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Cottage Life

Buy the Way: This couple used a line of credit to buy their dream cottage in P.E.I.

Photo by Marcia Ruby

The search
Marcia Ruby and Tom Howard always hoped they’d get back to the Maritimes. Tom’s from Saint John, N.B., and for more than 30 years, the Kitchener, Ont.-based couple would travel east with their two daughters to visit family. “But when the grandparents passed, we had no easy place to go,” says Marcia. “Our hearts were there, but our wallets weren’t.”

So when Tom’s sister sent them the listing for a cottage on P.E.I. in May of 2021, their first instinct was to shrug it off. “But when we looked at the place, we just saw ourselves there,” says Marcia.

What they got
It was a modest, two-bedroom, 621 sq. ft.-bungalow listed for $199,900, across the street from the ocean in Fernwood, just 20 minutes from Summerside on the Northumberland Strait—a spot known for the Seacow Head Lighthouse from the 1985 Anne of Green Gables movie.

They hadn’t been looking to buy anything, but they still had some bank credit available from when they’d downsized from their house in Kitchener to a condo nearby a dozen years ago. “A light went off. We could use the home equity line of credit we’d established when we bought our condo,” says Marcia. (A home equity line of credit, or HELOC, is a revolving line of credit that allows you to borrow against the equity you’ve already accrued in a property.) Their fixed interest rate was decent at 1.8 per cent, so it was beginning to look like the perfect time.

Within a few hours, they’d found a local realtor and put in an offer of just over $200,000. By the next morning, the place was theirs.

The silver lining
The cottage is just what they’d hoped it would be: their daughters—now 34 and 39—host friends in the spring, and the couple spends their summers there. Of course, there’s always a hiccup: the septic tank couldn’t be repaired. The family switched to a holding tank that filled up faster than they realized. To offset pressure on the tank, daughter Amelia immediately got to work building an outdoor shower, which they love even more than the indoor setup.

“It just made sense financially for us to buy this way,” says Marcia. “And we’re pretty happy to have the means for our family to stay rooted in the Maritimes.”

Marcia Ruby and Tom Howard standing on a beach in Prince Edward Island
Photo courtesy of Marcia Ruby

Line of credit know-how

Before you use a home equity line of credit to purchase a cottage, accredited financial counsellor Max Mitchell has tips.

Be careful about interest rates—especially if you’re on a variable mortgage

“In a previous interest-rate environment, a HELOC would be a lot more appealing or much lower risk than it is today, when interest rates are much higher,” says Mitchell, who’s based in Vancouver. Marcia and Tom have a low, fixed interest rate, and are currently paying down their principal as quickly as they can, before their mortgage and HELOC renews in a few years—likely at a higher rate.

Research the appreciation potential of property in the region 

“Anytime you’re using debt to purchase an investment, you should make a very educated guess to make sure your return is going to be higher than what you’re risking,” says Mitchell. “That doesn’t mean asking your realtor, who’s incentivized to make a sale.” In other words: do your own research.

Be prepared for future cash-flow crunches 

“If something comes around a year from now—such as having to pay for your kid’s wedding—you can’t sell the toilet from the cottage, you can’t sell the porch,” says Mitchell. “You have an incredibly illiquid piece of property.” Also, if renting out the cottage is part of your cost-covering plan, consider if you can still make the monthly payments if a flood, fire, or other event makes the place unrentable: “If everything goes sideways, how will you be impacted?”

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Realtor.ca launches open offers in an effort to curb bidding wars and inflated property prices

Photo by Michael Vi/Shutterstock

Blind bidding has been the way of the Canadian real estate market for a long time now, but with skyrocketing property prices creating a housing market that many middle-class Canadians are unable to break into, there has been a push to make the market more hospitable to first time-buyers.

In 2022, the federal government released its budget where Minister of Housing, Ahmed Hussen, was tasked with creating a Home Buyers’ Bill of Rights. A major goal of the bill was to end blind bidding and make housing more affordable. Shortly after, the Ontario government announced it would be creating an “open offer” alternative as part of a reform to the Trust in Real Estate Services Act, 2020 (TRESA) blind bidding practice.

On April 1, 2023, realtor.ca officially launched the Canada-wide rollout of the open offer option.

Since real estate is regulated provincially in Canada, regulations differ across the country. This means the information provided in an open offer will look different from province to province, depending on local rules.

Realtor.ca explains the new option: “In certain parts of the country, you may see specific offer details, like the price on the listing page. In other regions, you may only see the number of offers presented.”

Openn, the company in charge of rolling out transparent bidding on realtor.ca, notes that the process in Canada is unique compared to how Australia and the U.S. run open offers.

