Monthly Archives: June 2015

Buying a Home That Was Once a Crime Scene

Alexandra Posadzki of The Canadian Press had an article published in The Toronto Star  recently, discussing some of the factors associated with purchasing a home that was once the site of a marijuana grow operation. The major upside identified in the article has to do with price: one can expect such a home to have a reasonable discount applied. But there are some issues you can expect to encounter, such as securing a mortgage from a bank or getting the home insured. Apparently, major banks and insurance providers are shying away from these properties, even after proper renovations have been done and several years have passed since the crime was committed. The justification for this, according to the banks, is that the home is likely inhabitable, because running a grow operation requires pesticide use, and often mould can become a serious issue. In such cases, the onus falls on the potential homebuyers to prove that the house is livable, a process that requires the financing of multiple, and pricey, tests.

Posadzki refers to the problem as “home stigmatization,” and such a problem extends beyond just drug related crimes.

Mark Weisleder of The Toronto Star makes a very interesting point. More often than not, as a potential homebuyer, the chances of your real estate agent willingly offering up information about a home’s shadowy past, is slim to none. But this is not because the lie of omission will help make the sale, real estate agents themselves are often kept in the dark about the home’s past. If a real estate agent knows about a murder, for example, they are obligated to disclose this under their Code of Ethics as a material fact. The problem is if the agent doesn’t know about it, there is nothing to disclose. Weisleder’s recommendation is that homebuyers conduct their own research, offering up two online resources that will help you find out whether or not a crime was committed in the home, and what kind of crime it was. To check out these resources for yourself, visit HomeVerified and IVerified.

James Armstrong of Global News also discusses the phenomenon of home stigmatization, providing another resource that homebuyers can use to shed light on a home’s criminal history. Housecreep, developed by Toronto-native Robert Armieri, is described as a hub of “stigmatized” homes, listing homes where people have died, and if drugs have been grown or sold. It even goes a step further, letting you know if a famous celebrity used to live there. At the moment, most of the entries are for the GTA, with particular neighbourhoods being showcased, like Regent Park, Cabbagetown and Parkdale but many of the other approximately 2,000 listings are from around Canada and the United States.

Housecreep is interesting, in that, the information provided on the site is crowdsourced, which means that people have to sign up and provide the information about their home’s past. This raises questions about the validity of the information being provided.

The Problem of Phantom Bidding

Let’s be honest, not all real estate agents exercise the best moral judgment when conducting business. Greed is a powerful motivator for deception, and it’s easy to see how some would want to take advantage of the skyrocketing house prices in Toronto by jacking up the price ever so slightly.

Homebuyers have been suspicious of this practice – real estate agents making up phony bids and masking it as part of a greater bidding war to drive up the price of a home – for a long time. But unfortunately, such a fraudulent practice is one that is difficult to prove, when one considers that a formal bid for a home need not be in writing. Garry Marr of The Financial Post offers a great example of how a “phantom bid” typically goes down:

The scam involves a sales agent hinting to prospective buyers there are other bids as a way to coax them to bid higher. “You say, ‘We’re expecting another offer. I do have another offer. You may want to go back to your client and make sure this is their best offer’,” says said Joseph Richer, registrar of RECO. “You are suggesting there might be competing offers when there may or may not be.”

As Alexandra Posadzki of The Canadian Press explains, as of July 1, agents will not be allowed to imply they have received an offer unless it is in writing and has been signed. They will also be required to keep records of all of the offers they have received on file for one year. Buyers who suspect that there is foul play a foot can file a complaint and a request for information with the Real Estate Council of Ontario. Carolyn Ireland of The Globe and Mail raises an important appoint, stating that the new rules are intended to protect the consumer, helping to take out some of the stress associated with entering a bidding war.

In terms of the logistics for brokerages the new law will require them to keep an offer, or an equivalent summary (a list of buyers and contact info with name of broker, date and time), on record for one year. A broker who fails to follow the rules could be prosecuted and face a maximum fine of $50,000 or up to two years behind bars. Alternatively, the agent could be referred to a disciplinary committee and be ordered to take educational courses or pay up to $25,000 in fines.

