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Why No One is Buying Your Assignment

Around this time last year I predicted 2009 was going to be the year of the assignment. I was wrong. While assignments did begin to take a greater role in the overall Toronto condo market, they still have not gone ‘mainstream’. Quite frankly, this method of buying and selling real estate will probably never go mainstream, however, in 2010 it looks like assignments will be seen as a “Third Way” of buying condos in Toronto (the traditional two ways being pre-sale or resale).

People contact me just about every day and ask me about assignments - I want to buy an assignment! I want to sell my condo by assignment! The truth is, most people have no idea what is involved when buying and selling an assignment. When the Average Joe learns just a fraction of what there is to know about assignments, 95% of the time Average Joe ends up returning to the comparatively simple world of pre-sales and resales.

So for all the sellers of assignments, as well as those who may be thinking about buying a condo by assignment, I’d like to introduce to the the top-5 reasons why many assignment listings never sell:

1. No Market Exposure. You are not allowed to advertise assignments on the MLS. Many assignment listings don’t sell because no one knows about them!
2. Lawyers. Most lawyers hate assignment deals. They often look for reasons to kill the deal – and with assignments, you don’t have to look to hard.
3. Price. This is probably the #1 reason why many assignment listings don’t sell. You can’t price an assignment like a resale property. Investors buy assignments and investors don’t pay current market value for property!
4. Closing Day Too Far Away. Buying a pre-sale condo then trying to flip it a month later is a fool’s game. The unit must be at or very close to occupancy so that market value can be accurately predicted and the investor can safely determine if they are getting a deal.
5. Closing Costs. Did you get your closing costs capped by the developer when you first bought your condo? If not, there is no way to tell exactly what they might be. Buyers of assignments need some degree of certainty as to what closing costs they will incur, otherwise they will move on.

Bottom line, assignments are not for everyone, but for the right buyer and seller, working with a good Realtor and co-operative lawyers, they can be a fantastic way to transact in real estate. Questions about assignments? Contact me.

10 Days is a Long Time To Think

When you buy a new condo in Ontario, you have 10 days after you receive your copy of the executed agreement of purchase and sale and the condominium documents to rescind on your agreement if you choose to do so. This can be for any reason whatsoever, technically you do not even have to provide a reason. You are released from your obligations and your deposit cheque(s) are returned to you.

I think this law is valuable and necessary and that it does what it is supposed to do – protect buyers from doing something they will regret. Unfortunately, some people are thinkers, and thinkers often think too much.  A lot what-ifs and worst-case scenarios can play out in your mind over the course of 10-days and the initial joy and excitement of buying a condo can be replaced by anxiety and fear over future events that may or not occur.

Typical rescission rates for most new condos is about 20%. That means out of every 5 purchasers, 1 will change their mind during the 10 days and will return their unit. By contrast, conditional deals in the resale market go firm about 95% of the time.

In my own experience, buyers who rescind on their agreements tend to do so because of one reason: risk. They just don’t have the stomach for the risk involved in buying pre-construction – and there is a lot of it! This has led me to believe that some people just should not buy a pre-construction condo. They are not cut out for it, and they would be far better off looking at lower risk investment opportunities in the resale market.

Buying a pre-construction condo is a high-risk, high-reward scenario. If you tend to be a risk-averse person, understand the inherent risk involved and use the 10-day cooling off period to carefully consider whether you are comfortable proceeding.  Questions or comments? Contact me.

Pricing Starting to Favour Pre-Construction

Once upon a time in Toronto real estate, there was a rule  that investors followed religiously – you only buy a pre-construction condo if the price is lower than that of a comparable existing resale condo. If the price wasn’t lower than existing resale condos of similar quality in the immediate area, then it just didn’t make sense to buy. After all, why take on the risk of buying ‘from plans’ when you don’t know how long it will actually take to be delivered, what the final build quality will be like, and what additional surprise costs you may incur along the way.

When market really started to get hot sometime in mid-2007, and pre-construction condos became the thing everyone and their mom were investing in, this long-held rule was abandoned. Prices of pre-construction started to reach heights never seen in the resale market. $600 Per Square Foot was suddenly a normal rate for pre-builds, whereas resale prices were still hovering around $425 PSF.

Over the last six months, there has been a seismic shift in the resale market. Prices have escalated at about 2% per month since June 1. If you bought a condo on May 1st of this year anywhere downtown, it likely has appreciated about 12% in value. Congrats.

Prices have gone up so much and so quickly in the resale market that the value is now, incredibly, starting to once again favour pre-construction.  Resale prices in several of the ‘prime’ downtown buildings like College Park, The Hudson, The Met, 18 Yorkville, Mozo, are now routinely hitting the $550-$575 PSF range. One upper floor 1+den with parking unit at College Park recently sold for $660 PSF! With several pre-construction projects across the downtown still selling between $500-$550 PSF, it doesn’t take a genius to figure out where the best value for your investment dollar is and where it will be in the months ahead.

