By Ross Marowits, The Canadian Press

Nearly half of Canadians would consider selling their homes privately but very few are aware of changes implemented several months ago that make that task easier, a new survey suggests.

While 45 per cent of Canadians would consider bypassing realtors to sell privately with the advice of a real estate lawyer, only 11 per cent were aware of and understood changes to getting on the Multiple Listing Service , according to an Environics poll sponsored by the TitlePlus program.

“What these findings show us is that there is an appetite among Canadians to conduct the sale of their home privately,” says TitlePlus vice-president Ray Leclair.

TitlePlus title insurance is offered by Lawyers’ Professional Indemnity Co. as protection for title matters, survey, fraud, other legal issues and legal services provided by the real estate lawyer when you buy your home. In Quebec, it doesn’t offer coverage for notary work. Coverage is for professional liability or title insurance but not both.

Even though its product is available for homes sold by realtors, Leclair said it is concerned that people won’t do their homework as the interest in private sales grows.

Real Estate agents have historically sold most homes in Canada. But new rules agreed to in October make it easier for homeowners to use a real estate agent only to get their property listed on Canada’s premier real estate portal without paying for a full package of realtor services.

The change was made after Canada’s competition bureau argued that the old rules stifled competition and raised the price of selling a home.

The Canadian Real Estate Association doesn’t tabulate how many more private sale listings have been added in the past few months, but it doubts the easier access will dramatically divert business away from its trained agents.

“I suspect that people really still want to rely on a professional and they want to rely on the resources that a realtor brings to the table,” Wayne Moen, the incoming president of CREA said from Edmonton.

The Internet, cellphones and a more hands-on approach by younger consumers are changing the industry. But he said realtors offer clients valuable experience in negotiating, marketing and access to data to establish the best price and expose the property to the most sellers.

Some realtors fear increasing private sales will impact their livelihoods by reducing commissions. But Moen said he believes any change will take time and not be dramatic.

“Your home is a greater and greater part of personal net worth and I just don’t think people are willing generally to roll the dice and do it on their own. There are just too many factors involved and too many things that could go wrong.”

Realtors currently operate on the principle that selling agents will split the standard five per cent commission with the buyer’s agent. Yuval Fish, an advocate for private home sales, hopes flat fee MLS listings will encourage more Canadians to sell their properties on their own.

“I’m pretty sure that there’s going to be a huge increase in the amount of people who would want to try it and see if they can try and do it themselves,” said the spokesman for PropertySold.ca, an alternative listing service that also provides advice on selling homes privately.

Getting on the MLS requires the participation of a realtor or broker licensed to practice within the province where the property is being sold. It’s simple and can cost as little as $109.

But selling a home privately takes more than just pegging a sign on the front lawn. It requires time, perseverance and a knack for selling.

“There’s a lot of people who don’t know how to negotiate. They are intimidated when somebody calls in and wants to see the home. Those are the kind of people who probably need assistance,” Fish said.

For thousands of others, it’s a doable proposition even though just 25 per cent are successful, he said. The key is obtaining exposure, pricing appropriately and knowing your market.

Fish suggests sellers list on as many websites as possible including the MLS, hire a good real estate lawyer and avoid overpricing.

Don’t be afraid to seek help by hiring experts to conduct an appraisal, title search and competitive market analysis, he adds. Most sellers will have to fork over up to about $1,500 including the listing and advertising, but can save thousands in the process.

The average Canadian home sells for $340,000, which would attract a commission of $17,000.

While sellers would ideally like to avoid all commissions, offering a commission or fee to buyers’ agents could increase traffic by providing an incentive to reluctant realtors, Fish said.

Most agents won’t agree to show the home to their clients if they have no skin in the game. Others may not even notice private sales because they refer to an internal MLS system that doesn’t include private listings.

More Canadians are living closer to the edge as consumer debt loads continued to climb in the first three months of the year, a study shows.

Already at record levels, Canadians now owe just under $26,000 on average on their lines of credit, credit cards and auto loans, according to credit rating agency, TransUnion.

