Why do realtors do blind bidding?

I had a Twitter pal ask me yesterday, why do realtors engage in blind bidding in multiple offers– why isn’t there transparency about what another buyer has offered to pay? He added, why would anyone want to bid when they don’t know what the competition has offered?

Well, the problem is with our current law. Under the Real Estate Brokers and Business Act, it’s illegal for realtors to disclose the terms of an offer to another agent/buyer.

Legally, then, we’re simply not allowed to tell anyone what the price, or closing date, or any other details are of another person’s offer. There are things we are required to disclose, but not those.

What are list agents required to disclose? Well, when a written offer is received we are required to notify all interested parties (mostly realtors who have booked showings, but this could include anyone who has expressed interest) that we have received a written offer and when we plan to present it to the seller for their consideration. If it is what is called a double-ender in the business, where the agent is acting for buyer and seller, or providing customer service to the buyer by simply writing up an offer for them, but where they don’t have their own agent), we have to disclose that too, and indicate if the brokerage will be reducing its commission accordingly, and if so, by how much. (I don’t double-end, by the way, but it’s not illegal to do so.)

As offers come in, we are required to disclose the number of offers, whether any have come from another agent in our brokerage , and whether that has any impact on commission, i.e. has the commission been reduced because of the higher/double commission to the brokerage. Similarly, we have to disclose whether we’ve received two or more offers from another brokerage.

I’ve never been clear why this latter rule applies, to be honest, but in April, all of these rules are going to change.

There will be new legislation coming into effect that will permit a Seller to decide unilaterally to release the details of all buyers’ offer to other buyers.

I’m not exactly sure how this will work and if it will only apply to price, or if it will also apply to closing date and other conditions, such as financing or home inspection. Often these kinds of details can be more important than price: I’ve had sellers reject higher offers in a multiple offer situation because a lower offer had no conditions, or because the closing date was not what they wanted.

The idea behind this, I think, is so that there will be more transparency and that Buyers will have a better idea of where they stand in the bidding process, but because only the Sellers can decide if they want to do this or not, I expect it will have a limited impact.

I don’t know how many Sellers will want to disclose this kind of information when it’s likely in their interest to have “blind bidding” and buyers putting in their very best offers without knowing what anyone else has offered. I also don’t know if they have to make that decision at the time of the listing, or if they can do it any time.

The idea, I suppose, is to make things more rational, but I’m not sure if that will be the case or not. I’m thinking of art auctions where everyone knows what price is being bid and you’ll still see people driving up prices — I can imagine if two offers are close that it could be a bidding war of attrition.

It will certainly make it more difficult for listing agents to manage the process, so I’m looking forward to finding all the details.

The new rules will also make it clear that when a buyer chooses to work with the listing agent instead of getting their own agent — again, in a double-ender– they will be considered “unrepresented.”

I’m all for this – I don’t think buyers realize when they approach the listing agent to do up an offer for them that the listing agent has no fiduciary obligations to them – they act for the seller – and no requirement whatsoever to act in the buyer’s best interest. The listing agent is supposed to try to get the best price possible for the seller, and so while they are obliged to answer buyer’s questions honestly, they are not supposed to go out and do any research for the buyers or provide them with any advice on price.

I’ve always encouraged buyers who approached me as listing agent to get their own agent, and I refer out all calls that come in any property that I’ve listed to another agent in my brokerage because I don’t think they understand that I can’t provide the same kind of service to them that I do to my sellers. Calling them “unrepresented” instead of using the current terminology (“customers” instead of “clients” may help drive home the point that they’re really on their own, and the agent who is writing up an offer for them is more of a scribe than an agent.

One final change coming with the new legislation that I’m all in favour of is that it will no longer be considered “multiple representation” if two agents from the same brokerage represent buyer and seller.

This does away with the legal fiction that because we are acting for the same brokerage, we are actually one party. This change will free us up to discuss things with agents from our brokerage like bottom lines and motivations the same we do with other agents, but which is currently prohibited by law. I’m very glad to see that one gone.

So, lots of changes coming but not a lot of detail yet. Our first office meeting to discuss these changes will be early next week — I’ll keep you posted!

What’s the current state of the Ottawa real estate market?

A twitter pal asks: what’s the state of the current real estate market in Ottawa?

 I think we’ve hit bottom of real estate prices here and that we’ll start to see some stability, now that it seems interest rates aren’t going up again for the near future. Another rate hike would slow things down, but the Bank of Canada is finally seeing the impact of its aggressive rate hikes and has signalled a pause at least for now.

We definitely saw price drops over the past eight months due to the higher interest rates. Prices went down to about 2021 levels (still above pre-pandemic levels) and it took much longer for properties to sell, even though we are still technically in a seller’s market.

But our inventory is very low, because sellers don’t want to sell at what they now perceive as a loss, compared to the high prices of a year ago, even though prices are higher than they were pre-pandemic. Because of this low inventory, we have started to see multiple offers again. If the property is well-priced and well-presented, there are still plenty of serious buyers out there.

But prices are definitely not as high as they were at the peak of things: we are seeing price drops, and definitely it is possible to make conditional offers again, for financing and home inspections. Even in multiple offer situations, some properties are selling below list price or only marginally over list.

I’ve seen several homes where sellers have to sell and are taking a beating – selling for the same or less than they paid for two years ago, which means they are losing out because they had to pay legal fees and land transfer taxes to buy, and must now pay legal fees and commission fees on top of that.

I’ve been telling my buyer clients for several months now that I thought there was a window of opportunity to get in the market if they could afford to do so and that things would start to change quickly if interest rates stabilized or began to come down. We’re starting to see that happen now.

