Hello, tech! How technology is helping homebuyers open new doors
Posted December 21, 2020
COVID-19 has changed the way Canadians buy real estate. Say goodbye to open houses, Realtor showings and in-person paperwork with your mortgage broker, and say hello to virtual tours, video conferencing and e-signatures. Industry experts say technology was set to play a larger role in the homebuying process anyway, but social distancing has accelerated the pace. Here’s how tech is helping get Canadians home.
As any house hunter knows, real estate listings rely on more than just photos these days. Slideshows, video and 3D renderings are visual elements that buyers have come to expect. While most serious buyers say they would want an eventual in-person viewing, a May 2020 Nanos/Ontario Real Estate Association survey shows that 42% of Ontario house hunters would be open/somewhat open to buying a home using only online tools to view it.
Anurag Kumar and his wife took possession of their first home in April 2020, at the height of the pandemic. Kumar says he and his wife were already amenable to tech-based house hunting strategies: “We went on virtual tours, and video conferences and e-signatures were the other major tools we used,” along with a few socially distanced home viewings.
HOME INSPECTIONS & APPRAISALS
Home inspections were down 50 to 70 percent during this year’s early spring real estate market, however, home inspectors were able to work by following social distancing and by donning hazmat suits and respirators. Communication with prospective homebuyers was maintained via phone or video call. If Canada sees another wave of coronavirus this coming fall/winter, this may be the workaround the industry continues to use.
For homeowners seeking mortgage refinancing, appraisals are heading towards tech-based collaboration between homeowner and home appraiser. Guidelines from the Appraisal Institute of Canada direct homeowners to take interior photos, and to conduct video-based walkthrough “inspections” for appraisers via video-call using apps like Zoom, Skype, Facetime or WhatsApp.
MORTGAGE & FINANCING
The financial side of home buying has experienced a similar fast-tracking of technology, says 8Twelve Mortgage COO and Principal Broker, Akber Abbas – although some organizations have been better equipped to respond than others.
“As a mortgage brokerage, we were well-suited for COVID. We were moving towards a paperless environment and being cloud-ready in Canadian data centres. Back in 2018, we had started putting plans together to enable us to maintain our operations and continuity,” he explains.
“When COVID hit, everyone [at 8Twelve Mortgage] was able to literally pick up their laptops, being in a secure environment, and start working from home. We were able to service clients. We were still able to get approvals moving forward,” says Abbas, contrasting that with tech-adverse companies that were ill-equipped for social distancing. “Some brokerages in Canada didn’t have CRM solutions in place, or e-signatures, or even Zoom video conferencing. These were all part of our repertoire,” he says.
COVID has forced those who were caught by surprise to catch-up fast, whether it’s home mortgage lenders embracing video conferencing, or banks onboarding businesses faster for remote deposit capture of checks to facilitate electronic payments.
Canadians are living in unprecedented times. For companies like 8Twelve Mortgage, tech solutions have proven pandemic-ready, helping first-time homeowners secure the best mortgage rates and established homeowners restructure a mortgage without delay. “The market is catching up to where our business capabilities were,” says Abbas.
According to first-time homeowner Anurag Kumar, technology is only as good as the people wielding it. “We can use all the technology we want, but the human touch is different – trust me, I work in IT, so that’s something I am not supposed to say. Our 8Twelve Mortgage agent, Muhammad Mirza, helped us throughout the process by answering our calls at night, our emails, and through video calls and so on. He gave us his professional help and guidelines,” every step of the way, says Kumar, sharing his experience via email from his first home in Milton, ON.
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Home Insurance Basics
Posted December 16, 2020
Getting ready to buy your own home? There are a lot of boxes new homeowners have to tick off, and one of the most confusing can be insurance. Certain types of insurance are mandatory and others are optional…. but highly advisable. Here are 5 types of insurance the experts want every homeowner to have.
While not legally required, it’s nearly impossible to get a mortgage without proof of home insurance. But why would you want to leave your biggest investment unprotected? Home insurance covers the rebuilding or replacement value of your house, detached structures such as a garage, your contents, plus personal liability if anyone gets hurt on your property.
Be sure to read the fine print and find a plan that works for you . Standard policies may not include things like earthquakes, termite damage, or certain types of flooding. If these are relevant to you, look into additional coverage.
The cost: Varies depending on coverage, home value and additional factors
Many condo owners think their condo corporation’s commercial condo insurance covers their unit, too. This is not the case. It is limited to common areas like the building structure, its exterior and shared spaces like the lobby or elevators. You’ll need a personal condo policy to protect your own unit, its upgrades and contents (including those stored in your locker).
