6 Must-Know Facts About Liberal’s New FTHBI Homebuyer Assistance Program

Published September 23, 2019 by Real Estate Leads

You’d likely have difficulty find even a few adults across Canada who haven’t been aware of the affordable housing crisis in the country. There’s no debating the fact that young people are having difficulty entering the market like never before, and emphatically so at that. Even though the markets in Vancouver and Toronto are not as hot as they were, it’s still a situation where the average entry-level house cost is simply beyond the means of a lot of people and despite the fact they’re gainfully employed.

Combine this with the new mortgage stress test regulations and there’s fewer first-time homebuyers out there. That’s not ideal for realtors of course, and here at Real Estate Leads our online real estate lead generation system is designed to give new realtors a little more clout when it comes to prospecting effectively in what’s essentially a smaller pool of prospective clients.

The Liberal Governments First Time Homebuyer Incentive (FTBHI) program is designed to help these people out, and from a realtor’s perspective that is of course going to be good news as it will mean more actually qualifying first-time homebuyers being out there to begin with.

However, it is always important for realtors to be responsible to their clients’ long-term best interests and as such it may be necessary for you to be something of the voice of reason for people – clients or otherwise – who are perhaps a little too uninformed about exactly how this assistance plan will work for homebuyers who tend to only see it as ‘my means of getting into home ownership.’

So for today’s blog here are 6 things you should know about the FTHBI Program:

Shared Equity

The FTHBI I run by the country’ federal housing agency, and the first thing people should know is that this is a shared-equity mortgage program. Be very aware that the government IS going to share in the gains (or losses) of the home’s value as it fluctuates over time. The 10 per cent offered toward the down payment for a new home – or five per cent for resale homes, is interest-free but make your potential clients aware that the gains in equity on the property will also be payable at 10% anytime they sell the home in the future.

Limited Numbers of First-Time Buyers Will Qualify

First-time homebuyers that have a household income of $120,000 along with the minimum five-per-cent down payment requirement are eligible to apply. However, the price of the mortgage plus the incentive amount must not exceed more than four times your clients’ household income.

The obvious correlation for this is that this means that the program isn’t going to be practical for folks who want – or need – to live in perennially-popular housing markets like Vancouver and Toronto. The median price of homes here is simply too high to make this equation work.

The consensus is that, theoretically, the maximum purchase price of a home under this plan would be $565,000. Needless to say, you won’t even find a condo for that price in these cities, and a detached home will be at least twice that. Most first-timer buyers will qualify for far less under this program, and if you’re a realtor working in a major urban centre then this program may not be the good news that both you and your would-be clients may have been hoping for.

It Won’t be ‘Doable’ for Buyers in Every Market

This is related to the second point above, but it can’t be stated strongly enough that buyers in some markets may find it challenging to find a home selling for a price that qualifies for the program. A recent report that analyzed average home prices from July 2019 in 25 markets across the country found that buyers with the maximum qualifying income and the required five-per-cent down payment would qualify in 19 of those cities.

Where are they? Eastern Canada, Quebec, the Prairies, along with smaller urban centres in Ontario. And the 6 markets where the average home buyer would fail to qualify for the FTHBI include Toronto and several markets elsewhere in the Greater Golden Horseshoe along with Greater Vancouver and neighbouring Victoria and Fraser Valley out west.

Again, no surprises here. One of the things realtors may have to do it they work in these areas is but brutally honest with prospective clients and explain that buying a home here is not in their best interest. Being ‘house poor’ is a very real condition and majorly problematic for far too many people in these locales.

They’ll Be Paying It Back – Guaranteed

A common misconception that’s already been attached to this program is that the monies will be paid back only when the home is sold. Not true – borrowers must pay the CMHC back after 25 years or once the home sells. Borrowers can also pay back the loan early without penalty. The amount borrowers owe may vary depending on how the value of the home changes over time.

Should the home’s assessed value rise, the loan repayment will increase concurrently with that number. The same will occur if the home has lost value by the time it is sold or the mortgage matures. The loss-sharing end of this equation should not be comforting to would-be buyers, however.

For ones with little equity, selling after a big price correction and covering costs like realtor fees, paying out the mortgage, and assuming closing costs can be very challenging. Finance experts specializing in mortgage lending say it is fairly unlikely the government will actually absorb part of a buyer’s losses if home prices take a dive.

$ Savings Can Extend Beyond Mortgage Payments

Now for some better news; the government estimates the program could save buyers as much as $286 per month, or in excess of $3,430 per year, in mortgage payments on a $500,000 house. Depending on when the home is sold, those savings can be even greater. Selling before their five-year mortgage term is up will likely save money with the FTHBI, as the interest and default insurance premium savings will likely outweigh what’s surrendered in equity.