“The agent selects the transparency settings based on what is applicable in their province,” says Becky Madden, the head of marketing at Openn. “Transparency settings can include the number of offers, the timeline of the offers, offer values, the number of people watching the property, and unconditional offer flags. They must comply with appropriate regulations and the sellers’ choice.”

While sellers might not like the sound of offer transparency, for now at least, open offers are an option—not a requirement. “Sellers must opt in, and based on my experience working with numerous sellers, there isn’t a compelling incentive for them to,” said Ivan Lobo, a real estate consultant at Made in CA.

“Sellers may still favor the blind bidding system, as it grants them a competitive edge by instilling a sense of urgency or scarcity among potential buyers,” says Lobo.

Critics of the blind-bidding system agree, noting that an optional transparent system does nothing to help buyers. The blind system creates a sometimes-false sense of urgency, driving buyers to place offers well above the offer actually needed to secure the bid.

A transparent bidding system therefore removes the obvious advantage sellers have in driving up the offers made on their home. “They could receive lower or fewer offers compared to what they would get under blind bidding, since buyers might become more cautious or conservative when they can see other bids,” Lobo says.

“This could eventually lead to a more balanced market with fewer bidding wars and less inflated prices.”

There is still no word from Hussen’s office on when the Home Buyers’ Bill of Rights will actually come into law, so until sellers’ hands are forced to show their cards, optional transparent offers are likely to remain a rarity.

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Experts predict a price drop for Canadian cottage regions in 2023

Photo by Shutterstock/Alessandro Cancian

After two years of soaring cottage prices, the real estate market is starting to stabilize. In its Spring Recreational Property Report, Royal LePage forecasted a 4.5 per cent dip in cottage prices across the country in 2023, dropping the aggregate price from $619,900 to $592,005.

“General consumer inflation combined with a severe lack of inventory has dampened sales activity. Buyers who are active in today’s market appear willing to wait for the right property—a sharp contrast to what we experienced during the pandemic,” said Phil Soper, president and CEO of Royal LePage, in the report.

A return to in-office work has also caused the market to slow. During the pandemic, cottages offered an alluring escape from the city, especially with the introduction of high-speed internet in rural locations. But now, with many employees required to return to the office a few days per week, and shops, venues, and events back in full swing, buying a cottage has dropped in priority.

But despite the market stabilizing, buying a cottage is still expensive. Across the country, prices remain 32 per cent higher than pre-pandemic levels. To better understand the cottage market, here’s a breakdown of what’s happening in each province:

Cottages in Ontario

In 2022, the aggregate price of a waterfront property in Ontario increased by 8.9 per cent to $1,006,600, compared to 2021. Southern Georgian Bay was the most expensive region with a 7.1 per cent price increase to $1.5 million, followed by Orillia, which saw a 22.4 per cent increase to $1,377,000, and then Muskoka, which saw a 15.7 per cent decrease to $1,062,500.

Muskoka’s price drop may be indicative of a more significant trend. According to a Royal LePage survey of Ontario realtors, 52 per cent of respondents reported less demand this year than last year. The entire province is forecasted to see a five per cent decrease in recreational property prices.

“Activity in the recreational market came to a comparative standstill in the last half of 2022. Rising interest rates, buyer fatigue, and lack of inventory all played a role,” said John O’Rourke, a broker at Royal LePage Lakes of Muskoka. “Early signs this spring point to a more balanced market where inventory levels and sales are trending in line with historical norms.”

The market in Quebec

In 2022, the aggregate price of a waterfront property in Quebec increased 17.3 per cent to $480,200, compared to 2021. Memphrémagog topped the price list after a 24.6 per cent increase to $860,000, followed by Les Pays-d’en-haut with a 4.3 per cent increase to $600,000, and then Les Laurentides with a 25.3 per cent increase to $530,000.

Despite its major price jump in 2022, Quebec is forecasted to have the biggest price drop in 2023 at eight per cent. Similar to Ontario, this price drop is due, in part, to lack of demand. In a Royal LePage survey of Quebec realtors, 76 per cent of respondents reported less demand this year than last year.

“Buyers are more patient; they’re negotiating, and they’re taking time to carefully assess their needs and financial capacity before taking the plunge,” said Véronique Boucher, residential real estate broker at Royal LePage Au Sommet. “Conditional offers to purchase, which were practically unheard of during the pandemic real estate boom, made a big comeback in the latter half of 2022, a sign of a much more balanced and fair cottage market.”

