Winnipeg's Real Estate Blog

NOW is a very good time to buy!

The Winnipeg housing market has slowed somewhat from it's height of activity in the spring and early summer.

As evidence of this, we can see that currently there are over 1200 homes listed "For Sale" in the city, with another 245 Condos in addition to that number.

Compare this to the spring time when there were under 600 homes and under 175 condos at any one time.

Reasons for the 'blip' in activity:  it could be a number of things, such as pre-occupation with the federal election, or worries about the economy and the stock market fluctuation ("let's wait and see what happens" type of thinking).

No matter what the reasons, buyers have more choices right now than they have ever had during the year.  So NOW may be the best time to find a house and only have to compete against 1 or 2 other buyers.  But don't wait too long.....

"What's wrong with that basement floor?"

"Why is the basement floor all cracked? Is the house shifting?"  This seems to be a very common question these days.  By my count, nearly 25% of homes have basement floors which are heaving, cracking or breaking up.  This percentage is much higher in some areas, such as river Heights.  However, before we hit the panic button, or discount a potential home, lets take a look at what is really happening:

It is important to understand how homes are constructed.  After the hole is dug, the 'footings' are poured in place.

These footings are concrete and typically 16" to 24" wide by approx. 10" thick.  They basically follow the outline of the house (not including the garage).  In addition, you will find 3 or 4 square concrete blocks in the centre of the outline, which will hold future teleposts.  These footings serve to hold the weight of the house.  The next step in the constrution process is to pour the basement walls into these footings.  Following this, the entire house is built, up to and including the roof.  The last thing in the project is to pour the concrete basement floor.  This is poured on top of the footings, and not attached to them.  This is to allow the basement floor to float, much like a driveway.  The reason for this is simple:  As the ground underneath the house shifts and settles, it creates very high forces.  The 24" wide footings are able to deflect those forces sideways, however a large slab of concrete, perhaps 1400 sq ft in size, would not be able to deflect  this force, and must be allowed to move up or down.

What about piles?  A common mis-conception is that piles would prevent this from happening.  It is important to realize that the piles sit under the foundation (and footings) only, and have no impact on the basement floor.  An average home may take 20 or more piles, just to secure the foundation.

So if you see a house which has a rough and uneven basement floor, this does not mean it will ever affect the structure.  On the other hand, a pristine basement floor does not mean it will never shift or get worse, either. 

The bottom line: The basement floor does not form part of the structure of the house, and is designed to move and shift with the Manitoba Gumbo.

"WHEN" is the best time to buy a house (or condo)?

A common question among prospective home buyers is "when is the best time to buy a house"?  My (tongue-in-cheek) reply is "4 years ago".  But since we don't have a time-machine, and are forced to deal with the current reality, lets look at some realistic answers:

How about the spring-time?

While there are usually a flood of listings in the spring, this is also the most popular time for buyers.  After a long winter, home buyers come out to buy a home for early summer possession.  This means that there is usually a competition for the available homes.

So perhaps the middle of summer?

This used to be a case.  Most buyers take a break from home-shopping in the middle of summer, instead heading on vacation, the lake etc etc.  I have found there are 2 types of home-buyers:  Those who want a home, and those who really really want a home.  While in the spring time, both groups come out to look and shop, the second ground (the one who really really wants or needs a home) comes out all year long.  So where a home might receive 10 offers in May, it may only receive 3 in July, but those 3 are the really serious buyers.

Add to this the fact that there are generally fewer listings to choose from, and the end result is pretty much the same.

In the fall-time we usually see an increase in activity once again, as buyers want to get a home before christmas.  I see the fall market as a smaller version of the spring market:  more listings, but also more buyers.

So what then is the answer to the question:  I have found that perserverance and persistency pay off.  Don't give up, just because you lost 2 or 3 offers.  Many times I have had a buyer say "This is my last attempt" ....and then get the house they wanted. 

You may also be rewarded by occasional 'blips' in the market:  perhaps a listing has been just slightly overpriced, or a poor-weather weekend has kept other buyers away from the showings.  Any number of things can happen, but if you don't try, you won't succeed.

Perhaps the worst advice has been to wait until the market cools down:  I've known buyers who gave up their search for a home a couple of years ago.  The homes which sold for $125,000 at that time are now commanding $170,000 plus...   

