Seven of the most common mistakes people make when buying a home

Jeff Stern
The Vancouver Sun

After nearly three decades helping people buy that next home, I have listened to many a first-time home buyer’s regret. I’ve been on the other end of a phone call where the buyer made a common mistake and needed my help getting out of it. Here are seven of the most common mistakes people make when buying a home, and what many home buyers wish they had known ahead of time but often learn too late.

1. Online house pictures are fake

What one sees online and what one sees in person are two vastly different things. It’s a bit like supermodels who, in the pages of a magazine, shimmer with perfection, but in real life, are unrecognizable in the real-world grocery store garb of hasty ponytails and make up-less faces.

House photos get a similar treatment; wide-angle lenses make rooms look more spacious than they are and the place is scrubbed within an inch of its life for staged for photos. There’s the big wide smile and the sucking in for the photo, then it returns to its normal relaxed face and gut.

The surprising amount of “presentation” can feel like a gut punch when you walk in with super-model expectations and find a sweat-pant, beer-bellied version instead. What looked like an enormous eat-in kitchen is revealed to be so small, in fact, one must side-step around the table. It can feel like deception. Knowing ahead of time won’t change that fact, but it will reduce the disappointment and frustration of the process.

2. Deciding ahead of time what we need or want in a home

House hunting is, as buyers soon discover, like the endless scroll – if you don’t know what you’re looking for, you can go on searching literally forever. The longest transaction I ever helped with lasted almost four years. Yes, years.

A common mistake most people make is not planning what they need and also what they want in that house – not just for now, but for the future. It’s strange to me that more detailed planning goes into a weekend grocery shop than into the buying of a house.

Listing aspects of a home, including lifestyle aspects like a place to work out or play guitar, that you (a) must have, and (b) want to have, will carry you farther than looking online, browsing forever, hoping to stumble upon “the one”. Trust me… seeing more pictures, more open houses and more privately shown houses doesn’t help focus your search. It actually does the opposite, making your blurry wants even more blurry.

3. Getting mortgage approval before looking at houses

Here’s a painful way to shop: look at houses blindly in “your” price range. Accidentally and unexpectedly fall in love with that perfect home, then talk to the bank and realize you need to be shopping thousands of dollars below that price. Your pre-approved amount and what is realistically within your reach is disappointing.

This is the sour shopping experience of the buyer who does not take the step of getting pre-approved for a mortgage before shopping within the price range they can reasonably afford.

How does getting pre-approved work? Hint: it’s not an app or an online calculator. It’s going to a bank. Here’s more on that.

4. Involving my parents right from the beginning

Once you’ve found that perfect-for-you home, do you plan on getting the “final yes” from your parents (or grandparents, or co-signer or whoever)? The biggest mistake people make with this is involving them only at that final moment. What inevitably happens is the parent comes in cold, doesn’t know what you’ve seen, experienced and turned down up to this point, and so they disapprove of the home you’ve decided on.

If they had been involved from the beginning, however, they would be on the same page with you about what you’d learned and seen until that point. They would know that prices aren’t what they were 20-plus years ago when they bought, and so would not be shocked. They would know what’s available in your price range, and so would not be shocked by what isn’t.

Involve them from the beginning. Invite them to meetings with your real estate agent. Bring them to every showing and open house. My advice to clients is, if someone is going to influence your buying decision, either have them involved all the way or not at all. It will save disappointment and a load of frustration.

5. Taking my friend’s advice is a bad idea

Friends mean well, but there’s a lot they don’t know. And what they don’t know can hurt you.

One condo owner, for example, took her friend’s advice to withhold condo fees until some maintenance issues were addressed. This gave the condo legal leverage against her and she was at risk of losing her condo. Her friend didn’t know what to do then, and she was in a mighty fine pickle. That’s when she called me in a panic.

Having many years of experience, I was able to work some magic and it all worked out well, but at an unnecessary additional cost in legal fees and interest costs that she, not her well-meaning friend had to cover. She nearly became homeless over her friend’s well-intentioned but ill-informed advice.