Waterfront property in British Columbia

In 2022, the aggregate price of a waterfront property in B.C. increased 5.6 per cent to $1,065,000, compared to 2021. Invermere was the most expensive region with a 26.6 per cent increase to $2,025,000, followed by the Comox Valley, Denman Island, Hornby Island, and Mt. Washington areas with a 4.4 per cent increase to $1,350,000, and then the East Kootenays with a 0.2 per cent increase to $774,500.

In a Royal LePage survey of B.C. realtors, over half reported that cottage owners remained full time in the area rather than moving back to urban settings after the pandemic. This trend has caused a shortage in supply, keeping prices relatively high. But Royal LePage expects B.C. cottage prices to drop by two per cent in 2023.

“Come springtime, I anticipate that supply levels will rise as more sellers move into the market, but I don’t expect there to be a huge wave of relief,” said Frank Ingham, associate broker at Royal LePage Sussex. “Many buyers continue to wait on the sidelines for prices to fall or for borrowing costs to become more affordable, especially those purchasers who are buying for their retirement or for their adult children to enjoy. This trend is creating more pent-up demand on the sidelines and is causing properties to stay on the market twice as long as last year. However, as the spring market gains momentum, I expect more homes that have been sitting on the shelves will start to move into the hands of buyers.”

What’s happening with housing in Alberta?

In 2022, the aggregate price of a waterfront property in Alberta decreased by five per cent to $641,900, compared to 2021. Wabamun Lake was the most expensive area at $820,200, a 7.7 per cent decrease from 2021; Pigeon Lake at $674,500, a 0.7 per cent decrease; and then Lac St. Anne at $534,700, a 10.9 per cent decrease.

Alberta is experiencing a lack of turnover in its cottage markets, keeping properties in demand and prices high. That’s why, despite the decrease in 2022’s waterfront prices, Alberta is the only province in Canada forecasted to see a price increase of 0.5 per cent in 2023.

The market in the Prairies

In 2022, the aggregate price of a waterfront property in Saskatchewan and Manitoba increased by six per cent to $271,300, compared to 2021. North Central Saskatchewan topped the list with a 20.9 per cent increase to $688,000, followed by Lac du Bonnet in Manitoba with a 10 per cent increase to $550,000, and then Interlake, Man. With a 0.4 per cent decrease to $450,000.

“Business is faring as usual in our recreational markets. Demand and inventory are proportional to one another, creating balanced market conditions. Reduced supply has kept recreational property prices buoyant,” said Lou Doderai, broker and owner of Royal LePage Icon Realty in Prince Albert, Sask.

Despite a stable market, the aggregate price of a recreational property in the Prairies is forecasted to drop by three per cent in 2023.

The market in Atlantic Canada

In 2022, the aggregate price of a waterfront property in Nova Scotia, Newfoundland, New Brunswick, and Prince Edward Island increased by 17.2 per cent to $279,900, compared to 2021. Despite an 18.4 per cent decrease, Shediac, N.B., was the most expensive region in 2022 at $464,500, followed by South Shore, N.S., with a 22.4 per cent increase to $450,000, and then Cape Breton, N.S., with a 22.1 per cent increase to $427,500.

Nearly half of the respondents in a Royal LePage survey of Atlantic Canada realtors reported a decrease in demand this year compared to last year. As a result, Royal LePage forecasted that the aggregate price of a recreational property in Atlantic Canada will drop by three per cent in 2023.

“Parties on both sides of the transaction are waiting for a better deal—recreational buyers are sitting on the sidelines waiting for more inventory to become available, while sellers are holding out for higher offers and competitive bids. But the multiple-offer scenarios and homes selling over asking are not as common today as they were during the pandemic boom,” said Corey Huskilson, sales representative at Royal LePage Atlantic in South Shore, NS. “As we enter the spring market, I expect activity to pick up but prices to stay stable as supply and demand remain relatively balanced.”

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Ontario real estate market forecast: cottage-country realtors predict more inventory this spring

Photo collage by Taylor Kristan

Ontario’s real estate market has been in a dizzying state since the start of the pandemic, especially in cottage country. Prices boomed over the last two years with some recreational properties jumping into the millions as buyers scrambled after cottages, looking for an escape from the city. But then travel reopened, events restarted, and the cottage market cooled.

The Canadian Real Estate Association (CREA) reported that in February, 29 waterfront properties were sold in the province’s Lakeland region, which constitutes cottage-heavy areas such as Muskoka, Haliburton, Parry Sound, and Georgian Bay. That’s a 62.8 per cent drop from the same period last year, and 51 per cent below the five-year average.

In part, the lack of sales is due to low inventory. There aren’t many waterfront properties on the market right now. This has kept cottage prices stable, sheltering them from the price correction happening in urban centres. But the market could change this spring as local realtors anticipate a flood of new listings to hit the scene.

