Do I Have to Sell My House?

Once rare in our area, multiple offers, often above asking price, are becoming more common, leading clients to ask: “If I receive a full price offer, do I have to accept it?”

In short, the answer is no. The fine print on the listing sheet states that “This is not an offer or promise to sell that could bind the seller to the buyer, but an invitation to submit such offers or promises.” The seller can even counter a full price offer and ask for more money. In seller’s market, the seller has the advantage and can ask for whatever price they want.

Recently, we’ve been seeing some brokers and sellers listing properties below market value to encourage multiple offer situations and prompt bidding wars. This practice is unethical and discouraged by the real estate board.

I advise my clients to price their home at their bottom line sale price. I conduct a thorough competitive market analysis and suggest a listing price that will generate strong interest and attract financially qualified buyers. The risk with setting the listing price below market value is that buyers who are qualified at a low price range will visit and present offers when the owner knows they aren’t going to sell at that price, wasting the buyer’s time, the seller’s time and the broker’s time.

Pricing is a balancing act and the real estate landscape has changed significantly in our area over the last year and a half. Previously, brokers would list properties slightly above the market value, expecting prospective buyers to present opening offers slightly below market value. Negotiations would then take place through counter offers until a mutually agreeable price was reached. It wasn’t unusually to see as many as 7 counter offers. These days, counter offers are rare. Multiple offer situations are now the norm, with prospective buyers offering their best offer on the first offer. If the seller were to counter at a higher price, the buyers would likely walk away.

 

Overbidding

Another trend we’re seeing is overbidding on an offer to purchase. Buyers are anxious to do whatever they can to have their offer accepted amidst all the competition. The downside to overbidding that buyer and their brokers need to be aware of is that they may not get financing. Banks require a property evaluation before they agree to financing. If the bank evaluator appraises the property below the selling price, they can ask for a larger down payment from the buyer or only provide a mortgage for their evaluated price, which can be a problem for prospective buyers who are already pushing the limits of their budgets with their offers.

High ratio mortgages, between 5% and 19% down, can appear less desirable on an offer but are worth considering if the selling price is well above market value. The CMHC, which guarantees these mortgages, is less likely to send an evaluator to appraise the property’s value, so an offer above market value is less problematic in terms of financing.

 

Should you take the highest offer?

In my opinion, conditions can be more important than price in an offer. We’re increasingly seeing buyers making huge offers, only to ask for significant price reductions after the building inspection. I encourage my clients to carry out pre-listing building inspections which they can show to buyers before they make an offer, so that there are no surprises and no inflated price reduction requests.

So back to the original question, “do I have to sell to the highest bidder?” You are absolutely not bound to accept the highest offer. You can look at other conditions in the offer, like source of funds and building inspections, when making your decision. Note, however, that you’ve signed a contract with your real estate broker. Clause 7.1 (2) in the brokerage contract states that, if your broker brings you an offer that meets all the criteria you set out (price, dates, inclusions, exclusions) and you refuse that offer, they can demand to be compensated. I have yet to see a broker exercise this clause, but as the seller, you do need to keep in mind that it is a possibility.

 

If you have questions about pricing your home for sale, please feel free to contact us. We’d be happy to discuss the best strategy for you.

Protective Flood Zones

We’ve just experienced a winter with very little snow followed by a very dry spring. We’re dealing with low water levels throughout the region and facing the prospect of a drier than normal summer. For many homeowners and prospective buyers, however, the threat of seasonal flooding is an ongoing concern.

Gone are the days when a homeowner could build a house anywhere on their property. As development has increased, municipal and provincial governments have passed laws intended to protect homeowners, their neighbours and the environment. These include rules regulating construction in flood zones.

Flood zones have received a lot of media attention in the past few years but our area has always experienced floods – it’s part of living by the lake. Major flooding usually only occurs every 20 years or so, but those of us living in Hudson, Rigaud and Vaudreuil in 2017 and 2019 know firsthand they can happen more often. I can remember Main Road by the ferry being flooded a few times during my childhood. My dad even had to rescue our neighbours by canoe in the 90s when water surrounded their home. Coming together through floods has become part of our community identity.