Most of the time, friends share what worked for them or “heard” worked for someone else. The thing is, that may have been fine in their particular situation, but it’s not necessarily applicable in your situation. Take non-professional advice with a grain of salt. And, if those friends will be instrumental in your choices, make sure they participate in all the decisions and meetings and showings. Otherwise they end up impeding your buying process rather than helping it.

6. I wish I hired an arms-length property inspector

Two big mistakes for home buyers happen with property inspections. Either the buyer foregoes the inspection to save a few hundred bucks on a purchase, or they “hire” Uncle Bob to “inspect” the house.

Here’s the trouble those buyers wish they could have avoided. Those who got no inspection sometimes got nasty surprises with big price tags attached to them. An inspection would have warned them about that. (And for only a few hundred dollars. Worth it.)

Those who got Uncle Bob to look at the house because he’s a plumber (so knows things about houses) and because he’s family (and so does it for free), often find two things happen. First, Uncle Bob may know plumbing better than anyone, but he knows diddly about structural, electrical systems and heating, so he missed something. Again, the new homeowner is the one who will have to pay for his mistake, which can thousands of dollars.

Uncle Bob is not insured with Errors and Omissions Insurance or bonded, so there’s no way to file a claim against that professional, insured inspection agency. You just eat it. Hopefully you can afford to do that – after all, you saved hundreds of dollars in inspection fees.

The second thing that happens is that those family get-togethers now feel a little more awkward.

All of this is easy to avoid. Hire a professional, certified home inspector.

7. I wish I followed my brain instead of my heart

The biggest mistake when deciding on location, many buyers will tell you, is that they followed their heart and not their brain. City folk thought the idea of living in the country sounded romantic, so they went ahead and bought it without thinking through all the pesky details (like added costs of commuting, septic tank maintenance, well water testing and maintenance).

Sometimes people move to be close to where they work. (Here’s why that’s a bad idea.)

Other times people move to be close to someone they love. One client of mine purchased a home in another town to be close to a sibling. One year later, that sibling’s circumstances led them to move away, and my client was now living in a house and in a town where their only connection and reason for living there had left. That exciting move to be near family ended up being the worst and most expensive thing that could have happened.

The bottom line, when you’re looking to buy a home, is to involve a knowledgeable real estate professional. Yes, from the beginning. You are not “bothering” an agent by asking to see houses … they WANT to help you! Then involve others along the way. Home buying is a team endeavour. Assembling a team of the right people and in the right way will save you a lot of pain and time and money and hassle.

© 2019 REM Real Estate Magazine

Coffee shop owner bullied by BC government

Andrew Duffy
Western Investor

A Victoria businessman, who claims he is being financially bullied by the B.C. government, has launched a legal fight over the province’s 20 per cent foreign- homebuyer’s tax.

Eric Chang, who owns the Serious Coffee outlet on the Old Island Highway in Victoria’s View Royal neighbourhood, said he has been unfairly targeted by a tax that was supposed to be aimed at foreign speculators.

“I’m here for immigration. I’m not here to buy and sell houses, make money and run away. I want to immigrate here and raise my kids here,” he said.

But that appears to be in jeopardy as he faces a bill of about $269,000 from the province. It’s money that he does not have and the bill could force him to return to Taiwan.

“It’s so stressful and so frustrating,” said Chang, who has been contacted by collection agents seeking payment on the outstanding debt.

Victoria lawyer Bruce Hallsor, who is representing Chang, said there is unfairness in the case as his client was invited to come to B.C. as part of the provincial nominee program.

“We’ve invited him to be here, to come to this country — the province of B.C. invited him,” he said, noting Chang and his then wife, Sin-chen Su, abided by all the rules by investing in a business and a residence to show their commitment to live and work in the province.

The problem was the first house Chang and his wife bought was in Vancouver. They entered into a contract to buy a pre-sale in the spring of 2016 as they waited to be accepted into the nominee program — Chang was confirmed as a candidate in the fall of 2016 and approved as a nominee in December 2018. His application for permanent residency was received in February this year.