If you’re a buyer looking to get into the cottage market, here’s everything you need to know about what’s happening in Ontario’s cottage regions.

Muskoka

Three hours north of Toronto, Muskoka’s known for its windswept pines, rocky shores, and luxurious cottages. But as the CREA reported, Muskoka is currently short on inventory. According to real estate broker Susan Benson, waterfront property listings in the region are at their third lowest in the last 10 years. This has caused a spike in prices.

“The median list price for January and February is up 27 per cent compared to last year at the same time,” Benson says. The median list price for a waterfront property in Muskoka currently sits at $1.7 million.

This median price, however, might see a dip in the next few months. Benson says that at the end of 2022, properties were sitting on the market for about 15 days. Now it’s closer to 47. “Buyers aren’t biting,” she says. With properties sitting for longer, sellers may have to lower their prices to make themselves more appealing.

“A property that is priced properly can end up looking like a bargain in a market with competing properties that are overpriced,” Benson says.

Plus, the spring season typically brings additional inventory, giving buyers more choice and control. “You should, as a buyer, be able to negotiate conditions that ensure a proper vetting of the property and confirm your ability to pay for it,” Benson says. “This was the piece that was missing at this time last year.”

The Kawarthas

Southeast of Muskoka is the Kawarthas, a chain of lakes that feed into the Trent River. Similar to its northern neighbour, the region is suffering from lack of inventory, which is keeping prices high. “I listed one last Wednesday and had four showings on it. I got two offers, and it still sold $30,000 over the asking,” says Greg Ball, a real estate broker from the area.

The average price of a waterfront property in the Kawarthas currently ranges from $700,000 to $1 million, depending on the size and location of the property.

Ball predicts that the rise of interest rates and the financial burden of variable mortgages might spur an injection of new inventory into the market in May, balancing out prices and reducing the chances of bidding wars.

“From past experience, when a recession-type market hits, you dispose of what you can,” he says. “Something like the cottage will come before the house.”

If you’re planning on shopping around in the region, Ball advises using a local realtor. “We went through three years of people buying from their Toronto agent, and I’m not knocking them, but we are now getting calls from those people that purchased in 2021 and 2022 that can’t get their money back because they bought in a poor area,” he says. “I just can’t stress how crucial it is to use a local realtor that knows the area.”

Bay of Quinte

A little west of Kingston, not far from Frontenac, is the Bay of Quinte, a long and narrow body of water that connects to Lake Ontario. Unlike the two previous regions, the Bay of Quinte is already seeing its inventory bounce back.

“We’re probably up 20 per cent since December, which is typical,” says local real estate agent Doug Peterson. “When you look at the waterfront market, it’s pretty predictable, seasonal up and down.”

He expects more properties to come on the market in the coming months. “I think a lot of sellers have been hesitating over the last six months just because of uncertainty, and now things are starting to firm up a little bit more in the economy,” Peterson says. “It’s still a little topsy turvy, but people can’t wait forever.”

The Bay of Quinte hasn’t seen any recent fluctuations in waterfront prices, with the average hovering around $800,000.

If you’re looking to buy in the region, Peterson says you should act quickly. “The market is pretty tight, and well-priced listings are starting to move fast. There is a little bit of urgency that’s come back into the market,” he says. “We went for a few months where buyers were able to wait and see, and now we have those people saying, ‘Oh geez, I guess I should have done something.’”

Grand Bend

A little north of London on the sandy shores of Lake Huron is Grand Bend. The region is home to an iconic beach, making nearby cottages a hot commodity. But compared to 2022, inventory is down. “Last year, being a pandemic year, the situation was a little bit different, a little bit of a frenzied market. So, we’re looking now at more of a return to normal,” says local real estate broker Emily Carcamo.

As of the end of March, Grand Bend had 39 waterfront listings available with an average price of around $1 million. “That’s actually quite good,” Carcamo says. “If we’re looking at waterfront from Port Franks up to Bayfield, we’re looking at about 11 properties for sale where the average price is over $2 million.”

Grand Bend prices aren’t expected to see any drastic changes, but property on Lake Huron is a niche market meaning there’s always interest. In fact, the average sale price for waterfront properties in 2023 is 14 per cent higher than it was at this time last year. While days on market remains similar. In March 2022, properties sat for approximately 13 days. In March 2023, it increased to 15 days. This means properties are still turning over quickly.

The area has traditionally seen a lot of attention from baby boomers moving to Grand Bend post-retirement, but COVID has pushed an increasing number of young families out of urban centres in search of rural retreats. In many cases, they’re buying older, more affordable properties and renovating them.

