Mostly correct… mostly…

My last blog was March 13th of this year. If you are on this page, you have probably read it. My predictions were quite accurate even if I say so myself. Nanny, nanny bo-bo to you! At the same time, I was wrong on “rents stay the same”. Rent, in B.C., has increased 10% on average across the province year to date.

As a local real estate agent I have been busy since mid-May. At times, it crazy busy and at other times just steady. Any “losses” from March, April and May have been recovered and surpassed by production from late May, June, July and August. The past three months have set sales records in my area. The gains cannot be passed off as “buyer frenzy” from the lack of April and May activity. Something has changed. People have changed.

Not all real estate is booming. Yet, some real estate is experiencing multiple offer bidding wars.

What’s hot?

Location: “Better” locations are seeing more action. Quiet streets, cul-de-sacs, views and higher end neighbourhoods are winning.

Features: Buyer’s want what they want. Newer single-family homes, pools, triple car garages, waterfront, views and “extras” are helping sellers get multiple offers.

Homes with Suites: Legal suites are helping buyer’s borrow more money-yes. At the same time, having secondary accommodation in a home is a strong trend. Stay at home pandemic orders help.

Why suites? One aspect of interest suited homes that people often ignore is tax creep. Utility costs, increases in taxation and homeownership expenses are pushing people to seek extra income. Growing up my mom could afford a home in a single income – No suite needed. Not today. Local taxation and utility costs are rising more than incomes and a large part of the interest in secondary suites is clearly monthly cashflow.

What’s not hot?

Higher priced older homes that need work are not hot. “Project” homes that require work prior to moving in are still selling but buyer’s are negotiating and expecting a discount. On the opposite end, a “move-in ready” house which is priced a little high will most likely get good activity (showings) and even an offer. If the price is too high but the house is “nice” it would likely see a buyer take a run at a “lowball” offer.

Condo’s and some Stratas are not hot. Recent strata insurance issues have dampened sales of older wood-frame building units. Lenders have also been reluctant to lend on older buildings and we have even seen lenders request a copy of the home inspection reports and deny lending if they don’t like what they see.

Yet, concrete construction and “rentable” condo’s are still a solid play in my opinion.

What does the future hold?

It’s a great time to be working with an experienced real estate agent.

More than ever, prices are in flux. Some up, some down.

The value of features are in flux. Some up, some down.

The number of moving parts in a deal these days is the highest I have ever witnessed. Prices will modulate up and down for the next 12 months. Interest rates, CMHC and gov’t tinkering will have an impact and these changes will appear in 30 to 60 days cycles. So, consult with your agent regularly if you are planning to buy or sell in the near future. Timing the market is not possible yet it is possible to create a flexible plan and see what happens.

Good luck out there!

Buying and Selling During a Pandemic

“Should I buy this home considering the virus and stock market issues”?

It’s March 13, 2020 and negotiating deals recently saw this question come across my desk more than once.

Speak to your Lawyer, Accountant and Realtor® about personal advice based on your situation. Consider the following thoughts.

  1. Real Estate is truly local. The overriding local economic, social, taxation, migration and demographic factors are more important than other forces. Your local market might currently offer some killer deals?
  2. Money placed into “real property” is a longer-term investment.
  3. Rents will not change due to a pandemic and stock market crash per se. Base rents, to real investors, set the lowest price model for valuations. If you can rent a property cheaper than owning it (plus a savings plan) real estate in your area probably is overpriced. Ask your Realtor® about CAP rates and Net Operating Incomes in your area.
  4. Economic activity after the pandemic usually increases dramatically. Hurricanes destroy roads and infrastructure whereas pandemics panic and scare in modern times. For example, SARS hit in 2002 to 2004. In my area, real estate prices doubled from 2003 to 2005 and tripled by 2007. To be clear, SARS itself had no correlation to real estate prices increases in my area. Connecting the two is not statistically valid. What was valid were items mentioned in point 1; local factors.
  5. People with cash will be much richer in 6 months than you. As financial turmoil spreads, people with solid cash positions are wringing their hands. So, looking at your purchases without emotion makes a lot of sense right now.
  6. Real Estate prices and selection are based on supply and demand; Supply of property and money (financing). In my area, for example, supply has been limited for many months. Prices have fluctuated up and down. Rents are high (due to a shortage in supply). Government taxation has nearly halted building new units. And, last week my partner and I were involved in two “multiple offer” negotiations. The demand is high. Supply is limited in my area. What’s going on in yours?
  7. Financing. Recently, in Canada, the feds dropped mortgage rates. This helps all buyers access more money. In a market where supply is limited, this will raise prices over time.
  8. Prices and Values. Prices and values are relative. Mortgage rates and terms compared to rents are the real key. Think “cashflow”. People who wait to purchase are simply paying other people mortgages. I find over time, a massive drop in housing prices is not likely and those who wait may get priced out. Unless your parents own a mansion, you need someplace to live.
  9. FEAR. Many people will retract and defer based on fear. This will allow those who are analyzing the numbers and trends to have more open and free rein to deal in their best interest. But, it won’t last.
  10. You can’t time the bounce back. The stock market will bounce back. Buyers and Sellers will bounce back and Governments respond much faster with economic stimulus. Waiting to time your entry probably won’t work. In the past, bounce bask could take months and years. Today, I suspect this could happen within weeks and months instead. And, when people realize the bounce back has happened, it’s too late.
  11. Old Fashioned Advice. Everyone can be an expert in hindsight. A real expert crunches the numbers and takes action without emotion based on the data available at the time. If the numbers work and you are in it for the long term (+ 5 years) then it’s a great time to purchase real estate.