Personal condo insurance isn’t legally required, but most mortgage lenders consider it mandatory. You should too, says Steve Totani , a real estate broker with Zolo Realty in Toronto.
Totani provides the example of a small condo building that experienced massive flooding as the result of a plumbing problem. Owners’ homes were ruined as were their belongings. “Once the units were repaired, they each got an empty unit with four dry walls. Property insurance would have brought a condo owner’s unit back to how it was, for example, granite countertops and better appliances. Just relying on the condo’s [building] insurance is a big mistake. Paying $20 or $30 a month extra can save you tens of thousands of dollars in that sort of situation,” explains Totani.
The cost: Varies depending on coverage, condo value and additional factors
A property’s title is the legal proof of its ownership. When you buy a home, the owner signs the deed over to you. Title insurance protects you against challenges to your ownership or issues relating to your home’s title, such unpaid liens, encroachment issues, fraud, and other issues that could prevent you from selling, leasing or mortgaging your property. ( You can read more details here .)
Toronto real estate lawyer Bob Aron writes that “most real estate lawyers today regard title insurance as a critical component of the [real estate] transaction and will usually not close a purchase without it.” Likewise, most lenders make it a requirement for financing.
The cost: A one-time premium based on the value and location of the property, generally in the $225 to $325 range[yh1] .
MORTGAGE DEFAULT INSURANCE
Mortgage default insurance (also known as “mortgage insurance”) is mandatory on all high ratio mortgages . Those are mortgages with a down payment of less than 20 percent of a home’s purchase price.
This insurance protects lenders in return for qualifying borrowers with as little as 5 percent down, making it a win for both parties. Without mortgage insurance, homeownership would be impossible without a sizeable down payment.
The cost: Between 2.8% to 4% of the mortgage[yh2] amount. This can be rolled onto the mortgage so it’s not an out-of-pocket expense.
“Life insurance is the type of insurance that’s overlooked the most often” says Totani, the Zolo Realty broker.
“People ask about mortgage rates, property tax, property insurance, and their monthly payments, but I hardly ever hear anyone asking, ‘Should I top up my life insurance policy?’ to ensure their mortgage is paid off and their family is not going to be out of their home,” in the event of a tragedy, says Totani.
Totani advises checking your policy and upgrading it if needed, to reflect your homeownership situation. The peace of mind this provides will be worth the effort.
The cost: Varies depending on life insurance type, coverage, and personal factors.
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Canada’s Housing Outlook After COVID-19
Posted December 14, 2020
What’s next for Canada’s housing market after the first wave of the COVID-19 pandemic?
While the national housing market experienced an unprecedented drop in volume during the 2020 spring market, May 2020 housing stats already show some recovery underway.
“The big picture is things are moving in the right direction… but still have a long way to go. [But] prices appear to be holding firm at this point,” says Shaun Cathcart, Senior Economist with the Canadian Real Estate Association, in the industry organization’s May 2020 national statistics report .
Benjamin Tal, managing director and deputy chief economist at CIBC World Markets, says the real estate market is in no jeopardy of seismic change. While housing activity may have dropped 70 percent compared to one year ago, “The damage to the real estate market is not as significant as perceived,” said Tal in a Canadian Real Estate Forums webinar . Tal expects the economy to recover between 2022 and 2023, adding “the demand for real estate will remain very strong.”
We spoke with Paul Taylor, President and CEO of Mortgage Professionals Canada to get a mortgage expert’s take on the two major factors that will affect Canadian real estate values in the mid-to-longer term.
“If employment is strong house price growth tends to be strong also, but when employment numbers fall, you start to see higher levels of mortgage default, or people choosing to sell their home before they have to miss that payment. This can add supply to the market which can make house prices a little bit softer,” says Taylor.
The billion dollar question is, what will Canada’s employment and jobless rates look like in Q3 and Q4 2020? At last official count (June 2, 2020), unemployment hit 13.7% (the highest jobless rate in four decades), however, employment has been rebounding , with 289,600 positions returning in May after March and April’s waves of job losses.
While some sectors are returning to business others will be contending with longer term issues, notably Alberta’s oil industry, which was experiencing a downturn prior to COVID-19. Other sectors Taylor expects to “suffer a bit,” through 2020? Tourism and hospitality and manufacturing (less employment means less discretionary spending).
Keep an eye on employment statistics, as they are an indicator of what could be coming down the line.
EMERGENCY RELIEF PROGRAMS
Canada’s government responded to the COVID-19 pandemic with programs aimed at keeping Canadians secure in their homes during the shutdown. The federal response included temporary programs such as the Canada Emergency Response Benefit (CERB) and increases to the Canada Child Benefit, a wage top-up for low-income essential service workers, and a special GST tax credit payment.
