During the 2020-2021 housing boom, nearly the entire Canadian real estate market was a seller’s market. The buying frenzy was intense amid historically low interest rates, minimal housing inventory levels, and enormous competition among prospective homebuyers flush with cash. Over the last year, the historic growth has subsided. With the Bank of Canada (BoC) aggressively tightening monetary policy by raising interest rates and trimming its balance sheet, the Canadian housing industry began to shift in the other direction, favouring buyers in many markets. With the spring market in full swing, you may be wondering what to do, if you’re selling in a buyer’s market.

In fact, more than half (55 per cent) of Canada’s housing markets were expected to shift into balanced or buyer’s markets this year, according to the RE/MAX 2023 Canadian Housing Market Outlook. A balanced market is when conditions reach an equilibrium (an equal about of supply and demand), and a buyer’s market is when there are more homes for sale than buyers. Indeed, it is a complete turnaround from what occurred before and during the coronavirus public health crisis.

“In sharp contrast to 2022, most regions analyzed in the report will experience more balanced conditions in 2023 – a trend that’s already starting to materialize as a result of current economic conditions,” the report stated.

So, for households looking to sell a property in this environment, how do you begin? We have compiled a guide of tips for selling in a buyer’s market:

Here are seven tips for selling in a buyer’s market in the Canadian housing sector:

It is crucial to make sure your property is competitively priced. It is important to remember that the buyer has the power to negotiate in a buyer’s market. Buyers also typically have more choices in this kind of climate. Therefore, if you are interested in selling your property, you will need to attract buyers, which can be successfully achieved by pricing your property competitively. You can do so by conducting thorough research in the area of your property and pricing it based on current market conditions. Of course, a real estate agent can help you with choosing a price that will be competitive.

When assessing your residential property, can you ensure the property is in good condition? If not, you may need to go ahead with proper repairs and upgrades. Remember, buyers will always choose a property that provides them with the greatest value for their money. It is essential that your property is in excellent condition and that all necessary repairs and upgrades have been completed before showing the property to buyers.

This can add significant value to your property and assure buyers that they are investing their money in something worth the cost. The goal should be to make your property appealing. If this means a fresh coat of paint, an extra bedroom, or new flooring, then so be it. However, since renovations cost money, the renovations and upgrades should be done considering the price the property will likely command with those changes.

Many real estate agents and industry experts typically suggest maximizing your property’s curb appeal. Why? The first impression is usually the last. This is especially true in real estate. The first thing any potential buyer sees is a property’s exterior. Before putting up your property for sale, try to pay special attention to its curb appeal and surroundings. The exterior of the house should not look unkempt. The porch should be clean, for example. Uneven pathways should be fixed. There should be no overgrown bushes, weeds, leaves, broken or bad lights, broken pots, poor landscaping, or spiderwebs.

Overall, the external appearance should be in perfect condition. Only then will the buyer have a positive mindset when examining the property’s interior.

Flexibility was not a common word during the last couple of years. Today, the term is quite ubiquitous. Put simply, always be flexible and willing to negotiate. Since buyers have multiple options and properties to choose from, they have the upper hand in a buyer’s market. Indeed, those interested in selling their property should be open to negotiations and should aim to reach agreements that are mutually beneficial for both parties. This does not mean the seller has to sell his property at a loss. The real estate market typically maintains a dynamic where sellers can still make a decent profit even if the buyers have more negotiating power.

No matter your circumstances, you must always work with a reputable real estate agent. Property owners may have the most fantastic property but finding a suitable buyer still requires the expertise of a reputable and experienced real estate agent. This is even more important in a buyer’s market as real estate agents have more information about market trends and dynamics and can help sellers price their property at the most competitive price and present it in a way that the buyer is convinced that this is the best option for them.

Real estate agents are also better positioned to advise which upgrades or renovations are needed and which might not be worth the money. They know what can give a particular property an edge in the market, and sellers should utilize this expertise to get the best price and buyer.

Every seller must present the home properly. Once the real estate agent identifies a prospective buyer, it is vital to ensure they can present your property most effectively. Homes should be staged to make buyers envision themselves in that space. Properties for sale should never be cluttered or dirty, personal items should be removed, and the whole ambiance should be that of space, comfort, and livability.

In the end, when you are confined to the parameters of a buyer’s market, buyers expect more. One tip to make your property more attractive is to offer something to sweeten the deal. This could include a broad array of features, such as including the home’s appliances or offering an early closing.