There’s at least one critic of the laws making his opinion known in the media. Real estate lawyer Lawrence Dale, a founder of discount broker Realtysellers, doesn’t believe the law will do anything to deter agents from abusing the system and scamming potential buyers, arguing that they’ll simply find a way around it. In addition to that, Dale believes the new complaint system being introduced could be abused by buyers suffering from remorse from paying too high an asking price for their new home.


Zoocasa to Shut Down Later This Month

There was big news in the Canadian real estate industry last week, as Rogers announced that it is shutting down its brokerage website Zoocasa, which served as a referral service for real estate agents, effective June 22. As the CBC the website, a wholly owned subsidiary of Rogers Communications, began as a listings website before expanding in 2013 into linking up buyers and sellers with realtors. The news comes as a shock to some, but many analysts and conspiracy theorists foresaw this eventuality for reasons that went beyond Zoocasa’s control.

There are some that believe the closure was the result of a failure to meet bottom line estimates. Susan Pigg of The Toronto Star reports that that company had been losing approximately $1 million a month for much of the last two years, according to an anonymous source close to the company. A website like Zoocasa shoulders high administrative and technology platform costs that far outweigh the number of real estate transactions taking place on the site.

However, for others, the closure doesn’t at all seem coincidental, comeing only a few months after succumbing to pressure from the Toronto Real Estate board to stop publishing housing data, particularly home resale prices.

One of the key services Zoocasa provided to users was the ability to subscribe to daily emails containing data on the selling prices of homes. As Alexandra Posadzki of Global News points out, this feature was intended to be no more than an email marketing tactic to boost traffic to the website. However, earlier this year, TREB urged all of its members to stop sharing sold data, warning that this constituted  a violation of the Board’s rules that may warrant the restriction of access to Multiple Listings Service (MLS) data.

But what “rule” did Zoocasa break? According to TREB, the publishing of home sales data breaches the privacy of home sellers.

But what Posadzki and many other analysts argue, is that the closure of Zoocasa “demonstrates the extent of the monopoly that MLS has over Canada’s real estate market.” As many realtors will tell you, there was a time when it used to be far more difficult to obtain that sort of proprietary information about how much houses sold for — not just listed for. Keeping a stranglehold on that information, it is believed, encourages would-be buyers to work directly with real estate agents in order to get that information. Zoocasa was a disruptive service, in that, by providing home buyers and sellers with that information, one could effectively broker a deal without an agent, further pushing them out of the process altogether.

John Andrews, a professor of real estate at Queen’s University, in an interview with the CBC, said Zoocasa was the most likely of the “alternative agencies” to succeed (because of their Rogers backing) and agrees that the shutdown is largely in part due to the dominance of the MLS system.

“I’m not really surprised by the [shutdown.] The MLS system really had a very strong market share and the various alternatives to listing don’t necessarily provide the whole host of agent services to their markets.”

Toronto Real Estate Market Update – Detached Homes Up 18% From 2014!

May 2015 reported 11,706 sales by Greater Toronto REALTORS resulting in an increase of 6.3% in comparison to 11,013 sales reported in May 2014. Sales for all major housing types were up for the TREB market area as a whole, however – sales for detached homes in the City of Toronto were down.

“During my tenure as TREB President over the past year, it is clear to me that ownership housing remains top of mind as a quality long-term investment for GTA households. This is why, despite a shortage of listings in some market segments, we experienced a record number of sales reported through TREB’s MLS® System for the month of May,” said Mr. Etherington.



The strength in price growth was resulted in record May transactions, coupled with a dip in the number of homes available for sale. The average selling price for all home types combine in May 2015 was up by 11% annually to $649,599. The higher annual rate of average price growth compared to the MLS® Home Price Index (HPI) Composite Benchmark points to the fact that the proportion of high-end home sales continued to be greater compared to 2014.

“Tight market conditions, especially for singles, semis and town homes in the GTA, have resulted in strong price growth regardless of the price metric being considered. With no relief so far on the listings front, expect similar rates of price growth as we move through the remainder of 2015. At this point, a number of months where listings growth outstrips sales growth would be required to satisfy pent-up demand,” said Jason Mercer, TREB’s Director of Market Analysis.