Assist2Sell

REM 16 JANUARY 2011

In a recent guest column in REM (November 2010), broker Ari Lahdekorpi wrote in praise of commission-based compensation. The author commented that “any flat fee or a la carte type of formula removes some aspect of motivation or creative thinking on the part of the agent.” We are in favour of commission- based compensation models.  We disagree that the commission must be percentage based. We believe the author’s opinion portrays real estate professionals unfairly. Most successful agents care more about bringing about a successful transaction where everyone wins, than the compensation. Successful agents are motivated by much more than compensation. As co-founders of the largest “discount” real estate company in North America, we’ve heard numerous attacks on compensation models that challenge the typical percentage commission model in use by most brokerages. None are particularly convincing and most are simply untrue.

For example: “You wouldn’t go to a discount doctor or attorney, would you?” Really? While we have tremendous respect for our fellow real estate professionals, we hardly think a comparison to professions that require years of education, testing and experience is a fair comparison. Let’s face it, this is not brain surgery! The requirements to obtain a real estate license pale by comparison. “You get what you pay for.” Do you? A prospective home seller calls a local brokerage to see about listing their home. Which agent do they get, and how much of a commission do they pay? Is it a top producing agent in the office who has sold lots of homes, is a skilled negotiator, knows the market and is working with active buyers? Or is it the brand new agent who just passed the exam and has no experience, no buyers and not a clue on how to value or market a home? Truth is, it could be either one or most likely someone in between and the commission is the same regardless of which agent they end up with. However, when it comes to the commission charged it is usually the same. Do sellers get what they pay for? Maybe, maybe not. “If you don’t pay a ‘full commission,’agents won’t sell your home.” There is no direct correlation to the amount of commission paid and the results in selling price. In their book Freakonomics, authors Levitt and Dubner conclude that having a real estate agent sell your home won’t necessarily result in a higher sale price. Flat fee versus percentages. Whether a seller pays a flat fee or percentage fee makes no difference. If we charge a flat fee of $12,000 to sell a $200,000 home, it is the same as charging a six per cent fee. How is it that simply charging a flat rate fee, as the author says, “removes some aspect of motivation or creative thinking on the part of the agent?” We understand the argument that making more money is motivating. We just don’t agree that one needs to make all of it from one seller. We know that by charging a competitive low flat fee we attract more sellers. More sellers, combined with effective marketing, skilled caring agents and a well-run business, will result not in less compensation, but greater overall compensation.

Our experience over the past 23 years with hundreds of offices throughout North America and thousands of home sales is that our agents typically sell more homes and make more money that the average agent. Yes they work hard and make less per sale, but they handle more business in one year than most agents get to do over a three-year period. You’ve heard the adage “if you want to get something done, give it to a busy person.” Who would you want performing your brain surgery? The doctor who does it once in awhile or frequently? We are in favour of commission- based compensation models. We disagree that the commission must be percentage-based. It is unfortunate that some real estate professionals attempt to discredit “non traditional” brokerages merely because of the lower fees they charge.Competition is good! Sellers are entitled to choices. Limited choices may have worked for Henry Ford in the early 1900s

(“People can have the Model T in any colour – so long as it’s black.”), but that’s not true today. There is room for other business models in the real estate industry to help home buyers and sellers. Consumers will vote with their pocket books and may the best solutions win.

Mary LaMeres and Lyle Martin are the co-founders of the realestate franchise Assist2Sell.

www.Assist2Sell.ca REM

Sunny Freeman, The Canadian Press

TORONTO - The Canadian real estate market will follow a similar pattern this year as that seen in 2010 as buyers pull sales forward into the early months in anticipation of higher interest rates, according to a report from one of Canada's largest real estate firms.

The aftershocks of the recession, including a lingering low interest rate environment, will continue to influence the Canadian real estate market in 2011 — a year that will be stronger than expected, said the report released Thursday by Royal LePage.