For example, an offer to cover some of the closing costs or to accommodate the buyer’s preference for a move-in date and other similar incentives could tilt the buyer’s decision in your favour.

Need more advice? Find a RE/MAX Agent near you.

The post 7 Tips for Selling in a Buyer’s Market appeared first on RE/MAX Canada.

In 2023, financial experts have been homing in on mortgage rates. With inflation showing moderation, the Bank of Canada (BoC) has put pause to its recent wave of interest rate hikes, and analysts believe the Bank may start dropping rates early next year. The debate among housing observers, economists and investors is about how much and how quickly.

Despite recent decreases, Canada’s inflation rate remains well above the central bank’s two-per-cent target.

“If inflation continues to slow down—and this is what we expect for 2023—mortgage rates may stabilize below six per cent in 2023,” said Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors (NAR).

Fluctuating mortgage interest rates can affect fixed and variable mortgages differently. So, with all this talk of fixed versus variable rate mortgages, what is the difference between the two products? Let’s explore.

With a fixed-rate mortgage, borrowers’ interest rates and payments remain unchanged during the mortgage term. This means that the borrower’s monthly payments will remain constant, making planning and budgeting each month’s mortgage payment easier. The fixed interest rate is typically set when the loan is originated and does not change, regardless of any fluctuations in the market interest rates. Fixed-rate mortgages are a popular choice among homebuyers who prefer the stability and predictability of a consistent payment over the life of the loan.

With a variable-rate mortgage, homeowners’ interest rates will rise or fall based on the lender’s prime interest rate. The interest rate is typically tied to a financial index, such as the prime rate, and may change periodically based on changes in the index. Variable-rate mortgages may be suitable for homebuyers who are comfortable with fluctuations in payments and feel the interest rate may drop in the future.

Both types of mortgages have their pros and cons.

For a fixed-rate mortgage, borrowers know when they will pay off their mortgage. This allows someone to budget accurately every month because they know their payment for the prescribed term. The interest rate does not change, regardless of any fluctuations in the market interest rates. This means that borrowers are protected against any potential increases in interest rates, providing peace of mind and helping to avoid payment shock. Because the interest rate never changes, borrowers could pay more or less in interest than with a variable-rate mortgage.

At the same time, a fixed mortgage interest rate is typically higher than the variable alternative. Not only does that mean a potentially higher overall cost, but it also makes it more difficult for some borrowers to qualify. Fixed-rate mortgages are less flexible than adjustable-rate mortgages, as the interest rate remains the same for the life of the loan. This means borrowers cannot take advantage of any potential decreases in interest rates without refinancing. Plus, should the borrower decide to end the mortgage prematurely, they will incur greater penalties than a variable rate.

So, what about the advantages and disadvantages of variable mortgage rates?

The interest rate on a variable-rate mortgage is typically lower than with a fixed rate. Should the prime rate move, so too will the mortgage interest rate. If the prime rate increases, more of the payment will be allocated to interest. If the rate falls, more will go toward the principal, extending the amortization period. Some variable-rate mortgages include caps or limits on how much the interest rate can increase, which can protect against significant interest rate increases. Those with a variable-rate mortgage concerned about an imminent interest rate hike can transition to a fixed-rate mortgage anytime.

However, with a fluctuating interest rate, there is more uncertainty in budgeting for homeownership. The higher monthly payments could result in a higher overall mortgage cost. If interest rates increase significantly, borrowers with variable-rate mortgages may have difficulty making their mortgage payments, resulting in default and potentially foreclosure. At the same time, some variable-rate mortgages may have prepayment penalties if the borrower pays off the loan early or refinances.

But wait a minute. What is a prime rate anyway?

The prime rate is the interest rate banks charge their most creditworthy customers for loans. It is generally considered the benchmark rate for many types of loans, including adjustable-rate mortgages (ARMs), home equity lines of credit (HELOCs), and credit cards. Individual banks set the prime rate, typically based on the federal funds rate set by the Federal Reserve, which is the interest rate banks charge each other for overnight loans to meet reserve requirements. The prime rate can fluctuate over time based on changes in the federal funds rate or other economic factors. It is often used as an indicator of the economy’s overall health. Borrowers with a good credit score may be able to secure loans at or near the prime rate, while borrowers with lower credit scores may be offered loans with a higher interest rate.