As a real-life example I will leave you with this:  a young gentlemen bought a condo thru me in the fall of 2006.  At $79,000 I felt that the 2 BR condo was a very good value.  He lived in it for 18 months, and the only alteration he made to the condo was to allow his cat to destroy the carpeting.  We just sold that unit for $124,000, a 57% return.

While this type of increase is not typical, it does go to the point of this article:  the best time to buy....is right now!

Buyers ask: "How Much Should We Offer For This House?"

Perhaps the most common question would-be home buyers ask me is "What do you think this house will sell for?".  (Actually, homeOWNERS ask the same question).

The real, honest answer is: "Whatever someone is willing to pay for it."  Since we don't have a Crystal Ball, no one can predict the final selling price.  It all depends on how many offers there are on a house, and how badly someone wants it.  Incidentally, I don't like the term "bidding war", because that is really not correct or descriptive of the process.  But here are a couple of guidelines to help us along in the process:

If the house has been on the market for a few weeks, or even months (yes, that DOES happen, even in Winnipeg), and the owner and their agent have never adjusted the price, the buyer might try something a little lower than asking-price.  Provided that the buyer (with his own agent)  has done some comparing and homework, and assuming that the listing price of the house is not 'pie-in-the-sky-dreamin', an offer of a few thousand below asking price might be accepted.

If the house is 'taking offers' on a given date, and the buyer is lucky enough not to have to compete, putting in an offer of full-asking price might not be a bad idea.  Again, I stress that the buyer thru his agent, has performed a comparison-study of the house, and assured that it is fairly priced.  Assuming the asking price is realistic, a buyer might be well advised to count their blessings for not having to compete against a number of other buyers.

If the house in question is receiving 5, 6, (thirty?) offers, then all bets are off.  I've seen some pretty scary and ridiculous things happen in a case like this, and my best advice to my buyer would be: "Write your best offer....your walk-away price".  In other words, if the house goes for more than your offer, you feel you've given it your best shot and don't wake up the next day going "Doh" ala Homer Simpson.

The reason that 'bidding war' is somewhat of a misnomer: In a case of so many offers, the process is really pretty simple.....put your best offer forward and hope for the best.  On the plus side, at least you will find out almost immediately (within hours, anyway) whether your offer is accepted.

I've had a few buyers who have tried to buy a "Private Sale", and were left hanging for a week before being rejected.  In their case, they could not go out and pursue other homes, while their offers, (along with the deposit cheques) languished in the home-owners hands.  It seems that some private sellers are being 'coached' to hold on to offers and tell the buyers that they have to "think about it?".  Then, during the next week, while they are no doubt thinking hard, they are also 'shopping the offer around'. 

Please remember this:  yes, the market is hot, competition for homes is fierce.  However, homes listed with Realtors still have certain rules to follow, whereas private sellers are pretty much left unregulated.  Its 'buyer beware' to the extreme...

Mortgage Pre-Approval and C.M.H.C.: What Buyers need to know!

Being pre-approved by a mortgage lender is, today, the absolute minimum requirement before looking at, or making offers on, homes or condos.  In this day of 'multiple offers', homeowners can not take your offer seriously unless they know that you are pre-approved by a lender.  But there is a bit more to this story:

In Canada, Banks are permitted to loan out (mortgage) up to 75% of the value of the home.  For a $160,000 home, they can loan out up to $120,000 to the buyer.  The rest, in this case $40,000, has to come by way of a down-payment, or be insured by a Mortgage Insurance Company.  In Canada we have Canada Mortgage & Housing Corporation (CMHC)  and GE Mortgage Insurance Canada.

Here is how it works:  Mr. & Mrs. Smith want to purchase that $160,000 home, but only have 5% down payment ($8,000).  This means that they will require the above "Mortgage Insurance", and CMHC or GE will be happy to do so, provided that the Smith's qualify (i.e. have a clean financial history, with no defaults or bad credit).  Of course, either company will charge for this service, and this amount, usually several percent of the value of the mortgage, will be added onto the monthly payments.

Here is where it gets interesting:  Banks (or Credit Unions for that matter) may 'pre-approve' the buyers, but they can not speak for CMHC or GE.  The final word is up to these insurers.   So we could have a situation where the Smith's are pre-approved, and their offer is accepted, however once the entire deal is shipped to CMHC (or GE) for approval, it could still fall apart.

