Edmonton Real Estate Blog

Title Insurance - What is it and how does it help me?

This is the second in a series of three articles written by guest author Stan Galbraith of Galbraith Law. The series includes Real Property Reports, Title Insurance, and Real Property Reports vs Title Insurance. 

Within the last 10 years, a new insurance product has arrived in Alberta.  It is commonly referred to as title insurance.

What is title insurance? This product was never available before so what has changed?  What does title insurance provide that cannot more adequately be provided by a Real Property Report (RPR)?

Title insurance has been a popular product throughout the United States for many years.  In fact, Chicago Title traces its history back before the famous Chicago fire caused by the cow.  The three major title insurance companies providing insurance in Alberta all have a parent company in the USA.  These companies first started Canadian operations in Ontario.

Both the USA and eastern Canada operate a different Land Titles registration and transfer system then we have here in Alberta.  We are fortunate in Alberta to have a government-guaranteed Land Titles system commonly referred to as the TORRENS system.  Throughout the rest of North America, when you get a Title, you can never be completely sure that it discloses everything.  For example, there could be an unregistered mortgage or unregistered transfer that may impair your title.  In Alberta, “what you see is what you get” and the government guarantees this.

Previously, title insurance primarily covered the issues covered by the Torrens system.  Eventually, companies became innovative and expanded their coverage, so their insurance had applicability here in Alberta.  Over the years they have continually added new items to their coverage.  Now, their product offers substantial benefits at a very reasonable one-time cost.
Some of the issues title insurance covers is as follows.

It covers the gap between submission and registration.  A couple of years ago when registration was taking 5 weeks or more, you could never be sure when you submitted your documents as to other registrations in the stream that may affect your title.  For example, I acted for one purchaser where the sellers ex-spouse filed a Matrimonial Property Judgment against the title one week before we submitted our Transfer of Land.  When we submitted, the Judgment was not there.  By the time we got registration, the Judgment was registered.  Title insurance will step in to deal with this.

It will cover deficiencies that would not show on a Real Property Report such as unregistered utility easements or builders liens or matters that would be shown by non-Land Titles searches such as deficient corporate status.  It will cover hidden deficiencies such as underground storage tanks or underground septic tanks.  In one case, they paid out a claim to move a septic tank when it turned out the tank was buried partly under the neighbors land.  Coverage is also provided for unknown special assessments on condominiums. 

Title insurance covers issues that would have been shown on a Real Property Report if one had been obtained.  Use of this product can avoid the need to obtain a Real Property Report.  It also covers internal non-compliance issues that would never be shown on a Real Property Report such as lack of building permits or failure to meet building code on renovations such as a basement development.

Even where there are known defects, title insurance will often underwrite these issues.  This could include a fence in the wrong location or a deck that is too big for the property.

Most of this coverage continues after the closing date.  Perhaps the most important coverage that continues after the closing date and during the entire time the property is owned is against forgery, fraud, duress, incompetency, incapacity, or impersonation. 

Title insurance is an insurance product.  As such, it does not fix a problem.  It provides insurance or indemnity coverage.  In other words, the title insurer has no obligation to do anything until a problem actually arises.  When this happens, they have the choice to pay damages rather than actually fix the problem.  Problems can be deferred or masked instead of fixed. 

Deferring or masking problems can come back to haunt all parties at a later date.  For example, when a seller, who accepted title insurance when they bought, sells and the buyer does not accept title insurance they may be forced to solve the problem.  Obtaining Encroachment Agreements, especially where fences or other structures encroach onto municipal land can be quite costly.  Likewise, applying for and obtaining development and building permits can be time consuming and expensive.  If a buyer insists on this solution, the seller may be forced to undertake an expensive remedy and may look to the realtor and lawyer who helped them originally purchase the property for some redress.  Accordingly, it is doubly important to ensure a purchaser understands the extent and impact of title insurance coverage and the fact that it does not apply when they sell the property.  By simply insisting that any new buyer obtain title insurance rather than relying on an RPR, they will continue to defer any issues.

Overall, in my view, title insurance is a valuable addition to the real estate marketplace in Alberta.  The coverage for future fraud for the entire ownership of the property by payment of a one-time premium is enough justification to purchase title insurance on every real estate purchase.  In some cases, title insurance is the only way to effectively close a real estate deal.