If you are interested in taking advantage of some hidden gems in the pre-construction market downtown, let’s talk.

Prepare to be Disappointed

I would love to paint a picture for my readers and clients that buying a new, pre-construction condo at a VIP sales event is a simple and straight-forward process where if you have money and are ready to spend it, you get exactly what you want when you want it. Unfortunately this is not always the case.

This past weekend I attended yet another one of these VIP broker-type sales events at one of the highest-profile condo projects downtown in the King and Spadina neighbourhood. Condos at this project are selling in the $800-1000 per square foot range. These are not low end condos.

My client wanted to buy a 1 bedroom unit for something around $500K. We lined up early, we knew exactly what we wanted, we even had our deposit cheque ready to be handed over. When the doors finally opened, we were told that there were no 1 bedrooms available (even though it was advertised that there would be). In fact, there were no units available unless we wanted to spend at least $750K.

Of course, I knew this would likely be the case beforehand and had prepared my client for this reality. But most people attending these “VIP sales events” have no clue what they are walking into.

My best advice to buyers is “prepare to be disappointed”. Even though you may know exactly what you want to buy and have the financial means to do so, you may go home empty handed. It’s the nature of these sales events. They are built around hype and anticipation. Once you are through the doors they know that given the chance, most people will buy just about anything

Questions or comments? Feel free to contact me or leave a comment below.

Protect Yourself: Never ‘Register’ With a Developer

When you enter into a new condo sales office, the first thing the pretty girl behind the desk will say to you is “Have you been here before? / Can I get you to sign in? / Have you registered with us yet?”.  Hmmm…you’ve got to ask yourself why they are so quick and in-your-face to get your personal information when you’ve only just walked through the doors. The reason is simple but most people are shocked to hear it.

When you sign-in/register with a developer, you are giving up your right to be independently represented on any future purchase at that condo development. You are effectively saying, I am not working with an Agent, and I give up my right to have an agent represent me in the future.

NEVER REGISTER OR SIGN-IN WITH A DEVELOPER!

Even if you have absolutely no intention of working with a Realtor, or if you think you have absolutely no intention of actually purchasing a suite at the development whose sales office you are entering, don’t give up your right to be represented! Remember that the sales people in the sales offices are working exclusively for the developer – they have ZERO obligation to you and your interests.

Remember, it costs you nothing to be represented by an exclusive buyer’s agent. The developer pays the fee on your behalf! Be smart, protect yourself and always leave yourself the option to be represented.

So what should you do?

1. Never give up your personal information on a sign-in or ‘registration’ forms. Tell them you are working with a Realtor/you have an agent.
2. If they press you to fill out the form anyway, put down your agent’s name and contact info. Better yet, give them your agent’s business card with your name on the back of it. (If you don’t have an agent, feel free to use my name and contact info.)
3. If they give you a hard time, or refuse your agent’s name as registration, you’ve got to ask yourself if this is a developer you want to buy from.

If you are thinking about buying a new condo, click here to hire me as your exclusive buyer’s agent.

New Condo Search Websites Popping Up Everywhere

New condo buyers in Toronto are finally getting some serious attention from ‘the industry’ and it looks like the future isn’t entirely bleak for those wanting a true web 2.0 experience when searching online for information on new developments. This month two new Toronto condo search websites have popped up recently that I wanted to share with my readers: CondoCatch and Novo Condo.

CondoCatch is a fairly simple yet effective Google maps-based site which shows most of the new condo developments in Toronto on a map along with their key stats and occupancy dates. One neat feature is the ‘timeline’ which shows in chronological order the expected occupancy dates of their database of new condos. I’m not sure who runs CondoCatch or what their goals are, but it looks like they are not agents and they are focused on creating a useful tool for consumers.

Novo Condo is based out of Montreal and is a more sophisticated and professional looking site, but the basic premise is the same. They offer consumers a Google map of the GTA with most of the major condo projects included and the ability to contact the developer directly for more information. Clearly the focus on Novo Condo is on the developer/marketer/agent side of the equation to generate sales leads and interact with potential buyers and investors.

Check them out and let me know what you think!

Mortgage Rates Heading Back Down?

Mortgage rates have risen sharply over the past 2 months. Getting a 5-year fixed rate in the mid to low 3s was possible just a few weeks ago, but now 5-year rates are hovering around the low 4s with most lenders. Still, rates are very close to all-time lows and money is cheap.

I got an interesting email from a mortgage broker this week that seems to suggest rates could actually be heading back down in the months to come. Read on for a copy of the email newsletter I received from Marcus Tzaferis of MortgageMarcus.com.

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BuzzBuzzHome.com Aims to Help You Find Your Next Condo

BuzzBuzzHome.com has just launched in beta. What is BBH? In their own words:

BuzzBuzzHome’s mission is to give people the power to search, research and connect to directly new home developments.

