Canada Just Released New Mortgage Rules: Here’s What You Should Know
It’s no secret that home prices in Canada have been raising at an alarming rate over the past few years. Some of the country’s biggest cities have seen massive increases in price point year after year, with Vancouver and Toronto arguably leading the charge. Needless to say, this has posed some concerns relating to the country’s economic stability; how much longer can this trend continue? The increased pricing that we’ve seen year after year has not been in line with inflation, and it seems that the market has been living in an unstable bubble bound to pop without an adjustment. In an attempt to stabilize the Canadian markets, new federal rules were backed by the Bank of Canada, and launched on Monday October the 17th 2016. The theory here is that over time, the new rules will drastically decrease the risk of Canada’s financial system becoming unstable. The idea is to protect home owners from taking on too much debt. Whether or not the new rules will achieve said goal is yet to be seen. Either way you slice it, the rules have been implemented, and anyone considering a home purchase in the foreseeable future will be affected by them. Here’s what you need to know.
What are the New Rules?
Essentially, the new rules involve a Stress Test designed to predict whether or not a potential home owner will be able to pay off their lone in the event that interest rates rise, or that they encounter personal financial change. This is a brand new concept as stress tests were never required in the past. The stress test will include 5 year mortgages, which is the most common type in Canada. The test itself will require borrowers to qualify at the Bank of Canada’s posted rate of 4.64 percent, even though mortgages are currently being offered at around 2.5 percent. Moreover, in February of this year we also saw the implementation of new rules that have affected, and will continue to affect, active buyers: Home buyers in Canada who are considering a property purchase of $500 000 or more, now have to source a minimum down payment of least 10%. Home’s that are listed under the $500 000 mark can still be purchased with a down payment as little as 5%, and homes over the $1 million mark still require a 20% down payment.
So What Does this Mean?
There are a number of implications here. For starters, first time home buyers will likely be affected more than anyone. First time home buyers will be forced to look at smaller priced homes as a result of the stress test and the higher down payment requirements. With that said, the drastic increases in average price point have greatly limited the inventory of smaller priced properties in many major cities. Those of us looking to sell their homes in order to upgrade or downgrade will likely be affected much less, as they will have already built up a strong amount of equity in their home. With that said if the new rules do what they set out to do, first time home buyers may be in a better position a few years down the line as the industry starts to level out. At this stage, they’ll simply have to be patient, or have to find a way to make a little bit more money.
Most people looking to buy won’t be able to afford as much home as they would have in the past. This will, presumably, slow the market down and prevent people from taking on debts that they can’t handle; in turn, it is expected that home prices will decrease over time, giving the market a chance to slow down to the rate of inflation, thus evening out the economy. The areas that will be affected the most are the cities that have seen the biggest rise in price points over the years, primarily Vancouver and Toronto; the rules apply across the entire country, however most cities have not seen the drastic increase in pricing that has been seen in these two metropolitan powerhouses. As a result, Vancouver and Toronto now have a shortened supply of inventory, particularly in the lower price range. The concept is that these rules will minimize the amount of transactions, and see lowered pricing across the board as a result.
Many in the industry also believe that the “stress test” will result in higher mortgage rates in the years to come. Essentially, these new rules will minimize competition in the mortgage market, which will result in less approvals and higher interest rates. This will have a negative effect on consumers, and may trump the positive effect of lowered home prices in the future.
As it stands, there’s no way to accurately gauge how these new rules will affect the future of the real estate market in Canada. There are both positive as well as negative potential outcomes, but at least something is being done to level out the market. Time will tell if the desired effects will take place, or if some other rules and regulations will need to be implemented.
Halloween is just around the corner. This is a great way to touch base with your past clients, network and even your prospects. Its short notice now, but if you have time create little loot bags and give them away this weekend to your past clients who have school age children. Feel free to drop off a pumpkin to those without. I found a great idea for loot bags that are very cute and better yet inexpensive. All you need are some plastic gloves, rockets and some small candies.
For those contacts that are potentially prospects or just in your network, its a good idea to create a mass email that can go out to each recipient directly from your email. You may want to create a blog posting and use that single post to drive traffic to your website via a mass email and / or your social media accounts.
