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.

I Am Your Coach

If you help clients buy and sell real estate, you are a coach.

The problem. Likely you have never formally learned “how” to coach. Many aspects of real estate are “learning by doing”. And, those who can “do”, survive. “Doing” and “surviving” is not coaching. And, real estate is changing faster than ever. Trial by fire will not keep you at the top anymore.

Coaching is not training. I have taught hundreds of seminars. My first career was in biotech. My job was to teach nurses, doctors, dentists and surgeons how to use our products. It was technical. It was training. We had teams all over the world trained to conduct the surgery and place the implants. The only problem was there were no patients. Everyone had technical expertise, but none of these fine professionals could motivate patients to say “yes” to the procedure. Over time, the best surgical teams were those lead by doctors who could convince patients to say “yes” to treatment. Many of these teams never received “formal” training. Like the top producing agent, they had so many clients(patients), they figured out how to use the product because they had the need. Sound familiar?

Great players are not automatically great coaches. I am a good real estate agent. I have sold hundreds of homes and negotiated millions of dollars on behalf of clients. None of this qualifies me to be an “effective” real estate coach. I am certified my NORE and have completed coaches training. The NORE model (Nature Of Real Estate) is derived from CTI (Coaches Training Institute) and customized for the unique demands of real estate by Suze Cumming. I have experienced great success using this model as a student and coach. If you have tried coaching and didn’t feel the magic, perhaps it’s worth trying a new method and new coach?

Avoid paint by numbers. A friend started real estate in 2008 at the same time as me. He started at one of the best training brokerages in town. I chose a brokerage filled with old farts (and knowledge). I heard his managing broker speaking one day at a seminar. He had hundreds of “training” ideas. I still use some of his ideas to this day. My friend bombed out after 28 months, faithfully paid his office bill and struggled to do a few deals. My path was the opposite. I was able to selectively hone my tools to fit my values and skills. My coach helped me do this.

The Difference? There are thousands of great trainers out there who think they are coaches. Thousands of agent have training. Few become top producers. Find a good coach and you will understand the difference quickly.

What’s next?

Are you reaching your financial goals?

Are you waking each day focused and energized?

Do you feel like you are just a few steps away from a break thru?

Do you feel stalled or less focused?

Are you ready to kick some ass and hammer this profession?

Is the best of you yet to be harnessed?

I am here to help realtors. It’s my profession. We make peoples lives better. I coach realtors. 😀

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

Showing Properties…Simple?

Have you ever called your real estate agent to book a showing? Here is what happens.

  1. Your agent contacts the listing agent to make sure the property is not sold.
  2. Your agent sends a formal request to show the property at a set date and time.
  3. The listing agent receives the message and makes a log entry, contacts the seller and waits for approval. If all is good, the showing is confirmed by the listing agent sending a confirmation message back to the buyer’s agent via email and text message.

You simply meet the agent at the listing and are quickly escorted throughout the home. Simple!

WAIT!

What if the seller cannot accommodate the showing as requested? What if there are tenants who do not respond timely to the listing agent’s request. What if the showing is cancelled or delayed by the seller or tenant? And, what happens when the buyer’s agent has lined up two or three showings and now has a gap in the schedule? What if there is a pending offer? What’s the status of the offer? Is the offer in negotiation? What’s the process now?

Booking a showing may seem simple but there is a lot that goes on behind the scenes. In most jurisdictions the timing of offers and showings comes under legal scrutiny should a conflict arise. Agents have specific legal and ethical rules that govern their conduct designed to benefit the public.

Often, these rules and ethics are not crystal clear and agents do their best behind the scenes to ensure fairness. This is one reason why top agents often say such great things about other top agents. A solid transaction always takes two talented agents!

Veteran full-time agents will agree:

  1. Negotiation starts when the showing is booked. Every comment, question and nuance is important should the buyer write an offer later on.
  2. Every showing is important to the seller and to the buyer. If it’s not, don’t book it. Be respectful. You are not buying every house you look at but someone took a lot of time out of their day to prepare the home. Respect.
  3. Feedback is appreciated. What did you like or dislike? This could help the seller in the future. And, more importantly, what did you purchase instead?
  4. Work with a full-time agent. You will notice the difference.

Viewing and screening properties is the most important element in real estate sales. It may seem like a simple appointment but it can lead to a great real estate purchase with the right advice.

D

 

Serving One Master

Matthew 6:24 “No one can serve two masters, since either he will hate one and love the other, or he will be devoted to one and despise the other. You cannot serve both God and money.”

June 15th Real Estate Agents in BC are banned from Limited Dual Agency. It’s an old lesson and it’s time now for agents to understand what this really means.

To me, it’s the goal to avoid conflicts of interest. My interest to support and protect the interests of my client needs to be placed at the forefront of my actions. Yet, real estate is a consumer game. Buying, selling, products, services, features and benefits, and emotions are involved. It’s not so cut a dried as some would like.

Let’s say I work for a developer selling new downtown condo’s and they are selling fast. My mom wants to buy one. Today, based on the rules, I would have to step aside and get my mom and the developer new individual agents. Agents that neither really know. Interesting. I don’t think this serves either of them very well at all. The delay could cost my mom a place to live. Mmmm.

Or, I list a home down the street in my area and my buyer clients whom I have shown many, many properties want to view the property. Technically, I am now in a conflict. And worse, if they want to buy it, I could again be double recused. This one I understand but I still struggle with.

Can agents create a thriving business serving one master? I know we can. But it’s a hard profession to succeed in and perhaps one of the hardest to “make it”. So, next time you meet with your agent, discuss these changes and how you will tackle these issues should you run into them. You will need to be flexible and you may not feel “served” but let’s hope you get the deal!