“We are seeing more families leaving urban centres where prices were more expensive,” Carcamo says. “They’re re-evaluating their priorities in life and their goals, wanting to live in more of a rural setting by the beach where life is a little bit slower, a little bit more enjoyable—living that vacation lifestyle.”

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Private mortgages have risen 72 per cent in Ontario, and they could have an increased default risk

Photo by Watchara Ritjan/Shutterstock.com

Private mortgages have become more common than you might expect in recent years. While they’re still much rarer than the traditional route, there has been a significant uptick in private mortgages in Ontario in just the two-year span from 2019 to 2021. According to the Financial Services Regulatory Authority of Ontario (FSRA), the rate of private mortgages increased by a whopping 72 per cent in that time.

What is a private mortgage anyway?

According to Ivan Lobo, a real estate consultant at Made in CA, a private mortgage is “a flexible option for borrowers who may not qualify for a conventional mortgage, because of poor credit or other financial situations.” When someone doesn’t qualify for a conventional mortgage, they might decide to take out a private mortgage instead, so they can still make the offer on the home.

“Private lenders don’t require borrowers to undergo stress tests, which banks use to ensure that buyers can afford a mortgage rate that is two per cent above the current rate,” Lobo says. “This exemption offers borrowers more flexibility if they don’t meet the strict underwriting standards of banks.”

Basically, a private mortgage avoids the stress test, so you can qualify for a private mortgage easily. They also have shorter terms than the traditional five-year term that you would receive from a bank, at just one or two years.

Is there a higher default risk?

Since private mortgages lack oversight and regulation, this can create a significant risk for borrowers. “Private lenders usually charge higher interest rates and additional fees, leading to higher costs for the borrower over the loan’s life,” says Lobo. These costs “could cause defaults among borrowers who have overextended themselves.”

Because the loans are short term at only one or two years, they also require renewal more often. And those with a private mortgage at a high interest rate may not even be able to renew their loan at all. “For markets where house prices have fallen say 30 per cent or more, it’s very likely for private lenders to call in the loans,” Lobo said.

And if the borrower is able to renew, the rate will likely end up much higher than the initial offer, leading to a significant default risk.

What does this mean for the market?

If default rates rise, this can have a negative affect the market. According to the Canadian Bankers Association, the default rate for November 2022 was at 0.07 per cent. If that number starts to rise in a significant way, it will inevitably affect the market as power of sales start to pop up with regularity.

Currently, the default rate isn’t concerning, but reports on the rate lag by months.

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Ontario is banning NDAs on real estate deals. What does it mean for the market?

Photo by Novikov Aleksey/Shutterstock.com

 As of April 1, Ontario realtors can no longer use non-disclosure agreements (NDAs) or confidentiality clauses to obstruct consumers from making complaints to the Real Estate Council of Ontario (RECO).

Before this legislation came to pass, a realtor’s NDA or confidentiality clause would prohibit a client from complaining to RECO. For instance, if a realtor didn’t disclose a property’s defects to a buyer, and the buyer sues the realtor, an NDA would bar the buyer from reporting the agent to RECO.

With the new legislation, a consumer can always make a complaint to RECO, even if the parties legally resolve the issue, according to Joseph Richer, the RECO Registrar.

“The new provision follows existing case law and other regulated sectors that have similar provisions,” says Richer. “RECO is pleased the government agreed with RECO’s recommendation that it be added to the code.”

Will banning NDAs hurt realtors?

This new legislation could be an issue for realtors. The details of the complaint may be posted on the RECO website, and any realtor with a conviction will definitely posted about.

Now, a complaint about a realtor could be searchable when future clients look up their name. This could be damaging to a realtor’s reputation, which is very important in the world of real estate.

But Belleville realtor Doug Peterson isn’t worried.

“I support it,” says Doug, who is the team leader at Rufo Real Estate, Royal LePage ProAlliance. “If a practitioner or a registrant has done something wrong, they shouldn’t be able to effectively buy their way out of it.”

How will this NDA ban affect the real estate market?

Peterson doesn’t think this new legislation will affect home values. In fact, he believes it will make the real estate business in Ontario more professional.

The Ontario Real Estate Association (OREA) would agree. This NDA ban is part of a larger updated code of ethics from the Trust in Real Estate Services Act in Ontario. OREA’s website says the Act was created in 2020 to “ensure that Ontario is a leader in North America when it comes to real estate standards.”

How will the ban affect consumers?

Peterson sees the new regulation as a consumer protection tool. This way, consumers can report a real estate agent who “cuts corners” to RECO.