Real estate purchases are big. If you are a first time home buyer or investor, you will have to learn different thought processes in order to move forward. A low price on a bad property is far worse than a high price on a good one. What makes a good purchase? Running the numbers, looking at local factors and thinking long term are strategies of the winners. Remember, everyone needs shelter.

(Dean Desrosiers 2020. The thoughts and opinion expressed are those of Dean Desrosiers and not Century21 or any other entity he may be affiliated with)

Sell me something, please!

Two drops of grapefruit essential oil into my DesrosiersCook branded water bottle had me smiling this morning. My good friend Jen introduced my wife and me to essential oils and how they can enhance our lives. Billy, through his clever network of suppliers, sourced cool white with blue lettering “Swell” style water bottles. We have bought hundreds of essential oils and water bottles. Both items, I like very much. They make my short experience on this planet slightly better.

We purchased these items from friends. And, it’s important to note that we always try to purchase from friends and family. Why? I think it’s part of the meaning of life.

Sure, we could go online and find a slightly cheaper version of each item. And, chances are, they are all made at the same factory in the east somewhere. But to me, the act of supporting a friend is the essence of life.

Your entrepreneurial friends need your support. Those who rely on commissions, contingency sales or who own a retail business need your support to pay their bills. Simple as that.

Often your entrepreneur friends do not have retirement plans and they have taken risks to create a business. Unlike people with “Jay-Oh Bees”, entrepreneurs do not know if they will be able to pay their bills each month. Budgeting when sales are slow can be stressful. Jim Rohn calls it, “too much month at the end of the money.”

How can you help your entrepreneurial friends?

Buy their stuff, drink their Koolaid, ask them what help they need. Avoid their competitors and don’t be a dick. Support your friends and family.

Oh deer, you are not an expert…

Harry Beckwith tells us that “marketing” takes a day to learn but a lifetime to master. After 15 years in biotech and 12 years in years in real estate, I still find the science of marketing fascinating. I have spent millions of dollars trying to find the magic recipe. I can honestly say I have tried nearly everything in marketing and promotion over the years. (well, not blockchain yet). And, I am still looking and learning.

I get a lot of advice from clients about marketing. It’s all very good. Yet, for those of us who research the science of marketing, it’s a lot like asking the deer about how to use a rifle. Just because we are the target, doesn’t mean we are the expert. Yet, as the target, we certainly know when it works.

Coaching and Training 100

For many years I have been hesitant to act as a coach in real estate. However, I have coached hundreds of people from Dentists and their teams, professional salespeople, marketing professionals, basketball and volleyball players, martial artists, soccer kids and more. Yet, I have always felt that once I started offering “coaching” to other real estate agents, things would change dramatically for me and they have.

Let’s start with an important distinction.

Training is different that coaching.

Training is the teaching of “how” to accomplish a task. How do you interview a client? How do you discover the needs of buyers and sellers? How do you best conduct a showing of a property? How do you write an ad? How do you organize your day? How do you write a contract? Training is the foundation of developing true skill in any profession.

Coaching is the science and art of helping someone else achieve their goals. Coaching is helping the client (the coach’s client) understand why and what is important. Coaching is the ability to inspire the trained to obtain and achieve their best.

Training

  • Transferring Knowledge
  • Group Setting
  • Compliance – Things you need to know
  • Structured delivery
  • Requires “telling” by the instructor
  • Delivered by wrought
  • The material is important

Coaching

  • Enhancing effectiveness
  • Best one on one
  • Client-centric – for the needs of the client
  • Unstructured yet should be formal (the method)
  • Requires “listening”
  • Long lasting and inspiring
  • The coach and method are important

April 4th is my birthday. It’s also the day I am officially launching my real estate agent coaching practice.

