Preparing for the post-rate-drop scurry

This article was produced in partnership with the Top Law Firm, Barristers and Solicitors.

Desmond Devoy, of Canadian Mortgage Professional, sat down with Abraham (Avi) Top, founder and principal lawyer, and Stefan Avramovic, managing lawyer, at The Top Law Firm in Toronto, about when interest rates may start to fall, and why real estate professionals need to be ready for the flurry that will accompany any rate drop.

It’s always darkest before dawn.

When it comes to real estate, “there will be an upturn at some point,” in the market, said Abraham Top (pictured left), founder and principal lawyer at the Top Law Firm, during a recent Zoom meeting.

As a senior real estate lawyer who started one of Canada’s largest real estate law firms, he knows the problems being faced by the market.

“We are in a state of flux. The interest rates are high and the inventory is low,” he said. “I am not anticipating there to be a further rate increase by the Bank of Canada. However, that fear, by itself, is enough to keep buyers on the sidelines until the rate drops. This is a mistake. They could be getting a great buy now if they find one and only lock in at a current higher rate for a shorter time until the rates drop. Then, once the rate drops, they refinance and lock in at a lower rate while the price of their home jumps overnight due to lower rates, prompting more inventory and price hikes.”

Now, not everyone is cloaked in darkness. Some of the bigger lenders are having to turn away business.

“For the B lenders and the private lenders, it’s a good time for them,” said Top.

For the smart brokers out there, he stressed that “it’s actually a good time.” They can “explain to their clients the positives of buying now versus when the rate drops. Then, come spring, they can revisit those clients and sow the fields they had planted earlier. They can capitalize on the fact that B lenders and private lenders can facilitate transactions for their clients easier and with less stress as opposed to the big banks.”

Stefan Avramovic (pictured right), managing lawyer at the Top Law Firm, agreed that this is a good time, or fertile ground, for brokers to “catch up on things that maybe they haven’t done yet.”

The main question hovering over the markets is where will interest rates will go?

“I think they may have peaked,” said Top. “I don’t see the Bank of Canada increasing rates again, especially coming into the holiday season and the New Year. It won’t be until early next year when we will see the housing market get stronger by the Bank of Canada lowering their rates.”

In fact, mid-September, or sooner, “the interest rates might start to come down depending on Canada’s recession and how the current government looks to solve it.”

“The rate drop won’t be huge,” he cautioned of any rate declines. “It’ll be minimal.”

And once the rates do come down, watch out.

“It’s going to ignite the real estate market,” said Top. “You’re going to see a whole mass of properties coming up for sale. Once the interest rates come down, even a hair, we’ll see homes coming up for sale.” That is why he thinks everyone in the industry needs to “get their house in order.” Because when the rates drop, even slightly, “it’s going to be busy. You don’t want to get caught without the infrastructure to facilitate transactions.”

Avramovic joked that if he had a crystal ball, he would be speaking to us from his yacht rather than his office.

But jokes aside, he agreed that “it’s just a matter of time,” he said for rates to come back to earth. “Keep your due diligence, and be prepared for when there is a change in the market,” he advised.

Taking a team approach to customer communications

So what can brokers and buyers be doing in the meantime to prepare for this deluge come the new year?

“For buyers, they need to become educated and speak to as many people as possible,” said Top. That means researching the right broker to guide you.

As for brokers and mortgage agents themselves, “I think they need to know the market, follow the industry, keep up to date with industry standards,” said Top. “If you’re not constantly updating, constantly updating yourself, you’re doing yourself and your clients a disservice.”

Avramovic agreed that for clients, picking the brains of real estate lawyers at the beginning of the transaction is important to find out important questions about their upcoming transactions such as the timeline, what is required and, most importantly, what the fees will be.

“Living costs have gone up so every dollar counts,” Avramovic said, and clients should not find out the final costs on closing day.”

This ties in with the need for communication, and being available, to all parties in the process. Having a technical portal that lets all parties see where everyone is in the process is great – but a client may want to know why a certain step has taken place and want to speak in person with someone.

“A lawyer is not a person who works in a message centre halfway across the country or world, reading from a script, but a real person with legal knowledge about why or what is happening with their closing.”

“We listen to our brokers, agents and clients,” added Top. “Each of our business partners works with a designed legal team. We designate a team just for each client so they are always speaking with the same people every time and not shuffled to a different person every time they call or email.”

“So now when you call in, your call goes straight to someone who knows what you’re talking about,” said Top.

Avramovic agreed that, in the industry, one of the biggest problems real estate professionals have is “not being able to get a hold of a lawyer.”

And when it comes to law, “if something needs to be answered, I always say it needed to be answered yesterday,” said Avramovic. “We have to be there to alleviate any stress from any clients or brokers or real estate agents. We need to be there.” At the Top Law Firm, “we make sure that it’s resolved right away,” through the team’s approach.

As the last people to touch a mortgage file, “we’re sending that client off on their voyage,” said Top. “Client retention is paramount. When we send our clients off, they are fully aware of what they’ve signed, what they’ve read and what they’re entering into.”

Having served as a coach with teams like Hamilton United and the men’s and women’s varsity soccer teams at Mohawk College, as well as having played in France, and professionally in Canada, Avramovic agreed that a team approach is important to any file.

“The real estate agent or the mortgage agent carry the ball for the first 200 yards and the lawyer carries it for the last 20 yards,” Avramovic said. Communication amongst the parties involved in fundamental in ensuring that the transaction closes as smoothly as possible and that conversations between lawyers and mortgage brokers, he said, can give both sides information that a “robot” simply cannot.