Friday, February 19, 2010

Competition vs. MLS -- Part 2-ish

The real estate section of today's Globe has an article headlined "Under the Gun" It starts off with an example of a couple in court because they got badly screwed around by unscrupulous-sounding agents. Then to the lady in the main photo who has burned through 4 agents who "failed" to sell it. We get a little dose of an agent defending their services, then into a Queen's professor who pretty much slags the current MLS setup. Ouch. Allow me to pull a couple of things out of the article that you may have missed in the whole "agents are useless crooks who are about to get their comeuppance" flavour of the thing.

First of all, the court case. Sounds like the agents failed to disclose "multiple representation" or "dual agency" and failed to disclose a family relationship between an agent and a buyer/seller. If true, nail them.

Or maybe they disclosed but did a poor job (accidentally or on purpose) of explaining and/or the sellers didn't read or pay attention to what they were signing. If true, nail both sides.

In any case, what the hell does a single anecdote of unethical behaviour have to do with the state of the industry? That was rhetorical; the answer is "It doesn't". Every profession has its baddies ... the occasional accountant steals, the occasional lawyer steals or screws up, the occasional financial analyst runs a massive Ponzi scheme. Shouldn't happen but it does.

Next up, the lady who burned through four agents who couldn't sell her house. Sounds like every time she went with one who said he "had clients who were interested" or "had contacts". Four times? We all have contacts and clients. That's not how you pick an agent. At least not four times.

So she decided to sell it herself, thereby supporting the "real estate is messed up and needs to change so that people have more options" theory. Well, she did have an option and she tried it (selling it herself). That didn't work either. Her bottom line: "She is now planning to list with [another] agent" but apparently using different selection criteria.

If you burn through four agents, plus yourself, and are working on number five, this is NOT an indication of systemic flaws in the industry. Even if you are cosmicly incompetent in selecting professional advisors, your house will eventually sell on MLS ... unless ... Unless your market truly stinks (not true here ... this was Calgary, not Detroit) or the house is seriously overpriced (I'm putting my money on this one).

And at the risk of being repetitive, she's about to hire an agent!

Finally, the prof. He says a rival database to MLS could give better information, the industry is protectionist, the consumer should have do-it-yourself choices, etc. But what would he do if selling his house? "I would probably pay full commission for the full service ... I know I would be able to find somebody really really good".

I am not saying our system is perfect. I am not saying that all agents are expert and professional. But here's a summary of this article from one perspective:

A certain number of agents behave badly. A lady in Calgary is learning that selling a home involves more than putting a sign on the lawn, and requires some care in selecting an appropriate representative. And an expert observer who seems to think big changes are needed would use a good traditional approach to selling his own home. Hmm.

P.S. Why is this called "Part 2"? Check it out.

Tuesday, February 16, 2010

That might work, ... if ...

The Feds have announced some changes. If everyone sees them for what they are -- and what the Feds say they are -- they should be good. They should slow you down if you were about to do something silly. But they shouldn't stop you or seriously restrict you in doing what you want to do in real estate.

The first and major change requires. you to "qualify" for your mortgage at the five-year fixed rate. So you qualify by "pretending" that you are getting a mortgage at say 4.7% (whatever the 5 year rate du jour is). Then you go ahead and grab that juicy 2.5% variable rate.
This is kind of like your government protecting you against yourself. Might make our FoxNews-watching neighbours scream "socialism" and go a little crazy. But might also make you thank them if your variable rate starts up in a year or two.

Next up, is a new limit on the maximum amount you can refinance to. It's still early and I need more details on this one, but here's what I THINK they are up to. You can still go 95% mortgage when you buy a house. But, when your mortgage comes up for renewal, you have to get to at least 10% equity/90% mortgage. Why?
They are trying to encourage building up a safety cushion of equity. Presumably they are also discouraging a few folks who have lots of equity but are tempted to borrow back the whole wad in order to "buy themselves something frilly". For example, say you think it's time to buy some stocks or a snazzy cottage, etc. -- Well, fine, just don't risk absolutely everything on some delusion that interest rates will nudge zero forever and real estate will go endlessly and uninterruptibly up. ("Uninterruptibly"???)

Third is the one that I hope won't turn into one of those things that shows up in the headlines with the explanation continued on page 6. Headline: MINIMUM 20% DOWN"... page 6: "if you are buying a place for speculation/investment/rental income". In other words for 95% of you, it doesn't change anything.

First take. If I screwed it up, you can tell me. Or I'll post clarifications, corrections and apologies later.

Tuesday, February 9, 2010


Suddenly the papers are full of bubble talk. Is there or is there not a Canadian housing bubble?

If you only read the headlines, you may think there is one.

Read the entire articles and the likely conclusion is "probably not, but we're not sure".

I don't have an answer. For quite a while, I have been concerned that the boom has been based on low interest rates and not yet supported by the economy. Our thinking was that if the economy perked up before interest rates start up, we'll be ok. If not, there will be a correction of some sort.

This seems to be what the media, banks, etc are suddenly worried about.

And the question about the economic recovery seems to be a similar debate ... Have we bottomed out? On the way up? Or another dip to come?

So I don't claim to have the answer, and I do claim nobody else has the answer. Doesn't mean I wont try to tell you what to do!
Actually, I'll mostly tell you what NOT to do.

Don't set yourself up by buying at your max price with hardly any down payment with a variable mortgage and think you'll move at a big profit in two years.

If you have enough down payment to withstand a short-term price correction; AND your income can handle an increase in payments (or your current payment schedule is attached to a fixed rate); AND you can stay in the house for a few years to ride out a correction, you should be fine.

Another "don't". Don't go hide in the basement solely because there MIGHT be a correction. If you are confident that this is a top, maybe you should hold off.

But if you aren't sure, and it turns out there is no bubble, your house might be more expensive when you come up for air.

Competition vs. MLS ... part 1

So, the government (in the form of the Competition Bureau) wants to open up access to the data on the MLS system which is the property of organized real estate via CREA (Canadian Real Estate Association).

The idea is that the MLS system, built and operated by organized real estate, is the focal point for such a huge percentage of real estate sales in Canada that it is impossible for alternative approaches or systems to establish themselves and compete.

Theoretically, easier and more open access to this data would create lots of options for people to handle much more of the buy/sell process themselves at a much lower financial cost.

I’m going to rattle on for a post or two with some thoughts and perspective that I don’t expect to see very clearly expressed in the media. I might even be right about some of it.

And I’m actually still thinking some of it through. I understand the value of competition and I know that real estate commissions represent a lot of money, and there are probably changes that should be made to the MLS system.

But I think that I’m going to conclude that what the competition folks are after is wrong-headed and will leave homebuyers and sellers with weaker service, more risk, more confusion and will not ultimately save them any money.

So, if this interests you, follow the blog or subscribe or whatever. I’ll try to get at least one piece on this topic up daily for a week or so. And I would love it if you got in on the conversation.

Final thing today … here’s the official Royal LePage thought for the day:
Royal LePage Position
Royal LePage Real Estate Services believes that CREA and the MLS system are important components in Canada's real estate market. It is important to note:

1. The real estate market in Canada is highly competitive, and includes a wide variety of companies with diverse and innovative business models and price structures

2. There are other channels through which buyers and sellers can participate in the market, including online and do-it-yourself options

3. The organized structure and efficient attributes of the Canadian real estate industry are recognized globally, and many emerging markets would like to adopt a similar system.
Consumer protection and trust are the hallmarks of our business, and we will advocate strongly for our business, our partners, and our customers.

I'm back!!!

Time flies. Got a little busy. Then took a holiday. Got busy again, and well ... here we are.
I was determined to kick this off again with a post next week. But the headlines of the last couple of days got my attention.
Which headlines? Well, the Olympics and the Suberbowl stuff are certainly interesting. But for this little corner of the world I think we'll have a go at the "housing bubble" headlines, and the business of the Competition Bureau taking on organized Real Estate.
Stay tuned for a post on each sometime today.

And if you're thinking a newer, large-ish home would be nice but you want to stay in the Beach vicinity and don't want to break the bank, check out our little goodie at (MLS E1781422)

By the way, the return of this blog is going to take a modified approach. Its main focus is still our take on the real estate market. It will still be largely non-promotional (except for mention of our new listings and the like). But it's going to be more fun and interesting.

Not that real estate isn't often interesting. But if this means I occasionally can't figure out any way to tie an interesting tidbit to real estate ... it gets posted anyway.

Talk soon.