Real estate trends Archives

When you buy a home in Quebec, you are required to pay a Land Transfer Tax, also referred to as the “Welcome Tax” thanks to the former Quebec Minister of Municipal Affairs, Jean Bienvenue (which means welcome in French), who was responsible for instituting it. The municipality will send you an invoice in the weeks following the signing of the Deed of Sale.

The Welcome Tax is based on:

the sale price OR

the evaluation price of a property OR

the amount of the consideration stipulated in the Act of Sale, if different from the price paid (for example if given as a gift).

The Municipality will take the highest of the three as the basis for their calculations. In addition, many Municipalities are also now multiplying the base number by an extra amount, a Comparative Factor, that changes yearly. In 2023, the Comparative Factor in Vaudreuil and Hudson is 1.28%, so the Welcome Tax on a $500,000 home, for example, would be calculated on a base of $506,400 ($500,000 x 1.28% = $506,400). In Saint-Lazare, the Comparative Factor is 1.33%, so a $500,000 home would have a base value of $506,650 ($500,000 x 1.33% = $506,650).

Once the base is determined, it is broken down into increments which can vary by municipality.

The breakdown for Vaudreuil, St Lazare and Hudson is:

The first $55,200 is multiplied by 0.5%

$55,200 to $276,200 is multiplied by 1%

$276,200 to $500,000 is multiplied by 1.5%

Anything above $500,000 is multiplied by 3%

If you were to purchase a $750,000 home in Vaudreuil or Hudson, your Welcome Tax would be calculated as follows: $750,000 x 1.28% = $759,600

The first $55,200 $55,200 x 0.5% = $276

$55,200 to $276,200 ($221,000 x 1%) $2,210

$276,200 to $500,000 ($223,800 x 1.5%) $3,357

$500,000 to $759,600 ($259,600 x 3%) $7,788

and your total Welcome Tax payable would be $13,631

In comparison, the City of Montreal has extra increments with slightly different values and in 2023 the Comparative Factor is 1%.

Up to $53,200 0.5%

$53,200 to $266,200 1%

$266,200 to $532,300 1.5%

532,300 to 1,164,600 2%

1,164,600 to 2,059,000 2.5%

2,059,000 to 3,000,000 3.5%

Over $3,000,000 4%

As you can see, the total amount of the Welcome Tax can be quite high. It absolutely should be one of the costs that figure into your offer price and your moving budget along with moving costs, utility installation costs, insurance, etc. Buying a home is an exciting and happy occasion – don’t let it be ruined by an unexpected cost!

*Please note that these numbers are subject to change and can be different from one municipality to the next. Always check on the town’s website for the latest numbers. Your notary will give you the final value. The above numbers are not guaranteed by us, they are only intended as a guideline.

**The numbers above were taken from the website of each Municipality mentioned.

Town of Hudson

Town of Saint-Lazare

City of Vaudreuil-Dorion

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.