I was out with a good friend the other day. He's a bright guy and usually a nice guy. When he said to me that "residential real estate is cookie cutter" I was a little surprised.
For those of you who know me, I wasn't going to intimidate my old 6'4 pal with my built.
Best rebuttal would be a challenge. By the way I sold this guy a house last year. And it was a pretty complicated deal so I'm not sure where he got the idea it was easy.
Here's the scenario I gave him;
A buyer locates a house they love. There's an offer date on the property.
After viewing the house they need to devise some strategy for the offer date.
-How much will they offer?
-How many offers will they compete with?
-What have comps sold for? If comps are plentiful, you use the best available and make all your adjustments-time; size; lot size; mechanics; parking situation; basement; # washrooms; ensuite; bedroom sizes; location on street; street itself, etc.
The inspection reveals that some work needs to be done;
-new roof
-new furnace
-grading issues
-knob and tube wiring exists. Not sure how much at the time of inspection. They have some work cut out around insurance issues.
The survey reveals that there is an easement at the back of the property. It's a substantial easement. The easement no doubt affects the use and enjoyment of the property.
A family room addition was completed in 1999. There's been 2 owners since so permits aren't available. It's being sold "as is" The survey does not show the family room addition. It's an existing survey.
The parking is a mutual drive with a pad park infront of the house. Though there is no legal permit for the pad. The owners claim it has been grandfathered and can be used as is. There may be some considerations here that affect enjoyment, use, resale value.
The mechanics are updated though it's known that these homes all contained oil tanks some 70 years ago. There's some investigating necessary around the oil tank.
It's an estate sale. Closing may be complicated while awaiting a certificate of appointment. The closing may also be pushed back week after week so make sure you have a contingency plan if you have a house to sell.
On the finance side, you may have some work and costs involved in the event that you close on your purchase prior to getting the equity out of the sale of your current address.
At this point my big buddy conceded that there's a few issues that he may have overlooked.
I've always been okay with the fact that I'm not doing rocket science for a living but I do have specialized knowledge and the more transactions I see, the more I can say no two are the same.
Cheers--
Michael Gruenstein MBA CSC
http://www.TheSmithsBuyAHouse.com
http://www.PropertiesinTheGTA.ca
mgruenstein@trebnet.com
Monday, January 31, 2011
Thursday, January 27, 2011
Looking Inside A House....at its "guts"
Here's me (an agent not an inspector) giving you some basic advice when you start looking at homes.
Not unlike us, homes get tired. Some get really tired. Nothing is built to last (forever). Most homes work in 20 year cycles. I've written about this before I'm pretty sure. But 90 blogs later...I'm losing track.
Anyway, a furnace, air conditioner, roof, windowws, plumbing and wiring make up most of the mechanics of the house.
If you've located a house you like...here's the tough decision if it turns out that the house is nearing that 20 yr cycle.
What's your budget like after land transfer tax and some renos that you'd need to do to be satisified with the property. I ask because in the event that the furnace and all other mechanics have had their day...you may be looking at 25-50k in mechanical work that you may need to put into the house the first year you take possession.
You'll wanna factor that into your offer price.
The Sellers are responsible for keeping the house in "working order"...so if the mechanics are old but heat is being distributed and the windows aren't cracked, they have every right to say it's in working order. Of course, you have every right to offer what you feel the property is worth.
THE LUCKY homebuyer finds the house at the 5 year mark on most mechanics and a seller who has taken to servicing the mechanics regularly.
Knob and tUBE:
Many older homes have this wiring. In some cases it has been replaced where renos have been done, for ex a kitchen. But bedrooms and some fixtures still have working strands of the wiring. The tricky part with this wiring is that the inspector can only "guess" at how much of this wiring is in the house. Basic removal of receptacles for light switches or in an unfinished bsmt it may stand out. Otherwise you really don't know until you buy. Once you buy, you have options. A few insurers will cover at a premium, others will mandate that if you can prove that less the sat 20% of the house has knob and tube...they're ok to insure, still others will force you to rid the wiring within a specified time period.
Asbestos:
I get asked about this all the time. Asbestos is like a band aid that is used to insulate pipes and keep the contents warm. It can be found above a water boiler in the basement; it can be encased in ductwork; it can even be in certain glues as a mold on older linoleum type floors. So when you do renovations you want to hire a team that is conscious of the age of the house and takes caution when removing old boliers or flooring for example. Undisturbed asbestos is not much of a concern for you.
