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Why I wouldn’t sell my home myself!
Posted by: | CommentsCredits for this article goes to
BILL GRIMSHAW/FOR THE TORONTO STAR
By Mark Weisleder | Fri May 13 2011
Why I wouldn’t sell my home myself
Alison Philpot sold her house privately but wonders if it was worth the trouble she experienced.
BILL GRIMSHAW/FOR THE TORONTO STAR
By Mark Weisleder | Fri May 13 2011
Since writing about whether you could create a bidding war without an agent, I have received numerous emails from sellers, real estate agents and companies that provide “for sale by owner” services on the pros and cons of selling by yourself.
Allison Philpot sold her home in Ottawa using a For Sale by Owner marketing service. She listed her home for $419,000, and was able to create a bidding war after her first open house. She received a top bid of $429,000, which she accepted.
The buyers seemed like nice people, as they lived in the community. Unfortunately, they later terminated the deal, relying on a condition in the offer, although Allison suspected that they just found a house that they liked better. The second bidder was no longer interested.
She then dealt with another buyer, who was represented by a buyer agent. Allison later admitted that she was out-matched in the negotiations, and eventually sold her home for $405,000. In addition, she agreed to pay the buyer agent a commission of approximately 2 per cent or $8,000. So her net selling price was $397,000.
After the fact, she reasoned that had she used an agent from the start, she would have probably sold for about $430,000, and that even if she paid $20,000 in commission, she would have netted $410,000, or $13,000 more, without any of the aggravation.
Still, Allison states that had she not gone through the experience herself, she would probably have felt that she had overpaid the agent.
The buyer who walked away from the first deal later told Allison that he would never try and buy a property again without an agent, as he found the process way too stressful himself.
I received many emails from real estate agents talking about their additional network of potential buyers that they bring to every sale, as well as their own experience in qualifying potential buyers in advance and protecting sellers from unusual clauses that are sometimes inserted into agreements. Many agents in Vancouver are now setting up marketing events overseas, as more and more foreigners are looking at Canadian real estate as a safe haven to invest. More buyers mean better prices for sellers.
I spoke with Patrick Sullivan , a vice-president for Com Free, a company that provides services to assist home owners selling by themselves. These tools include a guide to assist the seller in determining the sale price, staging the home for sale, conducting open houses and preparing for negotiations. He suggested that there is no real harm in a seller trying to save money selling by themselves. They can sell with an agent later if they are not successful. He also claims that Com Free listings continue to grow and that they have many success stories. However, because they have no contract with the seller, the seller is not obligated to tell them how long it took to sell and what the property sold for, so it is difficult for Com Free to state how their seller compares with sellers who use an agent.
If you plan on doing this by yourself, at a minimum either have your lawyer look at the contract before you sign it, or make the deal conditional on your lawyer’s review and approval of the agreement. In my opinion, no marketing service can properly prepare buyers or sellers to deal with the stress and emotion that will invariably be involved with any real estate negotiation. It is not easy. Every buyer, seller and property are unique and will require a successful strategy to win.
Whatever method you choose to buy or sell your next home, be prepared and fully informed before you start.
Also read:
Should you sell before buying?
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Mortgage fraud on the rise
Posted by: | CommentsAll credit for this article goes to Nicolas Van Praet. Reproduced below for my clients.
Mortgage fraud on the rise
Nicolas Van Praet Feb 21, 2012– 7:19 AM ET
Reuters
MONTREAL — Consumer credit company Equifax uncovered roughly $400-million worth of mortgage fraud in Canada last year, an“eyeopening” number industry experts estimate represents only a fraction of the cheating taking place in the country’s real estate market.
Atlanta-based Equifax says many financial institutions are tightening lending and, as a result, deceit in the property market is rising. A report the company released Tuesday says two-thirds of all the fraud it sniffed out last year was related to real estate.
“Mortgages are the biggest bang for the buck,” said John Russo, vice-president and legal counsel for Equifax Canada Inc. “So when credit gets tougher to get, that leads to more people falsifying documents, giving false pay stubs, inflating their income, kind of fudging things to get a home.”
The $400-million in mortgage fraud represents only a sliver of the roughly $1-trillion in total residential mortgage credit outstanding at the moment in Canada . But it rose sharply in 2011 from 2010 in dollar terms, increasing 150%, Equifax data suggest.
The figure is “eye-opening,” Mr. Russo says, because that’s just the amount Equifax flushed out on its own for its clients. “There’s a lot more out there that just goes under the radar and is not seen and not caught.”
Often tracking strong housing markets, mortgage fraud occurs nationally but is more concentrated in large urban areas in Quebec , Ontario , Albert and B.C., says the Criminal Intelligence Service Canada, a federal agency that shares intelligence between police forces. Numerous criminal groups across Canada are involved in a wide range of mortgage frauds at varying levels, the CISC says, sometimes with the help of industry insiders such as property agents, mortgage brokers and lawyers.