There are so many things that you can go for Halloween to create engagement with your audience. Ask people to post the best costumes that they saw during the night. Or hold a BEST COSTUME contest and give the winner a gift card to a local restaurant. If its not too late, do a pumpkin carving contest, that usually gets a lot of people to enter and connect with you. Post your contents on all of your social media platforms.
Holidays like this allow for fun and out of the box thinking. If you have children, send a loot bag to each child in the class. Making sure everything is safe and free allergens ie: peanuts, tree nuts, dairy etc. In this case you can do candies, like rockets, lollipops, even stickers. Make sure you add a little name tag to the bag with compliments from you.
If you feel that you will not have enough time to get things organized; don’t worry about rushing. Just prepare for the next holiday …Thanksgiving for our American friends and Christmas for our Canadian friends.
HAPPY HALLOWEEN ALL AND REMEMBER TO BE SAFE!
This is a quick post to show why it’s worth it to pay for value and hire the best agent to represent you and your home. Recently as I’ve been going through listings and seeing photos of various properties, I have come across these photos. Now keep in mind these are ACTUAL PHOTOS THAT ARE ON THE LISTINGS ON MLS FOR ALL TO SEE.
I would not want my house being represented in such fashion, even worse I’m not sure if the sellers know what the pictures look like. A true professional would not make the listing live, with photos of this nature. Some may argue better to have photos than no photos and normally I would agree, however with these two examples below, I’m not sure I agree any more.
Photo #1: This is a current property listed in Oakville for close to $900,000.
Photo #2: Active Listing
So here we are in 2016 and boy have the times changed. The old school still exists, and with good reason: door knocking, networking, trade shows and referrals are all relevant and efficient ways to generate leads. But if you’re a new agent, good luck building your business with just these methods. The fact is this: online is the present and online is the future. Gone are the days of people using the internet strictly to research or play games; now people buy everything online, from clothes to food to electronics to everything in between. Point being to harness new technology or get left in its dust.
But why is there so much mixed feedback from realtors who have tried online lead generation? Why is it that some agents praise the online lead gen arena, whereas other agents have nothing but horror stories? The reason is this: online lead generation works, but not all agents know how to leverage it. Be prepared for some blunt honesty here: if you’re an agent who has unsuccessfully tried online lead gen and is reading this post, I’m sorry to say, your follow up, or lack thereof, was likely the issue. That’s the bad news. The good news is that you can improve! Any agent can be successful with online leads, but the key is to understand what that success entails. Here are the keys to running a lucrative online lead generation campaign.
Understanding the Numbers
Ok, so the big thing here: numbers. Online lead gen is a science; a science with very concrete equations. So in theory, and in practice, if you understand the numbers, you understand how to be successful. The average real estate agent will only close 1.5-2% of the leads that they’ve generated online. So typically, you’ll close 1 in every 50 leads. Doesn’t seem like much, right? Wrong! Closing at 2% will yield a massive return on investment. For example, if you spend $300 a month and generate leads at roughly $10 a lead, you can gauge and project a return on investment by calculating over the course of a year: $300 a month for 12 months means you’ll spend a total of $3600 ($300×12) for the year. 30 leads a month means you’ll generate roughly 360 (30×12) leads for the year. If you close 2% of these leads, you will close 7 deals for the year. In the GTA, the average commission per deal is floating around 15-20K right now, but let’s say you make only 10K a deal. That means you’ve made 70K on a $3600 spend. That 2% seems a lot bigger now, doesn’t it? This tie’s into my next point.
Having Patience and Perseverance
What I hope is an obvious offshoot to the numbers I’ve quoted above, is the fact that you’ll need to be patient and you’ll need to persevere. If you’re only closing 1 in every 50 leads, you’ll need to have a big picture perspective when you’re following up with them. For example, you may have periods of time where you’ve followed up with lead after lead, and not one of them wants to give you the time of day. But remember, it may be that next lead that shows interest. Maybe you’ve called 49 leads, not one of them bites, but giving up on that 49th lead is what sets apart the success stories from the failures. That 50th lead may be part of the 2% you are looking for. You absolutely have to keep this in mind when you’re doing your follow up. What’s more is that even the leads who do convert will likely take some time to get there. These leads don’t know or trust you yet. You need to win them over. Some of them may bite quickly, but generally speaking, you’ll want to give the lead a time frame of 6-12 months from initial point of contact to seeing them close. That’s not to say that you can’t close sooner, but it’s always best to be prepared for the worst.