In some instances, a RECO ruling could mean a realtor would have to complete a course or receive a suspension. Some rulings even lead to a discipline hearing or taking the realtor to provincial court.

Peterson and his colleagues plan to educate their clients about the new code of ethics rules through blog posts. He wants his clients to know that they have rights, and that they should be treated with professionalism and care.

“It’s not a major issue for most realtors,” says Peterson, with a chuckle. “Because we try not to make mistakes that are litigious.”

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New report predicts some cottage regions could see steep price drops

Photo by JHVEPhoto/Shutterstock.com

A new report from economists at Desjardins predicts that the gradual fall of home prices in Ontario will continue, with some cottage country regions seeing drops of up to 50 per cent.

The authors noted that rural areas have seen major spikes over the past few years, with places such as Bancroft, Quinte, Muskoka, and Haliburton seeing the average home more than double in price from December 2019 to the peak in March 2022. “These communities have also seen the largest price declines, and that trend is expected to hold going forward,” the report states. Projections include: Bancroft with a drop of 50 per cent, Muskoka and Haliburton at 39 per cent, and Peterborough and the Kawarthas, 37 per cent. 

This comes as the housing market across Canada is cooling off in the face of rising interest rates and limited supply. While some projected drops for cottage country look alarming, it’s important to put things in context, says Anthony vanLieshout, the broker of record for Royal LePage Lakes of Haliburton. 

“Within Haliburton County from 2016 until the end of 2021, we saw property values appreciate to the tune of 300 per cent,” he said (a cottage around the $300,000 mark would’ve risen to nearly $1 million). After such a dramatic increase, he says it only makes sense that prices are creeping down; but a cottage that may now be in the $700,000 range isn’t exactly a steal.

The data and projections also consider homes in an entire region, not just cottages alone. Peterborough and the Kawarthas, for example, includes homes in the city of Peterborough, a different market than waterfront properties on nearby lakes. 

“I have been selling about three cottages a week for the last eight weeks,” said Jill Price, broker at RE/MAX All Stars Realty in the Bancroft and Kawarthas region. “In September, October it was hurting a little bit, and prices did go down, but now I’m seeing a steady increase in sales.”

Price said that cottages in the $600,000 range have been more difficult to sell, while those around the million dollar mark are moving fine, suggesting that wealthier buyers have been relatively insulated from rate hikes. She also described a “huge influx” of buyers—up to 50 per cent—purchasing strictly for investment, which also contributes to lower inventory.  

Overall, the housing market—and to a lesser extent, the cottage market—is coming down from what vanLieshout calls “unrealistic and unsustainable highs.”

He said one thing that’s not likely to change is the heightened interest in cottage living, a lasting effect of the pandemic. “It definitely featured cottages in a positive way, and the demand is always going to be higher than it ever was for those reasons,” he said. “I think that will hold for all of rural Ontario.” 

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A class-action lawsuit claims Toronto real estate brokerages are price fixing commission rates. Is it true?

Photo by Shutterstock/Juice Flair

A class action lawsuit filed at Toronto’s Federal Court of Canada alleges that several of the country’s top brokerages and real estate associations have been price fixing realtor commission rates.

Toronto resident Mark Sunderland filed the lawsuit after he paid a five per cent commission rate when he sold his home in August 2020, 2.5 per cent of which went to the brokerage representing the buyer. Sunderland claims that buyer brokerages have price fixed their commission rate at 2.5 per cent or higher by steering clients away from properties that offer lower commission rates. Sellers who offer a lower commission rate are allegedly put at a disadvantage because fewer potential buyers see the property.

Eleven brokerages are named in the lawsuit, including Royal LePage, Century 21, Sutton Group Realty, and Chestnut Park Real Estate, as well as the Toronto Regional Real Estate Board and The Canadian Real Estate Association. As a class action lawsuit, the claim is filed on behalf of anyone who sold residential real estate listed on the Toronto Regional Real Estate Board’s Multiple Listing Service (MLS) from March 11, 2010 onwards.

The defence, representing both brokerages and real estate associations, is seeking a dismissal, arguing that the claim is baseless.

The court has yet to deliver a ruling. In the meantime, here’s everything you need to know to understand the claim.

How did our real estate process develop?

Going back 50 years ago, brokerages only sold their own listings, says David Fleming, a Toronto broker. If you wanted to buy a house, you had to walk into a brokerage and see what they had for sale. This is now called multiple representation, where both the buyer and seller are represented by the same brokerage. It tends to result in a conflict of interest as the seller is trying to get the most for their home while the buyer is trying to pay as little as possible.