How Well is the Program to Be Received?

The Feds say the program is expected to help 100,000 families purchase their first home over the next 3 years, but we have to imagine that the extent to which it’s utilized may be less than that given many different factors and some of the risks that buyers are likely becoming more aware of.

Should the program not be as enthusiastically received as expected, it’s possible that it may not have the shelf life some would expect it to. To conclude here, it’s not wise for prospective homebuyers to assume this program is guaranteed to be there even a few years down the road.

Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to you exclusively and for your own privately-served region of any city or town in Canada. Only you will receive the leads, and you’ll be the only realtor attached to that region while taking advantage of Real Estate Leads. It’s a dynamite way to supercharge your client prospecting efforts, and we encourage you to determine that for yourself!

Revisiting the Vendor Take-Back Mortgage

Published September 17, 2019 by Real Estate Leads

Nearly every reputable realtor will have long since established ties with a mortgage broker to whom they’ll recommend clients who are going to need financing assistance from a lender in place before they’re able to purchase a home. In much the same way it’s beneficial for a mortgage broker to understand the workings of real estate investment and transactions, it’s helpful for realtors to understand mortgages AND the history of ways people have found the means of financing homes in Canada.

As we always insist, being knowledgeable makes you more appealing to prospective real estate clients and furthers your reputation as a ‘good’ realtor in your locale. Finding new clients for whom you can flex your muscles in this regard is a challenge, but here at Real Estate Leads our online real estate lead generation system for Canada is a proven effective way to be fast-tracked towards meeting real people who are genuinely considering buying or selling a home in the near future.

What Is It?

A vendor take-back mortgage is a unique kind of mortgage where the home’s seller extends a loan to the buyer to secure the property’s sale. They’re also called seller take-back mortgages, and it’s true that both the buyer and seller can benefit if the circumstances are right. It creates the possibility that the buyer might be able to purchase property above their financing limit, and conversely the seller is potentially able to sell the property at or above asking price more quickly.

Born in the Days of High Interest Rates

Vendor take-back mortgages were common in Canada some 25 to 30 years ago, and the reason they were so frequently taken was because interest rates were sky-high back then compared to today. Vendor take-back mortgages were very common in the ‘80s and ‘90s when interest rates were well over 10% and sometimes even moving up to as high as 20% in the early 80s.

Some have suggested that the new B-20 mortgage stress test that’s been in place for a few years now might make vendor take-back mortgages start to become a ‘thing’ again. That might be so, but industry and broker experts say that would only be the case if applications have other qualifications that extend beyond the 200 extra basis points as they’re detailed in the B-20.

It’s true that sellers could benefit by having a vendor take-back mortgage as it could earn interest on money in ways standard lenders wouldn’t offer and in a more secure environment due to the financials being leveraged against real estate.

Industry consensus is that vendor tack-back mortgages be something of a fix for those lacking purchasing power due to the B-20 stress test, but we’ve been warned not to expect them to be resurfacing in the residential real estate market anytime in the near future. This is primarily attributable to the growth of private lenders and mortgage investment corporations, and then there’s the fact that sellers usually redirect finances earned from the sale of homes to purchasing new ones.

This, of course, is true of both inhabitant homeowners and property investors.

Tempered Enthusiasm

We can understand that vendor take-back mortgages are not as commonplace in the market today because people need money to purchase their own homes, but these types of mortgages would really only work well if that homebuyer was planning to exit the market sometime shortly thereafter.

On this, one industry expert was recently quotes as saying “If you sell your property and you have this equity on hand and you’re then unsure of what to do with it, it’s pretty common to then look to invest it with a mortgage company or lender.”

We’ll conclude today by mentioning that despite all these forewarnings and the fact that vendor take-back mortgages represent less than 1% of the traditional residential real estate market, they can be more appropriate in the commercial real estate sector. On the commercial side – where the rate of return is a bit more attractive for the investor – an operating business may also be part of the transaction and this changes the assumption of risk factor for the buyer.

Will vendor take-back mortgages ever return to the residential market? They may, but it’s unlikely they’ll ever be as commonplace as they were 20-plus years ago.

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It’s hard to argue against this service given what it does to supercharge your client prospecting efforts, and you’re encouraged to find out for yourself – sooner rather than later preferably!

