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Defence

We are bordering on a buyer’s market right now. I wouldn’t say we are quite there yet, but with the Sales:Active Listings ratio hovering around 35% for downtown condos, buyers certainly have choices when they go out looking for condos this summer. But I don’t want to talk about buying for a change, I want to talk about selling. Specifically, as a seller in this market, you better be able to defend your asking price.

In a seller’s market, where a monkey could sell a condo, agents and sellers will quite often pull a price out of the air without giving it any thought. In a buyer’s market, it’s back to the fundamentals of marketing: Product, Place, Promotion, and PRICE! Yes, choosing the correct asking price is a very important piece of the marketing mix for selling your property.

If you over-price your property, you are shooting yourself in the foot. You will get less potential buyers through your property, less offers, and potentially no offers at all. Inevitably you will have to reduce your price but by then your listing will be ’stale’ and most potential buyers will have moved on.

You might think there are no risks associated with under-pricing, but there are. Underpricing a listing in a seller’s market results in multiple offers and potentially an artificially inflated selling price. Underpricing in a buyer’s market when there are less active buyers and more listings means you could end up selling your property for less than it is actually worth, but you would never even know it because there just isn’t the same critical mass of buyers out there.

Bottom line, you (and more importantly your agent) need to be able to defend your asking price when a buyer’s agent comes a calling and says, “How flexible is the seller on the price? It is a buyer’s market after all…”. Questions or comments? Thinking of selling? Contact me.

The Market Has Peaked, So Now What?

So the market has peaked (probably). Now what do you do? Well, first thing to remember is that most people won’t realize the market has peaked for about 3 months so if you are reading this you are way ahead of the curve. Secondly we are not talking about a market crash, and quite possibly we may not even see prices start to fall till Q3 or Q4 of this year. Making predictions on exactly how much prices will rise or fall is fool’s game, so I won’t go there, but I could forsee a scenario with flat or slightly falling prices by the end of 2010. Depending on what your situation is, here are some quick thoughts moving forward:

For Buyers:

It’s already much better now than it was just 2 months ago. Inventory is up, some sellers are starting to get a grip on reality, and you actually have multiple properties to choose from. Things will continue to get better as inventory continues to rise along with interest rates which will increase supply and decrease demand at the same time. Don’t rush into anything. Now is not the time to pay higher for a property than the last guy did. Buy smart, buy for the long term.

For Sellers:

Understand that the market has changed. Price your property for what it is worth and don’t follow the “price it low for multiple offers” strategy. Remember that if you want to command top dollar in terms of selling price, your property must show better than all the other properties on the market – proper staging and marketing is vital. Better to list now than wait till Summer. There is still time to close before the HST kicks in July 1st. Want to talk about selling your condo? Contact me.

Investors:

Keep buying if the property makes sense and the neighbourhood has good long-term upside potential. Stop buying if you are hoping to flip for a quick profit or if you are over extended.

Questions or comments? Thinking about buying, selling, or investing and want the advice of a professional who understands the market? Contact me

HST Rush Is On

The long predicted rush to beat the HST seems to be in full effect. Developers who have nearly finished buildings are rushing to get their remaining inventory over $400K sold and closed (building registered) before June 30th. For example, Empire Communities has School House Lofts in the Annex – a boutique collection of high-end condominium residences, all priced over $629K, and they are trying to get these units sold and the building registered by June 30th. If they do not, they will either have to absorb a MASSIVE hit from the inclusion of the 8% extra HST, or they will have to raise prices on all units significantly.

On the resale side, buyers and sellers alike are trying to get their closings in before June 30th even though the impact will not be nearly as great as on the new build side. Let’s just say that all the real estate lawyers in the city will be VERY busy the last week of June and completely bored the first week of July!

Here’s what the actual impact of the HST will look like for both buyers and sellers of a typical $400K transaction

For Sellers, closing before July 1st will save you 8% on your real estate fees (assuming fees at 5%, that’s $1600). Legal fees on a typical sale will be about $1000 (HST would be $80 extra here).

For Buyers, closing before July 1st will save you 8% on your legal fees (assuming fees at $1500, that’s $120).

Other miscellaneous expenses to think about that will cost more come July 1st include home inspections and moving expenses.

Tip For Buyers: If you are buying a condo, check the status certificate to ensure that the budget includes an accounting for the HST and the impact it will have on the services the condo uses regularly. If the condo board has not planned for the increase, this is not a good sign!

Tip For Buyers and Sellers: Secure your lawyer early to handle your closing as many will be ‘booked up’ for the last week of June and may refuse you service.

Questions or comments? Feel free to contact me.

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.

Glas Condominiums – Now Registered!

Glas Condominiums (25 Oxley Street) is now registered. Congrats to all unit owners and investors who bought in the building several years ago and now you officially own your units.

I’ve spent a lot of time in the building lately as I have a couple of clients who are keen on the building. The suites are impressive and already Glas is commanding one of the highest price-per-square foot values in the area (King and Spadina). I expect resales to be in the mid $500s for most suites in the weeks ahead.

Today there are already about a half-dozen suites that have hit the MLS system as standard resale properties (building is registered, owners can sell and advertise at will).

