Southern Ontario-based home buyers, who offer cash to purchase houses in poor condition, have started to make inroads in northern Ontario, due to the region’s hot real estate market.
Devin Labranche, a Sudbury-based realtor with eXp Realty, started his career in London, Ont., where he said the practice of cash offers for homes was already common by 2017.
“We started to see the market grow there quite a bit and we could kind of tell through demographic distribution that people were spreading out through the greater GTA area to other areas due to the housing crisis,” he said. “So it was just a matter of time before they came here [to Sudbury].”
Since the start of the COVID-19 pandemic Labranche, said he has heard from clients and family members who have seen advertisements from companies that offer cash buyouts for homes with no strings attached.
The companies include SLG Home Buyer and Cash House Buyer. Some use roadside signs, and others send out mailers, which are often made to look handwritten.
“It’s just a great way for people to feel like, ‘Oh, I’ve been hand-picked for somebody who wants to buy my house,'” Labranche said. “They tend to prey on vulnerable people who don’t know the market or who are in distress and need to sell right away.”
Labranche said people looking to sell their homes should speak with at least three local realtors to find out what comparable houses have sold for, and what they might expect in the open market.
Labranche agrees buying and renovating homes can be a good business model, but cautioned sellers should be diligent if they want to get the best possible price for their home.
Tyler Peroni, chair of the Sudbury Real Estate Board, says home sellers should speak with a local realtor before making any big decisions. (Tyler Peroni Sudbury Real Estate Broker/Facebook)
Tyler Peroni, chair of the Sudbury Real Estate Board, said homeowners should meet with a local realtor before they make any decisions about selling their property.
When asked if companies buying homes for cash were preying on the vulnerable, Peroni was more cautious.
“I hate to make an allegation against anybody that’s doing this,” he said. “We want to see the best in any business model or any business that operates in Sudbury. As long as there’s full disclosure and transparency, I don’t think that we can necessarily knock any business practice.”
A growing northern Ontario market
Real estate investor Ammar Beg owns a Markham, Ontario-based company called Canada Fast Offer. He has advertised in Sudbury and other parts of northern Ontario, and purchased homes from the region.
Beg said there are several reasons businesses like his have had a greater presence in northern Ontario since the COVID-19 pandemic started.
The first reason, he said, is that the increase in house prices has made it worthwhile for investors to buy homes in the region, invest in renovations, and resell them at a profit.
“In the past, let’s say a couple of years ago, if I looked at a property in Sudbury or Timmins or North Bay or some of these areas, even Sault Ste. Marie the value just wasn’t there,” he said. “Now that the numbers have gone up it’s starting to make sense.
“We can give them a reasonable price where they can pay off their debts, they can have some cash in hand. They can move forward with something, and we can still turn a profit.”
The second reason companies like Canada Fast Offer have entered the market, said Beg, is that more people have turned to real estate investing in the last 18 months.
“Now with the pandemic, I think what’s happened is that there are a lot of people who are either on CERB, or maybe their business has gotten some grants, and now they have that time and ability to find these off-market sellers and market to them,” he said.
Flyers from real estate investors, often designed to look hand-written, have become a more common sight in northern Ontario cities, according to realtors in the region. (Jonathan Migneault/CBC) The business model
Beg said his business focuses on homes that are not in a liveable state. He offers a cash buyout, renovates the home, and either turns it into a rental property or sells it on the market. He said more often than not, he resells the home.
“We’re actually adding to the inventory of liveable homes,” he said. “We’re not taking away from the housing market, we’re actually adding to it, because these are not properties you would live in.”
He said many of the sellers he works with prefer not to go through the traditional route of selling through a realtor, and find it simpler to accept a cash offer for their property.
“If you live in that situation and you’re classified as a hoarder, and the place is a mess and it’s not liveable, the last thing you want is a rotating door of people walking through your home,” Beg said.
As for those mail-in flyers, Beg said direct mail marketing rules mean companies have to cast a wide net. Real estate investors can’t target specific homes with direct mail marketing, but must instead cover entire postal routes.
Homeowners who have no intention of selling, and who may not require major renovations, can get caught in the marketing blitz.