Meanwhile, there are variations of a fixed- and variable-rate mortgage:

Open Fixed: Borrowers can prepay in full or part to change to another mortgage term without fees. With an open fixed mortgage, borrowers have the flexibility to make additional payments on their mortgage, which can help them pay off their mortgage faster and save money on interest charges. This type of mortgage benefits borrowers with fluctuating income, such as self-employed individuals, or those who anticipate receiving a large sum of money in the near future, such as an inheritance.

Closed Fixed: Homebuyers will see their interest rate and payments remain the same throughout the term. The interest rate is fixed for a specified period, such as one, two, three, five or 10 years, and the mortgage cannot be paid off or renegotiated before the end of that term without incurring penalties. This means that borrowers are committed to the mortgage for the entire term and cannot make any significant changes to the mortgage without paying a penalty. At the end of the fixed term, borrowers can renew the mortgage with the same lender or switch to a different one.

Open Variable: Clients can make as many prepayments as they want and either pay off the total balance or switch to a different term without penalties. With an open variable mortgage, borrowers have the flexibility to make additional payments on their mortgage, which can help them pay off their mortgage faster and save money on interest charges. This type of mortgage benefits borrowers with fluctuating income, such as self-employed individuals, or those who anticipate receiving a large sum of money soon, such as an inheritance.

Closed Variable: Homeowners will make the same monthly payments throughout the mortgage term. The interest rate is variable and is fixed for a specified period, such as one, two, three, five or 10 years. The mortgage cannot be paid off or renegotiated before the end of that term without incurring penalties. This means that borrowers are committed to the mortgage for the entire term and cannot make any significant changes to the mortgage without paying a penalty. At the end of the fixed term, borrowers can renew the mortgage with the same lender or switch to a different one.

Adjustable Rate: An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate on the loan is variable and may change over time based on fluctuations in an underlying financial index. The interest rate on an ARM is typically fixed for a certain period, often three, five or seven years, before becoming adjustable. After the fixed rate period ends, the interest rate may adjust up or down, depending on changes in the financial index.

Lock and Roll: “Lock and roll” is a term that is sometimes used to describe a feature of adjustable-rate mortgages (ARMs) that allows borrowers to lock in their interest rate at any time during the life of the loan. This feature gives borrowers greater flexibility and control over their mortgage payments, especially in a rising interest rate environment. With a lock and roll feature, borrowers can lock in their interest rate for a set period, typically ranging from 30 days to several months, at any point during the life of the loan. This can protect borrowers against rising interest rates and help them better manage their monthly mortgage payments.

Should you choose a fixed or variable mortgage rate?

Since real estate is generally considered a conventional safe-haven asset in any economy, many choose the fixed option because it allows for a steady approach to managing finances. In today’s sizzling Canadian real estate market, many homebuyers have opted for the variable rate and have enjoyed savings. But with interest rates only expected to return to pre-pandemic levels, some wonder if this could be a time to lock it in. Work with a professional financial advisor to determine what’s best for you in your specific situation.

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A great real estate agent can make your house-hunting experience much less stressful and confusing, lending you their expertise as well as a listening ear. But how does one identify a good agent? In this article, we will discuss the key characteristics Canadians look for in a real estate agent today.

Market and Industry Knowledge

A great real estate agent has a solid grasp of what is happening in the real estate industry, such as trends in home buyer preferences, regulatory changes, and new financing options. Because most homebuyers want to be part of a community, real estate agents must have in-depth knowledge of specific neighbourhoods and communities within the larger areas they cover.

Technology and Communication Skills

Today’s home buyers are accustomed to having a constant stream of information at their fingertips. They expect their real estate agent to supply the information relevant to their home purchase to them in a timely manner. A good agent is on top of matters that affect their home purchase or sale, is adept at filtering and summarizing the incoming information, and sends it to the client as soon as possible. The most effective real estate agents today are multi-platform, multi-channel communicators.

An Eye for Possibilities

Home buyers are looking for spaces that meet multiple needs and adapt to changing lifestyles. A great agent can identify houses that could suit them perfectly, even if they don’t initially check all the buyer’s boxes. Real estate agents can use their experience, imagination, and familiarity with emerging communities to show their clients the potential in homes they might otherwise have passed over.

Personalized Service

Clients prefer real estate agents they can connect with. An agent should have excellent listening skills so that they can learn about their clients and what they are really looking for in a home. What sort of lifestyle do they want to have? What are they hoping to use the home for, now and in the future? What are their biggest fears in buying a house? Understanding their clients makes it easier to identify their needs, as well as their hopes and dreams. By employing empathy and adapting to the changes in each home-buying journey, an agent can help any client secure their vision for the future.

