Opinion: Uncovering the hidden costs of real estate transactions

Single-family houses in Vancouver. (Shutterstock)

Written for Daily Hive Urbanized by Alistair Vigier, who is the CEO of ClearwayLaw.com, which is an online legal marketplace that connects the public with lawyers, and a platform for rating Canadian lawyers. He also enjoys writing about Vancouver real estate and environmental issues.

The Canadian housing market, particularly in Toronto, Victoria, and Vancouver, has seen a significant rise in home prices over the past decade, but this growth is perpetuated by an often-overlooked aspect — the lack of transparency in the residential real estate sector.

Despite various factors such as imbalanced demand and supply, property speculators, and foreign buyers being cited as contributing to the situation, the opacity of the market only serves to worsen the already pressing issue of housing affordability in Canada.

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I don’t agree that foreign buyers are the problem, which really leaves property speculation and a lack of supply as the major issues in the market.

A more transparent market could go a long way in addressing the house price inflation crisis, and this is something that should be of interest to all Canadians.

To reduce property prices, the blind-auction process used in real estate transactions should be phased out. Properties should be sold in a transparent manner, allowing potential buyers to quickly assess the market value of any home they are interested in purchasing.

The easiest way to establish transparency would be to transition to open auctions. People could see the previous offers before offering themselves. This would stop people from offering $300,000 over the previous offer. Realtors wouldn’t be able to create an “offer frenzy” by playing into buyers’ fears.

This would also end the common practice of underpricing a property to spark bidding wars that drive prices beyond fair value. While such a transition would require cultural adjustment and may face strong opposition from realtors and some sellers, it would ultimately allow market participants to make informed purchase decisions and stop overpaying.

A fully transparent residential real estate market is in the best interest of all Canadians and could go a long way in slowing down house price increases. The current opaqueness of the market is a major concern and addressing it could provide a much-needed solution to the housing affordability crisis.

By publishing the real estate agents’ total sales commission in dollar terms (not percentages) and transitioning to open auctions, buyers could make informed decisions and the market would become more transparent, rational, and fair.

Property bidding wars

Bidding wars can turn the home-buying process into a nerve-wracking and highly competitive experience. To steer clear of these scenarios, it’s crucial to conduct thorough research and stay informed about the real estate market trends. This includes analyzing recent sales data, examining the local market demand, and keeping a pulse on the overall economic climate. If others want to act like clowns and offer $400,000 over the asking price, stay out of it. Let them have it.

Having a clear budget and sticking to it can also help you avoid bidding wars. Knowing exactly what you’re willing to spend on a property can make you a more informed and confident buyer. Furthermore, obtaining a pre-approval for a mortgage can show the seller your financial stability and increase your chances of making a strong offer, without going over budget.

Being prepared with all necessary documents and paperwork, and being available to view properties as soon as they become available, can greatly increase your chances of securing the property you desire without having to participate in a bidding war.

You should also avoid places where active bidding wars often take place in Canada, for example, Richmond, Burnaby, and Markham.

Hidden expenses

The act of buying or selling real estate can be a costly and complicated process, often involving hidden expenses that can add up and greatly affect the overall cost of the transaction. From closing costs like title searches, title insurance, property surveys, legal fees, home inspection fees, real estate agent fees, property taxes, and moving expenses, the list of costs can be overwhelming.

It’s crucial to be mindful of these hidden expenses and take them into consideration when creating a budget for a real estate transaction. This is especially important as these costs can often be substantial and have a significant impact on the final cost.

I want to hear your thoughts on how to create a more fair real estate market. Let me know in the comments. Things are not going to get better on their own, we need to push for changes.

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