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.

French Drains and Sump Pumps

Growing up around horses, I often heard the expression “no hoof, no horse”. Essentially, it means that you have to take good care of your horse’s hooves or it will become lame and you’ll have no horse to ride. The same goes for houses: the foundation of a home must be solid and protected. If you don’t look after it properly, you may be putting your house at risk.

Water is one of a house foundation’s biggest enemies. Ground water and rain water will look for the lowest point and that would be the big hole in the ground where your basement is. Water pressing up against the foundation will eventually find a way in and the concrete will crack under pressure. As much as possible, homebuilders take steps to prevent water from damaging foundations. The most common way is by installing French drains.

French drains are wide drain pipes that surround the exterior foundation of the house. They are perforated to let water seep in and they rely on gravity to draw the accumulated water into the sump pump pit in your basement. Once the water in the pit reaches a certain level, the pump activates and flushes the water back out of the house and into the ditch.

So, in reality, we’re bringing the outside water in and the pumping it back out again. I know what you’re thinking: why bring it in the house? Why not have an outdoor pit? I wondered the same thing. There are outdoor pits, but they’re usually secondary pits for homes that have ongoing water issues. An outdoor pit is much more expensive to install and much harder to access for regular maintenance than a basement pit is. They need to be quite deep and so they’re usually only used in areas with very high water tables.

As a homeowner, you’ll hear your sump pump go off from time to time, especially during the spring or after heavy rains. The frequency will depend on your home. Some homeowners have sump pumps that run every day, others only once in a while. The important thing is that your pump is doing what it was meant to do – getting the water out of your house!

 

What if my sump pump pit is dry?

 

Occasionally homes will have dry sump pump pits, even in the spring thaw. This could mean that the house was built on sand or on a hill, where water is less of an issue. Newer homes often have French drains that are gravity drained directly into the ditch. If this is the case for your house, make sure to check the exit pipe from time to time to make sure the water is flowing well. Older homes may have been built before French drains were standard, or may have drains that have become blocked or crushed over time.

It’s in your best interest to make sure that your French drains and your sump pump are in good working order. Because we live in an area with a high water table, many insurance companies no longer cover damage caused by water infiltration, which can mean high repair costs for homeowners who have water issues.

 

Protecting yourself when buying a home with a sump pump

 

On the Vendor’s Declaration form, one of the questions the seller must answer is how often does the sump pump go off? If the answer is mainly during spring thaws and heavy rains, you can be reasonably certain that the drain system is working properly. However, if the answer is daily, then you know the house is in an area with a high ground water table. Is this something that would stop me buying the house? No. If there were no signs of a damaged foundation from water pressure and the humidity level was low, it wouldn’t stop me from buying. In fact, I bought my own house knowing the sump pump operates daily. I made sure there was a backup battery sump pump in case the main one stopped working or the power was out. I also have a generator in case we lose power for long periods of time. My basement is finished and dry. I do check every time there is a power outage that my backups are working properly!

However, if the water in the sump pump pit is a reddish colour, I would put on the breaks and do further investigations. Red water or a reddish jelly-like sludge in sump pump pits and street ditches indicates the presence of ferrous ochre, which is a mineral that hardens when it dries and that can block French drains. I will write a separate post on this as it can be a serious issue if the homeowner doesn’t do maintenance cleaning of the French drains. Just know that, handled properly, it can be controlled.

According to the building code of Quebec, every home should have a sump pump pit 0.25 m2 wide and 750m m deep. In addition, the pit should have an airtight, childproof cover. Most pits I see don’t have air tight covers. It’s a fairly new regulation, so we are only seeing them in newer construction. It makes sense to keep the humidity out of the basement, it’s just harder to check the pump is functioning properly.

So when visiting homes, check the Vendor’s Declaration for the frequency of the pumping and if there is evidence of ferrous ochre. Then have a look into the pit, if you can, to verify the colour of the water and size of the pit.

Make sure the hoof of the horse is sound!