Water:
Water is a problem for all homeowners and most homes have seen water. When you look at older homes in say North Toronto you may find markings on ceilings and patchwork. You're probably right to guess that it is water. Here's the thing: if it was the sight of water but was taken care of and just the owners did a crappy patch fix on the ceiling---that is one thing. What you need to concern yourself with is if water is still "active". If it is...this can be a costly repair and you better budget for it.
Thought I'd arbitrarily point these things out. They came up last night during a showing with some clients and I felt it worthy of a quick blog.
For more information about homes or the market...don't ever hesistate to call.
Best,
http://www.TheSmithsBuyAHouse.com
http://PropertiesinTheGTA.ca
mgruenstein@trebnet.com
416.271.2066
Not unlike us, homes get tired. Some get really tired. Nothing is built to last (forever). Most homes work in 20 year cycles. I've written about this before I'm pretty sure. But 90 blogs later...I'm losing track.
Anyway, a furnace, air conditioner, roof, windowws, plumbing and wiring make up most of the mechanics of the house.
If you've located a house you like...here's the tough decision if it turns out that the house is nearing that 20 yr cycle.
What's your budget like after land transfer tax and some renos that you'd need to do to be satisified with the property. I ask because in the event that the furnace and all other mechanics have had their day...you may be looking at 25-50k in mechanical work that you may need to put into the house the first year you take possession.
You'll wanna factor that into your offer price.
The Sellers are responsible for keeping the house in "working order"...so if the mechanics are old but heat is being distributed and the windows aren't cracked, they have every right to say it's in working order. Of course, you have every right to offer what you feel the property is worth.
THE LUCKY homebuyer finds the house at the 5 year mark on most mechanics and a seller who has taken to servicing the mechanics regularly.
Knob and tUBE:
Many older homes have this wiring. In some cases it has been replaced where renos have been done, for ex a kitchen. But bedrooms and some fixtures still have working strands of the wiring. The tricky part with this wiring is that the inspector can only "guess" at how much of this wiring is in the house. Basic removal of receptacles for light switches or in an unfinished bsmt it may stand out. Otherwise you really don't know until you buy. Once you buy, you have options. A few insurers will cover at a premium, others will mandate that if you can prove that less the sat 20% of the house has knob and tube...they're ok to insure, still others will force you to rid the wiring within a specified time period.
Asbestos:
I get asked about this all the time. Asbestos is like a band aid that is used to insulate pipes and keep the contents warm. It can be found above a water boiler in the basement; it can be encased in ductwork; it can even be in certain glues as a mold on older linoleum type floors. So when you do renovations you want to hire a team that is conscious of the age of the house and takes caution when removing old boliers or flooring for example. Undisturbed asbestos is not much of a concern for you.
Water:
Water is a problem for all homeowners and most homes have seen water. When you look at older homes in say North Toronto you may find markings on ceilings and patchwork. You're probably right to guess that it is water. Here's the thing: if it was the sight of water but was taken care of and just the owners did a crappy patch fix on the ceiling---that is one thing. What you need to concern yourself with is if water is still "active". If it is...this can be a costly repair and you better budget for it.
Thought I'd arbitrarily point these things out. They came up last night during a showing with some clients and I felt it worthy of a quick blog.
For more information about homes or the market...don't ever hesistate to call.
Best,
http://www.TheSmithsBuyAHouse.com
http://PropertiesinTheGTA.ca
mgruenstein@trebnet.com
416.271.2066
Thursday, January 20, 2011
Sellers Beware: Home Inspection Complete and Abatement Requested
Sellers see this all the time. A Buyer makes a conditional offer. One condition involves a home inspection.
Of course any seller of an older property in the City of Toronto will be concerned about what gets revealed during the inspection and how the Buyer reacts when the Inspector reviews his findings.
The Inspectors in the City are pretty good and from my experience, very few are out there to ruin a deal. Some are though. Most inspectors pass on their findings and then the concern is how the Buyers take this information.
Here's an example. I sold a property (my listing) a few days back. It was a 60 year old detached. The wiring had been updated over the years. It had an oil tank and an old furnace. As well as an older roof. Otherwise the property was in impeccable condition for its vintage.