This building is the first completed project under Brad Lamb’s development company.  Features like 9′ exposed concrete ceilings, extra large balconies (on some units) with gas lines, stainless steel appliances including gas cooking, granite counters, sliding barn-style doors, laminate floors throughout, floor to ceiling glass-wall construction, and ultra-modern design details – these are all features buyers of Brad Lamb’s projects have become accustomed to.

If you are a unit owner at Glas and are thinking about selling, or if you are a buyer interested in the building, contact me here.

Selling Your Condo: The Truth About Staging

Combined with cleaning your condo, staging it for sale is probably the most important thing you can do to prepare your condo for sale. Staging is simply the process of making your condo appear as attractive as possible to as many potential buyers as possible.

Condos that are staged properly sell faster and for more money than those that are not.  I am always baffled when I walk into a condo and discover that it has not been prepped for sale, or worse, is filthy and cluttered. Sometimes I can even see the vendor’s money flying out the windows…

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Selling Your Condo: The Truth About Open Houses

They don’t work. There, I said it.

Some of my fellow Realtors may not appreciate me posting this, but the truth is, open houses add little to no value to a successful marketing plan for selling a property.

What many agents tell their clients is open houses are a great way to ‘expose’ your property to the largest number of potential buyers and therefore help you get the highest possible selling price.  Some clients even insist that their agents do open houses. But statistics show only a small percentage of all properties are sold through open houses.

Who goes to open houses? Neighbours and people without agents. If you like the idea of having your neighbours and complete strangers off the street looking in your closets, then by all means, have an open house. But the serious buyers, those actively looking with intent to buy, are working with a Realtor. They will book an appointment to see your property through their agent because they want to buy your property, not to see what condiments are in your fridge.

Why do agents do open houses? Some agents are either dumb or naive and actually do think they sell properties, but most use them strictly as a prospecting and networking tool to meet potential new clients.  This is why you almost never see seasoned and successful agents hosting open houses. We have better things to do!

[The exception to this is perhaps in a down market where the number of agent-showings are dramatically reduced (as was the case from about Oct 2008-March 2009 most recently). In this type of market, an argument could be made that any potential increase in exposure could help sell your property and should be pursued.]

What are your thoughts? Leave me a comment or drop me an email.

Losing Money on Your Toronto Condo?

Over the past 10 years, the idea of losing money on Toronto Real Estate was thought to be an impossibility. Prices were increasing at a nice 5-6% per year, and that translated into thousands of dollars per month in ‘paper gains’. Not so any more. If you bought a condo in the past 18 months and you are trying to sell today, there is a high probability that you will lose money on the transaction.

I have been working with a buyer the past few days who is looking for a 2 bedroom condo downtown in the resale market. Our search took to the East Side, then to the West, and eventually we have settled on Cityplace as the buildings and the location is appealing to my client.

Researching some of the properties that are currently on the market quickly reveals that many sellers at Cityplace are currently looking at losing propositions on their investments. 

Couple examples:

• A 2 bed+den/2 bath unit is currently on the market for $410,000, original list $429,900. The seller paid $375,000 for the unit in June 2007. The seller spent probably around $15,000 in renovations. This one will sell for around $385,000. Assume closing costs of around $20,000 and these sellers are looking at a $25,000 ‘on paper’ loss.
• Another 2 bed+den/2 bath unit is currently on the market for $360,000. Original list price was $399,900. The seller paid $379,000 for the unit in December 2007. Let’s say the unit sells for $350,000-if so, the seller would be looking at a $29,000 hit + closing costs of roughly $20,000. $50,000 loss in 1 year of ownership. Ouch.

I always appreciate your feedback. Leave a comment or send me an email via my contact page.

Photo by Wyliepoon

Can’t Sell Your Condo? In this Market, Consider Renting

If you have have tried to sell your condo anytime in the last few months, you know what the Toronto real estate market is like better than anyone. 

Condos in ‘hot’ buildings that a year ago would sell over asking in week are now languishing on the market for weeks. Price reductions are happening every day. Conditional offers are welcomed with open arms as opposed to being laughed at in the heady days of 2007 and early 2008.

The bottom line is that it is a tough market to be a seller. The pressure is on you to have an immaculate unit in a great location at an irresistible price. And even then, that is no guarantee of success. 

One option that you might want to consider if you find that you can’t sell your condo, is to rent it. The rental market is not that bad right now. Leases are being signed every day as some would-be buyers are deciding to rent for another year. After you rent out your condo, you’ve got to live somewhere, so what do you do?

If you are fortunate enough to be in a financial position to carry two mortgages, then you buy somewhere else and take advantage of the market. But if you are like most sellers, that is not an option, so might I suggest renting yourself. That’s right, a real estate agent is telling you to rent and not buy (queue the dropping of jaws).

This is just what one of my clients did recently. Their condo unfortunately did not sell in a timely manner and due to personal constraints, they had to move, they could not wait for the market. So they rented out their 1 bedroom condo for about $1600 per month and then found a suitable place themselves in another part of the city for about $1200 per month. So they are actually ‘clearing’ about $400 a month while still paying down their mortgage. Their plan is to wait a year, see if the market has improved, and then either sell, or continue to rent. Not bad option if you can make it work.

I always love to hear your feedback. Leave me a comment or contact me any time.