Realtor Best Practices with Electronic Signatures & Exchange of Documents

Published September 9, 2019 by Real Estate Leads

We try to make a point of keeping this blog as a nice balance between real estate market news and industry developments along with tips for realtors that allow them to be better in what is an extremely competitive career field. As we continue to stress, knowledge and industry-savvy is very much power when it comes to retaining clients and building your personal real estate corporation. Today we’re on that side of things, and hopefully making you more aware of some of things new realtors may be not be aware of after finishing their licensing course.

Prospecting new clients isn’t easy, and that’s a part of what makes our online real estate lead generation system here at Real Estate Leads so valuable for those who are new to the business. It harnesses the power of Internet Marketing (and Internet surveys more specifically) to put you more directly in touch with people who are genuinely considering making a move – either buying or selling – in your local real estate market.

Today we’re going to look at what are the best practices when it comes to electronic signatures and exchanges of documents. Something that’s a fairly regular occurrence nowadays, and so it makes sense to be as in-the-know as possible with this stuff.

E-Signatures

When it comes to e-signatures or wet ink signatures, it is best to have someone be witness to the signatures. One of the benefits of e-signatures providers is that they provide the ability to identify the exact time and location for when the signature was placed on the document, doing so with security certificates. However, be aware that not all e-signature software suites provide security certificates when applying a signature to a document.

Further, programs and apps such as PDF Expert are not set up to provide digital security certificates when documents are signed. They are beneficial in the way that they properly flatten and embed signatures into documents, but they’re not as secure as a digital certified software like – among others – DocuSign.

It is important to note that the real estate regulatory bodies in most Provinces have legislation requiring that every service agreement must be in writing and executed in the presence of witnesses. This applies to agency agreements and offers to purchase, and means that any security certificate provided by credible e-signature providers are not recognized as the witness to the e-signature – at least not yet.

This is something you’ll need to determine for the Province you’re living and working in.

Hand Drawn vs. Stamp Signatures

A hand drawn e-signature – or ‘wet’ signature as they’re also referred to – is created when the signer’s handwriting is entered electronically on a touch screen. This is done with either your finger or a stylus pen. Each signature will be different, and they look very much like what your actual ‘real’ ink signature would.

The stamp e-signature is very common these days. You pick your signature and an initial style from a list of fonts and then place them on pre-defined areas of the document by dragging and dropping with your mouse or cursor control pad on a notebook. The click is then digitally recorded with a security certificate.

Mandatory & Standard Forms | Different Rules

Here, again the different Provinces will have different mandatory forms required of realtors when conducting and registering property transactions. One constant is that commission forms are mandatory for use by all registrants and treated differently than standard forms signed by realtors in Canada.

In most provinces the policy with mandatory forms is that only a hand drawn e-signature is permitted. Where the Real Estate Act requires an agreement to include a written signature, the signature requirement usually needs to be an electronic signature that is:

a) A digital representation that can be seen to be an authentic representation of the individual’s handwritten signature; and
b) Digitized and embedded permanently in the written agreement being submitted.

Either hand drawn e-signatures or a stamp e-signature can be used on standard (non-mandatory) forms in most Provinces, but again it’s best to confirm this on your own.

Electronic Signatures & Exchange of Documents

Generally speaking, electronic signatures (e-signatures) are no different from wet signatures. You and/or your clients will be affixing your name to an agreement in order to provide tangible proof that you are hereby agreeing to the terms set out in the document. Choosing to do this with ink, with a stylus, or with a digital signature serves the same purpose.

Bear in mind as well that when there are multiple parties to a contract (spouses, more than one individual on title, etc.), all parties must sign individually, although they can wet ink signatures or if you or e-signatures providers like Authentisign, DocuSign, Faltour, and more that are currently out there.

Precautions when Authenticating Signatures

It’s true that whether it’s a wet ink signature or an e-signature, there is always the possibility of fraud. Experienced realtors will always take precautions to check the identity of the clients. Asking questions about the content of documents to both spouses separately can help you confirm that both parties are aware and agreeable to the contents of an agreement.

And yes, this lack of certainty applies for wet ink signatures as well. In instances where you may not be physically present when the documents are signed it is best to keep a record ofthese conversations in your notes.

e-signatures and exchange of documents are a new development in the real estate practice, but overall the steps to take to ensure agreements are signed properly do not differ much from ‘original’ wet ink signatures – meaning the types with ink from a pen held in hand. Use common sense and you’ll be fine 90+% of the time.

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Vancouver Real Estate Developers Create New Home Inventory Drop Over 90%

Published September 3, 2019 by Real Estate Leads

If you’re a resident of Vancouver, you’d have to have been completely out of touch with the local media in order to not know that the housing crunch is a major issue in the city and has been for some time. No one is debating that Vancouver needs affordable housing, and part of achieving a greater supply of affordable housing is increasing the housing inventory overall.