A recession, of course, could change that dynamic, but the impediment at the moment is high interest rates – and a recession brings interest rates down. I really think if/when those rates come down, we’ll see an explosion of pent up demand, so if I were a buyer, I’d be getting off the sidelines pretty quickly.

Someone asked me what impact all of this is on cottage sales — I think, again, prices are down somewhat but inventory is very limited. Nice waterfront properties that are reasonably priced are selling briskly and in some cases with multiple offers, but again, not wildly over list price. One in Renfrew sold this week with nine offers for $ 34K over asking so we’re not seeing the crazy bidding wars of 2021 where that kind of property might have sold for $100K over asking, but we are seeing renewed interest.

In all cases, I would say that the bulk of interest (residential, condo, waterfront) is in reasonably priced properties. Still hard to sell a property listed for over a million dollars, and I think that’s strictly due to the high cost of financing. But once again, when interest rates start to come down, I think the pent up demand for all kinds of properties will propel the market higher again. Bottom line: we just don’t have enough housing for everyone who needs it.

Tomorrow: why do realtors do blind bidding?

What will the latest Bank of Canada Interest rate hike mean for buyers?

I’m struggling with the rationale behind the Bank of Canada’s most recent interest rate hike. From what I remember (I took Economics in my undergraduate days), higher interest rates drive down consumer demand for goods and services and that lowers prices which in turn lowers inflation.

The problem is that much of the inflation in Canada has been due to international forces that we have no control over. There were constraints on oil and gas supply in Europe due to the war in Ukraine that drove up oil and gas prices to the stratosphere and high grocery prices here, which given the double digit profits and 10% higher dividend announced by one grocery chain today, seem to be linked more to price-gouging than anything else. (Pretty hard to credibly claim you’re facing higher expenses, raise your prices, and then announce you made double digit profits year over year.)

Clearly, higher interest rates don’t impact global inflationary pressures nor do they prevent profiteering. But they do have an impact on housing. “We need higher interest rates,” I’ve heard people argue. “Housing prices went through the roof during the pandemic!”

Yes, they did. Primarily because people were forced to stay at home, work from home, restrict their contact with other people to their “bubbles,” etc. The lower interest rates made moving into a new home affordable. A lot of lifestyle decisions were made — people wanted home offices, back yards, pools for the kids, places that were more liveable. Once the panic over the pandemic eased, though, we were already seeing the market start to cool; it dropped dramatically in May/June last year, after the Bank of Canada introduced a full point increase to interest rates.

But the Bank continued to raise rates anyway, even though the impact on the ground of these increases takes six months to a year to show up.

Since consumer spending isn’t what’s driving the inflation train, I think the impact of these increases rates on inflation will be negligible; economist Jim Stanford thinks the impact will be non-existent. Worse, I think we’ll end up in a prolonged, deep recession.

Our current Bank of Canada governor says higher rates are necessary because we need higher unemployment to have lower inflation. I don’t know. We were seeing a post-pandemic adjustment taking place anyway, with cuts in some of the sectors that flourished during the pandemic. Microsoft plans to lay off 10,000 people. Shopify, which is Ottawa based, laid off 10% of its workforce last year. Amazon is laying off 18,000 of its employees. I’m not sure how having more workers lose their jobs is supposed to help the Canadian economy, but it will hurt Canadian workers.

Where higher interest rates have an immediate impact is on the housing market, because they make it harder for buyers to purchase homes. Sales stall, and home prices drop, but any drop in prices is more than offset by the higher cost of borrowing money. We can expect to see the cost of a fixed mortgage increase to 6.7 per cent and variable rates to about 5.75 per cent with the latest increase today. That puts the after tax cost of carrying a $ 700,000 home at over $3,800/month, which is insanely high. And that’s a pretty average home in Ottawa right now.

I’ve had people say to me, “well, we paid 6 or 7 per cent mortgage interest on our homes: this is just a normal market.” Well, no. Because you weren’t carrying the same kind of mortgage then as buyers have to carry now. My first home cost $ 80K. The average house price in Ottawa is more than eight times higher. Incomes are nowhere near eight times higher than they were back then.

Because first time buyers have to rent for longer periods, there is more demand for rentals. Rents are skyrocketing, making housing overall even less affordable and that much harder for first time buyers to save up for down payments. According to Paul Danison, who sends me a monthly recap of rental rates, the average rate of annual rent increase for 2022 was 10.9 per cent year over year.

The problem with housing isn’t inflation: it’s supply. We are short 1.8M houses in this country for our current population, and the federal government has set a target for immigration of roughly a half million newcomers a year. All of those people have to live somewhere. The federal and provincial initiatives to increase the housing supply are going to take a concerted effort and billions of dollars — we need building of the scale that took place after the Second World War, and we’re not seeing it. The federal government recently announced a $90M initiative to build 270 housing units in Ottawa. We have 12,000 people on waiting lists for subsidized housing here. 270 is great, but it’s also just a drop in the bucket.

Higher interest rates slow down the ability of developers and builders to build new housing because they have to borrow money to build, and at the moment since no-one can afford what they’re selling, the private sector can’t easily step in to fill the void. I know of one developer who pre-sold 500 homes in 2021 and only pre-sold 50 last year; without pre-sales, they can’t build. It’s a mess.

I expect we will end up in the worst of both worlds. Once the economy enters into a recession, the Bank of Canada will try to stimulate it by dropping interest rates.