I've explained this before in a different blog; mechanics in a home have a lifeline. Major mechanics like a roof may last 15 years, a furnace 15-20 and windows 15 yrs. The hope of any Buyer interested in a specific property is that the mechanics have been updated recently. In some cases it's a total victory. In others, the mechanics may all be reaching their natural lifespan. In the latter case, there's going to be a caution from the Inspector that the major mechanics may last a week after closing or months but even years.
Often Buyers will go back to the Seller asking for an abatement (money off the purchase price). So...should the Seller comply?
Well that all depends. How much demand is their for the house? How much are the Buyer's asking for? Is it a good deal and worth losing some money to finalize this deal? These need to be explored.
Technically speaking...the Seller is responsible to deliver the house in working order including all mechanics. If the day of the inspection the mechanics are in working order, they should be in similar working order on the date of closing.
A resale property is just that. It's not really the responsibility of the Seller to see to it that they purchase a new furnace for the Buyer or a new roof for that matter.
This issue creeps up a lot. Its a delicate line. Deals can fall apart over this; require further negotiations and certainly close to the Seller standing pat or giving in to some form of an abatement.
Its been said many times but a "good deal" is one where both parties feel they've "won".
Cheers-
Michael Gruenstein MBA CSC
http://www.TheSmithsBuyAHouse.com
mgruenstein@trebnet.com
Of course any seller of an older property in the City of Toronto will be concerned about what gets revealed during the inspection and how the Buyer reacts when the Inspector reviews his findings.
The Inspectors in the City are pretty good and from my experience, very few are out there to ruin a deal. Some are though. Most inspectors pass on their findings and then the concern is how the Buyers take this information.
Here's an example. I sold a property (my listing) a few days back. It was a 60 year old detached. The wiring had been updated over the years. It had an oil tank and an old furnace. As well as an older roof. Otherwise the property was in impeccable condition for its vintage.
I've explained this before in a different blog; mechanics in a home have a lifeline. Major mechanics like a roof may last 15 years, a furnace 15-20 and windows 15 yrs. The hope of any Buyer interested in a specific property is that the mechanics have been updated recently. In some cases it's a total victory. In others, the mechanics may all be reaching their natural lifespan. In the latter case, there's going to be a caution from the Inspector that the major mechanics may last a week after closing or months but even years.
Often Buyers will go back to the Seller asking for an abatement (money off the purchase price). So...should the Seller comply?
Well that all depends. How much demand is their for the house? How much are the Buyer's asking for? Is it a good deal and worth losing some money to finalize this deal? These need to be explored.
Technically speaking...the Seller is responsible to deliver the house in working order including all mechanics. If the day of the inspection the mechanics are in working order, they should be in similar working order on the date of closing.
A resale property is just that. It's not really the responsibility of the Seller to see to it that they purchase a new furnace for the Buyer or a new roof for that matter.
This issue creeps up a lot. Its a delicate line. Deals can fall apart over this; require further negotiations and certainly close to the Seller standing pat or giving in to some form of an abatement.
Its been said many times but a "good deal" is one where both parties feel they've "won".
Cheers-
Michael Gruenstein MBA CSC
http://www.TheSmithsBuyAHouse.com
mgruenstein@trebnet.com
Tuesday, January 18, 2011
Are we missing something?Are these new mortgage rules to slow down a bubble and restrain people from getting over their heads? Really? Not so fast!
I don't mean to sound like a cynic here.
Truth is that over the last few years the banks in Canada have come up with creative ways to reduce the chances of a housing bubble.
In an environment where the US has such low interest rates; a strong loonie; emergency lending rates; people willing to go into great debts...naturally borrowing is going up.
Inflation being light or reasonable and the strong dollar domestically doesn't leave room to cool the market by raising rates.
So tinkering with mortgage rates and rules to keep people away from market who may find themselves buried when rates rise (the very same ones who may look to ammortize over 35 years to make it affordable to buy) is the next best idea the government has.
If we slow down borrowing and the heated res market, then perhaps a bubble won't burst and consumers won't find themselves in deep shit. When consumers run 70% of your economy, if they go belly up (or down), you've got big problems in your economy!