Royal LePage predicts that average home prices will rise three per cent to $348,600 in 2011, driven largely by a rush to buy in the first half of the year in advance of anticipated interest and mortgage rate hikes in the second half.

“Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels," said Phil Soper, president of Royal LePage.

“2011 is expected to unfold much like 2010, when close to 60 per cent of sales volume occurred in the first half of the year in anticipation of interest rate increases that never materialized."

However, the number of transactions will be slightly lower than last year and activity will be modestly closer to the norm because the pull forward phenomenon last year was exacerbated by a tightening of mortgage qualification rules and the introduction of the HST in Ontario and British Columbia in the middle of the year.

Soper said the extension of low mortgage rates will be an unexpected boon to the market this year.

“Like many Canadians, we anticipated an end to the ultra-low interest rate era before year-end 2010," he said.

"Paradoxically, global economic weakness, particularly in the United States, allowed policy-makers and financial institutions to keep borrowing costs low, resulting in a stronger Canadian housing market and a better than forecast fourth quarter.”

Average house prices rose between 3.9 per cent and 4.6 per cent in the fourth quarter of 2010, while price appreciation is expected to continue a moderate and steady climb throughout the current year.

The report contrasts with some recent predictions by economists that prices should remain flat or decline over the next year.

The Canadian Real Estate Association has predicted prices will fall by 1.3 per cent to a national average of $326,000, this year, tied to weakness in British Columbia and Ontario — the hottest real estate markets of 2010. It has also forecasted a nine per cent decline in sales.

CREA has yet to release year-end data for 2010, but preliminary reports from two of the biggest markets, Toronto and Vancouver, released this week indicate 2010 declined as expected.

Sales were down by one per cent compared with 2009 in Toronto, while the average home selling price was $431,463, up nine per cent from 2009.

In Vancouver, sales declined 14.2 per cent from 2009, and were 10.3 per cent below the 10-year average for sales in the region. The average selling price in B.C.'s largest city was up 2.7 per cent at $577,808.

Canada's real estate market has been on a rebound over much of the past year after sales dried up in late 2008 and hit a multi-year low in January 2009.

The housing market's sudden plunge was sparked by a credit crunch that developed in the U.S. housing and lending industries, and gradually spread across the globe, causing a worldwide recession in the late summer and early fall of 2009.

The commercial real estate market experienced a similar plunge as investors lost confidence in the sector. However, the commercial market, which includes office and retail spaces, had a stronger than expected year in 2010 and that momentum is projected to strengthen throughout 2011, according to a report released Thursday by CB Richard Ellis Ltd. Some market observers had predicted a glut of vacancies in Canada's major business centres, but that didn't happen, said John O‘Bryan, vice-chairman of CB Richard Ellis Canada.

We‘ve had good news over the past twelve months with respect to interest rates, housing trends and employment gains, with many companies announcing plans for expansion, he wrote in the report.

"2011 may well be another good, stable year but should be viewed with cautious optimism in light of the concentration in employment growth on part-time jobs rather than the full-time positions that indicate confidence in long-term, sustainable growth."

If you’re a first time homebuyer, you can use the federal Home Buyers Plan (HBP) to take out funds from your registered retirement savings plan (RRSP) to use towards a down payment on a qualifying home.  

The Plan allows first time buyers to withdraw up to $25,000 from their RRSP (or, up to a maximum of $50,000 per couple) tax free, and have 15 years over which to pay the funds back into their RRSP. 

While 44 percent of first-time homebuyers are using the HBP to make a down payment, 46 percent of recent first-time buyers had no RRSP savings at all to use toward a down payment, according to mortgage insurer Genworth Financial Canada.

Also, Moneytools.ca from the Financial Consumer Agency of Canada has useful information on making a budget and sticking to it. 