And I think what we’ll see then is pent-up demand that’s going to drive housing prices up again, simply because there are too many people who need housing than we have houses available. But in the meantime, people are going to lose their jobs and many of them will lose their homes and until the war in Ukraine is over, there may not even be much of a change to inflationary pressures.

As Jim Stanford pointed out on Twitter, “2022 inflation had nothing to do with the labour market. So while this downturn will ruin lives, it won’t fix supply chains, energy prices, or oligopolistic power.”

How far do real estate agents go to verify identity?

Terrible story out of Toronto where for the second time, fraudsters (and apparently the same fraudsters) managed to list a property they don’t own by using fake ID and pretending to be the owners, successfully in one case. In each case, the fraudsters gained access to the homes by applying as tenants and presenting fake information to support their rental applications, then impersonated the owners (in one case, a 95 year old) and listed the property for sale.

The news story blames the realtors for not verifying the ID presented. The reporters did, however, and found this:

When screening the two potential tenants, the agents collected photocopies of their driver’s licences, contact information for their employers and personal references, and credit history checks.

The companies listed as employers had very little online presence, including no website.

When CBC called the phone numbers, those given for the employers were out of service, as was one of the personal references. The second personal reference appeared to be a wrong number.

CBC News also ran the three driver’s licence numbers through the Ontario government’s free driver’s licence check tool. 

https://www.cbc.ca/news/canada/toronto/fraudulent-home-sale-1.6710868

Now, I wasn’t aware there was a driver’s licence check tool, and I’ve been in the business for 13 years. As a former lawyer, I’m actually surprised the public has access to my driver’s licence information — I would have thought that was considered private. But I didn’t know about it, and I’m guessing other realtors don’t either, because I’ve never heard of it.

It sounds in the story like the prospective tenants weren’t properly vetted, but that assumes the personal reference contact info was invalid from the get-go. I suspect the fraudsters had people lined up ready to give glowing references at the time they submitted their rental application.

The reporter says that the person misspelled their name twice on the rental application. I’ve seen people spell their names, phone numbers, work numbers and personal identification incorrectly — they’re filling out legal paperwork and can be nervous or distracted, so I don’t place too much weight on that.

The employer’s number being out of service would be a red flag, but again, my guess is that the fraudsters had things set up so that someone answered the call when they perpetrated the tenancy fraud. Not sure why the reporter mentions that the employers had “almost no online” presence and no website — that seems pretty trivial. I would only do a Google search (if at all) if there were red flags in the rental application, but when I see red flags, I usually don’t proceed further anyway. An Equifax credit check might have exposed the fraudsters. I always do one (I never rely on the online version sometimes supplied by a prospective tenant), and if one wasn’t done here, that may be why everything went south afterwards.

But I can’t see this kind of elaborate fraud unfolding if all the reference phone numbers were out of service, so I’d guess that references were checked and that the references were all part of the fraud. Makes sense to me the numbers would be out of service by the time the reporters checked: they were no longer needed. Did the realtors do enough? I don’t know. I don’t have enough information. But here’s what we are required to do when it comes to both acting for sellers and for buyers.

We have to get a government-issued ID, compare the person in front of us to the information on that ID, and complete a FINTRAC form which is held by our brokerage. FINTRAC is the money-laundering legislation; if FINTRAC thinks there’s something suspicious, they can conduct an audit. (If we can’t get government-issued ID for FINTRAC for purchase or sale, there are other more complicated steps we have to take.)

We do *not* complete FINTRAC forms for rentals; they are not required. And as I recall, lawyers aren’t required to do them at all, due to solicitor-client privilege but the Law Society of Ontario has come up with similar steps that just aren’t audited by FINTRAC.

The tenant posing as the seller presented fake ID to the listing agents, who would have had to complete new FINTRAC forms for the sale, but it’s hard to fake being 95. Was there an elderly person involved in this scam too? The fake ID in the newspaper story is for someone who is clearly not 95. Or did the fraudster just use the seller’s name and no-one dealing with them as “seller” knew the true owner was 95? Was everything done through e-signatures? I’ve always had a concern about those electronic signature programs being used for nefarious purposes, but again, if you’ve been provided with what appears to be valid ID that matches the person you’re dealing with, I don’t know how you’d be expected to see red flags.

It’s not clear from the story, but I don’t know how the listing realtors would have known the fraudsters weren’t the owners — they had access, keys, and physical possession of the premises. And like I said, I never heard of a drivers licence check tool before, and have never heard of one being used to verify the validity of a driver’s licence. We have to check for expiry dates and make sure the government issued-ID we rely on has not expired, but that’s all that’s required: we’re not document examiners.

I always check Geowarehouse, which is the tax database, when I’m doing a listing or about to put in an offer for prospective purchasers. If the purported owner was in their say, 50s, and I could see from Geowarehouse that the current owner had owned the home for decades (the article indicates the 95 year old had lived there since the 70s), that might raise red flags, unless the seller claimed to have a power of attorney, in which case I’d ask for a copy. But if there wasn’t that kind of ownership history, I’m not sure how the listing realtors (who came from a different brokerage and weren’t involved with the rental) would know this was a scam.

I’d be interested to know if there was a prior rental listing that showed the property as rented/ tenanted. That would raise questions in my mind because it’s so hard to get rid of tenants, I’d want to know if they had moved out only a month or two later and why, but if I was given a satisfactory answer, that would be the end of it. If I saw a property that I had rented suddenly put up for sale by another realtor, now vacant and staged, and listed for sale by my former client, I might wonder for sure what happened and why they went with another agent.

