August 4, 2008
Toronto’s bidding wars continue
Even as the real estate market softens, vendors still offer conspicuously undervalued homes in some Toronto neighbourhoods
Listing properties below the market value has become a common practice in the Toronto area over the past five years – creating a bidding-war mentality for buyers. Even with sales down, the market cooling dramatically and active listings up by 22 per cent compared with last year, multiple offers continue in some highly sought-after areas.
While houses sit on the market longer with more inventory available in the Greater Toronto Area, most of the multiple offers are taking place in pockets of the central city still coveted by buyers. But under-listing properties has created a backlash, not just among frustrated consumers, but also from some agents who say the practice is undermining the profession.
“Underpricing a home to create an auction-like frenzy started on really great homes in nice neighbourhoods,” realtor Sally Cook says. “Now everyone is doing it on any old piece of crap.”
“It’s detrimental to the seller. You might have 19 bids, but only two people can really afford the house, because you’ve attracted everyone else who can’t with a lower listing, so it’s completely artificial,” Cook says. “And of course the house is going to sell over asking – because it’s underpriced in the first place.”
The Toronto Real Estate Board, meanwhile, says there’s little it can do to restrict the listing price an agent might place on a property.
“Auctions, bidding wars and the various ways of marketing properties are driven by the marketplace,” board president Maureen O’Neill said in a written response to questions by the Toronto Star. “TREB (and others) do not have the right to interfere with a market-driven function.”
See full story in the Toronto Star »
June 24, 2008
Realtors enlisted to fight money laundering
New law requires real estate agents to verify ID of buyers and sellers and track deposits
New federal laws and regulations dealing with money laundering and anti-terrorist financing that go into effect today (June 23rd, 2008) will require real estate agents and brokers to collect and verify more personal information from buyers and sellers. Real estate agents must also now track the source of funds received during the course of a real estate transaction, such as the deposit.
These new regulations are part of federal legislation (Bill C-25) passed in 2007 that requires a number of industries, including real estate, to do more to help stop money laundering and terrorist financing. The regulations are enforced by the federal agency known as the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC. “Real estate agents have had legal obligations under the federal government’s push to prevent criminal activity and terrorism since 2001, when Canada’s first comprehensive laws to combat money laundering and terrorist financing were introduced,” says the President of The Canadian Real Estate Association, Calvin Lindberg. “In the first phase of compliance, real estate agents were required to report only suspicious transactions, or transactions involving more than $10,000 in cash,” the CREA President explains. “Now, verified personal information must be kept of the buyer and seller for each and every real estate transaction in Canada. That personal information includes details such as occupation.”
Real estate agents are now required to ask for proof of the identity of all buyers or sellers involved in a Canadian real estate transaction. If the client is a corporation, that information must include corporate documentation, and the names of the corporation directors. They must also ascertain if a third party is involved in the transaction.
This also applies if a buyer or seller involved in a transaction is not represented by a real estate agent, but the other individual involved is represented. Those buying or selling privately will be asked by the agent representing the other party involved in the transaction to provide proof of identity as well, and that record must be kept by the real estate agent involved in the transaction.
Also under the new FINTRAC regulations, real estate agents dealing with clients they never meet must also verify personal information. The broker office involved can do this with a service agreement with an agent or mandatary in the area where the client is located. That agent or mandatary must then meet the client, verify the identification of the client, and provide the information to the broker office actually handling the real estate transaction.
“There are buyers, sellers or investors from other countries who rely on expertise here rather than visiting the property themselves,” the CREA President explains. “They must now meet with an official agent of the Canadian broker, and provide proof of identity. This agreement will add to the business costs of the Canadian broker.”
In addition to verification of personal information, real estate agents must also complete a report on the receipt of all funds received during the real estate transaction, not just those of $10,000 or more.
In order to comply with these new federal regulations, real estate agents are required to keep this identification and receipt of funds information on file for five years and provide it to FINTRAC if requested. It is the individual broker office that will be responsible for the safe keeping of the information, and the brokerage that will have to respond to any FINTRAC information request.