That’s one of the reasons Ontario moved away from this model, instead adopting a system of cooperation where one brokerage represents the seller and another the buyer, Fleming says.

This is where the splitting of commissions came from. “You have a six per cent commission signed with a seller, but the property’s not selling well. What if somebody at a different brokerage had a buyer and they could sell it for you?” Fleming says. “Would you be willing to cooperate? This idea of cooperation began a long time ago, way before MLS, and way before the internet.”

How does the commission process work?

Commission rates vary between sellers and their brokerage. In Toronto, where houses are going for around $1 million, Fleming says you’ll typically see commission rates range from four to six per cent of the total sale.

Once the seller and their brokerage have agreed on a commission rate, that brokerage may then turn around and offer a certain percentage of its commission to a buyer brokerage that has a client willing to buy. Typically the commission is split 50/50, but this can be negotiated. ““Outside of Toronto, you rarely see a 2.5 per cent buyer brokerage commission,” Fleming says. “Most of the commissions are two per cent.”

The catch with this system is that the seller ends up paying for the services of both their brokerage and the buyer’s brokerage.

Does the lawsuit have any merit?

The short answer, according to Fleming, is no, he doesn’t think so. “I think it’s very creative. And I think that it is one of many cases we’ll see going after the cash that is being held by different organized real estate boards, but I don’t think it has any merit whatsoever, because a quick survey of MLS will show you all kinds of buyer brokerage commissions that are not two and a half per cent.”

He admits that on the MLS, 2.5 per cent might statistically be most common, but it’s not a fixed commission. Over the last year, Fleming says he’s received two per cent commissions and 2.25 per cent commissions.

Frank Clayton, a professor at Toronto Metropolitan University’s Centre for Urban Research and Land Development, agrees with Fleming that it isn’t likely any price fixing is happening. “If rates get out of whack, somebody else can come in and set up a buyer brokerage and undercut other companies’ rates if they want to,” he says. “As long as the board isn’t reinforcing a certain rate, but I don’t think they are.”

If a seller is unhappy with the commission offered by their brokerage, Clayton points out that they can always sell the property themselves or use a discount brokerage that offers lower commission rates, such as one per cent or half a per cent.

“The selling realtor and buying realtor have to get paid for their efforts,” he says. “I don’t think splitting commissions is anything worth having a court case about.”

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This matchmaking platform helps you find people to co-own property with

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As many Millennials are coming to learn, home ownership may not be a viable option in urban centres. Instead, some property seekers are turning to co-ownership as a solution, sharing their mortgage with a partner or multiple partners. But finding a trustworthy person to partner with isn’t easy. That’s where Husmates comes in.

Described as the Tinder of the real estate world, the platform created by Toronto realtors Lesli Gaynor and Parimal Gosai matches people looking to co-own property. The idea came from Gaynor’s tenuous relationship with tenancy.

In the early ’90s, Gaynor, a single mom working as a social worker in Toronto, was renting from an unreliable landlord. “Every day, it was like I could have been evicted. I could have been kicked out,” she says. “My landlord, she would tell me that her brother was coming back to town, that she might need my unit. It just never felt really safe or secure.”

Gaynor and two friends decided to buy a duplex together to find some stability. They held onto the house for seven years, with Gaynor’s friends living upstairs and her living downstairs. “It was probably one of the best decisions I ever made,” she says.

Gaynor says that co-ownership is the direction real estate needs to head, especially in the Greater Toronto and Hamilton Area (GTHA), where prices continue to skyrocket. She foresees the rise of multi-unit homes, modelled on the condo framework but without the box-in-the-sky feel. Instead, they’ll be low-rise buildings where multiple families have their own units but might share a communal space, such as a living room or backyard. “I believe that co-ownership provides more access to build generational wealth and community,” she says.

Once Gaynor got her real estate license, she started using her social services background to help people buy property together. During this period, she met Gosai, who worked opposite her on a real estate deal. The two hit it off.

“We chatted, and we courted for a little while,” Gaynor says. “I realized that his passion aligned with mine. I didn’t want to work with a real estate agent who was looking to do real estate for the sake of making money. I wanted somebody who really understood why I was doing what I was doing. And Parimal really understood it.”

In 2019, Gaynor and Gosai launched Husmates. The platform, which is free to use, allows people to sign up and fill out details about themselves, such as their financial situation, hobbies, pets, and location preferences. Users can scroll through other profiles and “like” the ones they think would be a good match. Sometimes it’s two people matching; sometimes, it can be a group of people, Gaynor says.