Many of you have perhaps been following the BuzzBuzzHome blog, or following BuzzBuzzHome on Twitter for the past few months and like me, have been wondering what exactly they were planning. Now that they have launched their website it’s clear that they are aiming to build a comprehensive online database for buyers to be able to research new condo developments as well as sign up for updates on their favourite developments. It’s all based on Google maps and users can search and compare the various condo developments quickly and easily with the click of a mouse.

It’s also aimed at developers themselves so that they can reach their potential customers and make their information about their developments available in a user-friendly way. Developers are encouraged to ’sponsor’ their listings so that they stand out from the rest and so they can add more premium content.

It is still in beta, so the data is somewhat limited at the moment, but it looks promising.  Here’s hoping developers will be willing to share their data with the site to make it a truly useful tool for condo buyers.

Mortgage Rates Going Up Tomorrow

I’ve been telling my active buyer clients this for the past couple of weeks, but for those of you who are just readers and subscribers to this blog, get your application for pre-approval in ASAP because mortgage rates are definitely going up this week. Remember that most pre-approvals last for 90-120 days so if you get in your application in the next 24 hours then maybe, just maybe you will get locked in to today’s rates.

One of the mortgage brokers I work with informs me that rates on 5-year fixed mortgages will be bumping up by 40 basis points. So that juicy 3.79% rate that many lenders are throwing around will now be a slightly less juicy 4.19%.

Of course, this should come as no surprise as when it comes to mortgage rates, what goes down, must come up! Rates have been at all time lows for a few months now, and bond rates have been on the rise (fixed rate mortgages are usually tied to the bond market).

For a good blog on Canadian mortgages, check out Canadian Mortgage Trend. Check out this great chart they have right now on the 5-year posted rate trend over the past couple of years. Pretty revealing and it looks like we have already hit the bottom and are coming back up.

Looking for a mortgage broker or wondering about the pre-approval process? Contact me.

10 Things You Should Know Before Moving to Toronto

Are you thinking about moving to Toronto? Here are some fun facts that will help acquaint you with our city before you get here. 

1. It gets cold. Winters here can be harsh, especially the months of January and February. But the downtown core gets less snow than the rest of the city because of 2 things: the lake effect, and the urban heat island effect. Many people do bike all year round, but most people put their bikes into storage for at least 4 months a year (December-March)
2. It gets hot. We are not the Great White North of Bob and Doug Mckenzie fame. We actually do have a summer in Toronto. In fact, we have 4 seasons in Toronto. Seeing the mercury rise above 40 degrees Celsius (104 Fahrenheit) when factoring in the humidity is not an uncommon occurrence from about Mid June to late August.
3. Toronto has a lot of nicknames.  Popular ones include “The Big Smoke”, “T.o.”, “Hogtown”, “The T-dot”, and of course “Toronna“. There isn’t one that is universally accepted so feel free to pick that that works for you.
4. Getting around is easy. Most of Toronto is based on a grid-pattern that goes north from Lake Ontario. Yonge Street is the major dividing line east/west, and Bloor St is the unofficial dividing line between downtown/uptown.  The two major subway lines are the Yonge line and the Bloor line. If you get disoriented, just look up. The CN Tower is always south. 
5. The world is here, and the results are delicious! Toronto is one of the most multi-cultural cities in the world. Almost half of all new immigrants to Canada settle in the GTA (Greater Toronto Area). The restaurant scene in Toronto is as diverse as its population. 
6. We like to compare. Torontonians (that’s what we call ourselves) like to speak of themselves in relation to other ‘great’ cities. Downtown should be more like New York, waterfront should be more like Chicago, etc. Despite our self-effacing nature, when push comes to shove there is no other city on earth we would rather live.
7. Toronto is actually a pretty big city. Most people know that Toronto is Canada’s largest city, but many are surprised to hear that the GTA’s population of about 5.5 million makes it the 5th largest metropolitan area in North America. 
8. Toronto is on the water, but we are not really a waterfront city. If you are coming to Toronto from a city like Chicago, Vancouver, or New York, and hoping for a similar connection with the water-you’ll probably be disappointed. Yes we have beaches, yacht clubs, and a waterfront trail (sort-of), but Toronto was never set-up to be a waterfront city. Things are starting to change though.
9. Toronto is a city of neighbourhoods. From Little Italy, Greektown, Chinatown, Rosedale, Forest Hill, Cabbagetown, The Annex, Toronto is a city of neighbourhoods – each with it’s own unique character and flavour. 
10. Toronto is a safe city.  Make no mistake, crime does take place in our city, but overall Toronto is one of the safest cities in Canada and even the world. There are very few areas in Toronto where an average person would not feel secure walking around by themselves at night. 

Image credit: bensonkua