Respond within 5 Minutes
The quicker you respond, the hotter the lead is. According to a an insidesales.com study, if you are able to contact a lead within 5 minutes of being notified that they’ve registered and/or requested information, you are 9X more likely to make contact with that lead. Think about this for a second: when you’re in a store and you see something you like, what are the chances of you coming back for it if you don’t buy it immediately? They drastically decrease, right? People make decisions and act impulsively. You need to catch them when they’re hot.
Automate your Lead Follow up System
Regular follow up is the key. This may seem contradictory to the point of responding within 5 minutes, but the points do go hand in hand. Even with the leads who you’ll reach, they usually won’t close immediately, and for the other leads, regular follow up just may win them over with time. Yes, there are general rules of thumb to live by, the 5 minute rule being one of them, but there are always exceptions to the rule. Just because a lead didn’t pick up or respond within the 5 minute timeframe, doesn’t mean they won’t come around over time. It’s not as likely, but it does happen. For the leads who you do contact within that 5 minute time frame, you’ll need to follow up religiously to get that deal. A good follow up system, or CRM, is crucial to that follow up. Drip campaigns, listing match, neighborhood updates, activity tracking, notation and tasks; these are all crucial aspects of your follow up. Optimizing your follow up system will free up your time allowing you to be on the phone more, work in person more, and make more connections. Let the drip campaigns work their magic. Let the automated listings be sent. Let the system send birthday cards, and neighborhood updates, and newsletters etc. Working as a real estate agent is time consuming (preaching to the choir right?), so let automated systems take up as much of that time as you can. This tie’s into my last point:
Get an Assistant
Get a reliable assistant, and train him or her on how to qualify leads and manage your CRM. You’re busy taking buyers to showings, hosting open houses and closing deals. An assistant can handle the majority of the grunt work that ties into the necessary follow up. They can set up the drip campaigns, put in regular calls and emails, be the one to contact leads within 5 minutes of registration etc. Remember that lead gen is an investment, and with the right moving parts, the right attitude and commitment, there is a wealth of return to be made.
Understanding these key points will make your online lead gen journey a successful one. Set a goal in terms of how many deals you’d like to close off your lead gen campaign, and do the numbers. Once you’ve ironed out the math, commit to the follow up and hire the help needed to implement it. Have a strong lead follow up system in play, and give it time. The hardest part of working online leads is simply committing to the work and trusting in the numbers. If you can wrap your head around this, you’ll be in great shape.
If you’re a realtor, you’re probably familiar with the concept of online lead generation. If you aren’t, do yourself a favour and learn; online lead generation has been used by top relators for years now, as it allows agents to build out teams, increase sphere of influence, and ultimately make more money. So where’s the catch? It can’t be as simple as “do online lead generation and make more money”, can it? Well, I would argue that it can and should be that simple…with the right agents. So what makes the right agent? Why do some agents praise the world of online lead gen, whereas other agents seem to have nothing but horror stories? The answer has many facets, but it’s ultimately as simple as this: online lead gen isn’t for everyone. Here are the top 6 reasons NOT to do online lead generation.
You are a Part Time Agent:
Online lead gen takes routine commitment and consistent follow up. More importantly, it takes numbers. The average agent only closes around 2% of the leads that they’ve generated online. You read that right folks: 2%. As a general rule of thumb, closing at 2% means you’ll close 1 in every 50 leads. What this means, clearly, is that you need to follow up with a great deal of leads to find the small number who will make you a big profit. And you have to follow up on a regular basis. As a part time agent, are you going to have the time to dedicate to consistent phone calls, emails, setting up listing matches, and staying on top of your leads? Are you prepared to consistently follow up with 50 leads who seemingly don’t want to give you the time of day, in order to find that 1 lead who will convert? This is the reality of the online lead gen world, and as a result, you need to be able to dedicate full time hours to this work.