By Avery Shenfeld
After it beat a hasty retreat from excessive optimism, the Bank of Canada issued a new growth projection that
looks a lot like our own, with a similar global forecast, if still a modestly more optimistic take on what that
means for Canada. But there are also some interesting observations from the Bank on how it expects the
composition of growth to unfold.
In both our own projection, and that of the Bank’s, more of the growth in the years ahead will come from net
exports and capital spending, less from consumer and housing activity. On capital spending, the projection can
draw upon the optimism expressed on that front by respondents to the Bank’s latest business survey. But how
confident are we that trade performance can ultimately step up to the plate and fill in the gap left by a less
robust household sector and a decline in government’s role as fiscal policy tightens?
There may be a bit of wishful thinking on that front. Because what the Bank of Canada is loathe to see is a
renewed pick-up in debt-financed consumption and home-buying as the key driver for growth. It viewed the
borrowing binge it set off with a near-zero interest rate policy as a necessary evil in 2009 in an economy hit
hard by a drop in exports. Evil in the sense that Carney is concerned, with some justification, that piling on to a
record mountain of household debt risks a debt-service squeeze, or even worse, a run of defaults, when
interest rates are a lot less friendly for debtors later in this decade.
The trouble is that the Governor can’t pick his poison. The G-20 meetings in Seoul are unlikely to see peace
break out in the ongoing currency war. If Canada is going to behave like a boy scout and eschew intervention,
while others promote devaluation through quantitative easing (the US), central bank intervention (China and
Japan) or restraints on capital flows (Brazil and Thailand), it will be stuck with a strong loonie that will impede
an export-led expansion. Keeping interest rates tame enough to avoid a soaring C$ as the US holds its rates
frozen at zero, could ultimately set off a renewed climb in household debt, as borrowers again take advantage
of low rates.
If Carney wants to choose the mix of growth as well as its pace, a tool other than overnight rates might have
to be deployed. Currency intervention could be used to cheapen the loonie, or at least scare away speculators,
helping promote exports. Or if households launch an excessive borrowing binge before the overall economy
could live with higher rates, he could advocate a further tightening in CMHC rules as a part of holding back
the debt floodgates. For now, mortgage demand and housing prices look sufficiently becalmed that such
weaponry can be kept idle.
If global growth really deteriorates, and Canadian governments feel tapped out in terms of fiscal stimulus
room, Carney will have to keep rates low for even longer, and live with a further building in household debt as
a problem to be dealt with later. You can only micro manage so far.

Ottawa, October 5,2010 :Members of the Ottawa Real Estate Board sold 1,074 residential properties in September through the Board’s Multiple Listing Service® system compared with 1,218 in September 2009, a decrease of 11.8 per cent. Of those sales, 240 were in the condominium property class, while 834 were in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, stacked etc.) which is registered as a condominium, as well as properties which are co-operatives, life leases and timeshares. The residential property class includes all other residential properties.

“After record-breaking sales in September of 2009, this year’s sales were closer to the five-year average for this time of year. Home prices continued to appreciate but not skyrocket, as they generally do in Ottawa. I would describe the current state of the housing market in our region as balanced, with a good supply of homes available for sale,” said Immediate Past President Rick Snell.

The average sale price of residential properties, including condominiums, sold in September in the Ottawa area was $324,745, an increase of 6.6 per cent over September 2009. The average sale price for a condominium-class property was $240,050, a decrease of 0.8 per cent over September 2009. The average sale price of a residential-class property was $349,117, an increase of 8.2 per cent over September 2009. The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average sale price is calculated based on the total dollar volume of all properties sold.

The Ottawa Real Estate Board is an industry association of 2,600 sales representatives and brokers in the Ottawa area. Members of the Board are also members of the Canadian Real Estate Association.

Trademarks are owned or controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA  (REALTOR®) and/or the quality of services they provide (MLS®).

Learn how CMHC Refinance can help you achieve your
financial goals. View this presentation
now.

http://download.isiglobal.ca/cmhc/web/presentations/refi062010en/index.htm

Hi everyone,

Well, after almost 19 months of planning and thought we are launching our  Assist2Sell blog! It will be a forum for local Ottawa  trends and information related to all things Real Estate r as well as things relevant to Ottawan's.  We welcome your input and for sharing information  that could be of interest to others.  I look forward to hearing from you all and making this a "GO TO" place.