Banks and other mortgage lenders offered up to six months of mortgage payment deferrals , allowing homeowners to put a pause on mortgage payments, with the skipped payments and accrued interest added to the loan’s outstanding principal.
What happens next remains to be seen, says Taylor: “There’s a number of folks that have had their employment significantly impacted by COVID. So, the big question is how close to a full-capacity economy can we get to by September when the mortgage deferral programs expire? If the deferrals expire and a number of people find they have to sell their home because they have still not managed to get back to full income levels, we’ll see a slowdown.”
Keep an eye on the fall. September onwards will reveal where employment is headed, as well as the impact of removing – or potentially extending – income and mortgage relief programs.
Canadians with questions about mortgage options (including mortgage payment deferrals or mortgage refinancing) should speak to a mortgage professional for personalized advice tailored to their situation.
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Home inspections: Don’t buy a home without one!
Posted December 7, 2020
A home is probably the single biggest investment most Canadians will make in their lives. That’s why it’s important to make any sales offer conditional on a home inspection says 8Twelve Mortgage Agent, Zeynep Babir .
“The home inspection looks at the structural soundness of the house and the mechanicals: Are there any structural issues? Are there mechanical issues in need of attention?” explains the Toronto-based mortgage strategist.
By identifying any concerns with the home’s major systems (roofing, foundation, electrical, plumbing, heating, interior/exterior), a home inspector can give buyers a head’s up on potentially expensive defects in the property.
With this information, the buyer may ask for a price reduction to account for the repairs and upgrades. Or they may request the sellers complete the repairs before the sale’s closing date. In some cases, they may even choose to walk away from the house completely.
A HOME INSPECTION CAN SAVE YOU MONEY – AND GRIEF
In spite of the high stakes involved, home inspections are not mandatory: “A buyer can choose not to have a home inspection done – but it’s not the right decision,” says Babir.
“You always want to make sure whatever property you’re buying doesn’t have issues down the road ,” to the best of your inspector’s expert eye and diagnostic skills, she explains.
Although a home inspection is an out-of-pocket expense, Babir says it’s one that could save you a lot of money and grief later – and that’s before we even get to any actual repairs.
For example: in some situations, a lender may require an in-depth home appraisal before approving financing on a home that has been purchased (typically required for uninsured mortgages). An appraisal combines elements of a home inspection with a market value assessment based on recent sales to assure the lender that a home is worth its purchase price.
If the appraised value comes in lower than the purchase price, then the lender is only able to finance the mortgage based on the appraised value, leaving the buyer with three options:
- Disputing the appraised value;
- Finding the money to cover the difference between the appraisal and purchase price;
- Or finding another lender and getting another appraisal done in the hopes it will come in higher.
If these avenues are unsuccessful, the buyer may be unable to complete the conditions of the sale, leaving them open to loss of their deposit and/or even being sued.
Booking that home inspection earlier would have uncovered major red flags before the home transaction reached this stage.
HIRE A PRO
A home inspection costs in the $300 to $600 range and averages about three hours as the home inspector explores the property indoors and out observing, testing and taking notes. Although this is an important job that requires a lot of skill, there is currently no officially mandated national licensing or accreditation. This means anyone can call themselves a home inspector or even treat it as a lucrative side hustle.
So: do your due diligence when looking for a home inspector, says Peter Weeks, RHI , president of the Canadian Association of Home & Property Inspectors (CAHPI).
Start by asking for recommendations from your Realtor, mortgage broker, friends and family – or scan online reviews – but only use that as your first step. Next, “look at a few things like experience, work background, education, and most of all: their credentials and designations. What associations are they affiliated with? There are many and some have more credibility than others,” says Ottawa-based Weeks, who has a combined four decades of experience in construction and home inspection.
Weeks recommends hiring a home inspector with the Registered Home Inspector (RHI) designation used by CAHPI and the Ontario Association of Home Inspectors . Although membership in either professional body is voluntary, each group maintains strict professional background, education and training standards , and adherence to its code of ethics.
“The RHI [designation] is not easy to obtain. There are many hoops that an RHI inspector must jump through in terms of education and experience to obtain that designation. Ongoing continuing education is required annually to maintain the designation,” he explains.
Hiring a home inspector may feel like yet another extra step in your home buying process, but remember: the hours you spend vetting and hiring a professional RHI, and the half day you allocate to the inspection itself, could save you hours of stress and thousands of dollars down the road.