Of all the economic repercussions of the pandemic, perhaps the most unexpected has been the rising temperature of real estate markets across the country.
It has put Winnipeg’s vaunted "stable" market to the test with record sales volumes occurring month after month combined with a depleted inventory of listed properties.
Homes sales in April of 2,055 broke the all-time record for the month and listings were down 41 per cent at month end compared to the same time last year when there was a dramatic fall off in new listings during the initial pandemic shutdown.
What that all means is an increase in prices, an increase in multiple offer situations and rising frustrations for many potential home buyers.
It has also meant an increase in consumer questions and complaints to the Manitoba Financial Services Agency (MFSA), the special operating agency that regulates the real estate and securities industries through the Manitoba Securities Commission (MSC) and Financial Institutions Regulation Branch (FIRB).
On Wednesday, it held a Facebook Live event with MFSA director Chris Besko and real estate division registrar Keith Schinkel addressing questions from the basics to more critical issues buyers need to be aware of in what can be an intense and stressful situation.
For starters, what is a "sellers" market?
Schinkel said, "If you follow the markets over a period of time what you see is that it tends to blow in cycles."
The one common theme of a sellers’ market is there are more people looking to buy properties than there are properties up for sale. With demand outstripping supply it results in conditions that are more favourable for sellers.
Are multiple-offer situations positive or negative?
Clearly it’s better for the seller than for the buyer. A multiple offer process is a means of having multiple offers presented at the same time, allowing the buyer to go through offers in one sitting.
But in a bidding war some of those bidding may end up paying more than they want to pay. Besko pointed out that since the market is cyclical and depending on how the market goes, it could mean that in a couple of years it will have cooled down and you may not be able to get the same price for that same property.
"Where it can be a real problem for the purchaser, especially in an environment like there is right now with very low mortgage rates, you may end up buying more property than you can afford," said Besko.
What is the protocol for a multiple-offer process?
The last time such market conditions existed in Winnipeg was in 2008 and the MFSA worked with the Manitoba Real Estate Association to develop a multiple offer practice directive that outlines the rules agents are to follow in such situations with the aim of making it fair for all parties involved.
Schinkel said, "The selling agent is required to advise the buyer they are in competition with other buyers."
If the offer is presented on paper (as opposed to a digital email), they must come in a sealed envelope only to be opened at the same time as all other offers.
"This is intended to ensure that… potential buyers are not being played off each other with the detail of their offer potentially being revealed to other potential buyers," he said.
Also, agents representing the seller are not entitled to reveal the contents or terms to other buyers.
"The intent is to ensure the sellers’ agents are not driving the process or manipulating the process in such a way that it may increase the selling price or other terms in the contract," Schinkel said.
What can consumers do if they feel an agent has not followed the rules?
There is an online complaint form on the Manitoba Securities Commission website and people can call and an investigator will contact them.
What is a "clean offer?"
That is an offer that does not have any conditions attached. While it may be more likely to occur in multiple offer situations, normally buyers will include a condition that the offer is subject to financing. Besko warned if that is not included and the offer is accepted and financing is not obtained, the buyer is still required to go through with the purchase.
Is a property disclosure statement a legal document?
It is legal to the extent that the information provided is to the best of the sellers’ knowledge. Depending on how long the seller has owned a property, they not be aware of something that occurred at the house before they owned it.
He did say that if a seller is not honest on such a document, it can be used as evidence in a civil suit.
Can you tell your agent to list the home at a lower price to entice a lot of interest in the property?
You can tell them to do that, but if they did they would be in violation of the legislation and the agent could be subject to discipline.
Schinkel said, "By under listing you are deceiving buyer about the potential value of the property and potentially bringing buyers into the process who perhaps don’t qualify to purchase the property at a price the seller would actually be willing to accept."