Real Estate Agents can impact their clients lives in amazingly positive ways. My goal is to help this process. Simple as that.

A day in the life of a real estate agent…

A lot of people ask me about becoming a real estate agent. I could write a book with the answers. A day in the life of an agent is an interesting thing.

This is a typical Wednesday for me.

5:15 am – Awake. Double check schedule for the day, get cleaned up, smell nice, leave the house at 6:25 am.

6:45 am – Arrive at referral breakfast group to meet 35 of the nicest and most committed entrepreneurs in Kelowna. Heckle a little bit, give my one-minute elevator speech, enjoy the 20-minute vendor presentation, finish up breakfast, drink 3 cups of coffee and by 8:30 am I am ready to move on.

9:00 am – Team meeting with Robyn and Luke. We discuss closings, confirm lawyers and details and any keys, lock boxes and client gifts. We also discuss up and coming listings and buyers we need to provide support to. We go through each listing and look at the data, showings, feedback and create an action plan to discuss with the client.

10:30 am – Time to look at emails and make a few outbound calls to clients, lawyers, bankers, home inspectors and to mop up any urgent concerns.

Noon – I usually skip lunch Wednesday because the results of the team meeting will often have me focused on a project. Robyn will often grab me laksa on her mid-day walk. Luke will have adjusted my chair in an attempt to make me fall out of it and lunch will be eaten at the office and sadly, rushed.

2:00 pm – Client showings. This time of year, March, the inventory is often growing so mid-week showings are usually onezy twosy. Often I squeeze in another set of showings at 5:00 pm for clients who work during the week.

3:30 pm – Check listing inventory, confirm emails are going to active clients, finalize any CMA’s (comparative market assessments) that are due for clients. We complete about 4 to 8 CMA’s a week depending on the time of year and often not always for buying and selling, Some clients are curious to know the current value of their property and we are always happy to help.

5:00 pm – Showing of home

6:30 pm – Arrive at my own home. Dinner with Wendy and often rushed.

7:00 pm – Office work at home. Send feedback to agents from showings. Receive feedback from agents who have shown my listings. Confirm interest levels, send emails to agents to see how much buyer or seller interest exists. Today, no offer will be presented or written so I can be done by 8 pm.

8:00 pm – quickly confirm the schedule for Thursday. Toastmasters starts at 6:45 am so I will need to arrive at 6:35 am.

Common Interruptions:

No two days are ever the same but often, significant interruptions will occur.

Dropping off and picking up family, Booking showings for my listings, Writing Offers – requires brain time, receiving offers, sitting down with sellers and buyers on short notice to work through the details.

If it’s a good day, I will have helped at least 3 to 5 clients move their interests forward.

A great day is helping clients and also getting time with Wendy and my kids.

One reason your real estate market will not crash!

Quickly scan the internet comment sections regarding housing prices and you will see a large number of folks commenting on the impending crash of prices and the fall of the capitalist system.

However, there is one simple calculation that will tell you if the sale price of houses is acceptable for the area. It’s not the only criteria but this method works well for most of the markets.

Remember back when I said there are 3 ways to value real estate? This method is based on the Income Method. It utilizes the relationship between the cost of ownership (principle, interest, taxes, maintenance, utilities) measured against the rental income.

This value is expressed as Net Operating Income and you will sometimes hear the term CAP Rate.

In simple terms, if the property can be rented out for an operating income which exceeds the expenses to own it (a net), the property is considered a good investment. How much net operating income varies based on the property. Older properties require higher CAP Rates because of maintenance and variable expenses. New properties can often sell for lower CAP Rates because of less maintenance.

At press time a variable rate mortgage is 3%. Buy a 4 bedroom house at $620,000 and put 20% down and your mortgage for $500k will be $2100 a month. Monthly Expenses? Taxes $300. Water $100. Insurance $150. Maintenance $200. Utilities are a wash as renters and owners both pay these. Total monthly cost is $2,750.

Three things to consider.

  1. About 40% of the mortgage payment pays down the principle so the entire mortgage is not an expense. About $800 a month in equity is building for the owner.
  2. A four bedroom house in my area rents between $2,500 and $3,500 a month. So, this house may be a good investment.
  3. Some people may create a 1 bedroom suite and rent it out for $800 to $1,100 in my area. Which, makes ownership of this home much less than rent!

Understanding Net Operating Income and CAP Rates will turn you into a savvy real estate investor in no time. In the short run ask your Realtor® for these stats and buy with confidence. Your home and investment are on solid financial footing.

It’s your story to tell.

Real Estate agency relationships are private and confidential. The things you say and do with your agent are… between you and your agent.