There were 559,325 transactions reported through the Multiple Listing Service(MLS) operated by local real estate Boards and Associations in 2007.
June 24, 2008
Canada’s housing market still strong: central bank.
Conditions in the Canadian housing market remain “favourable”, with overall prices rising and few signs of excess supply, Sheryl Kennedy, deputy governor of the Bank of Canada, said today.
“The moderation in activity and price increases that we have seen in recent months is both expected and welcome,” Kennedy told an investment industry conference in Banff, Alberta.
House prices play a big role in the nation’s economy, she said: they can directly affect inflation, consumption, and decision-making in “the real economy” if a bubble inflates or pops. Policy makers at the Bank of Canada consider those implications when setting interest rates, Kennedy said. The central bank surprised financial market watchers earlier this month when it refrained from cutting interest rates, citing a higher risk of inflation from rising energy prices.
A major, widespread reversal in house prices is “unlikely” in the near term because the proportion of unoccupied, newly built dwellings in most Canadian cities is below historical average, Kennedy said.
The recent deceleration in house prices has been most noticeable in certain markets, such as the energy-rich province of Alberta, which had racked up “very steep” price increases in the past two years, she said.
Earlier this month, Statistics Canada said the annual rise in new housing prices slowed to 5.2 percent, its weakest pace since September 2005, as prices in the Western Canadian cities of Edmonton and Calgary slowed.
A declining trend in building permits also suggests that supply is adjusting to softening demand, while “the Canadian mortgage market is in reasonably good shape,” Kennedy said.
May 28, 2008
Realtors settle Internet Policy lawsuit
The National Association of Realtors agreed to give discount Internet brokers access to its listings of home sales, resolving a U.S. antitrust lawsuit that accused the trade group of trying to restrain competition. The settlement, filed in U.S. District Court in Chicago, calls for the realtors group to revise a policy that let real estate agents exclude their sales information from Web sites. The government said the practice propped up an old-fashioned business model and harmed consumers who can save 1 percent of the price of a home by using a Web-based broker.
“Today’s settlement prevents traditional brokers from deliberately impeding competition,” said Deborah Garza, deputy assistant attorney general in the Justice Department’s antitrust division. “When there is unfettered competition from brokers with innovative and efficient approaches to the residential real estate market, consumers are likely to receive better services and pay lower commission rates.”
The agreement comes as the housing market, in the midst of a two-year slump, has showed no signs of recovery. Today, the Commerce Department reported that sales of new homes in April were the second lowest since 1991.
U.S. sales of previously owned homes probably will fall to 5.39 million this year, the realtors association said in a May 15 forecast. That would be a drop of 24 percent from 2005’s all-time high of 7.08 million, making it the worst housing recession since the four-year slump.
On-Line Realtor Pleased
“We are reasonably happy but not completely overjoyed,” Glenn Kelman, chief executive officer of Redfin, a Seattle-based on-line brokerages, said in an interview. “It throws the gate open to all sorts of business models.”
Kelman said the settlement will still allow realtors to bar some on-line comments and price comparisons from firms such as Seattle-based Zillow.Com and Cyberhomes, a service of Fidelity National Financial, Inc. of Jacksonville, Florida.
Richard Gaylord, president of the realtors association, said in a statement that the settlement will let the group focus on “re-energizing the housing market” during a difficult period.
“Competition is alive and well in the real estate industry,” he said. “In fact, the competitive nature of our industry is even more apparent in times of market turmoil like those we are currently experiencing.”
Internet Brokers
Internet brokers, who seek to cut costs by charging only for the services a seller wants, sprung up in the 1990s and now operate in all major metropolitan areas.
Traditional real estate agents for such companies as Coldwell Banker Residential Brokerage and Re/Max International Inc. usually charge a commission of 5 percent to 7 percent of a property’s sale price, while discount brokers charge 2.5 percent to 4.5 percent, or a flat fee depending on the services provided.