One growing trend is people setting up fictitious identities, building up credit for those fake people and then using the credit to borrow. Equifax says five years ago it had identified 300 such fictitious identities in its national database. Now there are more than 2,500.
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Using mortgage fraud to further other criminal activity is also common. Criminals are buying properties to open marijuana growing operations, to trade drugs and to launder money.
An increasing number are getting caught and there’s been a dramatic increase in criminal and civil forfeiture cases as a result, said Andrew Bury , a lawyer specializing in loan security enforcement at Gowling Lafleur Henderson LLP in Vancouver .
“They’re grabbing these properties left, right and centre. And over and over again they’re crashing into the mortgage companies, the banks, [which are saying] ‘Wait a second, we have a mortgage on that property.’ “
Lenders are losing big sums while governments reap the re-wards of the seizures, Mr. Bury said.
But the bulk of mortgage swindling still involves ordinary people lying to obtain mortgages larger than their income can support, Equifax said. They’re living in homes that are simply too rich for them. Says Mr. Russo :“No matter how small or big the lie, it’s still mortgage fraud.”
It sometimes takes years for fraud to come to light, notes Toronto forensic accountant Al Rosen . He believes controls in the banking system remain inadequate.
“I see all sorts of situations where the appraised value of [properties] is just laughable. And some of these are not checked out very well,” he says. “Because the only thing that really counts is: What can you sell that property for?”
Canada’s highest-profile mortgage fraud to date is perhaps the case of Martin Wirick , a Vancouver lawyer sentenced to seven years in prison in 2009 for fraud and forgery in an elaborate scheme covering 107 separate real estate transactions conducted on behalf of his client, real estate developer Tarsem Singh Gill.
The scheme was so huge that the Law Society of B.C. raised special contributions from its lawyer members to compensate the victims. As of 2009, it had paid out $38.4-million for the Wirick fraud alone. Over a 40-year period before that, the society’s compensation fund disbursed a total of $52-million for all cases of lawyer misappropriation.
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Rate protection comes at a price
Posted by: | CommentsGarry Marr, Financial Post · Wednesday, May 5, 2010
How much protection do you really need? The latest prophylactic being sold to homeowners worried about getting caught with nasty high interest rates is something called the RateCapper from Royal Bank of Canada. It’s a product that offers you a variable rate that floats with prime, but guarantees your mortgage rate will not go beyond a certain point during the five-year term.
The price–there’s always a price — is that you give up the discount that you can negotiate off the prime rate.
National Bank of Canada has had a capped-rate mortgage product in the marketplace since March 2000. But trying to sell rate protection during a period of record-low interest rates would be as difficult as selling abstinence during the free-love 1960s.
“This product was not as popular [in the past couple of years] as it will be now,” says Jonathan Haziza, mortgage solutions product officer with National Bank of Canada.
With the National Bank’s Capped Rate product, for the term of your mortgage your rate can’t go above the five-year posted rate, now 6.25%, at the time you sign your mortgage. But instead of getting a variable-rate product as low as 1.75%, you are borrowing at 2.9% today.
I can just hear the conversation in the bank: “Honey, we’d better get some protection. We don’t want any nasty surprises, do we?”
But at what price that peace of mind? Mr. Haziza concedes National Bank is reconsidering its rates now that Royal Bank stepped in last week with the RateCapper.
The Royal Bank product, also for a five-year term, guarantees your rate cannot go above 5.875%, but allows consumers to borrow at prime, or 2.25% today. The price is not quite as steep as National Bank’s product, but consumers are still paying for it.
“It’s the best product in a rising-rate environment for consumers who can’t choose between fixed and variable,” says Anjel Van Damme, Royal’s director of home-equity financing products. “They get all the benefits of variables, but they know their price won’t go beyond a certain point.”
The bank protects itself from the possibility of rates skyrocketing through hedging. It should be noted consumers can exit the Royal Bank product with the usual variable-rate penalty of three months of payments, albeit based on the higher capped rate.
This type of product may become the latest craze, and there is nothing wrong with banks giving consumers options. But do you really want to take a pass on the almost-free money of this generation?
Rob McLister, editor of Canadian Mortgage Trends, says if you think rates are going to jump you should lock into a five-year fixed-rate product, which he says is still as low 4.35%.
“It’s a bad deal,” Mr. Mc-Lister says. “You are giving up quite a bit with these things.”
He adds that over the past decade, prime has averaged 4.81%, and 5.85% since 1991. Even if prime jumps by four percentage points, he says consumers would still be ahead with the variable option.