The house they first bought required help from Chang’s sister Ruby, a Canadian citizen who has lived here for 18 years. The title reflected his sister’s 98 per cent stake, with Chang and his wife holding one per cent each. They put down a large deposit in April 2016.

But between then and the time the deal closed in September, the then-15 per cent foreign buyer’s tax came into force.

At that point, Chang received advice from a notary public about dealing with the tax, that included he and his wife paying their share based on the equity they would have in the home.

The next year, Chang and his wife were told that, to comply with the nominee program, they would have to buy a home close to their business in the Victoria area.

The first house was sold, proceeds of the sale distributed to the three parties and Chang and his wife bought a home in Colwood, where he lives with his children.

Last spring, the province sent notice that Chang and his wife owed nearly $250,000 in tax as a result of the foreign-tax penalty on the purchase of the first home.

“More than a year later, when he’s living in Colwood he gets a letter saying: ‘You owe us $250,000.’ That would not apply to him as a resident, but they consider him to be a non-resident,” Hallsor said.

“That’s a bit of a complication because he’s certainly living here legally at the behest of the province. You have one branch of the government inviting him and the other is basically saying you’re not welcome here.”

Chang said he doesn’t have the money to pay that bill, and his sister is paying his legal bills via a line of credit.

In a statement, Finance Minister Carole James said, as the case will be before the courts, it would be inappropriate to comment on the specifics, but noted the tax measures were geared to tackle a housing crisis in B.C.’s urban centres.

Chang said if his legal challenge fails, he will have to sell his assets and return to Taiwan. The situation has made him wonder about B.C.’s core values, making him think the country does not value immigration.

“This tax, if he has to pay it, is the end of his business,” Hallsor said. “The only way to pay it is to sell his business or house, and if he does either of those he is violating his agreement [under the nominee program] with the province of B.C.”

Chang is not the only one wondering about B.C.’s values in the wake of property-tax rules.

Oak Bay resident Denise Simpson, who is part of a class-action lawsuit challenging B.C’s speculation and vacancy tax, said she doesn’t like the direction the province has taken.

“It’s very upsetting that they are treating Canadians like this. It’s really disgusting and I feel like B.C. is on the path to socialism if they haven’t already reached it,” she said. “I was proud to be a Canadian until this happened.”

Simpson, 72, and her husband Robert, 93, are joint owners of their Oak Bay property, but they live part of the year in Texas, where Robert draws his pension. That technically makes them a satellite family and means their property is subject to the speculation tax and a $6,000 tax bill.

The tax, designed to reduce the number of empty homes and help deal with B.C.’s shortage of affordable housing, targets properties that are left vacant for months at a time.

The speculation tax rate for 2019 is two per cent for foreign owners and satellite families, and 0.5 per cent for Canadian citizens or permanent residents.

Denise, who has lived in the home since she was five and inherited it 20 years ago, said she isn’t against the tax in theory.

“I agree with it in terms of preventing pure speculators from buying and keeping property empty. But I don’t see anything wrong with foreigners from anywhere being allowed to buy property in Canada,” she said, noting they use the home every year for weeks at a time, sometimes months.

“I do believe if the properties are truly vacant, they should be forced to rent them. I agree with the law in that respect.”

But she pointed out they are not wealthy and are living on pensions, and facing a tax bill like this could mean the prospect of selling or renting the house, which would mean she can’t use it.

She sees the tax measure as government imposing itself on people’s lives.

“It’s taking away people’s freedom — telling them what they can own and not own,” she said. “If I lose this house there is no reason for me to come back to Canada.”

Copyright © Western Investor

Market balances with transactions on par with 10-year September average; prices still correcting

Joannah Connolly
Western Investor

Predictions that the Metro Vancouver residential real estate market is in recovery mode may be realized, as home sales in September were up a whopping 46.3 per cent from one year earlier.

There were 2,333 home sales in the region last month, which is also 4.6 per cent higher than August’s count, the Real Estate Board of Greater Vancouver (REBGV) reported October 2.