But, by law, I am not allowed to contact my former client to find out because they have representation with a different agent now. So even if the realtors who rented the property originally saw the “for sale” listing, they are legally prohibited from contacting the true owner to ask why they decided to sell, or why they have listed with another agent. Blame the law for that one, not the realtors.

I feel for the sellers and the purchasers. I hope the purchaser’s title insurance covers this: the law is messy. A bona fide (good faith) purchaser usually can’t get good title from a thief, but we’re under a land titles system in Ontario where you generally can’t go behind what’s on title so it’s complicated. My question, though, where were the lawyers? It sounds to me like this scam was sufficiently elaborate that they got snookered too.

Here’s my final takeaway: if you’re renting a property while you’re out of the country, consider asking a trusted (“nosy”) neighbour to keep an eye on things for you. Not only is it a good idea generally, but as soon as that “for sale” sign went up, a neighbour might have contacted the sellers to ask why they were selling, and that would have been enough to shut this whole scam down.

Ottawa’s New Vacant Unit Tax (VUT)

So, the City of Ottawa introduced a new vacant unit tax that took effect on January 1, 2023, even though the paperwork (for those of us who had deals to close the first week of January) wasn’t available until January 4th. I’ve heard that some folks are having problems using it because the database has misidentified their address or, in one case, decided that a single family home is actually a multi-unit dwelling and won’t accept the declaration. Despite these obstacles, around 25% of home owners have filed the online declaration so far. Here’s the problem I see for the rest.

The VUT is filed online. Notices were sent out by ordinary mail to property owners back in November. I’m sure some people (like me) kept theirs, and others tossed them out like most of the junk mail we get. The notice, however, contains the access code you need in order to file your declaration. If you don’t have that, you have to set up a property tax account in order to do so.

All of this is great if you are computer savvy and know about the new tax. Not so great if you didn’t get the notice in November, or maybe aren’t fluent in English or French, or maybe don’t have an Internet connection. So I have some concerns about the way this has rolled out and the way it was communicated.

It seems to me that anything that has an automatic default should be sent by registered mail. Ordinary mail can get lost. I had two letters in December that were put in the mail and never reached their destination.

The penalties for failing to file are high. If you fail to provide the declaration by March 16th, it’s a $250 fine added your taxes. I’m told this has been waived for this March, but I can’t find verification. And if you miss the deadline altogether because you’re say, out of Canada, or didn’t get your mail, or forgot about it, or don’t have a computer, or didn’t hear anything about this — well, good luck, because there’s a fine of 1% of your property’s assessed value that again, will be applied automatically to your taxes. Yes, you can appeal. But the kind of vulnerable people (seniors, recent immigrants, people who can’t afford Internet) won’t likely know how to do that either. And if the prior owner fails to file the requisite return and the property is sold– well, guess what? The penalties go on the purchaser’s taxes. That’s right: it’s the buyer who has to pay.

Let’s look at the underlying premise behind this tax because there are plenty of people who are saying, Oh, I get this — I think it’s a good idea. I always start that kind of analysis with, “What’s the underlying problem that this policy is trying to fix?” And it seems that the City of Ottawa feels that by requiring each homeowner to verify online that their property has not been vacant for more than 184 days, that will help free up housing. It also assumes that properties that are vacant for more than 184 days would otherwise be available as housing, which may not be true.

It estimates there are 1,600 of these, but of course, there’s no way of knowing, because there’s no baseline. I will say as someone that has been in real estate for the last 13 years, we don’t see too many vacant properties unless they are completely uninhabitable, or the owners or tenants have moved out, the properties are listed for sale and are as yet unsold, or the owner died and the estate is being wrapped up. But let’s take the 1,600 number (which I think is likely high) as valid.

That means that 400,000 property owners are being forced to sign online declarations each year, or face severe penalties that will be automatically applied to their tax bills if they don’t, because the city estimates that 4 in 1,000 properties are vacant? That’s 0.004. What is the cost of administering this new tax, not just to the city in terms of the software and the dedicated personnel who have to deal with it, but to individual homeowners in terms of time and stress? Is it worth it?

There are some exemptions to this policy, by the way: where the owner died; or where the property was under “major renovations” with a permit and which the Chief Building Official believes are being carried out diligently and without delay; or because the occupants or tenants are in a hospital long term or supportive care facility; or where the property was sold to a third party; or due to a court order, and there’s some legalese about short term cottage rentals that I couldn’t make heads or tails of, and I’m a former lawyer.

But here’s a practical example of how this new tax can be problematic. I owned an investment property last year. It was tenanted until mid-September. The tenants left the property in a real mess. No “major renovations” so no building permit was required, but with trades booked up for a year, it took a long time to get everything fixed. So I don’t fit in the “major renovation” exemption to the tax.

Once the property was fixed up, I decided to list it for sale. The market had pretty much collapsed by then. It took me much longer to sell than I had expected, and the property was vacant until this January when the new buyer took possession. So it did not sell to a third party last year, meaning I didn’t meet that exemption either. Luckily, the vacancy added up to less than 184 days. But if my tenants had moved out a few weeks earlier, with the exact same scenario, I could have been stuck paying a hefty tax through no fault of my own. Or worse, it could have shown up on my purchaser’s tax bill this spring.

But why should sellers have to submit a declaration at all? Remember, the underlying purpose of this new tax is a deterrent — so that housing which would otherwise sit vacant is used to house people. But if you’ve just sold your property, whatever deterrent effect the new tax is supposed to have had has already kicked in.

