Real Estate Lawyer an Expensive Due Diligence Department

Real estate lawyers: what is their role in your transaction? Well, one represents the buyer, one represents the seller and when there is a mortgage, the buyer’s lawyer will also likely represent the bank.

Most deals that fail to close go down at different stages:

• At the point of appraisal
• At the point where all documents are submitted to satisfy mortgage conditions
• On closing

The question is – when a broker originates the deal, whose responsibility is it to ensure that all conditions have been met and information verified?

While the real estate lawyer does have to perform due diligence to protect their clients, much of this due diligence should have been performed by the broker.

Let’s look at some of the real estate lawyer responsibilities:

• To ensure title is clear by performing necessary searches  
• To ensure mortgage conditions have been met  
• Pay off existing mortgages
• Transfer mortgage documents, etc…

At the point where the real estate sales professional performs the above: should new or different information come up? Should there be a reason for surprises? We think not. Not only should you be gathering information from your client but you should be verifying the information presented too – and it is not difficult.

Clients make mistakes all the time. Some are deceptive, some confused, some may have just forgotten to mention something. It’s not in your best interest to take a client’s word at face value and you should be performing some level of due diligence. While you can’t find online what someone’s current tax bill is or the status of their water bill, you do have access to a lot of the land title data that lawyers have access to.

As you know, Teranet automated the land registry system for the Province of Ontario and offer solutions such as Teraview that lawyers use when performing property title searches and land transfers. While you cannot use Teraview as a broker, there is a solution offered by Teranet to mortgage agents and brokers that offers a lot of the same information as Teraview.

No – you cannot perform a full title search, register and discharge mortgages or transfer titles – but you can still investigate who is on title to a house, sales history, sales comps, registered mortgages and other encumbrances and more…

As a broker it makes no sense for you to wait for a real estate lawyer to discover on closing that someone else is on title to a property that wasn’t disclosed to you; or worse that there are undisclosed mortgages against the property. Nor should you wait for an appraiser or CMHC to tell you that the value on your application simply isn’t there.

By simply performing some preliminary searches you can learn all of this information and more.

Don’t leave anything to chance. Check out http://brokers.purview.ca/index.php to find out all you need to know about Purview For Mortgage Brokers.

HPI Monthly Report: Home Prices Down 0.3% in November

In November, the Teranet–National Bank National Composite House Price Index™ was down 0.3% from the previous month. It was the first monthly decline in a year. Moreover, it was very broad-based: prices were down in eight of the 11 metropolitan markets surveyed, flat in two and up in only one. Prices fell 1.6% in Halifax, 1.5% in Quebec City, 1.0% in Montreal, 0.7% in Winnipeg, 0.6 % in Ottawa-Gatineau, 0.3% in Toronto and Victoria and 0.2% in Calgary. Prices were flat from the month before in Vancouver and Hamilton and rose 1.1% in Edmonton. It was the first time in two years that prices were up on the month in only one of the markets surveyed.

Since in November 2013 the composite index declined only 0.1%, this November’s 0.3% decline meant that 12‑month home price inflation decelerated from 5.4% in October to 5.2% in November. That countrywide average was largely exceeded in Calgary (9.2%), Toronto (7.3%), Hamilton (7.0%), Edmonton (6.2%) and Vancouver (5.9%). Unsurprisingly, the resale market in these five urban areas is balanced or even tight. The 12-month increase was more moderate in Winnipeg (1.5%), Victoria (1.4%) and Montreal (0.6%). Prices were down from a year earlier in Ottawa-Gatineau (−0.2%), in Quebec City (-0.3%) and Halifax (−1.8%). The composite index has been up from a year earlier for 62 months now, since October 2009. The only one of the 11 markets to match that run is Toronto, though Hamilton comes close with 60 months.

For the full report including historical data, please visit: www.housepriceindex.ca

Happy Holidays from the Purview Team at Teranet!