“If you love dogs, you probably don’t want somebody who hates dogs. Or someone who’s a vegan, you don’t want to be with someone who puts a smoker in the backyard and uses it every day,” she says. “We’re not asking you to be best friends. We’re not saying you’ve got to hang out every Sunday, but you’ve got to have some synergy.”

Once people match, they tend to reach out to Gaynor and Gosai to facilitate the first meeting. This way, the two realtors can walk the prospective buyers through the mechanics of co-ownership. “We help them start the conversation, and then we let them go off on their own,” Gaynor says.

As with all real estate scenarios, co-ownership comes with complications. That’s why Gaynor stresses the need for an ironclad co-ownership agreement written by a real estate lawyer. To help the process go smoothly, she suggests setting up an anti-tsunami clause. This clause dictates that any major decisions require a three-month window to process. For instance, if one partner gets a job in another city and wants to sell their share, the other partner has three months to figure out their finances or find another co-owner.

Gaynor also suggests setting up a reserve fund with three months’ worth of mortgage payments in case something happens, such as one of the partners dies. That way, the other partner isn’t left scrambling to cover the mortgage.

“We spend a lot of time having conversations about what you need to be putting in place to make this work well,” Gaynor says.

For now, the platform is focused on properties in the GTHA, but there are plans to expand Husmates, possibly as far as Ontario’s cottage country. “ReMax does real estate all over,” Gaynor says. “Why not Husmates?”

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4 tips for booking a multi-generational cottage rental

Photo by Christine Glade/Shutterstock

From grandkids to grandparents and all the aunts, uncles, and cousins in between, many families travel together and this often includes multiple generations.

Many memories made on trips like this, and group travel is often more economical. It does, however, require some extra planning, boundary setting, and communication.

If you’re looking to book a cottage rental for your next family getaway, the first thing you need to consider is the area that you want to visit. Once that’s decided, your next challenge is finding accommodation that can cover the varying needs and interests of your larger group.

Here are some suggestions to help you find the perfect rental for your next large, multi-generational family vacation.

Set a budget together

You need to get everyone on the same page when it comes to the budget. While some may be happy to have more rustic accommodations, others may prefer a more luxurious trip. Plus, not everyone wants to (or can) spend unlimited amounts of money for a vacation home. Before booking, try to determine a price range to look within when using a site to search properties. Be sure to set a maximum limit to avoid disappointment or surprises.

Remind everyone in your group that there may be fees for cleaning or supplies that are not included in the rental price (look carefully at your booking site). This is also a good time to consider opportunities to share the cost of food.

Location, location, location

When choosing a location, you not only need to consider your budget, but also that property’s distance from where your group lives. Can everyone get there easily, and how isolated or accessible is the property? Will it be easy to get diapers if someone runs out? If there are health concerns in your group, is there a nearby hospital?

Determine what activities are a priority

When you have grandparents and babies— plus every age in between—finding a place with activities or space that accommodates everyone may not be easy. You’ll want to figure out if there are activities that require you to leave the property to enjoy. For example, travelling to the nearest beach will mean packing everyone up for the day. Conversely, if there is plenty to do on-site, you just need to show up and unpack.

You may find locations with a communal sports area or a private playground for the kids. Additional things to look for your rental to include could be board games or gaming tables, such as air hockey or ping pong.

If you are renting a place with a pool, it is recommended that you have family rules not just for the kids to follow (such as no swimming if there aren’t adults around), but also for the adults. Rotate adults as lifeguards to be within arms reach and help ensure the kids are being watched. Review the property’s pool area for safety.

Maximize the space and sleeping arrangements

Many of us have stories about when we were kids, sleeping together on the floor or small cots with cousins or siblings when we were on vacation. However, you will need to not only abide by the maximum occupancy numbers in your rental agreement, but also figure out the comfort level for your group. Those with babies will need a quiet space for naps and bedtime, while teens may want to stay up later even when the younger (and older) relatives have gone to bed.

Larger outdoor and indoor areas offer adults (and older kids) more quiet spaces to read or take time away from the entire group.

Find a space that is comfortable for everyone. Sharing rooms for the kids may seem like no big deal, but adults will likely prefer to have their own rooms. The same may go for bathrooms. Is one bathroom enough for your family of 13? If not, maybe filter your search to include rental properties with two or more bathrooms.

Making memories with your extended family is precious, but it does take some extra planning to get it right so that everyone leaves with happy memories, not sour ones.

Not sure where to begin? Check out these properties:

Ashton Villa Retreat, Ashton, Ont. 

Le Légendaire, the Laurentians, Que.

Avalon, Niagara-on-the-Lake, Ont.

Rideau Lakes, Ont.

Kemptville, Ont.

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