I’m also curious how anyone can complete an online declaration if an owner has to first get the Chief Building Officer to verify that the “major renovations” being done under permit are being done in a timely fashion without unnecessary delays. Who decides what “unnecessary” is? The CBO? Do we have to get sworn statements from contractors to verify that there are supply chain issues? Does the CBO have to send out an inspector to look at the state of renovations before the declaration can be filed? Heck if I know, but I know how long it can take to get a building inspector out at the best of times.

As realtors, we are now going to have to insert clauses in offers that require that the seller provide not just a copy of the declaration they file with the city, but a sworn declaration as well to the effect that the contents of that online declaration are true. Because an online declaration is pretty meaningless — there’s no way to verify the contents short of an audit, and again, that takes time, staff and money for what looks to me like a very negligible return. I have a feeling that a lot of homeowners are going to be upset when they find charges on their already high tax bills because of a new tax they didn’t even know existed.

Final sock drive numbers! #SockittoChristmas

And the Sock it to Christmas sock drive is over! We collected 1,519 pairs of socks, which is awesome! Amazing in a year when so many people were struggling themselves to get by!

Royal LePage Team members were incredibly generous, as always: my own office donated roughly 450 pairs of socks! But they weren’t alone!

Greg MacEachern of Proof Strategies hosted a Christmas party and asked people to donate socks — he collected a whopping 126 pairs and $ 180 in cash donations. The party even hit The Hill Times with the headline, Proof Strategies Socks it to Christmas in a good way! (Here’s a pic of all the socks they collected!)

We delivered 557 pairs of women’s and children’s socks to the Parkdale Food Centre on Monday, 450 men’s socks to Good Shepherd’s last Sunday and the rest went to the mission yesterday. So thank you, everyone, for helping us to Sock it to Christmas in 2022 — a huge thanks not only to the donors but the volunteers who helped sort, count and deliver socks and thanks also to the shelters and Parkdale Food Centre for doing their best to keep our neighbours warm over winter.

Merry Christmas!!!!

#SockittoChristmas Raffle Prizes!!!!

It’s the final week of the sock drive! We’ll start bringing our sock bins in on the 16th! If you drop off a bin at one of our participating Royal LePage Team offices (see below), you can be entered in a draw for some really great prizes! Here’s list of just some of the prizes!

Nectar Flowers, which is owned and run by a Ukrainian woman, Kseniia, (who says she also hires Ukrainian staff), has donated a $ 150 gift card! I met Kseniia at one of our office meetings where I made a short presentation about Sock it to Christmas and Kseniia immediately sought me out after the meeting and said she’d like to make a donation.

Check out some of the beautiful flower bouquets this wonderful company has put together! This business is a full service florist with daily flower deliveries, with a full time team on site — fully local and female-owned, they operate only in Ottawa and in the Ottawa area.

You can find Nectar Flowers on Instagram or on their beautiful website. Keep them in mind for thos big events, like weddings, but also gifts. Flowers don’t need a special occasion! Thanks, Kseniia!

Then Kseniia’s partner, Misha, approached me. He owns and runs M P Detailing on Merivale “where cargasms happen!” and wanted to help too! He has also donated a $ 150 gift card! This is a brand new business opened in late March 2022 with an awesome location, lots of space and convenient parking! Misha says “we do everything ourselves (service, website, photos, etc) and work really hard!”

You can find Misha and MP Detailing on Instagram and on their website! Thank you, Misha — I will taking my own car there soon to have you make it beautiful again! (It’s a working car, you know the type — I am in desperate need of a good detailer :-).)

Another wonderful gift that came out of the blue came from Jonathon Crone, who follows me on Twitter! He kindly offered to donate one of his amazing handmade fountain pens! Jonathan makes these pens, among others, for the judges on the Supreme Court of Canada. The wood used in this particular pen is local (walnut from Kemptville) and the gorgeous case is handcrafted from maple.

Awesome! Jonathan also makes spice mills that are to die for! These are on my Christmas wish list for sure (that’s a serious hint, people)! Jonathan says, “Spice mills are made by my autistic son and myself: as ‘singles’ they are $50/75/125, depending on small, medium, large. As pairs, I discount by $10, $25 or $50 per set. I can also make to order by desired wood species.”

If you check out Jonathan on Twitter, you’ll see pictures of all kinds of wonderful things he makes — handcrafted pen sets, furniture etc. He can even make custom sets of pens (and cases) for your business!

Check out Jonathon’s website and if you’re still on Twitter, give him a follow — @FurnByJonathan!

Another very welcome and unexpected donation came from Jane Daly who offered to donate a bottle of her Eau de Jane perfume!

Jane has been a Twitter pal of mine for ages and this was incredibly kind of her! Jane is an acclaimed beauty expert who has also worked for many years in the beauty industry, in promotion and new brand launches: she has been a consultant for Dove in several of their national campaigns. Jane’s passion for perfume led her to develop her own fragrance, Eau de Jane, which launched in 2019. This bottle of perfume is listed for sale for $ 115 USD.

You can find out more about this perfume on the Eau de Jane website and more about Jane on DalyBeauty.ca. Thanks again, Jane! (Jane says she will deliver the perfume in person once we have a winner!) You can follow her on Twitter too – @dalybeauty.

A perennial and much appreciated donor to the Sock it to Christmas campaign is Nancy Mooney (@NancyfromCanada for those of you on Twitter). Nancy has been kind enough to donate one of her gorgeous photographs to our raffle since Sock it to Christmas was first launched in 2017. Nancy is well known for taking beautiful pictures of birds and Westboro sunsets, and she has been kind enough to donate one of her beautiful prints again this year. Just stunning!

