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)

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

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!

Limited Dual Agency is truly limited.

June 15, 2018 saw the Real Estate Council of British Columbia overhaul the agency rules affecting more than 20,000 real estate agents in the province. 

At the core is the banning of “limited dual agency” or LDA. LDA is when the real estate agent, with the permission of both the buyer and seller (or sometimes both buyers) in a transaction, agree to let one agent(or team) act as “moderator”.

During the transaction, the LDA agreement allowed the agent to bend his or her fiduciary duty to facilitate the sale. Acting alone and technically working impartially, the agent was able to control the transaction for the benefit of the seller and the buyer. This was the theory.

BC has taken the bold step to ban LDA and it’s exciting.

I am not here to debate the good and bad of LDA. It’s gone and this is fact. It is also fact that sellers and buyers will not fully understand what this ban will mean. Many people will need to rethink the way they approach buying and selling real estate in BC. Some will be happy, some sad and some confused… at first. In time, it is expected that consumers will come to realize the benefits of the new approach.

If you would like to learn more in a hurry, call your agent up for a coffee. There is a four page form they need to share with you. 😉

Negotiating Leverage

Negotiating the sale of real estate is one of the most dynamic events in business and personal life. Money, emotion, needs, desires, features, timing and more combine to create an interesting storm.

Your real estate agent must be a negotiating expert. And if not an expert, your agent should at least profess to be a student of negotiation strategy and tactics. Your agents skill in this area will serve you: good or bad.

One tactic that is essential to understand is leverage. The FBI* tells us that there are three types. You will see other authors using similar categories with slightly different grammar.

Positive Leverage: Something good will happen if you agree to my terms.

Negative Leverage: Something bad will happen if you don’t agree to my terms.

Normative Leverage: If you agree to my terms, your normative values (the way you see the world) will be satisfied. Interestingly, this requires that the negotiator learns the normative values of his or her counter part. Insert: good communication skills and knowledge of “people”.

In residential real estate negotiations, I have found that positive and normative leverage are most powerful. Continue to read this blog and you will learn more.

*Thanks Chris Voss, Author: “Never Split The Difference”. Highly recommended read or audio book.

 

True Negotiation

A top producing real estate agent is a good negotiator. True or False?

Answer: True and False

Every aspect of real estate has a negotiating element. Consider now selecting a list price. The agent, in effect, negotiates with her or her own client for the list price.

Negotiate a price that’s too high and the home  may not get showings or worse, get showings with poor feedback. Negotiate a price that is too low and the house sells in a day or two. Maybe it was under priced? Maybe it was the “right” price. Which approach is correct?

Under priced homes do not require much negotiation skill. The offers pour in.

Over priced homes do not require any negotiation at all skill because the offer never arrives.

Somewhere in the middle is where your agent shines. A well priced home, marketed properly and with flair attracts offers.

Offers your agent can now apply their true negotiating skill upon.