That total was just 40 units, or 1.7 per cent, shy of the 10-year sales average for the month (see interactive graph below).

The board described September’s activity as a “return to more historically normal levels” compared with the highs of 2015-17 and the relative lows of early 2018 to spring this year.

“We’re seeing more balanced housing market conditions over the last three months compared to what we saw at this time last year,” said Ashley Smith, REBGV president. “Home buyers are more willing to make offers today, particularly in the townhome and apartment markets.”

With more homes coming on the market in September, up 29.9 per cent over August, there was a slight increase in the total number of Metro Vancouver homes for sale on the MLS. As of the end of September, home listings totalled 13,439, a 2.7 per cent increase compared with September 2018 and a 0.3 per cent rise from August this year.

For all home types combined, the sales-to-active listings ratio for September is 17.4 per cent, which is a solidly balanced market (12-20 per cent). When broken out by property type, the ratio is 12.7 per cent for detached homes (rising back into balanced territory from a buyer’s market), 18.9 per cent for townhomes, and 21.9 per cent for condos (rising back into a seller’s market).

“This is a more comfortable market for people on both sides of a real estate transaction,” added Smith. “Home sale and listing activity were both at typical levels for our region in September.”

As price trends lag sales trends, the benchmark price of a typical Metro Vancouver home continued to correct, now pegged at $990,600. This is a 7.3 per cent decrease over September 2018 but just a 0.3 per cent slip compared with August 2019.

Sales and prices by property type

There were 745 sales of single-family homes in Metro Vancouver in September, which is up 46.7 per cent from September last year, and 5.5 per cent higher than August.

The price of a typical detached home in the region is now benchmarked at $1,406,200, which is 8.6 per cent lower than one year ago but only $500 less than August’s price.

Sales of attached homes such as townhomes, row houses and duplexes leaped an impressive 53.5 per cent year over year to 422 units, which is also 4.4 per cent up from August.

The benchmark price of an attached Metro Vancouver home now stands at $767,500, which a 7.2 per cent decrease from September 2018 and a 0.6 per cent slip from August 2019.

A total of 1,166 Metro Vancouver condos exchanged hands in September 2019, which is a 43.6 per cent jump over September 2018, and also 4.4 per cent higher than August.

The price of a typical condo in the region is $651,500. This is a 6.5 per cent decrease from September 2018 and a 0.4 per cent decrease compared with August 2019, said the board.

Don Kottick, president and CEO of Sotheby’s International Realty Canada, recently told Glacier Media, “With the continued decline of prices over the last little while, it has brought potential buyers into the market who were previously priced out of that market. And the other thing we’re seeing is that people with million-dollar budgets are now able to buy the kinds of homes that they couldn’t a few years ago. So it’s opened up a bunch of options.”

Kottick added that, while price trends do tend to lag sales activity, he didn’t expect the price trend line to take long to turn around. “If people start to see all this activity, I don’t see that lag time being as long as it was on the way down.”

Fraser Valley also recovering

It was a similar, although not quite as extreme, story in the Fraser Valley, with the Fraser Valley Real Estate Board (FVREB) reporting sales of 29.8 per cent higher than one year previously.

There were 1,343 sales of all property types (residential and commercial) on its Multiple Listing Service® in September, which is also a 3.5 per cent increase over August 2019.

In the Valley region, the benchmark price of a detached home in September stood at $950,000, down 0.4 per cent compared with August 2019 and a drop of 3.9 per cent year over year.

The price for a typical attached home in the Fraser Valley was $520,000, a slip of 0.3 per cent compared to August 2019 and down 4.8 per cent compared with September 2018.

At $405,500, the benchmark price for a condo in the Valley region was down 0.9 per cent from August 2019 and down 7.6 per cent compared with September 2018.

Home prices vary widely in different areas throughout the region. To get a good idea of home prices in a specific Metro Vancouver location and by property type, check the detailed MLS® Home Price Index in the full REBGV stats package. For Fraser Valley prices by area and property type, see the full FVREB stats package.