And below is a photo Nancy took at the Arboretum that she donated to the last raffle – just beautiful!

Finally, Greg MacEachern at Proof Strategies, which is a top PR firm in Ottawa, has been a steadfast supporter of Sock it to Christmas from Day one. (You’ve probably seen Greg on one of the political TV panels, like Canada Talks — he’s a well known political commentator.)

Thanks to Greg, Proof has always donated a gift basket to our raffle and each year, Greg/Proof hosts a cocktail party at a local bar and asks guests to bring a new pair of socks to donate to the cause. I can’t thank Greg enough for his staunch support and the gift baskets have always been amazing!

I don’t have a picture of this year’s yet, but these photos of the last two Proof donated should give you an idea of what’s coming!

Proof Strategies is a public relations and communications partner that “asks better questions” to create insight, grow trust and achieve success. Founded in 1994 and now with close to 300 awards for client work and industry leadership, the independently owned Proof family of companies have more than 200 team members in offices in Toronto, Montréal, Ottawa and Washington, DC.

You can check out Proof Strategies at http://getproof.com and find out more about the work Greg does in Government Relations here. You can also follow him on Twitter as @gmacofglebe. Thanks so much, Greg — I always know I can count on you and that support is always so very much appreciated!

And that’s it for our prizes! We’ll be doing the draw at my office party on December 20th. If you drop off a pair of socks at one of our Royal LePage Team Realty locations, you can be entered in the draw (one ticket per package of socks). Here’s a list of all our drop off locations throughout the city!

Royal LePage Team, 1723 Carling Avenue (near Broadview)

Royal LePage Team, 3101 Strandherd Drive, Barrhaven

Royal LePage Team, 5510 Manotick Main Street, Manotick

Royal LePage Team, 48 Bridge Street, Manotick

Royal LePage Team,  484 Hazeldean Road (corner of Castlefrank)

Royal LePage Team,  6081 Hazeldean Drive (just off Stittsville Main)

Royal LePage Team 555 Legget Drive, Kanata, Unit 101 (Kanata North)

MNP, 8^th floor, 1600 Carling Avenue (corner of Churchill)

Critter Jungle, 1605 Orleans Blvd, Orleans

Cantina Gia restaurant, 749 Bank (Glebe)

Sock it to Christmas! Drop off Bin Locations

The annual Sock it to Christmas sock drive is back after a two year hiatus due to COVID. We’re looking for warm winter socks (must be new, not used). We have ten drop off locations from Manotick to Orleans, and if you drop them off at one of our Royal LePage Team locations (see below), you can be entered in a draw for great prizes including a handcrafted fountain pen made by Jonathon Crone of walnut (in a custom maple case), a framed photograph by Nancy Mooney, a gorgeous gift basket donated by Proof Strategies and a tea-themed gift basket I put together!

Maybe your Scout group wants to do a drive or maybe you’d like to run a corporate challenge to see who can collect the most socks in your office! Whatever you do will be very much appreciated — did you know that socks are the most requested item in shelters?

Men’s socks will go to Good Shepherds and The Mission; women’s and children’s socks will go to the Parkdale Food Centre’s Soup and Socks Program. Give the gift of warmth this Christmas! Let’s fill these bins — locations below!

LOCATIONS:

MNP, 8^th floor, 1600 Carling Avenue (corner of Churchill)

Critter Jungle, 1605 Orleans Blvd, Orleans

Cantina Gia restaurant, 749 Bank (Glebe)

Royal LePage Team, 1723 Carling Avenue (near Broadview)

Royal LePage Team, 3101 Strandherd Drive, Barrhaven

Royal LePage Team, 5510 Manotick Main Street, Manotick

Royal LePage Team, 48 Bridge Street, Manotick

Royal LePage Team,  484 Hazeldean Road (corner of Castlefrank)

Royal LePage Team,  6081 Hazeldean Drive (just off Stittsville Main)

Royal LePage Team 555 Legget Drive, Kanata, Unit 101 (Kanata North)

“Mom/Daughter Face Homelessness” – Who’s at Fault?

Okay, so I think we’ve all heard about this poor woman who bought a house off-market, didn’t know it was tenanted, can’t get the tenants out and now may find herself homeless. There are so many red flags in this story that I don’t know where to start.

The story says, “she [Kalu] bought the townhome sight unseen during the pandemic real estate boom through a real estate wholesaler, which buys and sells off-market homes at below-market value, and avoids realtor fees — a risky move, she acknowledged in hindsight.”

No kidding.

First of all, I don’t know what “real estate wholesaler” refers to. Whether you list a home on MLS or sell it off-market, unless you are the owner, or a lawyer, or fit within the auctioneer or other exemptions under REBBA, our governing legislation, you have to be a “registrant,” ie. a realtor.

I can’t tell whether this group she purchased through was a real estate brokerage or not. But people who engage in trading real estate who aren’t registrants and aren’t otherwise exempt from registration can be subject to hefty fines for trading in real estate illegally.

REBBA sets out how buyers and sellers are to be dealt with if the same realtor or the same brokerage is handling both sides of a transaction and acting for buyer and seller. They have to be honest and disclose latent defects/material facts that might not be discoverable by the buyer but could affect the buyer’s decision. If you are dealing with someone who isn’t covered by the Act, however, you don’t have that same protection.

There was no disclosure of tenants at the time Kalu signed the offer, according to the story. Let’s assume for the sake of argument that the “wholesaler” was a registrant or real estate brokerage. Is the failure to disclose that a material fact that ought to have been disclosed?

