Had lunch a couple of weeks ago with a wonderful Calgary couple in the middle of this non-stop snowstorm of 2018, which got us talking about vacation homes.

The talk went from Palm Springs to Phoenix, then north to Kelowna, where these folks own a getaway retreat.

Correction. They owned a getaway retreat.

With a proposal to introduce a non-resident speculation tax, as well as a suite of other residential-related taxes, by B.C.’s minority NDP government, their Kelowna condo was immediately listed and sold.

Their plans are now to spend some time, and money, in Palm Springs, rather than Kelowna, which I doubt is what B.C.’s NDPs had in mind. But, that’s speculation on my part.

In case you’ve been on vacation in California or Arizona, or have awoken from hibernation, hoping spring has arrived (have a shot and get back on the cot), here’s how the speculation tax is being proposed.

Non-residents of B.C. who own a secondary property in areas identified by the B.C. government (Metro Vancouver, Kelowna, West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack, Mission and the Capital Regional District around Victoria on southern Vancouver Island, excluding the Gulf Islands and Juan de Fuca) will be subject to a one percent tax, if that property is vacant more than six months of the year.
For example, a condo valued at $600,000 would be taxed $6,000 per year. And that’s only for the first year.

But there’s more. If you’re thinking of buying an existing dwelling in B.C., you’ll pay a land transfer tax, which, for a $600,000 home, would be $10,000 in taxes.

The entire suite of taxes being proposed will have the most effect on people living in B.C., according to a Royal LePage Advisor Survey of 535 real estate professionals in B.C. and Alberta.

When asked, 85 percent of B.C. advisers said the new tax policies have hurt consumer confidence in residential real estate across the province. Additionally, 78 percent believe home sales will decrease within the first three months of the announcement of the new policies, while 57.3 percent are of the mind prices will also decrease.

“The expected impact of the proposed housing taxes announced in British Columbia should not be taken lightly,” says Phil Soper, president and CEO, Royal LePage. “Homeowners across the province will feel the effects as major policy changes like this are also amplified by a drop in consumer confidence. We saw this happen in 2016 when the previous government launched a tax on foreign investors. A small number of international purchasers withdrew from the market — along with a huge cohort of domestic home buyers.

“Canadian home buyers from coast to coast were already struggling with new federal restrictions on access to mortgage financing. We expect the impact of the new government’s housing tax policies to be even more pronounced as they will force Canadians, Americans and potential buyers from elsewhere in the world out of the market.”

Of the advisers polled in Alberta, 80.7 percent believe Albertans’ interest in B.C. recreational properties will decrease, with 75.6 percent saying Albertans who already own recreational property in B.C. are likely to sell, which my friends did.

It is also the belief of 72.6 percent of advisers here that Albertans will now go shopping for property in Alberta, while 46.7 percent believe they will look in the U.S. for secondary properties.

It is the belief of the B.C. government the speculation tax will result in more housing for British Columbians, however, a mass exodus of Albertans and other out-of-B.C. property owners will have negative ramifications.

“We expect the new taxes will materially impact communities that rely on recreational property markets for the health of their local economy,” said Soper. “There will be some Canadians in British Columbia and across the country that will choose to sell their properties in the province as the new taxes add to the cost of homeownership.

“There are further unintended consequences from these kinds of policy changes. If property values decline, property tax revenues decline. Local municipalities will have to deal with this added burden.”

When asked, 81.5 percent of advisers said the proposed new tax policies have already caused interest from Canadians living outside of the province to decrease, with 73.8 percent believing that the move will result in many selling their properties. This is predominantly led by the impending speculation tax, which 90.8 percent of respondents believe will impact sales in the province from prospective homeowners located in other areas of Canada, especially Alberta.

Personally, I don’t see how this will free up a significant amount of housing for people in the designated markets, which have the most expensive housing in Canada.

It would require a full crash of those housing markets to see increased inventory and prices drop to levels more people could afford, which is something no one should want to happen.

