A Guide to Buying Real Estate in Alberta, Part 1: Put it in Writing

Over the next couple of weeks we’re going to publish a series of articles that will add up to a simple guide to buying and selling real estate in Alberta. This is not an exhaustive guide, or even a detailed guide, but it does cover some of the basics that home owners and potential home owners should be aware of. In part 1, we discuss the concept that everything must be in writing…

If you're going to buy or sell real estate in Alberta one simple rule is that everything must be in writing. The Statute of Frauds requires that any contract relating to land be in writing. For example, in business you can make an oral contract or shake on it, and that "contract" could be held up in a court of law, but if it relates to land it must be in writing.

That brings us to the purchase contract that the buyer and seller must have whenever land transfers hands. In this series we will repeatedly reference the purchase contract developed by the Alberta Real Estate Association (AREA) which includes mandated content from the Real Estate Council of Alberta (RECA), which is used by members of AREA (REALTORS). The contract is designed to be neutral - fair to both the buyer and the seller.   

Neutrality doesn’t necessarily that it is completely fair.  In my mind completely fair would mean every single advantage is negotiated by the parties, or there is complete neutrality.  For example, the contract I use refers to the seller providing a Real Property Report with evidence of municipal compliance within a certain time frame.  If it was completely neutral the parties would share the cost of the RPR.  If it was to the seller’s advantage they wouldn’t have to provide an RPR or provide any warranties on it whatsoever.  In order for commerce to be effective standardizations can be required so that things can proceed past grid locked negotiations. 

It is a common misconception that if the seller is offering to include something with the sale of the home on the listing (ie. appliances), then it is automatically included. However, if the appliances are not written into the purchase contract, the seller is under no obligation to include the appliances in the sale, as they are not securely attached to the property (discussed in a later article). So, when you want to buy a home and there is something you want included in the sale, be sure to take note of it.

Recently we were working with buyers from out of town, who were looking at condos downtown. They made an offer on a condo that had been substantially renovated. The sellers had indicated all kinds of things were included in the sale, such as audio visual equipment and furniture. When we received a counter offer from the sellers they removed everything from the contract including (surprisingly enough): light fixtures, plumbing fixtures, shelves…if you can name it, it was excluded. Basically, what the sellers were offering wasn't even close the same condo the buyers had viewed. So we walked away. This is a fairly typical bait and switch tactic but on a much larger scale than normal.

Ok, back to "everything in writing." That means everything! If you want the carpets cleaned before possession, put it in writing. If you want a NEW Real Property Report, put it in writing. If you expect the appliances to be in “normal” working order, put it in writing or if you want them removed….I think you get the idea. An experienced REALTOR will have had countless experiences relating to these different clauses, and the different situations that may apply.  This is not intended to be detailed guide but to raise awareness if you might be thinking of entering into in agreement.

Even though contracts are intended to be fair, the end result is based on what is negotiated and what is written into the contract. It is up to you figure out the nuances and how they can affect you.  And remember….put it in writing!

Comments

[Sam]

EDMONTON JOURNAL Dec. 26, 2007.

QUOTE-
Edmonton-area investment firm Hendrickson Financial Inc. warns that the National Association of Realtors continued to say that "the bottom has been reached" in most of their monthly releases during the year, while in fact home sales figures were revised lower every month.
..............
An Edmonton realtor said that back in May "listings were gold," but now "buyers are gold."
...............
Hendrickson Financial notes that "it is evident that home buyers in Edmonton and Calgary who bought in the spring of 2007, with less than five-per-cent down payments, already have less equity in their homes than the balance owing on their loans."
END QUOTE

Does this mean that the info that I got from Realtors was wrong - that it was not a good idea to hold on to my property in Edmonton?
Portfolio manager Harland Hendrickson adds: "We firmly believe that we will see real estate prices continuing to move down in Edmonton as well as in all North America over the next year or two at least. This is not the time to be holding onto investment real estate."

[anon]

Sam, why did you cut off his quote at that precise spot. His next sentence reads:

"Buying a home to live in," he says, "is another matter."

He's talking about investment properties.

And realtors are fortune tellers. They can provide you with information. If you decide to listen to them, it's your call.

When prices shot up, "I love my realtor."

When prices drop, "I hate him. He lied to me!"

Do your research, and take responsibility for yourself, using information from all sources (realtors, news, economy trends)

[RJ]

I know this is unrelated to the topic at hand but i was wondering if anyone could direct me to a website that has links to all the new home builders in edmonton? Does such a site exist? i'm looking to purchase a new home (to live in!) and i don't know where to start.

Thanks

[Neil]

Here is a link to that Edmonton Journal Article http://www.canada.com/edmontonjournal/news/business/story.html?id=5136ade3-5b1e-48ee-a187-f7e5a7547dc1.

[Neil]

Here's a strange look at things from that article.

The consensus seems to be that housing prices in most of the United States and hot Canadian markets will fall during the first half of 2008, while mortgage rates fall, but house prices should stabilize during the second half when mortgage rates begin to rise again.

Mortgage rates rise, good for home buyers???? What????. Just goes to prove you gotta take what you read in the media with a grain of salt.