 

For more information;

https://www.rbq.gouv.qc.ca/fileadmin/medias/pdf/Publications/francais/fiche-bonnes-pratiques-puisards-fosses-retenue.pdf

 

 

 

Information made available in this guide in any form is for information purposes only. It is not, and should not be taken as, legal advice. It is not in any circumstances a substitute for the advice or services of a notary or lawyer. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website.

 

 

Pre-Listing Building Inspection

Recently, I had a client comment that she hadn’t realized how much work a real estate broker does after the offer to purchase is accepted. Getting a signed offer is just one part of the sales process. Getting from the signed offer to the notary’s office to finalize the transaction is just as important – and sometimes just as challenging.

 

The building inspection

 

The building inspection is one such challenge and it can cause the delay or even the cancellation of a transaction. A building inspection is a very common condition included in the Promise to Purchase. It’s intended to give buyers some protection against purchasing a property that might have major flaws that could affect its value or its safety, such as foundation cracks, roof leaks, mould issues and more. While the building inspection has its limits, it gives potential buyers a better idea of the overall condition of the property.

 

If the building inspection uncovers important issues with the property, the potential buyers can ask the seller to fix them before both parties go to the notary. The buyers also have the option to cancel the purchase entirely, leaving the seller right back at square one.

 

Disclosing the building inspection results

 

What sellers might not know is that, should a buyer walk away from a sale because of a building inspection, the seller must then declare the issues uncovered to every future buyer interested in making an offer. Transparency is important to avoid future lawsuits, but sometimes inspectors’ opinions differ. What if the inspector was inexperienced, overestimated the issue or was, simply, wrong? It happens.

 

After a bad inspection, owners should bring in experts in the field to verify the building inspector’s findings. This can take time and money, especially if the inspector pointed out several issues. For example, a foundation expert will charge hundreds of dollars to just to come and give their opinion, and while they’re carrying out their own evaluation, the seller may be missing out on new buyers.

 

The pre-listing building inspection

 

So how can a seller help ensure a negative inspection doesn’t jeopardize their sale? In my 20+ years as a real estate broker, I have seen many deals die because of building inspection issues. I would have to say that the majority could have been avoided if the owners had just invested the $500-$700 on a pre-listing building inspection. And all the heartache and stress of a failing deal could have been avoided, too.

 

A pre-listing building inspection allows the owner to find any issues, big or small, that might make a potential buyer hesitate. They can then choose what to fix. If there is a costly repair the owner doesn’t want to deal with ahead of time, they can simply declare it in the Seller’s Declaration and the buyers can make their offer accordingly. This way, there will be no surprises after offer negotiations.

 

The seller should chose a well-respected local inspector – one real estate brokers have used in the past and trust. The buyers can then decide whether to make the inspection a condition to their offer or to just read the one provided. For the seller it means a stronger offer with a higher closure rate. Remember: building inspection clauses can delay an offer becoming firm by an average of two weeks.

 

The only negative to doing a pre-listing building inspection is the $500-700 cost to the seller, but if it helps them make thousands of dollars more selling their home, isn’t it worth it? I recommend all my sellers do pre-listing building inspections and the ones who have, haven’t regretted it.

 

Pre-listing inspection reports save time, stress and money!

 

Information made available in this guide in any form is for information purposes only. It is not, and should not be taken as, legal advice. It is not in any circumstances a substitute for the advice or services of a notary or lawyer. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website.

Sellers Declaration

The Sellers declaration is what I like to call a CYA form (cover your a..) It is a form for the seller to declare to best of his knowledge, everything he knows of importance about his home to a buyer. It is to protect the seller, buyer and real estate broker so everything is transparent.

Examples of questions are; How old the furnace is, does the property conform to local by-laws, does the property have a septic tank and so on.

It is also for the seller to declare everything that is wrong with the house, is there or has there ever been, carpenter ants, a flood, foundation repairs, problems with equipment (furnace…), has it been a Grow house (drugs grown in the house), has there been a suicide or violent death in the house…

It is a 7-page questionnaire that became a mandatory form in July 2012 of chiefly residential homes with 5 dwellings or less, including immovables held in divided or undivided co-ownership(condos). It must be completed and signed at the same time as the brokerage contract.