Soper doesn’t see the speculation tax, nor the other proposed taxes as being the answer, especially in Vancouver, but offers a solution.
“There is a structural housing shortage in Vancouver itself,” he says. “There are no quick fixes through housing policies. A determined effort to reduce the time and expense it takes for developers to work through the regulatory process will increase supply. There is clearly a need to increase density in the lower mainland with a focus on vertical dwelling and encouraging the development of condominium projects.”

In this day and age, social media is ubiquitous, especially for businesses trying to expand their reach. And while on the surface, platforms such as Facebook, Twitter and Instagram appear to have nothing to do with mortgages, they form the gateway to enlarged clienteles.

According to Ryan Dennahower, the keys to successfully using social media as a mortgage broker are personalizing oneself and highlighting rave reviews.

“I primarily use my Facebook business page for reviews,” said the Bespoke Mortgage Group broker. “After closing, I’ll follow up directly to ask clients to post a review on my Facebook page and then I’ll take that review and share it on my Instagram, and even my personal Facebook page to draw more attention to the services I do and provide to my clients.”

Dennahower uses Instagram much more often and proficiently because, by humanizing himself, he stands apart from competition . One of his favourite Instagram features is video posting.

“I found that with that personal touch, people absolutely love it. The thing I love about Instagram is you have Instagram Stories where you take a short video—maybe a 30 video in your car or at the office—and post it, and you get your material out there really fast, as opposed to perfecting it or editing it. I post things regarding products we have access to, whether purchasing a home with 5% down or a second home with 5% down. A lot of customers assume 5% is for first-time buyers, but when I post that stuff, people will message me directly. I find that when I started doing videos and posts about new products, I get tons of messages from people asking ‘Hey, how is that possible?’ or ‘How do I go about doing that?’ I’ll get messages for preapprovals, for options, from people saying they went to their bank and would like a second opinion but thought they’d have to pay a broker a fee  but now know they don’t have to.

“I’ve been able to convert quite a few of the leads into live preapprovals and into live deals.”

Dennahower has only been using social media in a professional capacity (notwithstanding reviews, which he’s maintained for a couple of years) since the beginning of the year and he’s seen his business surge.

“Even in the short time frame, like with the videos I’ve been posting on social media—even within the last month and a half—the amount of referrals, questions and leads I’ve gotten through those social media platforms have been surprisingly good,” said Dennahower. “I’m going to continue doing them as I feel they’re extremely valuable.”

Edmonton-based Collin Bruce of the Collin Bruce Mortgage Team at DLC Mortgage Mentors, has made social media a priority for the last year and a half, hiring Chatty Girl Media to handle duties—which includes Feature Friday, a weekly profile on a company agent.

Bruce also partnered with Oilernation, a popular Edmonton Oilers fan site, even running cross-promotion campaigns that include giving away Oiler jerseys. Although a big Oilers fan himself, Bruce says the idea is to personalize the Collin Bruce Mortgage Team brand.

“We gave away the new Oilers jersey in October and we were trending on Twitter,” said Bruce. “We’ll get a lot of messages in the inbox. I’m running a promotion right now that I just boosted, talking about the interest rate savings versus the penalty paid on an adjustable rate mortgage, and I’m sure we’ll get a lot of clients from that. The Feature Friday has gotten us a lot of comments, likes and traction, and I think it’s very important.”

Michael Feldman has radical idea: Revising the Interest Act.

The partner at Torys LLP says that the current mortgage system in Canada protects neither borrowers nor lenders the way it should. Residential mortgages most often come with five-year terms and 25-year amortizations, and as a result balloon payments hang in the balance on the last day. Feldman proposes jettisoning balloon payments altogether.

Samantha Brookes has been warning Canadians to take a close look at the clauses in their mortgage contracts for years, but her refrain has become a bit more prevalent in recent months.