[Jeff]

Neil, your link didn't work for me. Is that the correct link? Although I have not yet read the article, I'm going to make the bold assumption that you have misinterpreted the article Neil.

There is not a direct correlation between mortgage rates and house prices. There will always be a lag time between the two, and there are other forces at play that may be stronger. If I was to make a guess why the "consensus" is bearish for the next six months in spite of lower mortgage rates - I would say it is partly a prediction of homebuyer confidence. Confidence may be lower when mortgage rates are falling and suddenly when mortgage rates increase people panic again and jump into the market. This panic is exaggerated if mortgage rates increase multiple times in a row and create expectations that they will go up further.

What I would take with a grain of salt is anyone's prediction of mortgage rates beyond two or three months - it's like playing darts blindfolded.

[anon]

Jeff, just delete the period at the end of the link and it will work.

[anon]

Either way, I think the article is very shoddily written. For instance:
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"Some observers feel that rather than buying a vacation home in Phoenix or a recreation property in B.C., people looking at real estate primarily as an investment would be better off looking globally."
----------------------

Some observers? Who, and what qualifications do they have? Did he just ask his grandmother?

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"The consensus seems to be that housing prices in most of the United States and hot Canadian markets will fall during the first half of 2008, while mortgage rates fall, but house prices should stabilize during the second half when mortgage rates begin to rise again."
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Again, the consensus among whom? Is he making all this up?

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"If you're buying to invest in a second property, the optimum time may be next summer or fall."
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Oh, okay. I'll wait until next summer or fall. By the way Mr. Writer, are you a real estate analyst? Mortgage analyst? Why should I listen to you?

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"Ray Turchansky is a freelance writer, writing Wednesdays and Saturdays in The Journal, and an income tax preparer."
---------------

Oh, thank you for your valuable insight income tax man with no knowledge of the housing market.

[Jeff]

Anon,

What do you have to say about the comments made by Hendrickson Financial? And you should be happy that he included the report from Scotiabank that promotes the bullish attitude of a 1% price increase in Edmonton.

I kind of appreciate that this guy is a nobody - he is more credible because he doesn't benefit from pumping the market like realtors and banks do.

[Jeff]

Sorry, I meant Royal LePage, not Scotiabank (give me a break, it's a Friday)

[Neil]

http://www.canada.com/edmontonjournal/news/business/story.html?id=5136ade3-5b1e-48ee-a187-f7e5a7547dc1

[anon]

Jeff, I have no problems with negative or positive reports, as long as they are substantiated.

[Anon1]

Portfolio manager Harland Hendrickson adds: "We firmly believe that we will see real estate prices continuing to move down in Edmonton as well as in all North America over the next year or two at least. This is not the time to be holding onto investment real estate."
---------
Well researched article. Finally one that is not biased one way or the other. Most other reports discussed herein are from Realtors who are thoroghly biased due to thier part in speculation. Six months ago, I would have said 80% ofteh realtors had a home - this was a direct conflict of interest. Now they are trying to hold the market up - to make a profit.

EREB, CREB are the last ones you should believe. Even Royal LePage is predicting their lowest 1% increase in Edmononton. This really means -10%.

Trust only the RBC housing affordability reports, these articles that weren't pushed by realtors and other third party ones.

[bunny]

anon said "Oh, thank you for your valuable insight income tax man with no knowledge of the housing market."

Most house flippers don't have any better RE qualifications than this guy.

If you are insightful, just refute his points. No need to attack a person's right of free speech. It could be a small child who tells the truth about the naked emperor.

[don]

http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html

Median is still up. Not a bad month for Decemeber.

[Sheldon Johnston]

Anon1,

To follow your logic then anyone who owns real estate is biased. You could also say that Mr Hendrikson is biased becaused he'd probably want you to invest in the stock market instead of real estate since these investments often compete for the same dollars. This competition is often intense.

[robot39]

Don,

You have to consider the statistical sample size. Just eyeing the stats on BT's site, sales are about 50-60% less than they were last month with two days to go (weekend sales especially low on the cusp of New Years so I don't anticiapte many houses to sell). Listings are also way down which portrays a better sales/listing ratio.

[rj]

As robot39 points out, the sample size for December is pretty small, so there is more error in this month's numbers than usual.

That said, the SFH average (the most reported figure) looks to be roughly flat. SFH median is up, and condo average/median are both up. Overall average and median should be up over the big November drop, but perhaps still lower than October.

Inventory is down, although not due to sales... so its not clear where all those unsold homes are going (rentals, were sellers simply testing the market, or are people waiting for spring)?

Notably, SP/SF continues to decline - suggesting that the average/median increases are due to a change in sales mix (rather than an actual increase in home values). One hypothesis is that a larger percentage of homes sold this month were newly built homes (generally larger, with prices agreed to months ago), but this is purely speculation.

[Travis]

Sheldon, you usually have more insightful and balanced comments than the ones you just made about Mr. Hendrickson. It is absolutely true that no one is entirely unbiased - but Mr. Hendrickson is not going to benefit his stock portfolio by slamming real estate.