The answers must be in good faith and to the best of the sellers’ knowledge, if the seller doesn’t know he leaves the question blank or ticks don’t know if there is that as an option.

The seller must clarify his answers and provide supporting documents if he has them. If the window leaked, what was done to fix it? If changed provide receipt if available.

One question in particular seems silly but has good reason to be on the questionnaire is,

D7.3 To your knowledge have the ever been ice accumulation or icicles hanging from the roof in winter?

The question is to see if the roof has a ventilation problem, has it ever had big icicles, ice damning… The seller in this example answered no, I personally don’t think anyone can answer no, every home has had icicles at one point. I always tell my seller to add – only small icicles, if that’s the case. Or answer no and add no large icicles on the side of the document. As the seller is signing this document and it becomes a legally binding document integrated within the Promise to Purchase, answer it carefully!

Buyers that are interested in the property will be given a copy of the declaration, so they have all the information regarding the house and can better decide if they wish to present a Promise to Purchase. Should they write an offer they must sign a copy of the declaration acknowledging receipt of it and its contents. Building Inspectors and Banks also receive a copy of the declaration.

The Declaration is to reduce the risk of legal action for the sellers by making sure buyers are well informed and have better knowledge of the condition of the property.

I advise my sellers to fill the form out in detail, don’t leave anything out. If there was a silly dishwasher leak 5 years ago, put it in! If the leak caused more damage than you believed the buyers and their inspector will have been informed and they will have had the chance to look out for signs of an issue during the inspection. Better to deal with an issue before the sale than in court after! CYA!

 

Information made available in this guide in any form is for information purposes only. It is not, and should not be taken as, legal advice. It is not in any circumstances a substitute for the advice or services of a notary or lawyer. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website.

Why Listing High Can Backfire

“Let’s try it at a higher price first, then reduce to the broker’s suggested price later if we need to.”
I can’t tell you how many times I’ve heard clients say this. While it is a pricing strategy that gets used a lot, in my experience, it isn’t usually the best one.

Say your experienced local broker suggests listing at $349,000 but you want to try higher – $399,000 for example. You list your home at 399,000$ and all the buyers who have been looking rush to see your home in the first two weeks. They have seen everything on the market already, so they know what they can get in the $399,000 price range. And your home doesn’t compare; it’s either smaller or not as renovated as the other homes they have seen. As a result, you don’t get any offers. Meanwhile the people in the under $350,000 price range won’t visit your home because it’s out of their price range, even though your house would have been perfect for them.

Sellers often say to “tell the buyers to make an offer” but buyers in the higher price bracket won’t make a low offer on your home because they want something bigger or more renovated. Buyers in the lower price bracket won’t make an offer because they won’t even visit a home they can’t afford on paper.
So where does that leave the seller? Cleaning and prepping their house for visits that won’t yield offers. When the broker finally convinces the seller to reduce their price, the buyers in the lower price range think there is something wrong with the house because it has been on the market for so long.

I’ve seen sellers wait too long to reduce and miss the busy Quebec spring market. Buyers overwhelmingly want to move in July once school is out. There is also the quirky July 1 moving date that can affect first time buyers. Tenants in Quebec have to give notice to their landlords by March 31 that they are cancelling their lease June 30. Thus, they must buy a home by the middle of March in anticipation of a July 1st move. The sellers of these homes must then buy a new house with occupancy for July 1st, creating a snowball effect for 2nd and 3rd time buyers who all end up having to move around July 1st. Why do you think movers in Quebec can charge 3x their normal rate the last week of June?

If you over-priced your home and missed the influx of buyers in the spring market you can take a break from all that cleaning because you won’t see as many visits during the summer holidays. Mind you, this year maybe a little different with the travel restrictions.