Here's the thing...guess what has happened in these 3 recent instances:
1) HST is introduced
2) Mortgage rates and home lines of credit rules are tweaked so that buyers must satisfy 5 yr fixed heightened rate to qualify
3) Mortgage rules changed so that buyers can't amortize over 30 years and you can tap less of your houses value for money
In each one of these circumstances, there is a deadline for the rules to kick in.
The net result::
There is a surge of activity in the markets. Buyers feel like they better run to the bank and leverage the existing rules and buy. So more homes sell. In fact the numbers spike. And then the arguement is that they should taper off when the new rules hit.
I also can't help but wonder about the timing. Introducing further rules to restrict the ease of mortgage credit and having a commencement date of 60 days....that takes us right to the heart of the "spring market"....the busiest season for buyers.
Buyers will come out of the woodwork and figure out ways to get excited and work on their banks. Banks are still in the business of loaning money. Hey in the US, the banks are keeping rates low so money gets lent.
Anyway, what I'm suggessting is that all these attempts to slow a bubble and restricty those buying homes, when passed thru the media with a looming date of changing rules, seem to get the mortgage lenders, banks, realtors and buyers and sellers excitable and we actually get a further push into the market!
Truth is that over the last few years the banks in Canada have come up with creative ways to reduce the chances of a housing bubble.
In an environment where the US has such low interest rates; a strong loonie; emergency lending rates; people willing to go into great debts...naturally borrowing is going up.
Inflation being light or reasonable and the strong dollar domestically doesn't leave room to cool the market by raising rates.
So tinkering with mortgage rates and rules to keep people away from market who may find themselves buried when rates rise (the very same ones who may look to ammortize over 35 years to make it affordable to buy) is the next best idea the government has.
If we slow down borrowing and the heated res market, then perhaps a bubble won't burst and consumers won't find themselves in deep shit. When consumers run 70% of your economy, if they go belly up (or down), you've got big problems in your economy!
Here's the thing...guess what has happened in these 3 recent instances:
1) HST is introduced
2) Mortgage rates and home lines of credit rules are tweaked so that buyers must satisfy 5 yr fixed heightened rate to qualify
3) Mortgage rules changed so that buyers can't amortize over 30 years and you can tap less of your houses value for money
In each one of these circumstances, there is a deadline for the rules to kick in.
The net result::
There is a surge of activity in the markets. Buyers feel like they better run to the bank and leverage the existing rules and buy. So more homes sell. In fact the numbers spike. And then the arguement is that they should taper off when the new rules hit.
I also can't help but wonder about the timing. Introducing further rules to restrict the ease of mortgage credit and having a commencement date of 60 days....that takes us right to the heart of the "spring market"....the busiest season for buyers.
Buyers will come out of the woodwork and figure out ways to get excited and work on their banks. Banks are still in the business of loaning money. Hey in the US, the banks are keeping rates low so money gets lent.
Anyway, what I'm suggessting is that all these attempts to slow a bubble and restricty those buying homes, when passed thru the media with a looming date of changing rules, seem to get the mortgage lenders, banks, realtors and buyers and sellers excitable and we actually get a further push into the market!
Tuesday, January 11, 2011
Real Estate Myths....when buying or selling in GTA
Whether you flip homes for a living or are looking to purchase your first home, there are many myths about buying or selling. Be cautious: Here are just a few that immediately come to mind in the 10 min I have before going out to do an offer for a cherished buyer of mine.
Myths:
1. Your first offer is your best offer.
No doubt this was invented by a Realtor who was looking to close a quick deal and fire up the paperwork. I've had offers the day of a listing release that didn't compare to the one that came in 3 weeks down the road. I do believe there is a "right" buyer for your house. And I do believe the "best offer" is just that..."the best offer for .....you"!
2. In multiple offers, you'd better have the biggest offer price.
Not always the case. Preparation and a clean offer can be worth more to a seller than 10k. If the seller needs a quick closing date or needs to have a clause that he/she can extend the closing date...if a buyer can meet these specific needs...this can help win the house. Your agent needs to learn the motivation and needs of the Seller before the offer presentation.
3. Selling in the spring market gets you the biggest buck.
Not always. There's a lot of competition in the spring market. If better featured homes then yours sell for x amnt, then you may have to settle for less. Probably a truism when you have the best looking house on the street. Sometimes selling in the dead of winter with no competition is the best time to sell.