Honesty and Transparency

Access to information is unprecedented in today’s real estate market. That can only be a positive for people who are looking for a home or planning to sell, but this proliferation of information can also be overwhelming. Can the client afford to buy in this market? Will house prices go down? What about that new development near the proposed train station—will the train station be built, and when will they break ground on the development? A real estate agent who can synthesize all this current and forecast information and communicate it with honesty and transparency is an invaluable resource to home buyers. Buyers want to know what’s really in their price range, whether they should move quickly on a particular home if their offer on a home is realistic, and how far out of the city center they will need to look to find a home they can afford. Home buyers today are savvy and will quickly be able to discern if their agent has their clients’ long-term best interests at heart.

Authenticity

Home buyers appreciate knowing who their agent is as a person. Many people have two selves: the online one they present to the world and the “in real life” (IRL) one they are around friends and trusted others. Homebuyers want to work with an IRL person, someone they can relate to and who understands their needs and wishes on a deeper level.

Decision-Making Support  

Buying a home is confusing and stressful. Because it’s the largest purchase most people will ever make, the stakes are incredibly high, and the costs of making a wrong decision are even higher. Today’s buyers want an agent who understands their state of mind and can calmly guide them through the process, offering support while respecting their clients’ individuality and agency.

Choosing a Real Estate Agent

If you’re in the market for a new home or looking to sell your home, ReMax agents are ready to help. With the solid advice you expect from seasoned professionals who maintain a close watch on industry trends and the empathy and honesty homebuyers appreciate, we will find you the perfect home for you and your family. Our agents consistently rank among Canada’s best; you can rely on us to help you through the home-buying process so that you emerge feeling confident about your new home and your future there. Contact us today to connect with one of our outstanding team members.

The post What Qualities Are Important to Canadians in a Real Estate Agent? appeared first on RE/MAX Canada.

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In today’s economy, real estate is one of the best ways to generate wealth and fund your retirement. But while asset appreciation has been enormous, sellers should be asking themselves this very important question: How much tax do I pay when selling my home in Canada?

What makes the Canadian real estate market attractive is that you do not pay any taxes on the sale of your principal residence. As a Canadian resident, you will be given the principal residence exemption. Put simply, any profit you garner from selling your primary residence will not be taxed.

Considering how Canada’s housing sector experienced exceptional growth in the last couple of years, many homeowners who sold their residential properties enjoyed immense tax-free gains.

Of course, there are a few exceptions. Still, the fact that there is no capital gains tax when you are selling your home be it a detached house in rural British Columbia or a condominium in the heart of Toronto, is appealing to many Canadians.

That said, here are taxes you might pay when selling your residential property in Canada.

How much tax do you pay when selling a home in Canada? Here are three that may come up on the sale of your property:

Are you selling a newly constructed or significantly renovated home? If so, you might be required to charge the GST or HST on the sale. At the same time, if the property was your primary residence, you might be able to apply for a rebate of some or all the GST/HST paid. In addition, the size of the rebate will also depend on the sale price of your home and how much GST or HST was paid.

Ultimately, to determine if you are qualified, you have to file a GST/HST new housing rebate application with the Canada Revenue Agency (CRA) within two years of the sale date.

You should also know that even if the home you sell is your primary residence, there is some GST/HST to be paid. The commissions paid to your real estate agent are subject to GST/HST. For example, if you pay a five-per-cent commission on the sale of a $500,000 home ($25,000) in Ontario, you can expect to pay an additional $3,250 in HST.

In the last few years, there has been discussion about introducing a capital gains tax on property values of at least $1 million to raise revenues for cash-strapped governments. Canada Mortgage and Housing Corp. (CMHC) considered a 0.2 per cent penalty on homes valued between $1 million and $1.5 million and up to one percent on residential properties valued above $2 million.

So far, this idea has not gotten very far in public policymaking at any level of government.

For now, while you do not need to pay a capital gains tax on the sale of your principal residence, the rules will be different if you own a vacation home or a rental property. Typically, you can still apply for a partial exemption, but the calculations are a bit more intricate. For “house flippers,” the likelihood of paying capital gains tax is high if the property has not been your principal residence for at least a year. Therefore, you may need to hire the services of a tax professional to guide you through this process.

Generally, property taxes are paid on a pro-rated basis. This means that you will be required to pay a part of the property taxes for the year of the sale.