About the author: Stan Galbraith is a lawyer with over 25 years of experience.  He was admitted to the Alberta Bar in 1983 and has operated his own law office since 1988. Stan has a wealth of experience ranging from litigation and appeal work, to teaching and writing. He has now left the world of litigation behind and works with commercial and residential Realtors and their clients on closing their transactions. He also practices extensively in the areas of small business and wills and estate planning and administration. You can find his website at www.galbraith.ab.ca.

The Real Property Report: What is it and why do I need one?

Guest author Stan Galbraith of Galbraith Law is back! Earlier this year, Stan did a great series of articles for the Edmonton Real Estate Blog on foreclosures. He is back with a series on Real Property Reports and Title Insurance. This is the first of three articles in the series:

What is a Real Property Report (RPR)?  And what purpose does it serve in a residential real estate transaction?

An RPR provides a graphic representation of all the improvements and features of the property.  Years ago, it was called a Building Location Certificate and all it showed was the foundation lines of the buildings on the property and the lot lines.  Now, it is called a Real Property Report and provides a much more comprehensive report on the real estate or real property.

An RPR provides information such as the location of utility right-of-ways and easements.  It also shows boundary fences, the overhangs of eaves and additional improvements such as swimming pools and hot tubs.  In other words, it is a complete report on the real property or real estate.

Typically, in most residential real estate transactions in Alberta, this report is submitted to the local municipality for a compliance stamp or certificate.  This is a confirmation from the municipality that the buildings and improvements on the property comply with local zoning and setback regulations.  They will also verify whether permits are in place for all the structures.

The standard Real Estate Purchase Contract (REPC) contains warranties.

The seller warrants the buildings and other improvements do not encroach on any neighboring land.  They also warrant the location of all buildings and improvements complies with all relevant laws.  The RPR provides the proof that these warranties are true and correct.  As such, an RPR provides valuable information to a potential buyer. 

Where the deficiencies are noted in the report, the buyer can insist the seller take action at the time of the purchase to remedy these deficiencies.  For example, when the RPR discloses encroachment onto either municipal or neighboring land, the buyer can look to the seller to obtain an Encroachment Agreement at the time of closing.

Without the report, the warranties lose much of their impact.  Discovering a deficiency many years later makes it very difficult to pursue the seller.  For example, limitation periods may have expired or the seller may simply be difficult to contact and pursue.

Make note that the warranty in the standard REPC only extends to encroachment onto neighboring lands.  There is no warranty offered regarding encroachments onto the land that is bought and sold.  In other words, if the neighbor’s deck extends into the backyard of the purchased property, there is no obligation on the seller to do anything about this.  The buyer has the option, once they obtain Title, of negotiating with the neighbor to either remove the encroaching deck, or leave it as it is and put an agreement in place to cover the issue.

Most lawyers are of the view that an RPR provides the best solution on every real estate deal.  They say that is the only way to have the certainty required by the buyer.  Certainly, in most cases, it does provide certainty.  However, in my view, it's far from the ideal solution on every deal.

In the next article we will look at Title Insurance and what it has to offer.

About the author: Stan Galbraith is a lawyer with over 25 years of experience.  He was admitted to the Alberta Bar in 1983 and has operated his own law office since 1988. Stan has a wealth of experience ranging from litigation and appeal work, to teaching and writing. He has now left the world of litigation behind and works with commercial and residential Realtors and their clients on closing their transactions. He also practices extensively in the areas of small business and wills and estate planning and administration. You can find his website at www.galbraith.ab.ca.

Marketing Matters

As I read other real estate blogs I realize why people are skeptical of REALTORS. Only the good information is presentend and the only interpretation is a positive spin. We try to present a balanced picture on this blog, but by nature we’re positive. No matter who you read, one thing for sure is the Edmonton real estate market is tough right now in comparison to previous years, especially if you're trying to sell your home.

So in this tough market, we're spending more on marketing our listings than ever. Our philosophy is that when the going gets tough, the tough get better, do more, dig deeper and spend more. While many advocate cutting back on spending in this environment we’ve been increasing the number of places we’re putting our properties, the quality of the marketing and the quality of our ads.

Why? Its simple, really. You’ve got to get noticed in order to sell. If you are one of the thousands of home owners trying to sell right now you have to ask yourself: what details am I taking care of to give me the best opportunity to showcase my property to potential buyers?