From the entire team at Teranet we wish you and your families all the health and happiness through this holiday season and prosperity in 2015.

Trusted Advisor Series P2 – Protecting Your Client, Lender, Insurer and You!

In part two of our Trusted Advisor series we are delving into your role as a protector. As a broker you are in a unique position because you are negotiating a transaction both for your client, the borrower, and your partner, the lender.

The advice that you give and measures you take when underwriting your applications can make all the difference when it comes to protecting your client, your lender, the insured and in case we forgot to mention – you too!

Picture a parrot: due diligence, due diligence, due diligence!

The steps you take at the very begging of the application process help to prevent fraud, reduce the number of deals that fail to close and result in stronger relationships with your clients and lenders.

Why does your client come to you? Just to get the best rate? Or do they come to you because you know what the best products are and because you will negotiate with the bank – or because they trust you to help them with all of their financial planning needs as it relates to their home?

Remember the rule: a happy customer tells a couple of people of their experience while an unhappy one tells 10. This is a business that thrives on repeat business and referrals – you cannot afford to have unhappy customers.

Every deal that fails to close can potentially result in:

·       A frustrated referral source – if the deal came from a real estate sales professional or other referral source.

·       An upset client – there is nothing worse than finding out your plans fell through after trusting what you perceive to be an expert.

·       A disgruntled lender – lenders will only underwrite so many deals that fail to close before they reconsider accepting your applications – not to mention that your deals that don’t close impact the lender’s closing rates with their insurers.

Uncovering potential problems on closing doesn’t even necessarily mean the deal will be lost. It actually prepares you and your partners to find solutions for challenges before they begin to present problems – like registered mortgages on title and issues with equity.

Simple things like validating who is on title to the home, what the home is worth and current encumbrances are minimum due diligence measures that you can perform to reduce a large proportion of deals that may face problems on closing.

This will not only better protect all parties to the transaction but will also make you more profitable and maintain your reputation as your client’s trusted advisor!

For more tips about how to protect yourself and your partners when it comes to due diligence, please visit http://brokers.purview.ca/index.php.

Don’t Watch Your Deal Turn into a Pumpkin at Midnight

Mortgages fail to close for many different reasons. Most deals that fail to close occur because of innocent mis-disclosure on the part of the clients – and this can vary depending on whether you are working on a purchase or refinance mortgage – but this can be prevented.

Just as Cinderella’s carriage turned into a pumpkin at midnight – so can your deal!

The question is, what is your time worth? On occasion we meet brokers who don’t feel that it is their responsibility to perform due diligence – instead this should be left to the lawyer. However, we think that is a very costly proposition. When things pop up on closing that stop a deal, weeks, if not months, of your time and money are wasted - not to mention the time and expense of the real estate lawyer and insurer.

If you measure the small time investment to perform additional due diligence at the application stage, identifying problem deals early on – that time you would have spent on those problem deals can be dedicated to landing good deals. Seems like a fairly obvious calculation, but it is one that many brokers have still not wrapped their heads around.

Just by validating property ownership, the approximate value and encumbrances, you can:

• Identify properties where there may not be enough equity to pay closing costs – the real estate sales professional may not know
• You may identify all current mortgages on title
• You can identify other people on title to the home
• You can identify homes that are being sold in close proximity to their purchases which can pose a problem with some insurers
• You can identify undisclosed non-arm’s length transactions which can prevent mortgage fraud
• You can estimate equity to ensure that the information stated in the application is accurate and more…

The challenges listed above represent many of the most common reasons that deals fail to close. If you want to prevent your deals from turning into pumpkins – that little bit of extra due diligence can not only help you avoid deals but also save deals before you get to the 11th hour. Learning about potential issues early on empowers you to find solutions – and after all, your client does count on you as their trusted advisor.

For more about the benefits of conducting due diligence at the very beginning, stopping bad deals before they even get off the ground, please contact Purview For Mortgage Brokers today by calling 1.855.787.8439.