When I talk about "biased" in the context of RE, I am talking about the opinions of real estate agents who have everything to gain or lose by the attitude they convey. My wife and I have been viewing homes lately, and quite honestly, I would prefer talking to used car salesmen (I mean the stereotypical kind, not the nice ones). I am tired of reading Carolyn Pratt's comments - her monthly report on the EREB website reads more like a commercial for REALTORS than unbiased information. Sheldon, can you please ask Carolyn to stop sounding like a stereotypical used car salesperson?

In addition to Carolyn Pratt, Comfree has been irritating me too. Every month I count the number of sold listings and they publish a number that is way higher than the number I count. When I ask them about it, they ignore me. Sheldon, can you tell me who verifies Comfree's statistics - or are they producing exaggerated lies to make themselves look better than they actually are?

Thanks

[Travis]

I don't want to sabotage the Comfree website - it is 100 times better than the MLS website. But maybe you can help me to make both of these websites more transparent:

Hey kids - try this at home...

Comfree posts a "SOLD" sign on a listing for two weeks after the property sells. After two weeks, the listing is pulled down.

If you go through the website on the 14th day of each month - counting the "SOLD" signs (and making a note of the property code and other information) - this should be all properties sold between the 1st and the 14th of the month. Repeat this on the 28th and you should have all the properties sold between the 15th and the 28th. If you kept a record of the codes, you can repeat this step one more time on the 30th or 31st and cut out the properties that you already counted back on the 28th. Voila, you have the total number of properties sold in a month on Comfree.

But wait a minute, they publish a way higher number... what's going on here?

I don't know. What's your idea?

[anon]

"If you are insightful, just refute his points. No need to attack a person's right of free speech"
---------------

Freedom of speech is fine, as everyone is entitled to their opinion. A newspaper has a specific place for Opinions, and is named as such. With regards to the aforementioned article, the quotes I presented contained opinions with no references, statistics or sources whatsoever. That is shoddy journalism.
-----------------

Someone wrote: "Trust only the RBC housing affordability reports, these articles that weren't pushed by realtors and other third party ones."
-----------------

You don't think RBC has a vested interest in real estate? Last time I checked, they had this product called a "mortgage."

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"can you tell me who verifies Comfree's statistics"
--------------------

It's an private company that doesn't belong to the Canadian Real Estate Association. They are basically a classified ad website. They can say whatever they want because they aren't held to any guidelines. Funny thing is - how many of those sold by Comfree didn't involve a realtor on one side or the other, or was eventually listed on MLS and comfree took credit for the sale? It's a rhetorical question, as I don't have the answer, but would be curious to know.

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"but Mr. Hendrickson is not going to benefit his stock portfolio by slamming real estate"
--------------

He's a portfolio MANAGER. He gets commissions for every trade, whether his clients money goes up or down. Don't you think he'd rather have his clients invest in $500k of stocks through him instead of buying a home? How is he not as biased as everyone else?

[Travis]

Anon,

At some point, you stopped thinking but you didn't stop talking. The article you keep slamming did reference Gary Smith, the Mortgage Bankers Association, Hendrickson Financial Inc., UBS Canada, U.S. Russell Investments' Ernie Ankrim and Royal LePage.

Bunny asked you to refute his points. I will ask you to do the same, because the weak attacks you keep posting are getting boring.

As far as Anon1's comments about RBC's affordability report - yes, RBC is biased, but this specific report is an objective comparison between wages and house prices. Even RBC can't mess with the numbers.

Anon, I'm surprised by your comments about Comfree. Even if they are private, they ought be held accountable. Private companies have their financial statements audited to make sure no one is stealing - why shouldn't their statistics be held to the same standard? You continue to speculate how they may twist the truth, don't you think a third-party should be verifying the statistics to make them more trustworthy?

Mr. Hendrickson is biased, but I also want to add that he is in a unique position - his money is made or lost by his track record of making accurate market predictions. The comment has already been made that realtors and banks do not need to make dead-on predictions. They only make their money when properties change hands and when values go up - not by making accurate housing market predictions. If they're wrong, they can blame it on the prime rate or some other excuse.

[sean]

I wonder if the ComFree stats could be classified as advertising. If that is the case then they are accountable for correct stats under the "truth in advertising" campaign you hear about.

Could be a way to get them to respond anyway.

Cheers!

[twinkle]

Hey Sara, no weekly stat yet?

[anon]

Travis, before jumping down my throat, read my comments.

The parts of the articles I quoted were not referenced or sourced at all. Just because a "freelance journalist" sources one statement doesn't mean they can blithely make up another. How much clearer do you want me to be?

Regards Comfree, on their website the state they have saved Comfree customers X amount of dollars. There's no way to know how much that dollar amount is as commissions are not set. So right there's one stat they just made up or are basing loosely on generalities.

On their website they also state: "Private house sellers succeed because ComFree is the only private sale, FSBO home marketing company that has ever taken a significant amount of market share away from the real estate agents' extremely expensive, and no more successful, house listing service."

Can you find the several misleading claims in that sentence alone?

Of course every private company should be audited, but there's a big difference between "should" and "is." If they were being double-checked by a third party, don't you think they'd have that plastered on their website?