If that happens, the Smiths could loose their deposit, if they were not careful in how their offer was worded.  For example, if they wrote an 'unconditional offer', and CMHC denies their application, they will not get a mortgage, will not get the house, and thus loose the deposit.

Must Read:  Deposits: Why do we need it and is it safe?

“Where will the Winnipeg market go, and when will it end?

Trying to predict the market is like trying to predict the weather: there are simply too many factors involved to do it accurately.  Some of my colleagues thought it might have ended in 2006, but that was not the case.

This market is fuelled by several factors:  First time home buyers looking for their home and 'empty-nesters' looking to downsize.  Since both of these groups of people are looking for the same type of home, these smaller, entry-level homes, especially in the range of $150,000 to $200,000 are the big factor in this boom. We’ve now seen 1000-ft side-by-sides, without a garage, in the south end of the city, selling for around $170,000. Townhouse condos in one project jumped over 20%.

Another factor appears to be ex-patriots returning from other provinces, such as Alberta and Ontario.  Having sold their modest homes for HUGE dollars, these folks are returning to find that YES, $300,000 still buys a very nice home in Winnipeg.

So, if you are a home-owner, enjoy.

If you are home-buyer, waiting for this market to end may not be the best strategy. Annual price increases of 15 to 20% far outpace wage-hikes, so waiting to save a bit more money for that first home could mean falling further behind. 

Some buyers have expressed concern (or hope) that the bubble will burst, much like it has done in the U.S The U.S. market-drop came when several different problems combined to create a 'perfect storm' of sorts.

First, home-builders in the U.S. follow a different business plan than their Canadian counterparts:  For one thing, in the U.S. they build homes 'on spec', meaning that they just build them and hold them in inventory.  Builders may have a hundred or more homes, just sitting and waiting to be purchased, whereas in Canada, for the most part, the home is pretty much pre-sold. When a small drop in activity led to an overstock of homes, builders got scared and dropped prices and offered incentives so that first-time homebuyers could afford to buy these homes.

This led to storm #2:  Under-qualified buyers overextended their credit and purchased homes which were normally out of their price range.  When the short (6 month) mortgage re-opened at a higher rate, they suddenly could not afford to keep the house, and it went on the market, competing with other, new homes. This caused a drop in prices, in an effort to chase after buyers who were quickly starting to loose interest in what they saw was a burst in the market bubble.

This may be a bit of an over-simplification, however I hope it goes a little way to explaining what happened.  Aside from the difference in home-builder philosophies, our Canadian banks also have higher standards than their U.S. counterparts, further protecting the industry and home-buyers alike. While no one can predict where this will go, I also know some of my buyers who purchased a nice home 2 years ago for around $50,000 less than they would have paid today.

Deposits: Why do we need it, and is it safe?

One question home buyers often ask is :  Why do we need to put up a deposit?

In some areas, (the U.S., for example) the deposit is referred to as "Earnest-Money".  It shows that the buyer is serious, and actually locks him/her into the deal.  Here is an example:

Mr. & Mrs. Brown put their house on the market in May, and receive an offer for $190,000 with a $500.00 deposit.  Possession date is 3 month down the road.  They (foolishly) accept this offer, and go on with their lives, perhaps buying a larger home.  3 weeks before possession date, they receive notice that the buyers have changed their minds:  perhaps they lost one of their incomes, or were transferred in their jobs, or found a better home.  No matter what the reason, the buyers want out.

The buyers would immediately lose their deposit of $500.00, and 'may' be sued by the Browns for more than that.  With the courts, who can tell what the final outcome will be, however more time and money will likely be lost in their effort to win this suit.

Now we can see why home-owners are well advised to take larger deposits.  I recently had a listing in the $140,000 range and received several offers on it.  One in particular came with a $50,000 deposit cheque......these people understood the meaning of "earnest money"......

Is the deposit safe?  Absolutely.  The cheque is made out to the Listing Company and goes into trust, where it is held until it is turned over to the homeowner on possession date.  If the offer is not accepted, the cheque is not cashed at all.  If the deal falls apart on conditions, (Ex: the buyer can't get financing, or the home inspection fails) then the deposit is returned to the buyer. 