That’s an increase of 4.5 per cent, or another $1,000, over the same period last year.

The report comes a day after Bank of Canada Governor Mark Carney warned consumers to curb their spending, saying record low interest rates aren’t going to last forever.

The fear is that higher rates could push more consumers beyond their ability to repay their loans.

“There are going to be a lot of people in the market who are near the edge,” TransUnion vice-president Thomas Higgins said in an interview. “If there’s a drastic change in interest rages or unforeseen unemployment or some other shock from the U.S. or the European Union that throws off a province, or a region, or an industry, the people on the edge have no buffer.”

The news is not all bad.

Debt growth in Canada is slowing from the double-digit pace seen before the recession, Higgins said.

And total borrowing, including mortgages, typically the biggest household loan, is slowing, major Canadian banks said recently in their quarterly reports.

TransUnions’ figures don’t include mortgages, which typically make up two-thirds of a household’s debt.

Finance Minister Jim Flaherty said Tuesday he’s not concerned about a slowdown in consumer spending, as it suggests Canadians are heeding official warnings about spending beyond one’s means.

However, TransUnion said the fact that consumers’ debt load is still rising is a worry.

The Bank of Canada’s trend-setting overnight lending rate is just 1 per cent. But with inflation running at 3.3 per cent, above the central bank’s ideal range, Carney is under pressure to start raising lending rates to dampen demand.

Analysts predict a rate hike could come later this year barring unforeseen circumstances.

Total debt per consumer increased to $25,597 in the first three months of this year, Trans Union said.

Among types of loans, TransUnion said credit card debt, usually the most expensive to carry, barely budged from a year ago, falling $25 to an average of $3,539.

In a sign some borrowers may already be struggling, the national credit card delinquency rate rose 11 per cent. The rate measures the ratio of consumers who take 90 days or more to pay their bill.

The average line of credit, the most popular loans for their low cost and high flexibility, rose 5.9 per cent to $33,762 compared to last year. However, total line of credit debt declined for the first time in five quarters.

One noticeable shift was the decreased use of lines of credit, Higgins said. The category is the largest among consumer loans, making up 41 per cent of the total, and even more in Ontario, at 57 per cent.

But consumers are moving way from these highly flexible, low-cost products in favour of more rigid installment type loans, perhaps in a bid to force themselves to make regular payments, he said.

The average auto loan rose 12.4 per cent to $16,181 compared to a year ago. Total auto debt declined slightly to $45.8 billion.

The study found debt loads rose in all provinces, led by Quebec and Newfoundland and Labrador. British Columbians had the highest load at $36,649.

The average borrower debt on auto loans was also up in the quarter — by 12.4 per cent to $16,189 from $14,402 in the first quarter of 2010. The delinquency rate on auto loans fell slightly to 0.1 per cent from 0.13 per cent a year ago.

Lines of credit are the most popular form of consumer debt, excluding mortgages, accounting for more than 41 per cent of outstanding debt at the end of the first quarter. Debt on lines of credit stood at an average $33,981, up 5.9 per cent from $31,867 in the first quarter of 2010.

The report is based on anonymous credit files of all credit-active Canadians.

Sometimes a parent decides to buy a place for their children while they hit the books in university or college. It can be a good alternative to paying thousands of dollars toward residence fees or rent. Just look at the math:

Student rent of $500 a month = $6,000 a year = $24,000 over 4 years of school.

That money could go to your mortgage instead as an investment for you.

In Ottawa, for example, you can buy an older one-bedroom condo for about $195,000. Or, buy a 2-bedroom for $240,000 and let your child’s roommate help cover the mortgage by paying rent. Let’s assume you pay 20 per cent down. Here’s an example of what your monthly costs could total when morgage rates are low:

Think about it: if your child rents a place, your money is helping the landlord pay his or her mortgage and other costs. If you buy a place instead and rent it to them, you have a real estate investment with a guaranteed tenant: your child. If the investment goes up in value, you will make money. Just remember that those gains will be taxed.