In 2006, consumers paid $93 billion in real estate commissions, the Justice Department said.
In most markets, real estate brokers participate in the Multiple Listing Service, which lets them share information about properties that are for sale. By using the service, brokers and buyers can get listings on almost all homes in the market.
About 800 of the listing services across the U.S. are affiliated with the National Association of Realtors, which sets policies governing their use.
Listings
Realtors usually give their clients printouts of the listings and not full access to the database. However, some brokerages that operate online let customers see all the Multiple Listing Service information via the use of a password.
Those sites, the Justice Department said, help real estate agents be more productive and let them pass cost savings onto home buyers with lower commissions or rebates. The agency filed its case in 2005 and it was set to go to trial in July.
The Chicago-based realtors group, which has more than 1.2 million members who work in the residential and commercial real estate industries, didn’t admit or deny the Justice Department’s allegations in settling the case.
The agreement puts the group under enhanced government oversight for 10 years. There was no financial penalty. Garza, speaking to reporters in Washington, said the Justice Department generally doesn’t seek fines when it first tries to halt anti- competitive behavior.
“What we’ve done is achieve a very lasting and important change to the conduct” of the realtors association and its affiliated listing services, Garza said.
March 6, 2008
Home-buying intentions reduced
The number of Canadians who express an intention to buy a home within the next two years has dropped significantly from last year, according to a Royal Bank of Canada report released on Tuesday, suggesting a slowdown in the housing market.
Overall intentions to purchase a home dropped by five percentage points to 23 percent in the survey.
Respondents who said they were “very likely” to buy fell to 7 percent from 9 percent in 2007. That’s the lowest level since the survey was started 15 years ago, the bank said.
The number of Canadians who would “buy now,” rather than wait until next year was still strong at 52 percent, but down from 58 percent in 2007.
The number of respondents who said that purchasing a home is a good investment was at 85 percent, down from 90 percent in 2007, but still stronger than the 76 percent of 10 years ago.
“While those very likely to buy a home might be at its lowest level in over a decade, we need to keep in mind that the overwhelming majority of Canadians still believe purchasing a home is a good investment,” said Catherine Adams, vice-president of home equity financing at RBC.
The weaker outlook can also be seen in the number of respondents who expected housing prices to rise, at 56 percent, down three percentage points from last year’s 59 percent.
The online survey poll was conducted for RBC by Ipsos Reid between January 17 and 21, 2008 and is based on a randomly selected representative sample of 3,023 adult Canadians. The results are considered accurate to within plus/minus 1.8 percentage points, 19 times out of 20.
The number of Canadians who express an intention to buy a home within the next two years has dropped significantly from last year, according to a Royal Bank of Canada report released on Tuesday, suggesting a slowdown in the housing market.
Overall intentions to purchase a home dropped by five percentage points to 23 percent in the survey.
Respondents who said they were “very likely” to buy fell to 7 percent from 9 percent in 2007. That’s the lowest level since the survey was started 15 years ago, the bank said.
The number of Canadians who would “buy now,” rather than wait until next year was still strong at 52 percent, but down from 58 percent in 2007.
The number of respondents who said that purchasing a home is a good investment was at 85 percent, down from 90 percent in 2007, but still stronger than the 76 percent of 10 years ago.
“While those very likely to buy a home might be at its lowest level in over a decade, we need to keep in mind that the overwhelming majority of Canadians still believe purchasing a home is a good investment,” said Catherine Adams, vice-president of home equity financing at RBC.
The weaker outlook can also be seen in the number of respondents who expected housing prices to rise, at 56 percent, down three percentage points from last year’s 59 percent.
The online survey poll was conducted for RBC by Ipsos Reid between January 17 and 21, 2008 and is based on a randomly selected representative sample of 3,023 adult Canadians. The results are considered accurate to within plus/minus 1.8 percentage points, 19 times out of 20.