In certain markets better marketing can result in a higher net to the seller. In this market it can be the difference between a sale, or no sale. That can mean the difference between getting something or nothing.  You have to decide what’s important to you. 

A few things to consider are:

1. When you see your ads, are they advertising your property or are they more geared to advertising the agent who has your listing?  Are the pictures good quality and does it represent your property positively?
2. When people find your listing on the MLS and want more information, are they going directly to your listing when they click for more pictures and information or are they going to your agents site?
3. When you Google your area does your property come up on the first page?  Does your property come up on broader searches?
4. Have you been updated regularly on what is happening in the market specific to your home?  Have you viewed and analyzed the sales of other homes in your area?
5. What is your picture quality online like? Really crappy, crappy, just o.k., good, great or phenomenal?

If you’re selling on your own the answers to the above questions are not good. So then you have to ask yourself are you really saving the commission or just losing equity?

Homeowner solutions:

1. Hire someone who knows how to properly advertise when they do advertise and make sure its geared to marketing your home
2. Direct links on your listing are a must. Don’t hire an agent who links your listing back to their home page.  It's preferrable to hire someone who will use a custom domain for your property like, www.edmonton-condo.com , www.StAlbert-Home.com or www.edmontontownhome.com. What is your address online?
3. Ask for examples of everything - ads, photos, web sites, updates. Find out before you list what information would be included in your updates and how often you’ll receive them.
4. Check out www.sellmyedmontonhome.com for more suggestions.

What to do when your listing expires

If you're trying to sell your Edmonton home, and your listing expired in the past few months, you're certainly not alone. In fact, since September almost 6000 listings expired in Edmonton - about 50 more listings expired than sold!

In other words, you had a better chance of expiring than you did selling over the past few months. If you're among the home owners in Edmonton that are faced with the dilema of re-listing your home, there are ways to improve your odds. Before you re-list, consider all your options and ask yourself these questions:

1. Marketing - How was your home marketed on the MLS? Was there a link from the MLS to a web site dedicated to your home, where buyers could see dozens of photos and find out all the additional information they could dream of? Or was there a link to your agent's home page, advertising other listings? Was there a link at all? Was your home advertised on other web sites such as Google? How many times were your ads viewed? Could you find your home if you searched for it on Google? If you don't think good online marketing matters, know this: most of our ads get about 100,000 impressions a month, and each home's web site gets upwards of 1,000 visits a month and that's on top of the 20,000 people that come to our main site each month.
2. Presentation - Did your Realtor help you stage your home for showings? Did you have professional photography or just photos your Realtor took with their point and shoot camera? How about custom print ads? What were the hilite sheets at your home like? Dull photocopies or professionally produced custom colour sheets?
3. Negotiations - Did your Realtor coach you on how to deal with offers and what to expect? Did they explain all your options? What about dealing with lowball offers? Did you feel you were prepared and in control of the offer process (if you even got any offers!)?
4. Price - How did your asking price compare to the sale price of similar homes that sold while you were listed? Did your Realtor keep you informed of sales in your neighbourhood? Did they help you determine a reasonable price for your home or just tell you what you wanted to hear?

If you want to sell now, should you try the same strategy that has already failed you, or a new strategy, with better marketing and presentation, a more experienced negotiator and a more realistic price?

In 2008, over 90% of our company's listings sold.

If you'd like to know what we do differently, and why our listings sell instead of expire contact us anytime, or check out our site on selling your home at www.SellMyEdmontonHome.com where we discuss topics such as Selecting a Realtor, Getting the Most out of the MLS, Pricing Strategy, Avoiding Common Pitfalls and a whole lot more.

Are you missing the boat?

The week before Last week I had three different clients from different out of town locations, relocating to the Edmonton area for work reasons.  Between these buyers I showed about 75 properties. Except for one of these clients, none of them had any real knowledge about the Edmonton real estate market. One buyer lived here before but it was so long ago that her information was entirely out of date.

The end result was that all three ended up buying homes for their families to live in.

It makes me wonder though, just how many other relocating families or individuals are using their REALTORS to help them buy homes for their families in the Edmonton area?  The most recent migration stats I can find, show that plenty of people are relocating to Alberta:

It’s undeniable that the vast majority of relocations use a REALTOR. 

