Cross-border conundrum

In my hometown of Ottawa, condition-free offers are the norm. They could even be considered a requirement. I think any Canadian would say the same about their location right now, too – unless you live in Quebec, where there is a different hurdle to navigate: mandatory financing deadlines.

Shopping for a home while straddling the border of Ottawa and Gatineau, right in the middle of the two most competitive and anti-buyer markets I have ever participated in, has been a trying experience so far. There’s only a two-minute drive between the communities, but the frustrations of buying a home in 2021 greatly differ based on which side of the border I’m on.

For an offer in Ottawa, I can either overpay beyond belief with conditions – or, more commonly, I need to go in without an inspection or financing condition, tens to hundreds of thousands over asking, and still face an uncertain wait to find out if any of the 40 or more other prospective buyers were willing to take on more risk than I did.

For an offer in Gatineau, unless I have a bank statement showing I can buy the property in cash, I’m married to a financing condition that averages 14 days. My primary concern is no longer overpaying or lacking conditions with my offer – it’s missing the 14-day financing deadline that can only be waived by absolute proof of unconditional financing or cash in the bank. The odds of working into the eleventh hour for a ‘file complete’ notification on a purchase are as high as the odds of needing an appraisal on a conventional file.  

In other words, buying a home in Ontario is an extremely stressful and risky process for the borrower, whereas in Quebec, the borrower is financially protected from these risks. Instead, their homeownership dream is at the mercy of a limited number of appraisers and lenders, who must take a file from submitted to complete within a 14-day deadline, while a Realtor continuously reminds the would-be borrower that there will be no extension granted.

One would assume this financing condition makes a broker’s life easier and reduces stress. It could, but mortgage brokers in Quebec have two additional obstacles to face. First, Quebec brokers have a fraction of the lending options available in the rest of the country. The Quebec broker channel, with some exceptions, generally has access to one credit union, four monoline lenders and the usual broker channel banks. Second, of these available lenders, some are still getting used to the Quebec marketplace and trying to find their comfort zone, making them a bit harder to work with in some cases.

In an ordinary environment, the main impact of Quebec’s limited options on the average borrower is the pricing. Nesto recognized an average rate discrepancy of .05% to .15% for the same transaction type between our two brokerages, which operate on the same model in each province. The second impact is the inability to meet financing delays without pressure and stress – or inability to meet them at all in some cases, requiring an extension or loss of the property.

There are two broker channel lenders in Quebec that carry most of the origination weight. When they signal a delayed service level agreement, it takes less than five business days for all other lenders in the province to receive and try to manage the overflow. In February of this year, one of these larger lenders experienced an underwriter shortage that quickly turned into a backlog in processing incoming files.

While our objective is to ensure we have as close to a ‘file complete’ as possible prior to submission, imagine if overnight, you are suddenly forced to wait four to five days for a ‘first look’ when you have a 14-day financing deadline that cannot be waived by any other means apart from a ‘file complete.’

Low inventory, high pressure, increasing rates, approval delays and evaluation concerns – among many other items – are not the pillars of an ideal mortgage experience, but they are the reality for many homebuyers today. 

Chase Belair is the principal broker and co-founder of nesto, a digital mortgage agency based in Montreal.