4. Prior to selling...redoing the bathrooms or kitchen will net you a lot more then the cost of renovating these areas.
If you use high end finishes and make sure that your choices are neutral and you have good layouts and user friendly space to work with...yes, it should be the case. But if you bang out a mediocre bathroom or kitchen, depending on the price point, if the buyer thinks that its not suitable, he/she will not pay your for the upgrade in the way you hoped. Frankly, if they're going to redo it anyway, you should have left it alone in the first place. You may now be eating into your return.
5. The best home inpection company will find the issues with the house.
While there are better inspectors....if you purchase a house in the winter, depending on the exact day...most companies will not be able to look through the snow and ice on the roof to detail the state of the roof like they would in the summer. The snow around the perimeter of the house makes finding foundation cracks on the exterior more difficult too. Also, you can't test the A/C in freezing weather. So no matter the inspector, winter buying has some risks.
6. Always sell before you buy or buy before you sell.
This is the toughest one. You need to know your specific circumstances. You need to determine|:
-whats the inventory like to buy in my range
-what's the competition like to sell my house
-will your bank help you bridge finance? what are their specific rules and costs?
-if you sell first do you have a plan B if you don't find the house you're looking for?
-if you buy first...lowball what you'll get for your house so you're not surprised
7. Seller always keeps the deposit if the deal doesn't go through.
Luckily I haven't been thru this scenario. Here's the thing. The money is held in trust with the listing brokerage. In order for it to be released to the Seller it has to be legally directed. In other words, the Seller may have to go to court to get the money. The Seller may sue for damages should the seller have to resell property in a less hot market. For specifics here...speak to your lawyer.
8. If you buy a house with a legal pad park then it automatically transfers to you upon close.
New rules state that the new buyer must reapply for the legal permit to be in order.
9. If the current owner has a street parking permit for his second car, then you'll have no trouble getting one too.
Better double check with the city here. Many streets actually have waiting lists for street parking. You can check prior to making an offer of the status of this so you aren't buying a parking 3 streets away!!
10. All agents do the same job! So I will use my sister in-law who is part-time!
No way will I accept this. I work too hard to accept this.
Go to http://www.TheSmithsBuyAHouse.com and learn more around this and me!!
Cheers-
Myths:
1. Your first offer is your best offer.
No doubt this was invented by a Realtor who was looking to close a quick deal and fire up the paperwork. I've had offers the day of a listing release that didn't compare to the one that came in 3 weeks down the road. I do believe there is a "right" buyer for your house. And I do believe the "best offer" is just that..."the best offer for .....you"!
2. In multiple offers, you'd better have the biggest offer price.
Not always the case. Preparation and a clean offer can be worth more to a seller than 10k. If the seller needs a quick closing date or needs to have a clause that he/she can extend the closing date...if a buyer can meet these specific needs...this can help win the house. Your agent needs to learn the motivation and needs of the Seller before the offer presentation.
3. Selling in the spring market gets you the biggest buck.
Not always. There's a lot of competition in the spring market. If better featured homes then yours sell for x amnt, then you may have to settle for less. Probably a truism when you have the best looking house on the street. Sometimes selling in the dead of winter with no competition is the best time to sell.
4. Prior to selling...redoing the bathrooms or kitchen will net you a lot more then the cost of renovating these areas.
If you use high end finishes and make sure that your choices are neutral and you have good layouts and user friendly space to work with...yes, it should be the case. But if you bang out a mediocre bathroom or kitchen, depending on the price point, if the buyer thinks that its not suitable, he/she will not pay your for the upgrade in the way you hoped. Frankly, if they're going to redo it anyway, you should have left it alone in the first place. You may now be eating into your return.
5. The best home inpection company will find the issues with the house.
While there are better inspectors....if you purchase a house in the winter, depending on the exact day...most companies will not be able to look through the snow and ice on the roof to detail the state of the roof like they would in the summer. The snow around the perimeter of the house makes finding foundation cracks on the exterior more difficult too. Also, you can't test the A/C in freezing weather. So no matter the inspector, winter buying has some risks.
6. Always sell before you buy or buy before you sell.
This is the toughest one. You need to know your specific circumstances. You need to determine|:
-whats the inventory like to buy in my range
-what's the competition like to sell my house
-will your bank help you bridge finance? what are their specific rules and costs?
-if you sell first do you have a plan B if you don't find the house you're looking for?