Now the common logic belief would be that increasing the number of new housing starts in the city would be an integral part of these affordable housing efforts, but instead the reality seems to be that many of the NDP government’s efforts to ‘cool’ the housing market have done the same for developers and builders and and cooled off their enthusiasm for new projects at the same time.

Needless to say, big picture trends like this do a lot to influence the the industry environment for real estate agents in Vancouver, and it’s something that real estate and housing industry across all the country are likely keeping tabs on too. There’s the potential for downturns, and as a realtor that means you need to work harder to get your share of clientele. Here at Real Estate Leads, our online real estate lead generation system is an excellent way for realtors to get more out of their client prospecting efforts.

But back to topic here, it’s interesting news to read that Greater Vancouver real estate developers are launching less units – a lot less, to the tune of 90% less than were started for this time last year.

New Low for Pre-Sale Units and Launches

MLA Canada numbers for last month (July ’19) saw the fewest new pre-sale units launched in years. Developers have been choosing to delay new releases as a result of pre-sales not being absorbed as speedily or thoroughly as before. It’s true that these fewer launches did help to firm up the absorption ratio, but sales still came in very low.

Greater Vancouver pre-sale launches for that same time period were also extremely low. The number given for the number of new pre-sale units hitting the market in July was just 157, and that’s down 91.82% from last year. Industry experts didn’t expect a number so low, and it actually comes in in 43.07% lower than forecasted.

The MLA is also stating its belief that poor absorption is resulting in delayed or cancelled projects. Lower priced projects may also be stalled so that the developers can cash in on the Federal Liberal Government’s first-time buyer incentive (which many economists say will do nothing to make Vancouver or Toronto affordable for the people the program is supposedly going to benefit – but that’s a whole different topic)

Greater Vancouver New Pre-Sale Real Estate Listings

If we go back two years this month, to September of 2017, the number of newly available pre-sale units of new homes across Greater Vancouver was in the vicinity of 900 homes. Skip forward a year to September 2018 and it has actually dipped to 700 or so. However, the very next month – October of 2018 – saw this number jump exponentially to to some 2,4000 new home pre-sales being available.

The number came down again slightly, but stayed in excess of 1,000 for the next four months. It was only in February 2019 that things started to fall again, and it’s been a downward slide since then, confirming housing industry and economy experts to suggest that the foreign buyer’s tax and vacancy taxes, among other ‘cooling’ measures introduced by the government are actually serving to counteract the benefits they’ve created for homebuyers by making more difficult for many of them to find suitable homes for sale.

Developers Only Sold Slightly More than Half Of Pre-Sales

Also seen last month was a sharp drop off in volume for sales of newly launched pre-sales. Only a little more than half – 58 – of all the pre-sale units launched in July were sold. That’s a BIG decline of 95.34% from last year. In fact, it was the fewest pre-sale launch sales for any month over the course of the last two years at least.

Greater Vancouver Pre-Sale Absorption Highest In Months

Much fewer launches did promote a better sales-to-new-listings ratio (SNLR). The SNLR came in at 37% for July, down 43.07% from last year. However, that’s a high mark for the ration going back to December 2018. An SNLR above 60% is what’s known as a ‘seller’s market’, where prices usually go up. Between 40% and 60% means the market is balanced, and homes are generally priced ‘as they should be’. Below 40% and it becomes a buyer’s market, where prices typically go down.

Jan 2018 – 92
May 2018 – 70
Sept 2018 – 38
Jan 2019 – 18
Mar 2019 – 28
July 2019 – 27

Greater Vancouver’s absorption has picked up, but the ratio still isn’t at a balanced level as of yet. The industry is decreasing the number of new project starts due to weak absorption, and the number buyers for new launches appears to be dropping as well.

Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered exclusively to you and for your own one privately-served region of any city or town in Canada. It’s your region, and they’re your leads, every month and it’s a great way to get a leg up on your local competition when it comes to digging up prospective clients who are genuinely interested in buying or selling a home in the near future.

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All posts for the month September, 2019

6 Must-Know Facts About Liberal’s New FTHBI Homebuyer Assistance Program

Shared Equity

Limited Numbers of First-Time Buyers Will Qualify

It Won’t be ‘Doable’ for Buyers in Every Market

They’ll Be Paying It Back – Guaranteed

$ Savings Can Extend Beyond Mortgage Payments

How Well is the Program to Be Received?