More IS Better!  In this day of competing offers, homeowners are often impressed by larger deposits.  Naturally, the rest of the offer has to be acceptable as well, but if two offers for similar amounts are presented, the one with a $10,000 deposit may well be accepted over the one with $2,000 'earnest money'.

Multiple Offers: "New" Rules for Real Estate Agents in Winnipeg

This past week, 3 different people mentioned to me that they had read the newspaper article which reported that 'new rules' are being established for Realtors regarding the handling of "Multiple Offers".  The fact that 3 people asked me about this shows that there is considerable interest in this subject, so I thought I might use this opportunity to talk about it:

First of, these are not 'new rules':  Multiple Offers have been a reality in Winnipeg's real estate market for the past 3 or 4 years, and the procedures to deal with these situations have been around just as long.  These latest directive from the Manitoba Securities Commission is merely a reminder that these procedures are in place for a reason, and are to be followed by everyone.

The reason for these procedures:  to give everyone an equal chance at purchasing the home they desire.  The inference here was that a Listing Agent may have given their own buyers some unfair advantage, thereby tipping the scales in their favor.  (Having dealt with literally hundreds of offers and Realtors, I have found that the vast majority have been fair and impartial in their dealings with other Realtors and their buyers).

The bottom line of these directives and procedures:  EVERY offer, whether it is made through a Buyers Agent or the Listing Agent directly, must be given fair and equal treatment.  ALL Buyers must be aware of the fact that they are in competition with other offers, although the particulars of each offer (price, possession date, deposit etc) MUST NOT be made public to anyone, including the Listing Agents own buyer.

What does this mean for Buyers:  Since the Listing Agent can not give an unfair advantage to their own buyers, there is NO advantage to a buyer in calling the Listing Agent directly and writing the offer with him/her.  In fact, working with your own Realtor (Buyer Agent) can give you several advantages along the way.   It should also be noted that the Real Estate Industry is making every effort to assure a fair and level playing field.....those buyers who have attempted to deal with private sellers have often found that no such safeguards exist in that case.

Private Buyers:  Recently, a frustrated home buyer came to me and told me her story:  She had made an offer on a "private sale" home, and been told by the home-owner that they would 'have to think about it'.  The buyer was a little surprised, since her offer had been for the full asking price.  So, each night she would call the owners and ask if they had reached a decision, and each night she was told that they were still 'mulling things over'.  At the end of a week, she was finally told that the owners had accepted another offer?!?   All along, the buyer did not know another offer was being made. 

Say what you want about the 'bidding wars', at least if you make an offer on a "Listed House", you will get an answer, in most cases that same evening.

Also Read:

Buyer Agents: Benefits for home buyers in using their own Realtor!

"Buyers-Agent": Benefits for home buyers in using their own Realtor.

Home Buyers can now be represented by their own Agent!

In early days of Real Estate, whenever a home owner 'listed' a home, ALL Realtors worked for that home-owner.   By the nature of the listing agreement, any agent who 'showed' the house, was technically employed by the home-owner.  This caused a few problems, for example:  There is a thing in law called 'vicarious liability'.  In short, any statement made by ANY agent representing the homeowner are deemed to have been made with that home-owners consent.  This often occurred even when the agent never met the owner.  Here is how that could work:  Image you list your home with John Smith of ABC Realty, and a week later agent Linda Brown of XYZ Realty showed the house to one of her buyers.  By law, Linda Brown represented the owner, and any comments or statements she made about the home in question, were deemed to have been made with the owners consent.

Naturally this caused a few problems, especially when the owner never had any interaction with Ms. Brown.

So about 15 yrs ago, a new type of arrangement was formed.  Now, right in the "Listing Agreement" which the owner signs at the time of listing the home, he/she agrees that any Realtor (other than the Listing Agent's office) who shows the home, represents the Buyer-Only.

So today, Buyers have a choice:  They can continue to look on their own, or work with one Realtor who represents them in their search.  If they choose the latter, the benefits are many:  the relationship between Realtor and Buyer is called an "Agency Relationship", and is governed by the courts.  In short, an Agent owes his client a number of duties, similar to those of a lawyer owed to his client.  Chief among them are the duties of Confidentiality, Full Accounting, Good Faith and Full Disclosure, as well as Competence, Obedience and Loyalty.