Copyright © Western Investor

UBS Global Real Estate Bubble Index ranks Toronto second highest

Kimberly Greene
Mortgage Broker News

The real estate bubble risk in Toronto is the second-highest in the world, according to data from the UBS Global Real Estate Bubble Index 2019. Canada’s largest city has a risk of 1.86, which is second only to Munich, which has a risk of 2.01. Amsterdam and Hong Kong tie for third place with a risk of 1.84.

Vancouver still poses a threat with a risk of 1.61, although that is a modest drop from its assessment of 1.92 in 2018. Toronto also experienced a slight drop from its 2018 risk of 1.95, and even more from its 2017 bubble risk of 2.12.

The UBS Global Real Estate Bubble Index gauges the risk of a property bubble—defined here as the substantial and sustained mispricing of an asset—on the basis of patterns of property market excesses. Signs typically include a “decoupling” of prices from local incomes and rents and imbalances in the real economy, such as excessive lending and construction activity.

 “Low affordability already poses one of the biggest risks to property values in urban centers. If employees cannot afford an apartment with reasonable access to the local job market, the attractiveness and growth prospects of the city in question drop,” write Head of Swiss & Global Real Estate Claudio Saputelli and Head of Swiss Real Estate Investments Matthias Holzhey in the report.

These drops are often followed by attempts to curb price appreciation through regulatory measures, what have served to correct the market in the most overheated cities in recent years. In fact, real prices in the top four ranking cities in the 2016 UBS Global Real Estate Bubble Risk Index have fallen on average by 10%.

Between 2000 and 2018 real home prices in the Canadian cities in the UBS Index (Vancouver and Toronto) rose consistently by more than 5% each year. But, the report reads, over the last four quarters, price growth has stalled.

“The introduction of taxes on foreign buyers, vacancy fees and stricter rent controls seem to have taken effect. While the average price level in Toronto has remained broadly unchanged from last year, prices in Vancouver are down by 7%,” the report reads. “Lower mortgage rates are supportive, but cannot outweigh lower economic growth.”

In other words, while homes are still overvalued, the housing frenzy seems to have come to a halt—for now.

In Toronto, home prices almost tripled between 2000 and 2017, and although measures have been put in place to address affordability, a major price correction seems unlikely in the near future due to factors such as a weakening Canadian dollar and low housing supply. In Vancouver, the growth rates have reversed from higher than 10% to -7% in just two quarters, and the market remains vulnerable to the slightest shift in demand. Regional housing supply in Vancouver is increasing, although prices are 75% higher than they were 10 years ago.

In both cities, the report states that favourable financing conditions are keeping home prices high, although affordability remains a key risk.

There are, however, several differences between today’s bubbles and those that destroyed the American housing market more than a decade ago, dragging parts of the world down with it. Currently, lending growth is on par with GDP growth, which is in contrast to the run-up to the Great Financial Crisis, when outstanding mortgage volumes increased up to 2.5% faster than GDP, according to the UBS report.

Toronto and Vancouver are the only cities in North America that have a high risk of having real estate bubbles; with the exception of Hong Kong, all other high-risk cities are in the Eurozone.

Copyright © 2019 Key Media

Relaxed B-20 results in stronger home sales

Ephraim Vecina
REP

In a mid-September analysis, the Canadian Real Estate Association revised its home sales predictions upward amid B-20’s loosening grip.

The group cited the decline in mortgage rates with longer terms, including the Bank of Canada’s benchmark five-year rate, as the major driver in the more relaxed stress test seen during the past few months.

Stronger housing sales and recovering prices in the Greater Golden Horseshoe region also proved to be significant factors in this dynamic.

CREA’s 2019 projections for overall nationwide home sales now stands at 482,000 units, growing by 5% from the five-year low registered last year.

The adjusted figure was 19,000 transactions greater than CREA’s previous forecast, although it’s still considerably below the annual record of nearly 540,000 set in 2016.

And while British Columbia is likely to continue its deceleration for the rest of the year with a 5.4% annual decline in sales, this will be offset by expected strength in Ontario (8.3% gain) and Quebec (9.7% increase).

