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)

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.

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

 

Make it a great day!

My life changed when I finally realized that each day when I awake…

1. It’s a miracle to wake up. Not everyone gets to. I have my wits and my hands, feet and legs all seem to be working just fine. Exercising a grateful attitude rather than angst for the day ahead has helped to shape my mood. Not every day is fluffy and bright but I am truly excited for the day ahead.

2. My day will be filled with challenges. I have replaced, “why is this happening to me?”, with “alright, these are my cards, what’s the best hand I can play?”. I am also getting better with leaving past events in the past. It’s not easy to forget the mistakes, fumbles and times when things don’t go my way but waking up with a fresh slate each day is refreshing.

3. The type, quality and value of my challenges will define my life. Speaking with people who seem to be “stuck” in their lives, it’s often easy to see what they are stuck on is low-value issues. What problems am I helping with today? Am I at 30,000 feet or am I stuck in the weeds of anger, frustration with small issues. Is the work I am doing benefiting me and those people around me? When I am at ground level, am I approaching the work with gratitude?

My only task, therefore, becomes, choosing my challenges wisely.

 

Keeping busy by standing still

People that perform at a high level share the ability to solve “good” problems. Of course, problem solving is essential for getting things done. Few jobs or projects roll out without a hiccup or two. But ask yourself, what type of problems are you solving; self inflicted ones or those presented to you by others? You may feel that you are an excellent problem solver but if you are solving self-inflicted problems too often, your keeping busy by standing still.

The real estate secret

I remember a friend at a party stating “we found our last home by ourselves, the agent just booked the appointment and wrote the offer. What an easy job!”

Now, I don’t know the who’s, what’s or where for’s of their relationship, but there is a secret that we real estate agents keep to ourselves. It’s a big secret hiding in plain sight. We hide all the good listings on the MLS and realtor.ca.

What my friend failed to recognize and acknowledge was the numerous homes they previewed. He forgot to mention the agents comments, analysis and advice given during each showing. And, he completely missed the importance and skill utilized during the offer process. From writing the offer, including subjects for the buyer’s benefit, to assisting in completing the due diligence and ultimately closing the transaction with the help of their lawyer.

The entire process was simplified and “easy” because his agent was competent. There are houses for sale everywhere. Choosing the right one, making sure it’s a good one and locking it up with a solid offer may seem easy but there are a lot of moving parts. That’s why we are here.

D

 

 

 

Looking to purchase real estate? Step One…Step Two…

One: Find a real estate agent

Two: Find a Lender

One

Top three things to consider when choosing your agent.

1. Does this agent have experience and skill?

Can they protect me and cover the details of a complex transaction? Do they know the area? Can the agent show me how the house is valued?  Can they match my schedule and give me the service I need? Can they offer me service I don’t know that I need?

2. Does this agent have time for me?

Will they be able to meet me on short notice for showings? Will he or she have time to help me conduct the due diligence to make a good purchase? Will he or she help me analyze my purchase? Will he or she “chase the case” and work hard behind the scenes for me?

3) Will this agent allow me to say “no”?

Many agents often sell their clients to  a “yes” proposition house after house. Yet, screening properties well requires unbiased views and truly understanding the needs of the client. Acting as a fiduciary means coaching clients to what’s best for the client. Sometimes in hot markets, this means coaching a faster decision but in others, it means slowing down and offering quality advice. Which might mean the client says “no”.

Two

Lender: A person who is skilled at finding you the most amount of money possible for the best rate and most flexible terms…

Banks: Your bank will often employ Mortgage Specialists. Some are the busiest and most productive lenders in the area. If your credit and income are good, you will have little trouble but be wary of the posted rate and standard terms. Mortgage Specialists are limited to finding you products from their institution. Not a bad thing but it could hamper you if you need creativity.

Mortgage Broker: An independent & licensed professional. Mortgage brokers act like real estate agents. They hold their license at a “house” and can access money from multiple sources – often from your current bank. Mortgage Brokers only get paid if their succeed in getting you a mortgage. Many are focus on long-term business strategies and want your repeat business.

There are other options for borrowing and mortgages such a family, private lenders, the mafia etc. Even if you choose an alternate route, I would still consider having a mortgage broker guide you through the process.

 

 

Rookie real estate agent mistake #1

Can there really be a #1 mistake that a real estate agent can make? Mistakes are made everyday in any profession but in mine, there is a lot of money at stake.

I remember my first couple years. It felt as if I fumbled from one mistake to another. Nothing “big” thankfully and the support of my broker and mentors kept me on track. Mistakes are just part of the massive learning curve.

In choosing my number one you will need a little background. I believe that an agents roles is that of consultant and advice giver. Today, the legal definition has evolved to fiduciary. Interestingly, real estate agents are only paid when a deal completes. This can create a conflict.

If an agent needs a “sale” or commission, how likely is this to affect their ability to act as a true fiduciary?

Number one mistake agents make: “needing the money”.

Money is important. Zig Ziglar says “it ranks up there with air”. But needing the money is the problem.

Ask your agent, how are they financed? Do they have cash reserves if they do not do a deal for a month or two? Is their advice given without undue financial interest?

It might surprise you to know that most of us aren’t that busy.