda3 last month with 0% financing for 48 months. Including taxes and fees we were quoted $19,050 with financing and $18,600 cash price. We ended up getting the car for $18,800 with financing. The payments are $391.xx/month. Multiply $391.xx/month x 48 months = $18,800.
Okay, the financing isn't free because we could have probably got $400 more off the car paying cash.
However, you are complete wrong about the downpayment. Perhaps if you have poor credit or low income they might force you to make a downpayment, but otherwise you can lease and finance cars at 0% with zero down. Please find me a manufacture where you can't finance or lease a car through them with zero down? Never heard of it personally.
Thank you HouseHuntVictoria for this article and holding this discussion panel later. This is too knowledgeable to get words from people into related industry. Seriously, CREA had many faults to receive complaints from competition bureau in future also.
CD Rates
"However, you are complete wrong about the downpayment."
Really marko ? It says so on the Victoria Mazda website in the section on financing. The words "down payment" are used in the section on additional fees. Maybe you got a wave because they are trying to flog some models faster than others but it does state it if you go look.
There is no such thing as 0% financing for a car (or furniture or any of the other things that advertize 0% financing, no payments for 1 year, etc). Every person who knows finance or accounting knows this. The interest has been built into the price. If you pay in cash up front, you should have leeway to negotiate a better deal for yourself (I would walk away if they don`t). There is no free lunch folks.
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