Since the Office of the Superintendent of Financial Institutions’ mortgage stress test was implemented in January, the founder of the Mortgages of Canada brokerage has seen “a huge influx” of Canadians who fail to qualify for a bank mortgage turning to alternative lenders that range from risky loan sharks to larger, more conventional companies like Home Trust.

While alternative lenders can provide a lifeline for Canadians who have run out of other financing options, Brookes said they come with pitfalls for those who don’t bother looking at the fine print.

“You need to read those contracts,” she said. “(With an alternative lender), the interest rates are higher, the qualifying rate is higher than if you were going with a traditional bank and they are going to charge one per cent of the mortgage amount (as a lender’s fee) for closing, so that means your closing costs increase.”

Alternative lenders tend to offer less wiggle room on their terms, so Brookes said that means you should pay special attention to another dangerous term she’s seen slipped into mortgage contracts: the sale-only clause.

It’s less common, Brookes said, but if left in, it might mean the only way you can break your mortgage is by selling your home. She usually makes sure it’s nixed from her clients contracts immediately.

She also advises mortgage-seekers to research a potential lender’s reputation, which can easily be done online. Looking up some lenders will reveal their involvement in growing strings of court cases, she said.

“If they are constantly in court fighting with consumers for money, are you willing to put yourself at risk with that kind of person?” Brookes recommended asking yourself.

Still, she said alternative lenders “that don’t end up in court every two seconds” are out there and can offer a good mortgage, if you do your research.

Broker Ron Alphonso has seen what happens when you don’t look into your lender. He recently heard from a couple who borrowed $100,000 via a paralegal posing as a broker, who then convinced the couple to give the money back to him so he could invest it on their behalf. Instead of investing it, the paralegal disappeared to Sri Lanka with the funds, leaving the couple on the hook for the money and resulting in eviction from their home.

“They got very, very poor advice,” Alphonso said. “Apparently the person that arranged the mortgage was an agent and paralegal that has since been disbarred. If they had a lawyer working for them, at least the lawyer could have said (before they signed the mortgage) maybe this isn’t right.”

Alphonso recommends seeking advice from a broker, who he said should also be questioned about how tolerant a lender will be if you were to default on one of your payments.

Some lenders quickly force their clients into a power-of-sale or foreclosure, while others will find a way to work out an arrangement that will allow them to keep their home.

“If you are already in some kind of financial problem and you go to a lender that is not flexible, you make the situation worse,” Alphonso said. “If you miss one payment, (within) 15 days you can be in power-of-sale.”

When that happens, he often sees people refuse to leave their home and try to fight the power-of-sale or foreclosure. They take the matter to court and end up spending tens of thousands of dollars in legal fees that can eclipse any remaining equity they might have in their home.

If they lose their case, which Alphonso said happens often, they end up with a massive lawyer’s bill, no equity to cover it and no place to live.

That’s part of why he said those seeking financing should have an exit strategy to get out of any mortgages they sign with an alternative or private lender with a higher interest rate.

“Your goal should always be to get to a lower interest rate,” he said. “If they don’t go in with a true goal of how to get out of this private mortgage, there will be a problem down the road.”

Alphonso recommended looking for an open mortgage, where you can prepay any amount at any time without a compensation charge or a prepayment limit that you would often find in a closed mortgage.

Open mortgages come with higher interest rates, but give buyers the option to switch to a cheaper lender if something happens. However, switching does often come with penalties, he said.

Because some agents and brokers don’t give enough information or fully explain penalties and clauses, he said the best way to keep out of trouble when seeking a mortgage is to ask lots of questions and understand what you’re getting into before signing on the dotted line.

by Ephraim Vecina, mortgagebrokernews.ca

A new report from independent research think-tank Real Estate Investment Network (REIN) ranked Ontario’s largest metropolitan areas in terms of real estate market performance and suitability for investment over the next 5 years.

In terms of growth, diversity, and fundamental strength, Ottawa came out on top of the wide-ranging survey, which looked at multiple factors including economic health, employment numbers, GDP and population growth, housing prices and overall affordability, rent and vacancy rates, and several others.