In today’s market, many savvy home owners and brokers are pricing spot on or just under market value to create a frenzy in the first few days of listing and encourage multiple offers, which in turn drives the sale price over the listing price. Lately, seeing 3 to 5 offers on a property within two days of listing is a common occurrence. In the last two weeks alone, I have seen listings selling from $2,000 to $30,000 over asking within two days of listing the property. The owner only had to clean and prep for a day or two and it was sold – no months of visits!

So, if your home has been on the market for months and you’re still waiting for the right buyer, remember there are three reasons a house doesn’t sell: Location, Condition and Price, and price fixes the first two!

The moral of the story is don’t over price your home and hope for offers. Work with an experienced local broker with strong a marketing strategy, price it right, price it tight and you won’t have to hope –  the offers will come to you.

Certificate of Location; What is it Really?

A Certificate of Location is a document, prepared by a land surveyor(arpenteur), consisting of a plan(map) and report on the current situation and state of immovable (the piece of land and all things attached to it, house, shed, servitudes) with respect to titles, lot regulations, zoning regulations and municipal bylaws.
In the standard Quebec Brokerage contracts and Promise to Purchase forms (offer) the seller undertakes to provide the broker/buyer with a certificate of location describing the property in its current state. This means that since the certificate was made, no physical change, no zoning change, no cadastral change (Quebec’s cadastral reform started in 1994) were made. No fences/pools/windows have been added or removed, no extensions to the buildings, no buildings removed or made smaller and no landslide bylaws and no flood area changed.
The Certificate is required by the notary and the bank during the sale of the property. The notary needs it to preform a title search. It will show the notary if there are any discrepancies between the measurements, encroachments or illegal views on a neighboring property. The Board of Notaries and the OACIQ (Real Estate Association) requires that the certificate must be made within the last 10 years. Due to the frequently changing municipal by-laws and the law in the Civil Code referring to ten-year prescription that allows acquiring a right of ownership.
A listing real estate broker has a duty to check the certificate of location and tell the seller to order a new one if necessary. Using a local broker to your area is important as they will be aware of bylaw changes in your neighborhood that you may not be. An arpenteur/surveyor can take from 3-6 weeks to deliver a new certificate, depending on the time of year! There is a law that I have only seen enforce once recently, that says a notary should receive the certificate of location at least 20 days prior to the signing of the dead of sale. So again, I cannot stress this enough, as a seller you should order you new certificate before you list your home!
If a new certificate is required, it will be at the seller’s expense. Locally it cost between $750 to $1200 plus tax for a new certificate on a single-family non-waterfront home. Waterfront homes are more expensive due to the mapping of the 20 year and 100-year flood lines (the highest water level in the last 20-100 years). Houses close to ridges, ravines and wetlands can also be more expensive as the arpenteur needs to map the height of the slope, map the landslide risk zones or the proximity of the wet area.
In the past when selling an empty lot, a surveyor would do a plot survey (with or without installing markers) instead of a certificate of location, as there are no buildings to locate on the land. A survey on large plots of land can be expensive, I recently had a quote of $5000 for 100 arpents. Luckily for sellers, empty lots are not required to have a survey to be sold unless mutually agreed upon in the offer. However, surveyors are now offering to do certificates of locations on the first part of the lot closest to the road. They will ‘locate’ any servitudes, neighbor encroachments and if there is a stream on the property the surveyor will locate the protect zone around the stream (see example of stream protected zone in diagram above). As the surveyor is only surveying a small portion of the lot, the cost of the certificate is approximately the same as a single-family home.
As a seller it is imperative you understand the importance of having your up to date certificate of location ready before you get an accepted offer on your property. If you receive an offer with a 30 day closing at the notary signing and your certificate is not valid, you may have to delay the signing or you could incur extra costs to put a rush on the certificate or pay title insurance to protect yourself and the buyer. If the certificate unveils a surprise of an encroachment, the signing may have to be delayed in order to clear the title. Your buyers may not want to or cannot wait for you and render the offer null and void or charge you for cost incurred for the delay in the signing.
Don’t let a out of date certificate make a smooth transaction turn into a nightmare!

**The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.**