2020 is also promising a picture of sustained recovery and stability. National home sales are forecast to grow by 7.5% to 518,100 units next year, “with most of this increase reflecting a weak start to 2019 rather than a significant change in sales trends out to the end of next year.”

The Association emphasized, however, that “the overall level of national sales activity this year and next is anticipated to remain below levels recorded prior to the implementation of the B-20 stress test.”

Copyright © 2019 Key Media Pty Ltd

Technology changing real estate

Emmy O’Leary
other

It’s hard to keep up with all the ways technology is changing various industries, especially in home and design. The Future of Home conference was a two-day event that featured in-depth conversations with top designers and industry leaders, such as Cheryl Young from Zillow and Patrick Sisson from Curbed.

Young and Sisson reflected on how technology is changing real estate as well as growing trends- like co-living.

While it may seem like co-living is a recent trend with startups like Common and WeWork’s WeLive making headlines, co-living has actually been around for approximately twenty years and most likely in a less trendy, branded version – think Craigslist roommate search.

Today it’s taking millennials longer to reach certain life milestones, like purchasing their own homes, so co-living companies have been viewed as viable alternative solutions. When discussing housing and technology trends, the default tends to be to focus on millennials; however, the United States population is growing to be skewed towards older generations.

Silver Tsunami

The silver tsunami, a term mentioned by Young and Sisson, is defined as the spread and growth of senior communities. By 2035, one-third of households will be headed by someone who is sixty-five-years or older, thus impacting how housing evolves. A prominent example of this is Related Companies partnering with Atria Senior Living in $3 billion development of upscale high rises for senior citizens. Manhattan and San Francisco will be the first sites for this project.

While developers are reacting to the U.S. demographic sheet, smart home technology is also responding.

Due to a growing trend of downsizing later in life and aging in place, smart home technology will include features and services to help facilitate this process. Young and Sisson discussed how Alexa’s simple voice commands, including ordering groceries or calling someone, is extraordinarily useful to the aging population or the smart, tech concierge Hello Alfred that provides in-house services such as unpacking groceries and putting them in the fridge and even making sure that a table has fresh flowers. However, in-house and smart home amenities are not only preferred by the aging population. More than 40% of millennials and Gen-Z’ers desire an apartment building with smart home features, and according to Bain & Company, the IoT market is projected to grow to $520B by 2021.

As homes get smarter, smaller and mid-sized cities are projected to grow. Sisson and Young named San Antonio, Memphis, and Louisville as some of the cities you look out for.

© 2019 · AlleyWatch

Developers deferred the release of new supply causing a decline in pre-sales

Ephraim Vecina
Canadian Real Estate Wealth

Over the past few months, the decline in residential pre-sales in Vancouver was much larger than anticipated, according to a new analysis of data from MLA Canada by real estate information portal Better Dwelling.

The figures showed that of the new releases in Greater Vancouver last August, only 102 pre-sales have been sold – a substantial 77.8% annual decline.

This came with a similarly dramatic 75.6% drop in new listings for pre-sales, down to 254 units.

Significant deceleration was brought about by slow absorption rates, which led to developers deferring the release of new supply.

These factors fed into Vancouver’s lower housing starts trend in August, which came amid a series of late or cancelled developments.

“Compared to the same month last year, both multi-unit and single-detached home starts declined by over 17% in the CMA,” CMHC stated in its report covering August.

Overall, however, “year-to-date starts in the CMA remained fairly stable due to a decline in singles starts which was offset by an increase in the multi-units segment.”

Total housing sales in August was 2,231 transactions, which was 15.7% greater on a year-over-year basis.

“In recent months, home prices have generally been stabilizing in British Columbia and the Prairies, a measure which had been falling until recently,” CREA said.

“The national average price is heavily skewed by sales in the GVA and GTA, two of Canada’s most active and expensive housing markets,” its study added. “Excluding these two markets from calculations cuts more than $100,000 from the national average price, trimming it to less than $393,000 and reducing the year-over-year gain to 2.7%.”

Copyright © 2019 Key Media Pty Ltd