Also remember, mortgage rates and other costs change, and these changes will impact the numbers and your decision.

Things to consider before you decide:

You can buy the property in your name, in your child’s name, or both. If you buy the property in your name, you should consider:

• The rental income you charge can pay a lot of your costs. Just remember you have to declare that income on your tax return.
• As a landlord, you can also claim many of your expenses, including mortgage interest. Assess your costs carefully before you buy. They will vary with the local real estate market, mortgage rates and other factors.
• Plan for some vacancies. Your child (or their roommate) may not stay in the condo over the summer break. Are you really going to ask them to pay rent if they are living somewhere else for a few months?
• Remember that you will own a greater share of the equity as you pay off the mortgage. And, the value of the condo may rise over time. This can offset your costs. But whether you do more than break even depends on what happens to housing prices in the area.

There are other benefits, too. Your child won’t need to look for a different place to live each year. They also won’t have to worry about subletting every summer. And their furniture won’t be coming back with them if they live at home over the summer break. Not a bad deal.

Remember: you may not make money if you buy a student condo.
But there are other reasons you may decide to go ahead. At the very least, you can provide your child with a nice place to live in a good neighbourhood while they go to school.

By Vernon Clement Jones

Brokers are finally seeing a change in consumer appetite for risk after the second chop to fixed rates in two weeks.

“Up until a couple of weeks ago, we were still seeing 50 per cent of our clients coming in looking for fixed and the other 50 per cent looking for variable-rate mortgages,” Dan Mass, owner of Verico Canada First Mortgage, told MortgageBrokerNews.ca. “But that’s now changed, we’re seeing 80 per cent now looking for fixed and only 20 per cent looking for variable since the fixed rates started dropping.” 

RBC set off another chain of falling rates last Friday by shaving 0.1 percentage points off its posted five-year fixed, taking it to 5.49 per cent. Over the weekend, TD Bank, Scotiabank, BMO and Laurentian followed suit, with most broker channel lenders having now effecting the change. Their collective move follows another 10-basis-point chop last week, although the most recent price cut also applies to the posted and special rates on one-, two-, three- and four-year loans.

Lenders are now pointing to falling yields on government bonds across a range of terms as impetus for the rate decrease. The decline actually runs counter to what most economists had predicted for the remainder of 2011. It also comes as consumers react to media speculation about a possible hike in the Central Bank’s key Overnight rate. That move won’t come this week, said Central Bank Governor Mark Carney Tuesday. Still, the narrowing gap between fixed and variable rates is expected to send many homeowners to their lenders looking to lock in and join the more-than-60-per cent of Canadian homeowners who have opted for the security of a fixed-rate mortgage.

Mass’s observations reflect that change only in part. The boom in business many brokers were looking for as the gap between variable and fixed narrowed hasn’t yet materialized, he said.
Still, another broker is predicting that increase in activity may come this fall as the banks near their year-ends and look to stir up more business.

“I think there’s still more room for lenders to drop their fixed rates before hitting the floor,” said Corey Romyn, an agent and COO for Taurus Mortgages in the Toronto area. “We’ve seen that in the last few years, especially when volumes are down for most lenders, as they are this year.”  

  Still, there is a limiting factor at play. The buyers may be attracted by the rates, Romyn told MortgageBrokerNews.ca, but may ultimately find themselves frustrated by the dearth of houses for sale.

Ray Turchansky, Postmedia News

Some 22 years after writing The Wealthy Barber, which became easily the bestselling personal finance book in Canadian history, David Chilton has a dire warning in The Wealthy Barber Returns, to be released this fall.

“The worst thing that’s happening to Canadians in the last 20 years has been lines of credit,” said Chilton, speaking at the conference of the Canadian Pension & Benefits Institute. “If I was prime minister, I’d shut them down. It’s unbelievable how people are abusing these things.”

He helped one person establish a schedule to pay off $30,000 in credit-card debt, only to have the person take on a $150,000 line of credit from a banker, “because the man was so nice and said I needed it.” The banker’s explanation: “It’s my job.”