I don’t know, and the reason I don’t know is because only minimal effort on Kalu’s part would have disclosed the presence of tenants. It’s not like not being told a place was a grow op, or that it had flooded: nothing was hidden behind the walls, it doesn’t seem like anything was concealed. The tenants were living there in plain view.

Kalu says she didn’t know until after she signed the Agreement of Purchase and Sale in January that there was a tenant who refused to leave. Did she think it was the owner living there or that it was vacant? The story doesn’t say. But I note she lives in Gatineau, close enough to do a drive by and see if people were living there. The story doesn’t say how she found out after the offer was accepted that it was tenanted.

But my first question before making an offer would have been: Why was the home being sold off-market for less than market value in a red hot market? Did she ask? What was she told? The fact the property wasn’t on MLS but being sold privately means you need to do more due diligence, and ask more questions, not less.

When we list a property on MLS, as realtors we have to verify all the information that’s in the listing. If you buy off-market, privately, and there is no MLS listing, you don’t have any of that, so you need to verify everything — the age of the furnace, the windows, the roof, the lot size, taxes. The story says she’s since been told the home is “delapidated.” Surely, you’d want to know the condition of the home before you make an offer? What if it had been a grow op? Or had asbestos? Or aluminum wiring?

Why not ask for a home inspection as a condition of the offer? This was a private sale, with no multiple offers to contend with. A condition like that allows you to back out if you don’t like what you find. A home inspection would have shown the minute the inspector walked in the door that the property was tenanted.

If Kalu had had her own realtor, so much of this story would have played out differently. She wouldn’t pay any realtor fees; the seller would, if the seller was prepared to deal with her realtor. At least she would have had some independent advice. But she didn’t. And what I don’t understand is if she found out before closing that there was a tenant in the property, why did her lender advance funds? Why did she close the deal at all?

Usually, if a property is tenanted, the lenders want to know that a proper notice of termination has been given and will require a copy of the notice. They want to be sure that the tenants plan to move out so that this kind of situation doesn’t happen.

Did the mortgage lender know the property was tenanted? I’m guessing not, because the story then says she ended up having to change lenders, and had to find a private lender at a higher rate of interest after the tenants refused access:

The occupants also refused to let an appraiser in to appraise the home, the LTB submission states, so Kalu couldn’t get financing with her bank — forcing her to delay the closing and use a private lender with an 8.99 per cent interest rate and two per cent lender fee.

Banks don’t like to finance a tenanted property that a purchaser wants to live in without having some kind of solid proof that the tenant is leaving. It sounds like this deal mentioned nothing about tenants at all. If that’s so, there is a standard clause in the Ontario Real Estate Association Agreement of Purchase and Sale that the seller must provide vacant possession: the clause is right at the bottom of p. 1. “Vacant possession,” meaning no-one is living there: it’s vacant.

If there was nothing in the signed agreement dealing with tenants, getting them out should have been the previous owner’s responsibility: it’s up to them, as the seller, to turn over vacant possession to the new buyer. If they don’t, they can be sued for specific performance and damages.

So I’m curious about that too — what did the deal itself say? Did the wholesaler use the standard form? Did the agreement say Kalu would assume the tenants? If so, how can she say she didn’t know? If it didn’t, why did she take on that role? Why close the deal at all if the seller couldn’t provide vacant possession? I’m wondering where her lawyer was in all this: the story only mentions a paralegal who’s helping her navigate the eviction process. The whole thing is just weird.

Despite knowing there were difficult tenants (remember they had refused access to an appraiser), Kalu took possession and closed the deal in April. She took on the role of landlord and then gave “her tenant [my emphasis] an N12 notice this April — a form under Ontario’s Residential and Tenancies Act to notify tenants about a landlord’s intention to move in. She’s also served the tenant multiple N4 notices for non-payment of rent.”

Under the Residential Tenancies Act, in order to evict a tenant so that a purchaser can move in to occupy the premises, the landlord must give 60 days notice (from the last day of the rental period) and one month’s rent as damages. Without proper notice and a month’s damages, the tenants are not required to move out.

The story says the previous owner had tried to evict them for non-payment of rent and never got a hearing, but here is nothing to say that he ever served them with the appropriate notice that a buyer was moving in, so I’m guessing the deal was silent on that point.

He said he began having issues with the two occupants just before the pandemic, when he notified them he wanted to sell the home after getting diagnosed with cancer.

The former landlord said the LTB had failed him, too, as he never made it through an eviction hearing after applying for one.

If so, I’m back to the question of vacant possession, and why Kalu’s lawyer let him off the hook. Maybe there was a clause in the deal saying the purchaser would assume the tenants, but that would contradict the story that says she didn’t know.

Either way, Kalu has taken on the role of landlord now. Did Kalu pay the tenants the one month’s damages owed to the tenants when she served them the notice of termination? Maybe not. They claim they have the right to stay indefinitely, which they would have if the notice doesn’t conform to the precise requirements of the Act. Without the payment, the notice is invalid; same if there are any errors in it. Maybe everything was done correctly. It doesn’t really matter, because she’s trying to get a virtually non-existent Landlord Tenant Board to remove them now.

Welcome to the crazy upside down world of landlord-tenant relations in Ontario, where tenants can refuse to pay rent for pretty much forever, and you can’t get rid of them without a Board order, in circumstances where the Landlord Tenant Board has essentially collapsed.