-if you buy first...lowball what you'll get for your house so you're not surprised
7. Seller always keeps the deposit if the deal doesn't go through.
Luckily I haven't been thru this scenario. Here's the thing. The money is held in trust with the listing brokerage. In order for it to be released to the Seller it has to be legally directed. In other words, the Seller may have to go to court to get the money. The Seller may sue for damages should the seller have to resell property in a less hot market. For specifics here...speak to your lawyer.
8. If you buy a house with a legal pad park then it automatically transfers to you upon close.
New rules state that the new buyer must reapply for the legal permit to be in order.
9. If the current owner has a street parking permit for his second car, then you'll have no trouble getting one too.
Better double check with the city here. Many streets actually have waiting lists for street parking. You can check prior to making an offer of the status of this so you aren't buying a parking 3 streets away!!
10. All agents do the same job! So I will use my sister in-law who is part-time!
No way will I accept this. I work too hard to accept this.
Go to http://www.TheSmithsBuyAHouse.com and learn more around this and me!!
Cheers-
Condo's-Good Investments? What's going on out there?
Are Condos a good investment?
You'll get many different answers here, depending on which economist you ask, which builder you ask, which renter you pole, which realtor you interview and which condo owner you ask and finally which building you are focussing on when you ask this question.
Look, in the perfect world, one would buy a condo off spec from the builder and pay entry level prices. Then the condo would be built and owners absorb their units. If the market is participating with low interest rates and a large buyer pool (particularly first time buyers)--you're going to likely be happy with your investment should you decide to sell.
That game is old. Where it gets tricky is when you factor in economic realities. So for those who bought say 5 years ago and moved in a year ago and decided to sell...it may not be quite so simple. Whats going for them is, 1) interest rates are low 2) strong pent up demand 3)prices have increased.
Now the tough part. If everyone decides to do the same at leverage this strong market, multiple units hit the market at the same time. So now a buyer is left scratching their head at the numbers and whats going on in this building that everyone wants out. For some it has been drilled into their heads that home is where you lay your hat and if you bought and immersed yourself in the purchase of your condo, you'd likely live there upon completion. Often not the case. With that many units for sale, naturally the supply outstripping demand, buyers have the upper hand on negotiations but still may not feel great about moving into what feels like an "empty" building.
I just ran into this scenario in the central core. On MLS my buyer and me found 3 units available. When we got there, the concierge showed me 25 lockboxes. There were so many available that sellers didnt want the impression that everyone was selling. So they asked the doorman to advertise the units for sale and let agents know they exist upon requesting the keys for the units booked through MLS!!
Another issue with new construction that you just won't know until down the road is the mix of renters versus owners. Renters dont have the same vested interest in the upkeep of the building and have little interest in talking the building up and continuing the marketing job after the developer has left the building, the same way that the owners will.
That said, we also run into a square footage issue in Toronto development. At 500-600 dollar a sq ft and little new inventory being built in the 1000 plus sq ft range (for obvious reasons...a developer can squeeze more units in and there are more buyers in lower range then higher range). So new construction is often built with open concept and light colors and big windows and tall ceilings to create a larger feel. The good news is that the finishes often rival those of detached homes. And if youre lucky and do your homework, you can find a good split plan open concept building that suits your needs. Layout in this ftg is everything in my opinion.
Finally, its the age old arguement of fees. It's true that the sexier buildings are often sold with the pool, gym, billiards room, concierge, spa, dining room, movie room, etc. All those amenities clearly increase the fees. If you're going to use the amenities-wonderful. If you're not, think twice.
Often older buildings have stronger reserve funds/savings for rainy day stuff. But...older buildings may soon need replacement of windows, furnaces, roofing, refurbishing of units and common areas and this can result in a special assesment (temp increase in fees for a period of time to top up the reserve fund after the fixes are complete.)
Reserve funds are always an issue. Often buyer can't see the documents of the condo corp until they come to a conditional agreement. If the condo just had a big withdrawal, you need to analyze for what purpose? Are you going to buy and get caught with the letter in your mailbox that fees are going up for a period so as to replenish the reserve fund? How old is the building? Typically lifeline of mechanics is 15-20 yrs. You'll wanna try to learn when mechanics were last updated and what service contracts there are available as well as who is responsible for the mechanics.