You Don’t Have a Solid Financial Foundation:
Like anything worthwhile in life, online lead gen doesn’t come without investment. Agent Locator generally recommends for single agents to commence with a starting budget of around $300 a month (including management fees). While this may not be an obscene amount of money to invest in your business (really, it’s a fraction of the cost of your monthly bills) it does add up over time and it is an investment. Along with the “2% rule” listed above, keep in mind that the 2% will not convert overnight. Generally speaking, you’ll want to give an online lead gen campaign a good 6-12 months to start making you money. While it’s not unheard of for agents to close business in their first 1-6 months, it’s not something you should bank on. The question you need to ask yourself is this: Can I comfortably invest $300 a month (or a larger amount should you want more leads) for 6-12 months without closing a deal? Assuming the worst will give you a safety net. This tie’s into reason #3:
You Lack Patience:
This is where you’ll have to be very honest with yourself. If patience is a virtue that you lack, then you may be better off staying away from the online lead gen world. With that said, Real Estate in general is a bad career choice for a person who struggles with patience; deals can take a long time to convert, and can sometimes be few and far between. With online leads, this is especially true. Online leads are early in the buying or selling stage. They aren’t looking to buy or sell now. With that said, there are always exceptions to the rule, but you should typically assume the worst when you’re projecting results; assume these leads won’t buy for another year, and exercise patience in combination with consistent follow up.
You Don’t Understand How it Works:
Understanding how online lead gen works is the first step to harnessing it as a medium to drive revenue. If you don’t understand the concept, then you’ll have a hard time implementing the steps necessary for success. You need to understand how these leads are being generated so that you can grasp the mind frame of the lead. This lead typed key words into a search tab, or they clicked on a paid advertisement on Facebook/Twitter etc. They didn’t call you, and they weren’t looking for an agent. They were looking for information. So when you follow up, the goal shouldn’t be to sell the lead on you as an agent yet, but rather to present yourself as a source of information and aid. The lead, whether intentional or not, reached out a hand by filling out an online form. That doesn’t mean they are ready to take you on as their agent, but it does mean that they are seriously contemplating listing or purchasing. Be the help they inadvertently went looking for. That way you’ll be top of mind when they are ready to start making moves.
You Don’t Research Your Partner Options:
In relation to my point above: understanding how it works will help you to choose the right partner. Any horror stories you may have heard in the past don’t always relate to an agent who wasn’t fit for the arena. Sometimes, the agent simply chose a bad lead gen provider. When exploring lead gen partners you should ask yourself these questions: did the company take the time to demo their product to me, and explain how every facet works? Does what they showed you make sense? Does the company offer training? Does the company have a dedicated support staff? Does the company have a track record of successful agents? Does the company offer a low cost per lead? If the answers are a resounding “yes”, then the only question is if you’re prepared to commit to the campaign. If the answers are “no”, then you’d be better off finding another provider.
You are Complacent or Content:
Are you happy doing 10 deals a year? Have you found a nice work/life balance? Does the added work involved with building your business scare you off? Or maybe you’ve been in business for 20 years and your sphere of influence consistently drives a yearly revenue and workload that you’re comfortable with. If you fall into these categories, online lead gen will simply be a burden on your finances and time. Long-time agents banking on their sphere of influence don’t need the extra work. Some of you may have families that you don’t want to take time away from. If you are at a stage in life where you simply don’t want to build you’re business anymore, then online lead gen is a venture you are better off leaving alone.
Where Does This Leave You?
In conclusion, online lead generation works…for the right agents. If you genuinely want to build you’re business, and sphere of influence alone isn’t getting the job done, you should consider online lead gen. If you are an intelligent, dedicated realtor with knowledge and capital to invest, then online lead gen can help you to reach levels of business that you’d struggle to achieve without it. That being said, you need to be honest with yourself in determining if you want to do this full time, if you have the funds to invest, if you understand the time commitment and follow up required, and if you have a good lead gen partner who will man the stations allowing you to do what you do best: sell!