It can take eight months to a year to get a hearing, much less an eviction order, and meanwhile, the tenants don’t have to pay a cent. If they pay arrears of rent at any time during this process, however, they get to stay as long as they want. You cannot kick them out. When a lease ends, it automatically converts to a month-to-month tenancy that can be extended indefinitely at the will of the tenants.

The only way to get tenants out is to have a purchaser moving in who plans to occupy the property for more than a year. The owner is supposed to give the requisite notice under s. 49(1) of the Residential Tenancies Act and pay them one month’s damages to move out. A landlord can do the same under s. 48(1) if they plan on occupying themselves: that seems to be what Kalu has done, and she’s applied for the eviction order because they’ve refused to leave.

But that’s the problem. You can’t get rid of tenants who don’t want to leave. There’s no mechanism in place anymore: the Landlord Tenant Board only works in theory, not in practice.

Which is why realtors avoid showing tenanted properties unless the tenants themselves have given notice of termination. And why, if we are acting for the seller, we put in a clause agreeing the seller will give the tenants the requisite notice but add a clause saying the seller does not warrant vacant possession, because s/he can’t. They can’t guarantee it because there is no body available to issue the order. And if there is no clause to that effect, the seller must provide vacant possession, and that puts them at risk because they can’t always guarantee it.

I don’t know what the exact terms were of this deal. I don’t know why Kalu didn’t have a realtor helping her; why she didn’t do even minimal due diligence; why the lender advanced funds once it knew there were uncooperative tenants in the property; and why, once it was clear that the owner could not provide vacant possession, Kalu closed the deal anyway. I don’t know why she hasn’t sued the owner for not providing vacant possession or the wholesaler and the owner for non-disclosure. I don’t know enough to really know what’s gone on here.

Except for this:

She’s in a terrible situation, and it’s disgraceful that the Landlord Tenant Board has fallen into such a state of disrepair that it’s pretty much useless. This woman is stuck, and she could end up losing everything.

At the end of this, the lessons are: don’t buy a property sight unseen. Do your due diligence before firming up a deal. Ask lots of questions. And don’t buy a tenanted property unless you’re an investor willing to assume the existing tenants, or have actual written proof that the tenant is leaving. Because at the end of the day, it’s buyer beware.

Should I renovate before selling?

I got these questions from a couple of Twitter pals and thought I’d answer them here:

Okay, so first question first. If a bathroom or kitchen is badly dated, it’s going to impact price. These days with more options for buyers, most are looking for move-in condition. This are big ticket items, and with supply chain issues and delays, I don’t know of too many buyers who want to take them on. I find that buyers tend to overestimate what renovations will cost as well. So if your kitchen is badly dated, I would say you should probably do some updates.

This doesn’t have to be a full gut job, however! If the kitchen layout is fine, you can get reasonably priced custom sized new cabinet doors from Swedish Doors in about 6-8 weeks. I’ve just installed new doors at my cottage in Benjamin Moore’s Soft Fern colour (a very light serene grey-blue-green) and I did the ones at my investment condo using their products as well. Here’s what they looked like, before and after:

Those new doors and new hardware can really update a kitchen. In both cases, my costs were well under $5,000, much less than the cost of a gut reno. Swedish Doors have an an online catalogue and a lot of their coloured doors are available at no extra charge. You can check them out here.

(If the appliances are in bad shape, I’d suggest replacing them, and best to place orders now; there are all kinds of supply chain issues.)

One of my pet peeves are cracked or damaged counters. If your countertops are damaged, I’d replace them before listing. Quartz is expensive these days, however, and while quartz is nice, you won’t get more money in the sale for installing it. Buyers just want a kitchen that’s fresh and clean and one they can live with, even if their long term plan is to remodel it.

There’s nothing wrong with laminate though, and there are a lot of new laminates that look like stone or quartz at about half the cost (check out Eastop Counters on Lancaster for examples: Omar is great. I ordered a new counter there for the cottage last week and they had it customized in less than seven days).

It’s more expensive that it used to be but still much less than the cost of natural stone or quartz, and the installation is less costly too, because one person can handle laminate, whereas stone or quartz requires two due to weight. (I always use R&C Cabinetry for my doors and laminate installations: they partner with Swedish Door and I love them. It’s a husband and wife team and Rebecca and Chris are an absolute pleasure to deal with.)

Depending on the size of your kitchen, you can get new cabinet doors, a new laminate counter, and new pulls for a lot less than it would cost to do a gut reno. And while home prices are falling right now, you’ll get a better price if you do these things than if you leave the home as it is, hoping you’ll find a buyer who wants to take those things on. Eventually you will, but they’ll expect to pay significantly less.

Sometimes old kitchen cabinets can be painted or updated with new hardware. Without seeing your homes, I can’t tell you what you might need to do, but I wouldn’t leave an old kitchen thinking buyers will just gut in anyway. I’d do what I could to make it as appealing as possible for sale.

Bathrooms are tough because so much is involved in gut-renovating one (plumbing, fixtures). That said you can replace an outdated shower head, and putting in a new vanity faucet often makes a huge difference. You can also tile floors and really update a tired bathroom that way: here’s an example of what I did to my investment property: the black and white tiles updated the room without me changing any fixtures.

Cost of that was around $ 600, as I recall, so it wasn’t a lot to spend to get a big bang for my money.

I am also a big fan of updating lighting, particularly in bathrooms. You can find great lights at big box stores and have a big impact.

So I would suggest that you be prepared to spend a little money to get your home ready for sale and not leave it thinking a buyer will just gut the kitchens and bathrooms anyway. For a relatively small amount of money, you can have a big impact, sell your home more quickly, and get a better price. I hope this helps!