Here are some of the benefits of working with one agent:

Save Time:  In North America with have the M.L.S.  (Multiple Listing Service).  Under this system, ANY Agent working for ANY Real Estate Brokerage, can show and sell ANY Listing.  This can save the buyer time, as he only has to phone his Realtor who then has information on ALL potential listings on the market.  (Incidentally, I was just speaking with a client who resides in Germany, and found that they do not have this system there, but are still operating under the old methods.  He is finding that his Listing Agent is really the only one showing his house.  For any of us in Winnipeg who have listed their homes in the past couple of years, you know that this is not the case here, as many homes get 30, 50 or even 100 agents to show it, depending on location and price)

Convenience:  On their own, buyers can call the "Listing Agent" of every listing they want to see.  I hate to say it, folks, but whenever we list a popular house, we get dozens, if not hundreds of phone calls, and may not return the call as quickly as some of you might like.  On the other hand, if you (the buyer) have a working relationship with one Realtor, he/she are more likely to call you back within 5 minutes, as they already know you and are working with you.

Accurate Feedback:  Often I will take a buyer out on a tour, and he/she may like a house, but not enough to make an offer at this time.  Then they will call me back a week later to see how much that house sold for.  The buyer can then get accurate information on the sale, helping him/her to get more educated in the market.  This is a learning experience, after all.

Be represented:  As explained above, having your own agent means that you are represented.  The agent works for YOU and answers to YOU.

Get the fresh listings:  In Winnipeg, most listings have a "Start date" and an "Offers Date".  Receiving timely notice of a new listing is certainly a benefit on its own.  If buyers wait for the listing to be published in newsprint, it may in many cases be too late.

What is the cost of this?  Money-wise speaking it is Free!  Whether you have your own agent or buy it directly from the "Listing Agent', the price of the house will be the price of the house.  Some agents do ask buyers to sign an agreement which states that he/she agree to buy a home only thru that agent.  While this is not always the case, it is certainly understandable, given the amounts of time a buyer-agent may be spending with you in your hunt for a home.  In this market, it is not uncommon for buyers to have to put in 3, 4 or more offers on different houses before they finally get the one they want.  All that means many hours spent on the buyers behalf.

In this day of buyer-agency, it simply does not make sense to shop on your own.

Costs involved in buying a house or condo!

I have found that many buyers are not aware of the fact that there are additional costs when buying a home or condo.  I had always 'assumed' (I know...you're not supposed to do that),  that banks would council their clients as to the actual costs involved, but learned that this is not always so.  Blame the hectic market pace, understaffing or any number of things, but for whatever reason, it's not being done.

So when buyers come to me, I sometimes have to give the bad news:  Here are some of the major expenses involved when buying a home (or condo)

Legal Expenses:  The basic legal fees for purchasing a home run around $500.00  Now, many lawyers will quote something like $299 or $349,  but thats the basic fee.......there will be additional expenses on top of that, so you can expect to budget around $500.00  (This will be significantly higher when purchasing a "Private Sale", where the lawyer has to draw up the offer and act on your behalf)

House Taxes:  Depending on the time of year you take possession, you may have to pay the remaining taxes for that year.  In Winnipeg, our taxes run from Jan to Dec, and are paid in June.  What this means, in short, is that if you take possession after June, you will most likely have to pay a portion of the taxes, (assuming the current owner has paid up the taxes for the entire year).  If you take possession before June, you may actually get a refund from the current owner.  The joy this brings will be short-lived, however, as you will then be responsible for the full tax bill on June 30th.....

Land Titles Transfer Tax:  This one is a real beauty.  Every re-sale of a house or condo is subject to this tax.  The kicker is that the more expensive the home, the higher the tax. 

So a $90,000 home (if you can FIND one  of those) will cost you $360.00. 

A $150,000 home or condo will cost you $960.00.

A $200,000 home will cost you $1710.00

For every $1000 above this price, you can add another $20.00 for our provincial coffers  (you know, to keep our roads nicely repaired and stuff like that)

So if you're up at a $300,000 house, you'll be facing a $3710.00 bill....

Of course, the buyer needs to be aware of moving costs, and other incident expenses.

The Good News?   Many buyers are also not aware that they wont be making a mortgage payment for about a month AFTER they take possession.  So if you're moving from an apartment into a house, and you take possession on July 1st, and left your apartment on June 30th,  your last apartment rent payment was likely made on June 1st, while your first mortgage payment will probably not  be made until the first week in August.