By knowing your private thoughts and motivations, your real estate agent is in a careful place to offer advice. A good place. A place to trust.

An ethical agent will hold back from the disclosing anything about your relationship, even it’s existence. Yet, top agents survive by referral. A referral is a recommendation from a past client, friend or associate. So, your referral is needed and vital.

If you liked working with your agent and he or she offered good advice and service please share.

What’s my house worth?

The number one question people want answered in real estate is “what’s my house worth?”. The answer, “that depends”.

The current trend online is to attract viewers with online and automatic valuation tools. “Click here to learn the value of your home”. Surrender your email address and then prepare to get dripped (marketing jargon for emailed, texted, called on a regular basis until you purchase or threaten death to the caller). These tools offered by Zillow, REMAX and many other providers are simple lead generation schemes. Here’s why.

Markets are local. A two story home in one part of town on a busy street might look similar to the same age, style and size as another but place this home in a “better” part of town on a quiet street and the price will be dramatically different. Minor differences in location can mean a lot.

Statistics are History. Current transactions between buyers and sellers happen fast and only become statistics 30 to 45 days later. The average first time buyer writes 2 to 3 offer before they acquire a home. This could happen in a matter of days. Following statistics, which are used by online systems for valuations, are no help to buyers who are in the hunt. Buyer’s who are activity looking at houses understand pricing better. Therefore, online valuation tools can easily be 30 to 45 days out of date which is a long time for buyers.

Tax Assessments are Wrong. The assessment authority will admit, “we don’t ever see the inside of the homes we are assessing”. When tax assessments are low, homeowners rarely complain because it means lower taxes. When the assessment is perceived to be high, homeowners fight them! Or, they sell! Tax assessments are not to be relied upon.

Buying is largely emotional. Smart buyers view multiple homes, learn pricing differences between features, areas, style and age. However, when a buyer walks into “their” new home, the choice is often automatic and partly emotional. Statistics cannot capture “feel”.

3 Methods to Truly Value Your Home. There are three accepted methods in the industry for the proper valuation of real estate. Each method will also have derivatives. Cost Method – what would it cost to buy the lot and replace the home in today’s construction dollars. Income Method – the value of the property if it was rented out and generating income for the owner/investor. Comparative Market Assessment – Comparing the subject property to local sales of similar homes against houses currently listed properties for sale.

Online tools are fun. Simple as that. The most important question is “why do you need to know the value?”. Are you selling, borrowing money or just want to update your financials?

A competent realtor who knows your area should be able to advise you and with the added bonus of no harassment! Valueations are often performed free! After all, what’s your time worth?

3 Reasons to stay loyal to your listing agent…

Not every house sells in 90 days. And, if you ask top producers, the main reason is the price. Yet, real estate markets are not so simple. Many agents invest thousands of dollars in your listing. If it doesn’t sell, the risk and loss to the agent are high. Whether your house sells or not, is not a reason to let your agent go and try a new one. Here are my thoughts as to why you should stick with your agent.

One: Professional Marketing. Did the agent use professional HD photos? Was the listing posted on the top real estate sites? Were the listing details compelling and accurate? Did the property look good? Many agents cut corners to save money and these short cuts and omissions can reduce exposure and cost you money. Selling property requires good marketing. Your listing does not need to appear in every magazine in town (in fact, print is the last place I would post) but the marketing plan needs to look good and cover the bases.

Two: Regular Reports and Contact. Do you get the “stats” on your listing? How is it doing in regards to page views, internet hits and likes? How has the data changed since the listing start date? How is it tracking now? The best thing about internet marketing is 100% of it is traceable. All clicks lead back to the listing and the “data” does not lie. You NEED this information. It will help you understand if you are priced correctly and if there is buyer action in your area and so much more. You should also get feedback from showings. Some say feedback is not really helpful. The best feedback is an offer of course!

Three: Your agent is full time and active in the area. I live in a unique area. So do you. My neighbour listed their house with an agent from a different town about 30 miles away. Not a long distance but far enough that the agent does not show or sell in our area much, if ever. The house was listed slightly overpriced in a heat of the market last year. A minor adjustment in price and the house could have sold. Instead, more than a year later, it’s sitting there. While I don’t know the seller’s motivation, I see this often. Hiring the local expert and one who works at the profession full-time is always prudent.

Staying loyalty to your full-time agent is the best gift you can give. Working by contingency (getting paid if something happens) is a hard road and many people just can’t handle the ups and downs. Giving your agent an extension, price change or relist is a solid strategy. It shows them that you respect their advice and appreciate their work. At the same time, make sure you are getting the real service you deserve.

D.Desrosiers 2019