Relocating buyers are quite often the best buyers from a seller’s perspective, because they have a short period of time to buy, and are usually well qualified and motivated. In 2006 and 2007 we had to show and help our relocating buyers buy a number of properties that were being sold by sellers on their own, because of the shortage of inventory in Edmonton. A couple of these were friggen nightmares to deal with - I’ve posted on some of these experiences previously.

Today, with the amount of properties for sale on the MLS, most of our buyers (relocating or not) are focusing their time exclusively looking at properties on the MLS. How many properties could a buyer set up appointments to view on their own through private sales?  I don’t know how many relocating buyers could set up 30 private sale appointments in a 3 day time span - especially since most of these buyers look during the day on weekdays. How would a relocating buyer then obtain all the necessary information to make an informed decision? Clearly many sellers who aren’t on MLS are missing the "relocating" boat.

Recently the Canadian Real Estate Association did a member survey that found the following. In the past year:

• At least 64% of its members listed a property after the seller failed to sell on their own.
• 6% of their members listed 10 or more properties where the sellers previously tried on their own.
• Over 92% of those properties that were For Sale By Owner properties and then listed by a REALTOR sold after being listed on MLS
• In the previous run up market over 30% of REALTOR’s introduced their buyers to FSBO properties. (This is surely shrinking)
• 54% of those introductions resulted in a sale where a fee was paid to the REALTOR. (Hence my position that Comfree's stats on commissions saved are misleading if they use their standard commission for every property sold, even if a REALTOR was involved.

My point is simply most relocating buyers still use the services of a REALTOR to assist in their relocation to the Edmonton area, and many sellers who try to sell privately simply miss the boat on this excellent market. 

How not to sell a property in Edmonton right now

It sucks right now to sell a property with a Tenant.  Yes it does.  Uh huh, and here's the proof.

In the past 30 days (as of this morning) There were a total of 619 sales in the Edmonton market.  416 of those were single family and 203 were condos.

Of the 416 single family sales in Edmonton on 11 of those were marked as "occupied by tenants" in the MLS database.   Which amounts to about 2% of single family homes sold in Edmonton

Of the 203 condos sold in the past 30 days in the Edmonton market 7 were marked as tenant occupied. Or roughly 3.4%  of all condos sold in Edmonton in the last 30 days were tenant occupied

Part of the reason that the sales are so low is, with the amount of choices that buyers have when they are looking at homes in Edmonton they don't want to bother with making someone have to move when they have plenty to chose from.  Then comes the REALTOR perspective of why deal with the headaches of showing a tenant occupied property and the possession issues unless that buyer is an investor or that property is exactly what the buyer wants.

So if time is of the essence then ixnay on the enantstay.

Real Estate Red Flags

Here are some phrases you may find on a listing or purchase contract that should raise a red flag in your mind:

"As is, where is"
This is a phrase you'll find commonly on listings that are in foreclosure, an estate sale, in disrepair, not lived in by the seller and many other instances. What this phrase basically means is that the seller does not want to not make any warranties or representations about the property and it's contents. The seller may state this because they have no way of knowing what condition the property is in, or they may be unwilling to identify or take responsibility for known problems. All in all, as is where is means what you see is what you get, and if you don't like it, too bad.

Normal
This is a favourite of mine... in the purchase contract it will usually state something similar to "normal working order" "normal wear and tear" etc. For example, the seller may warrant that the appliances are in normal working order. We had a client who called us about a week after taking possession of her condo and said that the washing machine bounced half way across the room during the spin cycle. When we contacted the seller she said "that's normal! it always did that!"

Title Insurance
The purchase contract that Realtors in Alberta use states that the property must be in compliance. To prove this the home owner needs to have a real property report with compliance from the city, which can be expensive and time consuming to obtain, especially if the owner has done work on the property without obtaining the necessary permits. The buyer's lender will require a copy of the RPR with compliance. One way to avoid getting the RPR with compliance is to offer the buyer title insurance as it can generally be obtained faster and with less expense - especially if the property doesn't comply. The buyer may not care about the RPR and may accept title insurance instead, but what many buyers don't realize is that most title insurance (like all insurance) has exclusions. For example, lets say part of the garage is on city property, and the city demands that it is corrected. Your title insurance may cover the costs of demolishing the garage, but most likely will not cover the costs of building a new one. (Sheldon has serious concerns about title insurance that we've discussed on the blog numerous times).