Glenn Wolff

OTTAWA – The Canadian economy likely suffered the worst quarter since the recession over the summer months, but Bank of Canada governor Mark Carney warns against taking too gloomy a view.

"I wouldn’t obsess about the third quarter," Carney told reporters Wednesday after Canada’s central bank released its latest global economic outlook.

The bank conceded the economy likely continued to brake in the July-September months to 1.6 per cent growth — down from two per cent in the second quarter and the distant memory of the first quarter’s 5.8 per cent advance.

But Carney said Canadians should take a longer view and also take comfort that no matter how modest, at least activity is still positive.

"Two years ago, I (would have said) the economic picture we’ve just seen would have made the bank happy, would have made Canadians happy, given the alternative," he said.

"We’ve recovered the jobs, we’ve recovered the lost output, we are doing better than virtually anybody else in the advanced world."

Canada’s current rate of growth is about half the pace the bank had expected a few months ago, and even slower than the U.S., but Carney notes that there’s no comparison between the Canadian and U.S. economies.

While all and more of the about 400,000 jobs Canada lost during the recession have been recovered, the U.S. has only recouped about 15 per cent of their losses. And Canadian domestic demand is outpacing the U.S. by 20 per cent.

Dangers lurk, however, as the bank’s latest quarterly review makes clear.

Both the Canadian and global recoveries, as well as future growth projections, are more modest now than they were three months ago.

To accommodate those diminished expectations and increased risks, the bank on Tuesday suspended the monetary tightening cycle it began in June. Analysts think the bank’s key interest rate will stay at one per cent for many months.

The bank says in the balance it still believes the recovery will continue, but it highlights "important" risks, both internal and external, with the potential to upset the apple cart.

Canadian households are steeped in debt and could become a drag to the economy should housing prices collapse. Latest data shows debt-to-disposable income among households has reached a record 147 per cent.

"If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadian households," the bank states.

Carney acknowledged keeping rates low for an extended period only increases the debt load risk, but said he believes consumer spending, including on housing, is tracking lower.

Coincidentally, the TD Bank also warned about household debt in a report Wednesday, saying one-in-10 households could find themselves in financial distress when interest rates rise. Fortunately, that many not be for some time.

Externally, the bank heightened its concerns over the growing friction in the world over currency manipulation, with advanced economies threatening to retaliate against China’s undervalued yuan.

The issue will be central to discussions at this week’s G20 finance ministers in Korea, but Carney suggested a solution will be slow and laborious.

Advanced economies, particularly the U.S., have long complained that China and other fast-growing Asian economies are artificially keeping their currencies below their true value in order to boost exports and discourage imports.

Although China has made some moves to increase the value of the yuan and hike domestic consumption, advanced economies believe those actions have not gone far enough.

Carney said as big a concern is that frustration will grow in advanced economies to such an extent that it will touch off a currency war, although he said China was the key.

"It’s not just China’s position ... but as part of rebalancing the global economy, increased flexibility of the (yuan) is absolutely essential," the bank governor said.

Despite the challenges, the bank sees the Canadian economy advancing from the slow third quarter to a 2.6 per cent gain in the fourth, and an average 2.3 per cent in 2011, followed by 2.6 in 2012.

One encouraging signal is that businesses have begun to invest in new machinery and equipment, which should boost productivity going forward.

Another, said Carney, is that exports will turn from being a net drag on growth to a tiny positive sometime next year as global demand picks up.

Still, it’s going to be a slow, hard slog back to normalcy.

The economy is not nearly as strong as the bank thought it was in July. It calculates output gap — the slack in the economy — remains at 1.75 per cent, not 1.5 per cent as estimated in the previous review.

The bank’s best guess now is that the economy will eventually right itself, but won’t be firing on all cylinders for another two years.