Buying a Home in Canada


(You can read the blog below or watch the vlog above)


Options for buyers with a house to sell

Halifax, July 14, 2011. Last week, the Canadian Press reported that two real estate companies that specialize in private sales, namely Realtysellers and Propertyguys, were merging. There has been a lot of talk about real estate commissions coming down recently and since a lot of buyers need to sell their current property before buying another one, I thought I would try to shed some light on the various options available to them.

When it comes to selling a house, homeowners have basically 5 options to choose from:

#1: Sell privately
#2: Pay a company to help them sell privately
#3: Pay a company for a mere posting on the MLS® System with no service for them
#4: Pay a company for a traditional listing on the MLS® System with limited service for them
#5: Pay a company for a traditional listing on the MLS® System with full service for them

With option #1, selling privately, sellers do all the work, pay for advertising, field calls, and show their house. If they manage to sell that way for the same amount they would have gotten on the MLS® System, they are big winners having only paid, say $200 for advertising and a for sale sign.

With option #2, sellers pay a private sale company like the two that made the news to give them advice. The firm provides them with a sign, lists the home on their site, and the sellers field the calls and do the rest. The cost varies depending on the package the homeowner picks, but let’s say they pay $400.

Since the next three options involve the MLS® System, here is what you need to know about it. When a company puts a house on the system, it offers to share of its commission with other firms in exchange for bringing an offer. So simply put, the Multiple Listing Service® is a commission sharing system between real estate companies. The firm that lists the home is free to offer whatever it wants to other companies for co-operating. The only restriction is that it must offer them something – even if it is a mere $1. So anything but zero is acceptable. Of course the more it offers the more interest the home is likely to generate on the system. But offering too much can backfire and be considered a sign of desperation that could attract low-ball offers. The amount is often a percentage of the selling price, but it can also be a flat fee. What is most commonly offered varies by area – just like the price of gas, if you wish, but in mine – the Halifax-Dartmouth area of Nova Scotia -- 2.5% of the purchase price is what is most popular.

So with option #3, the sellers pay a real estate company that has access to the MLS® System – because not all companies do. The firm places the home on its site and also on the system but with only $1 as compensation to other firms. And the sellers do the rest. Their cost? Say $600.

With option #4, sellers get the same as #3 but this time they offer a more attractive split like 2.5% to get other firms to bring their buyers, plus an extra 1% or 1.5% for basic services for them. Their cost: nothing upfront but 3.5% to 4% + tax if the home sells.

Finally, option #5 is the same as #4 but with full service for them (which could include open houses, lots of extra advertising, etc.). Their total cost, say 5% + taxes if the home sells. And nothing if there is no sale.

So which one is best? My guess is that only 10% of people manage to sell privately. Do they get as much money as if they had gone with option #5? Maybe not, but they don’t pay any commission. Option #2 is also attractive but only if it results in a sale. Otherwise it is a waste of money. Same problem with going on the MLS® System with $1. No company is going to co-operate for a buck so I also consider this to also be a private sale. My favourite is option #4. Since I can’t sell without an offer I would agree to pay the 2.5% that is most common in my area to get agents to consider my house but would try to keep the portion of service for me to a minimum at a cost of 1% or 1.5%. So I would be on the hook for 3.5 or 4% plus tax but only if I get an acceptable offer.

So there you have it, my goal would be to make sure I only pay if I sell. And for that cost to be the lowest possible amount needed to get professionals to do all the work and take all the risks.

                                                                                Alain Savard

Mortgage Rates

Discounted rates found on the internet on May 17, 2019.

Fixed-Rate Mortgages

1-year closed: 3.09% (3.09%)
2-year closed: 2.89% (2.89%)
3-year closed: 2.94% (2.94%)
4-year closed: 3.04% (3.04%)
5-year closed: 2.74% (2.74%)
7-year closed: 3.24% (3.54%)
10-yr closed:   3.24% (3.44%)

Qualify. Rate:  5.34% (5.34%)

Variable-Rate Mortgages

BofC’s Target:   1.75% (1.75%)
Banks' Prime:    3.95% (3.95%)

5-year: Prime - 1.30% or 2.65%

Some rates may only be available to people with top credit living in specific areas. BofC stands for Bank of Canada. The "Qualifying Rate" is used to qualify borrowers choosing terms of 4 years or less. The rates in bracket are from May 10, 2019.

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