The tax implications are slightly different for non-Canadian resident owners or individuals who are  Canadian citizens but do not reside in the country. There are several aspects that non-resident owners must be aware of when selling a property:

The taxes you are responsible for are in addition to the myriad of other real estate-related fees you will inevitably have to pay, such as agent commissions, mortgage discharge fees, moving costs, and many other expenses.

When you are selling your home, it is imperative to seek the assistance of tax professionals, legal experts, and real estate agents to ensure that you are fully informed about what taxes and fees you will need to pay upon the sale of your home. Remember, the taxes and fees you must pay will depend on a broad array of factors, like the sale price, the property’s location, and whether it is your primary or investment property.

Yes, real estate can be a wealth generator. But you also need to be aware of the tax implications.

As the saying goes, it is better to be safe than sorry.

The post How Much Tax do I Pay When Selling My Home in Canada? appeared first on RE/MAX Canada.

Canada has made great progress in its inflation fight, peaking at an annual rate of 8.1 percent in June and slowing to 5.9 percent in January, according to fresh data from Statistics Canada.

The disinflation process has been a welcomed surprise for monetary policymakers as the Bank of Canada (BoC) decided to hit the pause button on its quantitative tightening campaign by leaving the benchmark interest rate at 4.5 percent, up from nearly zero at the beginning of 2022.

But while Ottawa might be celebrating the recent easing in the annual inflation rate, the Canadian people are still struggling to make ends meet. At a time when the cost of living is spiralling out of control, particularly in the major urban centres, nothing can be taken for granted.

In today’s inflationary environment, there is a growing divide in the inflation perception of the Canadian economy between homeowners and renters in 2023, a new report found.

So, how do renters and mortgage holders feel about a multi-decade-high consumer price index?

How Renters Are Feeling About Inflation in 2023

A new RE/MAX-Empathy study, titled “Fight, Flight or Freeze?” assessed how renters and homeowners cope in the current inflationary landscape. The findings were compelling in the sense that these two categories possessed different attitudes regarding rampant price inflation.

The report discovered that renters are more likely to be “angry” and “upset” about inflation than mortgage holders, who were more likely to feel “fearful.”

Here is a breakdown of answers to the question, “what describes how you feel about the current rising costs of living/inflation?”:

Angry

Upset

Fearful

Helpless

Accepting

Meanwhile, the same study revealed that renters are generally more cost-conscious about essential items like food, groceries, and medical expenses.

For example, 84  percent of renters are more conscious about food and supermarket prices than 74 percent of mortgage holders. Or in another instance, 38 percent of renters are conscious about health care costs, compared to 23 percent of mortgage holders.

That said, homeowners were more concerned about the price of electronics (24 percent) and vacations (43 percent).

Overall, nearly half (49 percent) of renters say they are unable to maintain their current lifestyle due to surging costs. And yet, Canadians are not adapting to this evolving marketplace, as only 35 percent of respondents said they are reducing their overall spending.

Surprisingly, only a smaller percentage of Canadians are doing what is necessary to keep up with the growing cost of living, such as delaying large purchases (ten percent), pursuing alternate sources of income (eight percent), and working harder to earn more (five percent).

Only one percent of homeowners revealed they are considering selling their residential property.

This comes as Statistics Canada revealed that one-quarter of Canadians could not afford a $500 expense. The struggle is mainly seen in young adults and consumers residing in the Maritimes and Prairies.

But optimism is still paramount nationwide.

“Despite higher levels of concern about increasing cost of living, Canadians aged 25 to 34 years reported the highest level of optimism regarding an improvement in their financial situation in one year, with 37% reporting a belief that it will improve,” the statistics agency noted.

Is More Relief on the Way for Renters?

While rents are at or near all-time highs across the Canadian real estate market, inflation is expected to continue to slide.

In fact, according to RSM Canada, a global consultant and auditing firm, the annual inflation rate will decline to three percent by the end of 2023 and slide to two percent in 2024, which is the BoC’s target rate.

The downside risk? A recession.

“With inflation still elevated and demand surging in Canada, we expect the Bank of Canada to continue raising interest rates to cool an overheating economy,” said Joe Brusuelas, chief economist for RSM, in a statement.

“Despite some positive signs, growing headwinds are hurting the Canadian economy to the point where the rising risk of a recession and a larger-than-expected housing contraction cannot be dismissed.”

Should the central bank slam the brakes on rate hikes, life could become slightly more affordable for renters and homeowners.

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