Chilton’s summation: “That’s the problem. It’s a lot of people’s job to get Canadians to take on debt.

“Our financial institutions, when I was young, were credit providers. Now they’re credit pushers, and they are very aggressively hoisting as much debt onto the Canadian public as they possibly can. The public is taking it in, and it is not a good situation.”

Chilton graduated from Wilfrid Laurier University in Waterloo, Ont., and became a stockbroker. He realized financial education was his calling, and set out to write a book called The Ultimate Guide to Losing Money. Then while watching the TV show Cheers, he changed the book to The Wealthy Bartender, “but by the time I got to retirement savings plans, everybody was hammered. I had guys picking up girls.”

Eventually he did what he advises everyone never to do: He cashed in his registered retirement savings plan. The money was used to self-publish The Wealthy Barber, which held as one of its tenets “pay yourself first,” 10 per cent of your income. The book sold more than two million copies, and led to a U.S. edition and a PBS TV show.

In his followup book, The Wealthy Barber Returns, the message will shift from saving to not spending.

“When I told Canadians to ‘pay themselves first,’ that was three-quarters of the battle; I didn’t care what they did with the rest of their money.

“One thing we’re seeing that we never saw 20 years ago is that all sorts of people who built up their RRSP through ‘pay yourself first,’ have simultaneously built up their credit line through the back end and their net worth has changed modestly if at all.

“People cannot resist lines of credit. And the worst combination in the country is a line of credit and a home renovation — once they renovate one room, the other rooms pale by comparison, so they go on to the next room and it’s a never-ending cycle of renovation as they get deeper and deeper and deeper in debt. The four most expensive words in the English language are ‘while we’re at it.’ And the four most expensive letters are ‘HGTV.’

“We go through a credit crisis brought on by too much private debt in the developed world, particularly in the States, and our response — the Home Renovation Tax Credit. That’s like starting an alcoholic’s rehab by taking him on a pub crawl. The problem with governments is they want to get re-elected.”

“The economy needs to be strong as measured by GDP, and GDP is made up primarily of spending. Government is never going to try to get us away from spending during slow times, through artificially low interest rates and by subsidizing debt. The raison-d’etre of banks is to lend. We are borrowing too much money.”

Chilton says public and private debt in the developed world is “shocking,” and dealing with it through inflation or formal default restructuring is “going to lead to slower economic growth over the next X number of years.”

He also sees an erosion of the middle class in retirement.

“Right now a lot of people 75 or 80 have too much money; they’ve done an excellent job of saving throughout their entire lives, and they had defined-benefit pension plans to boot. It’s so tough to give away money you’ve spent your whole life saving.”

But personal and government debt will cause a new generation of people to run out of money as they live longer in retirement. “Even with pension plans, counting on historic returns is a very shaky move.”

Some people saving for their children’s education or housing will become cash-poor themselves. “Let the kids scramble on their own. You know how many people are headed to retirement with no money now, it’s crazy.”

Chilton reiterated a few topics from his first book.

“Your metric for housing affordability should be: Can you pay it back, can you save for retirement, and can you pay it back before you retire? I think one of the best things that could happen in Canada is if real estate prices fell.”

With life insurance, he said people who need it tend to be 10 to 15 per cent underinsured, but Canadians as a whole are overinsured.

Another way to reduce expenses is by avoiding active money management fees.

“What matters is whether your professional money manager is smarter than the other professional money managers. When you look at Canadian mutual fund sales, it’s amazing how many of the dollars are flowing into funds that have had good recent two-or three-year numbers; the problem is long-term performance has no proven correlation with future performance, and short-term performance has slightly negative correlation with future performance.”

A key is to develop good financial habits early.

“Beyond ‘Pay yourself first,’ I still say ‘Start young’ is the most important personal finance advice by far. It’s getting young kids to save, whether they’re in their 20s or 30s, and to live within their means. Living within their means is what financial planning is all about; it’s still what we struggle most with.”