 

New flood zone laws

Most municipalities have mapped their waterfronts and produced flood line maps showing the 20-year and 100-year flood lines. By law, homeowners can’t alter the shoreline, remove trees or add structural elements such as sand/soil or retaining walls below the 20-year flood line.

Prior to the 2019 flooding, it was possible to build between the 20-year and 100-year flood lines provided certain conditions were respected. Since 2019, however, most municipalities have created new bylaws to prevent construction below the 100-year line. In 2019 the Québec government produced a Special Planning (ZIS) flood map imposing strict regulations and a moratorium on construction below the flood lines.

You can’t build a new house in a flood zone, but what about houses that are already in the flood zones? These houses have acquired rights to be there but are subject to restrictions when it comes to renovating or rebuilding. For example, you can’t add an extension to an existing house and you can’t demolish a house with the intention of rebuilding in the same spot.

There are certainly risks associated with owning a home in the flood zone. If the home is damaged during flooding and the cost to repair it is more than 50% of the home’s value, the government will force the owner to demolish it and reconstruction will not be allowed.

Following a flood, home owners must have their homes evaluated to determine the degree of damage. The town will provide the owners with the names of three local evaluators to choose from. If the evaluator determines that the level of damage is less than 50% of the value of the building, the town can grant the owner a major renovation permit to repair the house. Otherwise, the house will have to be demolished.

In Hudson, you can get a major renovations permit to renovate up to 49% of a home, which can include implementing preventive measures like lifting the house, raising the foundation above the high water level or reinforcing the foundation to withstand flooding. Depending on the size of the house, these measures can cost $50,000 and up, but they can help ensure the living space stays dry. If you want to renovate more than the 49% of the house you may have to do it in stages, applying for a second renovation permit once you have finished the first phase of renovation.

In addition to the potential cost of preventing or repairing flood damage, it’s important to look into the availability of mortgages and insurance when considering buying a home in a flood zone. Some banks will not issue a mortgage for a house in a flood zone while others will require a risk evaluation. Insurance companies will charge higher premiums for flood protection or, increasingly, refuse flood coverage altogether.

 

Why buy in a flood zone?

A well-built older home that has been through previous floods with minimal damage may be an acceptable risk for some buyers. If the foundation is solid and the living area high above the water line, flooding can be an occasional inconvenience instead of a catastrophe. New products designed to protect homes from flood waters can also help minimize damage and subsequent repair costs.

So build it high, keep it dry and enjoy the view!

 

*The information contained in this article is for information purposes only. It is not, and should not be taken as, legal advice. It is not a substitute for the advice or services of a notary or lawyer.

 

 

Cause and Effect in Real Estate

The local real estate market is brisk and buyers are feeling the pressure to move quickly when a new listing becomes available. As a result, some buyers are calling the listing broker to book an appointment instead of waiting for their broker – who has been diligently searching for a home for them – to make the call. After they have visited the house with the listing broker, the buyers then call their broker to write their offer, thinking they’ve saved some time. What they don’t realize is that, per Quebec real estate law, they’ve just ensured that their broker is no longer entitled to their commission, even if they do all the work of crafting the offer and getting the best possible deal.

In real estate law, Cause and Effect says that the broker who is the cause and effect of you buying the house is the one who gets paid the commission, not the broker who did the paperwork. The listing broker you visit the house with will be considered the ‘cause’ of your purchase. Your broker, who will spend days writing the offer, overseeing the building inspection and doing the research to ensure you are protected, won’t get paid for their efforts.

 

Open houses

What about open houses? By law, it’s considered the same as visiting with the listing broker. However, if you tell the broker at an open house that you are working with another realtor, most brokers will respect that relationship.

Just a quick question…

“I will just call the listing broker to answer a quick question, then I will call my broker if I want to see the house.” Again, this can cause issues for your broker. Always tell the listing broker you are already working with someone if you call them with questions. Better yet, ask your broker to do it for you. They may even know the answers already!

Many buyers assume that if they visit with the listing broker they are unrepresented. In reality, according to real estate law, the listing broker automatically becomes their broker of record for that particular house.

If you like your broker and have a good working relationship with them, you should let them work on your behalf. After all, they’re in the best position to know your needs and wants and are more likely to represent you well in the negotiation process.