Like a virgin negotiating for the very first time...

Negotiating is one of the least understood aspects of your property value.  If you believe that the value is the value no matter what.  No one can help you here.  But consider this some people are better negotiators then others.  If you’re recently out of the hospital and 90 years old you may be at a disadvantage compared to someone with a higher understanding of the processess and  who has years   of negotiating experience behind them.

Simply put there are two positions to negotiate from.  Care to guess what they are?  If you cant’ figure these out you should have an experienced negotiater representing you especially when selling or buying something as valuable as real estate. 

You can negotiate from a position of strength or a position of weakness.  Something else you have to understand when selling your home is that the price is only one small part of the contract, albeit an important part.  Timing of conditions, wording of conditions and terms can have a substantial impact on your sale.  If you’re like most people who don’t negotiate for a living then you probably won’t even be aware that negotiating tactics are being used on you.

Some  real estate transactions can be complex and a simple explaination here on negotiating won’t suffice because negotiations can go so many different directions depending on the circumstances and personalities involved.  The courts are littered with case law on Real Estate and ignorance is no excuse and can be extremely costly especially if you are representing yourself..

In fact most often a well negotiated contract is one that has no problems and therefore you may see limited value of how it was negotiated.  In fact you may never realize how well it was done  until the contract is tested. That’s when you will see the value of a properly negotiated contract.

Imagine you go to the Louvre in Paris, or any museum for that matter.  You can walk through and with limited knowledge you might even enjoy your visit.  Or you may just look at things and not even truly understand what the hell you’re looking at.   Now go through with a guide.  Someone who has been there before, someone who knows the subtleties,  nuances and is there for your benefit.  This can add priceless value to you.

Everything you do in selling your home, from the timing, to the marketing, to the service you receive, to the pricing strategy will determine if you negotiate from a position of strength or from a position of weakness.

An experienced negotiator can reduce risk and add significant value or like a virgin having sex for the first time you can cross your fingers and hope it all goes according to plan.

Risk VS Uncertainty

You never know what the winds of change will bring. Stock market woes one day, huge rallies the next... Billion dollar injections... Real estate sales up 65% from the previous year for Edmonton...

How does one manage all the risk and uncertainy in markets like this? If you believe some of the people on this blog a good time to buy is NEVER. If I’d listened to these people I’d have nothing. In the late 80’s when interest rates where 16% it wasn’t a good time to buy. In the 90’s we were in a recession and it wasn’t a good time to buy. According to many of these people it wasn’t a good time to buy when the markets were going up...Rolling my eyes now. So it's not good to buy when everyone is buying, and it's not good to buy when everyone is selling and you have more choice. Truth is many of these people want you to live in the same fearful state they do.

Anyway, if you are coming on this blog and trying to decide when to buy then maybe now isn’t the right time for you, but it’s a start as you’ll hear both sides of the argument.

Risk is manageable.
Uncertainty is primarily psychological (fear, panic, euphoria). You can control your risk factors and tolerance. For example stocks vs mutal funds, long term revenue properties, flips or a home.

You can limit risk by:
1. Doing Your Research – Knowledge can be very powerful as it lets you see opportunities where others see only uncertainty.
2. Working with professionals – Experts of different specialties can be huge assests to you in mitigating your risk. Seldom are you the professor that you think you are. The problem with real estate is that you may think you’ve been doing everything correctly all along only to find out later, and at significant expense, that you didn’t do things correctly and that there was a lot of little stuff you missed.  Many times that little stuff can be become extremely costly in real estate. (REALTOR’S, lawyers, appraisers, mortgage brokers, financial planners and so on.)
3. Diversifying - Don’t put your eggs all in one basket.  Do I need to say more here?

Dealing with uncertainty is sometimes a matter of nature vs nurture.  If your tolerance for bad news is low, then the next couple of years are going to be really tough on you and you’re unlikely to see the forest through the trees. If you see opportunities in uncertain times, and you manage your risks wisely, then you can come out ahead in the long run.

Don’t get choked by fear spread by people who are using that fear to profit from you.

Top 3 Deadly Sins of Real Estate

The three deadly sins of real estate: