NOVEMBER 1, 2022

HOUSING MARKET QUIETS AS YEAR-END APPROACHES

NANAIMO, BC – Last month, 249 single-family homes sold in the Vancouver Island Real Estate Board (VIREB) area, a 37 per cent decrease from one year ago and up by three per cent from September. There were 42 condo apartment sales in October 2022, a decline of 65 per cent year over year and down by 19 per cent from September. In the row/townhouse category, 51 units changed hands in October, down 41 per cent from one year ago and up four per cent from September.

Active listings of single-family detached properties last month more than tripled from October 2021 but dipped by four percent from September, hitting 1,360. VIREB’s inventory of condo apartments was 314 in October 2022, up from 124 listings one year ago and down by five per cent from September. There were 296 row/townhouses for sale last month, up by 147 per cent from the previous October and virtually the same number as in September (295).

“More inventory and weaker demand mean it’s a perfect time to buy. Well-priced and well-maintained properties are still generating multiple offers and selling briskly, but the market has shifted from the heated conditions REALTORS® saw for much of the year,” says Erica Kavanaugh, 2022 VIREB Chair. “Buyers and sellers need to be realistic and flexible about prices, and a local REALTOR® can help develop a winning strategy no matter which side of the real estate transaction you occupy.”

Kavanaugh adds that the underlying supply issues contributing to low inventory and high prices are still factors working behind the scenes; they’ve just taken a back seat for now. “On the surface, it looks like the market is levelling out, and additional inventory is certainly good news for buyers. But active listings are still not where they need to be,” notes Kavanaugh.

In October 2013, there were 2,362 single-family homes for sale. Every year since then, except for 2018 and 2019, active listings dropped from the previous year, reaching a historic low of 394 in 2021. So, it will take a substantial decrease in demand or a significant increase in supply to achieve healthy inventory levels that can accommodate Vancouver Island’s expected population growth in the coming years. The board-wide benchmark price of a single-family home reached $787,500 in October, up eight per cent from one year ago but down by four per cent from September. In the apartment category, the benchmark price was $414,200 last month, an 11 per cent increase from October 2021 and down three per cent from September. The year-over-year benchmark price of a townhouse increased by 11 per cent to $583,900, but it dropped by two per cent from September.

Benchmark prices for single-family homes decreased from August to September in every zone except the North Island. However, prices are still higher than in 2021. In Campbell River, the benchmark price of a single-family home hit $679,300 in October, up by four per cent from the previous year. In the Comox Valley, the year-over-year benchmark price rose by seven per cent to $829,800. The Cowichan Valley reported a benchmark price of $804,500, an increase of nine per cent from October 2021. Nanaimo’s benchmark price rose by nine per cent, reaching $811,200, while the Parksville-Qualicum area saw its benchmark price increase by seven per cent to $913,000. The cost of a benchmark single-family home in Port Alberni reached $566,300, up 13 per cent from the previous year. For the North Island, the benchmark price of a single-family home rose by 20 per cent to $488,000.

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Working with a Real Estate Agent:

Buyers and sellers are presented with the brochure “Working with a Real Estate Agent” when they first meet a REALTOR®. Industry regulations have now made it mandatory for agents to explain immediately the kind of relationship you can have with your REALTOR®, also known as agency. The agent will ask you to sign a statement in the brochure acknowledging this discussion has taken place, tear off and keep the signed statement, and give you the brochure for future reference.

Signing the disclosure statement does not give you any obligation to that REALTOR®. It merely confirms that you have discussed your agency representation options. If you decide to buy or sell with that REALTOR® you will sign a contractual agreement: the listing agreement (as a seller) or the exclusive buyers' agency agreement (as a buyer). 

MLS® Listing Contract:

Sellers will sign a Multiple Listing Service® Listing Contract with their REALTOR®. This contract outlines the terms of their listing, including the length of time for the listing, the price, the commission to be paid, all the parties to the listing, the address and the legal description of the property to be sold, how the seller is to be paid, the preferred possession date, the financial obligations, and other information regarding the property.

The MLS® Listing Contract is the seller's agreement with the listing agency, not the salesperson. If the salesperson leaves that company, it is up to the seller and the listing company to decide whether or not the listing will go with the salesperson, or whether it will stay with the original company and be assigned to another salesperson.

The standard MLS® Listing Contract explains that the seller is liable to pay a commission if the listing agent or a cooperating agent brings an offer which meets all of the stated terms and conditions of the seller. As with other services, there is HST payable on commission, so when you are calculating your proceeds, take that into consideration.

Data Input Form:

Your REALTOR® will fill out the Data Input Form, which asks for all the necessary information to list your property. This includes the number and size of rooms, lot size, construction type, house style and more. Data from this form is entered into the MLS® database, where other REALTORS® are able to match your home with buyers.

Exclusive Listing Contract:

You and your REALTOR® will use an Exclusive Listing Contract if you choose not to list your property on the Multiple Listing Service®. An exclusive listing publicizes by advertising and the sign alone, without the benefit of the catalogue/computer. Sellers sometimes believe an exclusive listing will encourage fewer "lookers," and more buyers. However, an exclusive listing is often overlooked by REALTORS® working with buyers, because the first place they look is in the MLS® catalogue/computer. The greater the number of people who know about a property the greater the chance a larger number of serious buyers will meet your terms and asking price.

Listing Amendment:

A Listing Amendment form is used whenever a change is made to the original MLS® or Exclusive Listing Contract. A change may involve extending the listing date, changing the price, altering wording on the print- out, correcting measurements, or tax or financial information to name a few. All the owners and the manager of listing agency will need to sign this form.

Listing Cancellation:

Sometimes it is necessary to cancel a listing. You and your REALTOR® will need to fill out a Listing Cancellation Form. This form usually has a preprinted clause stating if the property sells within 60 days of cancellation, or before the natural expiry of the listing (whichever comes first), the seller is liable for commission. This is to ensure a REALTOR® receives compensations for the advertising dollars and hours spent showing a home prior to a listing cancellation. If the seller is thinking of canceling a listing because they are dissatisfied with the service of a REALTOR®, the seller should speak to the manager of the listing agency and outline their concerns. The listing agency will make every effort to achieve satisfactory results.

Hold Action Form:

Sometimes the personal circumstances of a seller changes, and it is necessary to temporarily stop marketing a home. If this happens, your REALTOR® will help you fill out a Hold Action Form. This form tells other REALTORS® who have access to your listing through the MLS® system that you wish to delay the sale of your home.

Property Disclosure Statement (PDS):

A seller is legally responsible to provide accurate information about the property they are selling. This includes all knowledge about the property, defects about which the owner is aware, and any upcoming expenses (such as special assessments in strata-titled properties). This information is provided on the Property Disclosure Statement form, and is filled out by the seller. The REALTOR® is not permitted to fill out the PDS on behalf of the seller.

Answers on the PDS must be correct and complete. The buyer will rely on this information if they decide to purchase the property, and any incorrect or incomplete information can make the seller liable. The PDS does not cover every aspect of the property, and the buyer must still make their own inquiries. The buyer can also hire an independent, licensed inspector.

Limited Dual Agency Agreement:

When an agent represents a buyer and a seller in a single transaction, it’s necessary to complete a Limited Dual Agency Agreement. This form gives an agent authorization to represent both parties in a limited capacity, while maintaining both parties' confidences regarding motivation, negotiating positions and personal information (unless either party gives the agent written permission to disclose such information).

This form is also used when two salespersons from the same company are involved.

Contract of Purchase and Sale:

The Contract of Purchase and Sale standard form is the basic contract signed by the parties (the sellers and the buyers). It outlines every aspect of the transaction, including the price, the terms and conditions, the dates, the inclusions and exclusions, the handling of existing tenancies, the deposit and increase (where applicable) and other legal matters as described in the preprinted contract and added as clauses.

Addendum (With Printed Clauses):

A special addendum form with preprinted clauses will be added to the basic sales contract if there is either financing to be cleared from the title before the seller can provide clear title, or where there is financing to be put into place after the title is registered in the buyer's name.

Addendum (Without Printed Clauses):

A basic blank addendum form is used to write additional clauses on the contract when there is not enough space on the contract itself. When that has been done, the buyer signs this form indicating that this clause is being removed.

Amendment to Contract of Purchase and Sale:

This form is used to remove conditions (subject removal) when they have been satisfied. An example might be where a buyer has to find financing by a certain date.

Leases:

A lease is used more often in commercial transactions than in residential ones. However, you may be a landlord or a tenant who prefers to use a lease for stability of tenure. A commercial lease is a complex document and should be drawn up by a specialist in the commercial field and reviewed by a lawyer for each party. A residential lease is less complex and normally involves a standard rental agreement with an outline of the rules and regulations of the building or complex, or expectations of the owner and tenant above and beyond what the Residential Tenancy Act sets out. If you have any doubts about how to draw a lease or how to interpret specific clauses, consult a lawyer or a REALTOR®.

Mortgages:

Mortgages come in a wide variety of formats, depending on the lending institution. Many institutions use a simplified form, and refer to the larger form where any deviations from their standard form may occur. The buyer should check that the document matches the commitment letter they signed outlining the terms of their mortgage. This will include the interest rate, the term, the amortization period, the prepayment privilege ("penalty"), the options (if any) for increasing the number of payments or making lump sum payments, the assumability of the mortgage if the property is sold, and the portability of the mortgage if the seller wishes to use it on another property.

If you are a seller who is carrying financing for a buyer of your property, make sure that your lawyer reviews the documents before you sign them. If you are a buyer who is asking a seller to carry financing, make sure your own lawyer reviews the documents as well. Many serious issues may arise where the parties are unfamiliar with the law concerning mortgage financing.

The purchase price of your new home is the biggest cost you will come across in your home-buying venture, but it is not the only one. A REALTOR® can provide you with helpful advice about other costs involved, some of which may include the following:

Application/Mortgage Broker Fee:

Processing your mortgage application costs lenders money. Consumers may be charged a fee by a lender or a mortgage broker for setting up a mortgage when income or credit issues become more sensitive to the approval process

Appraisal Fee:

The money you borrow for your mortgage is usually a percentage of the home's purchase price, or of the market appraisal -- whichever is lower. The lender will use someone on staff or an independent professional to make this appraisal. You are normally responsible for this cost.

Land Survey Fee:

A plot plan or survey of the property you want to buy is important to establish exactly where the boundaries are and make sure there are no encroachments such as part of your neighbour's house or garage sitting on your land. Your lending institution will want to see such a survey and can let you know what their requirements are.

Insurance:

If you are applying for a high-ratio mortgage – that is, if you are borrowing more than 80 per cent of your home's purchase price – you will have to pay for mortgage insurance to protect the lender in the event that you fail to make the necessary payments. As your new home will be used as security for your mortgage, the lender will want you to have extended coverage and fire insurance. You may also wish to check out the cost of buying mortgage life insurance. This insurance ensures that the mortgage balance is paid off if you or a co-borrower dies.

Legal Fees:

These are the fees charged by a lawyer to help you complete the home-buying process. Disbursements are the costs involved in processes such as conducting a title search, drawing up the title deed and preparing and registering the mortgage.

Property Transfer Tax:

This is calculated on the property's purchase price at the rate of one per cent up to $200,000 and two per cent of the price over $200,000. First-time buyers may be exempt from this tax subject to certain restrictions. Ask your REALTOR® for details.

When you buy a new home, the entire purchase price is taxable. You may, however, qualify for a partial provincial New Housing Rebate if you plan to live in the home yourself. Ask your REALTOR® for details. A “used” residential home is normally exempt from the HST. Remember that HST is also applied to the REALTOR®’S commission and most other transaction fees such as legal and appraisal costs.

Other Costs:

When you buy a home you will also want to budget for utility bills, annual property taxes and maintenance costs.

10 Steps to Selling Your Home Here’s a step-by-step guide to help you sell your home.

1. Decide when to sell: In real estate, timing can influence your home’s selling price. Factors like how quickly you need to sell, whether it’s a buyer's or seller's market and seasonality all plays a role in your home’s final selling price.
2. 2 Find a REALTOR® who is right for you: The REALTOR® who helped you buy your home is a good place to start. They already know your home and they know you, so you’ll be saving time right from the start. Or look for names on “For Sale” signs in your neighbourhood or ask your friends and family. Make sure to interview two or three candidates and choose the one you like best.
3. 3 Sign a Listing Agreement: This authorizes your REALTOR® and their brokerage to market and sell your home. It will define the legal relationship between you and the real estate brokerage and also set a time limit for your REALTOR® to sell your home.
4. 4 Determine your home’s asking price: The right asking price will attract buyers and pay you a maximum return. Setting too low a price means you could miss out on thousands of dollars. Setting too high a price will scare away buyers. Your goal is to find fair market value.
5. 5 Add some specialists to your team: Similar to when you bought your home, it’s essential to have a notary public or a lawyer handle all the various documents that change hands and make sure your best interests are being protected at all times.
6. 6 Prepare your home for sale: First impressions matter. Now is the time to see your home through a buyer’s eyes: get rid of the clutter, clean and repair as much as you can, within reason. Remember, weigh the cost of all your improvements versus the potential financial return.
7. 7 Let your REALTOR® do what they do best: Your home has never looked so good and now it’s time for your REALTOR® to market it to potential buyers. This happens with a “For Sale” sign, open houses, newspaper ads, a listing on the MLS®, the internet, and, of course, through your REALTORS®’ relationship with other REALTORS®.
8. 8 Prepare your finances: Will the buyer “assume” your mortgage or are you “discharging” it? If you’re buying a new home, is your mortgage “portable”? What taxes are involved? These are all important questions to ask your REALTOR® your mortgage lender and your notary public or lawyer.
9. 9 Receive an offer: Although your REALTOR® will walk you through the process, be prepared for some stress. You will see every offer since it’s required that your REALTOR® show you every offer that’s submitted. You will have three options: you can accept, you can reject or you can “sign back” or “counter”. Ask your REALTOR® what these terms mean. Happy negotiating!
10. 10 Close the deal: You were successful and have drafted a legally binding agreement. Are you done? Not quite yet. Contact your lawyer or notary public, contact your lending institution and consult your REALTOR®. Immediately start satisfying any conditions of the agreement that require action on your part. On closing day, your lawyer or notary public will finalize all the details and give you a cheque for the net proceeds.

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Due to a significant increase in inventory, July brought more options for buyers in the Vancouver Island Real Estate Board (VIREB) area.

Last month, active listings of single-family homes (not acreage or waterfront) climbed by 142 per cent from July 2021 and 15 per cent from June 2022, reaching 1,387. VIREB’s inventory of condo apartments hit 336 in July, 91 per cent higher than one year ago and up by 14 per cent from June. There were 267 row/townhouses for sale in July, a 107 per cent year-over-year increase and up by 20 per cent from June.

The additional inventory gives buyers more choices and mitigates the need to move too quickly when making an offer. Kelly O’Dwyer, 2022 VIREB President-Elect, notes that while sales have slowed, the tempo is more reminiscent of a typical summer market, but one the board has not seen in several years.

“While higher interest rates are certainly impacting the market, some buyers are postponing their home purchase and planning to revisit the process in the fall,” says O’Dwyer. “The pandemic threw a wrench into the real estate market, but what we’re experiencing now feels more like a typical summer.”

O’Dwyer also notes that REALTORS® are seeing price reductions on higher-priced properties, and multiple offers have decreased. Sellers may have to adjust their price expectations now that the market has shifted, although it is too early to say how long these conditions will persist.

By category, there were 297 single-family-home sales in July, a 34 per cent decrease from one year ago and down by 27 per cent from June. There were 75 condo apartment sales last month, a decline of 37 per cent year over year and down by nine per cent from June. In the row/townhouse category, 51 units changed hands in July, down 49 per cent from one year ago and 25 per cent from June 2022.

Notwithstanding higher inventory and lower sales, prices continue to rise throughout the VIREB area. The board-wide benchmark price of a single-family home reached $856,700 in July, up 22 per cent from one year ago. In the apartment category, the benchmark price hit $450,200 last month, a 26 per cent increase from July 2021. The benchmark price of a townhouse increased by 23 per cent, climbing to $624,700 in June. However, the benchmark price for the overall board area dipped by one per cent from June to July.

In Campbell River, the benchmark price of a single-family home hit $755,800 in July, up by 21 per cent from the previous year. In the Comox Valley, the year-over-year benchmark price rose by 21 per cent to $914,100. The Cowichan Valley reported a benchmark price of $879,300, an increase of 24 per cent from July 2021. Nanaimo’s benchmark price rose by 21 per cent, reaching $883,400, while the ParksvilleQualicum area saw its benchmark price increase by 20 per cent to $982,000. The cost of a benchmark single-family home in Port Alberni reached $611,800, up 27 per cent from the previous year. For the North Island, the benchmark price of a single-family home rose by 29 per cent to $478,300. Excluding the Comox Valley and North Island, all zones in the VIREB area saw small month-over-month price reductions from June to July.

If consumers are struggling with timing around whether to buy or sell in the current market, the advice of a local REALTOR® can be beneficial. REALTORS® have specialized knowledge of their communities and are equipped with sales tools, such as custom analytics, to help you develop a winning strategy for buying or selling your home. -

(Published by the Vancouver Island Real Estate Board)

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