Look, at the end of the day, I strongly believe you want to build equity. Renting does not achieve that. Detached homes are quite expensive for many buyers and condos can offer a great simplified lifestyle.
Theres pros and cons to the condo lifestyle for sure. Often money decides quickly which direction you will go. Now if you edge towards condo shopping...there's lots to know!
As always, I'd love to hear from you. Email anytime. And thanks for all the questions thru the website http://www.TheSmithsBuyAHouse.com
Michael Gruenstein MBA CSC
You'll get many different answers here, depending on which economist you ask, which builder you ask, which renter you pole, which realtor you interview and which condo owner you ask and finally which building you are focussing on when you ask this question.
Look, in the perfect world, one would buy a condo off spec from the builder and pay entry level prices. Then the condo would be built and owners absorb their units. If the market is participating with low interest rates and a large buyer pool (particularly first time buyers)--you're going to likely be happy with your investment should you decide to sell.
That game is old. Where it gets tricky is when you factor in economic realities. So for those who bought say 5 years ago and moved in a year ago and decided to sell...it may not be quite so simple. Whats going for them is, 1) interest rates are low 2) strong pent up demand 3)prices have increased.
Now the tough part. If everyone decides to do the same at leverage this strong market, multiple units hit the market at the same time. So now a buyer is left scratching their head at the numbers and whats going on in this building that everyone wants out. For some it has been drilled into their heads that home is where you lay your hat and if you bought and immersed yourself in the purchase of your condo, you'd likely live there upon completion. Often not the case. With that many units for sale, naturally the supply outstripping demand, buyers have the upper hand on negotiations but still may not feel great about moving into what feels like an "empty" building.
I just ran into this scenario in the central core. On MLS my buyer and me found 3 units available. When we got there, the concierge showed me 25 lockboxes. There were so many available that sellers didnt want the impression that everyone was selling. So they asked the doorman to advertise the units for sale and let agents know they exist upon requesting the keys for the units booked through MLS!!
Another issue with new construction that you just won't know until down the road is the mix of renters versus owners. Renters dont have the same vested interest in the upkeep of the building and have little interest in talking the building up and continuing the marketing job after the developer has left the building, the same way that the owners will.
That said, we also run into a square footage issue in Toronto development. At 500-600 dollar a sq ft and little new inventory being built in the 1000 plus sq ft range (for obvious reasons...a developer can squeeze more units in and there are more buyers in lower range then higher range). So new construction is often built with open concept and light colors and big windows and tall ceilings to create a larger feel. The good news is that the finishes often rival those of detached homes. And if youre lucky and do your homework, you can find a good split plan open concept building that suits your needs. Layout in this ftg is everything in my opinion.
Finally, its the age old arguement of fees. It's true that the sexier buildings are often sold with the pool, gym, billiards room, concierge, spa, dining room, movie room, etc. All those amenities clearly increase the fees. If you're going to use the amenities-wonderful. If you're not, think twice.
Often older buildings have stronger reserve funds/savings for rainy day stuff. But...older buildings may soon need replacement of windows, furnaces, roofing, refurbishing of units and common areas and this can result in a special assesment (temp increase in fees for a period of time to top up the reserve fund after the fixes are complete.)
Reserve funds are always an issue. Often buyer can't see the documents of the condo corp until they come to a conditional agreement. If the condo just had a big withdrawal, you need to analyze for what purpose? Are you going to buy and get caught with the letter in your mailbox that fees are going up for a period so as to replenish the reserve fund? How old is the building? Typically lifeline of mechanics is 15-20 yrs. You'll wanna try to learn when mechanics were last updated and what service contracts there are available as well as who is responsible for the mechanics.
Look, at the end of the day, I strongly believe you want to build equity. Renting does not achieve that. Detached homes are quite expensive for many buyers and condos can offer a great simplified lifestyle.
Theres pros and cons to the condo lifestyle for sure. Often money decides quickly which direction you will go. Now if you edge towards condo shopping...there's lots to know!
As always, I'd love to hear from you. Email anytime. And thanks for all the questions thru the website http://www.TheSmithsBuyAHouse.com
Michael Gruenstein MBA CSC
Monday, January 3, 2011
2011 Housing Market: Up or Down?
With 2010 behind us....well kinda behind us.
To be fair were going into 2011 with much of 2010.
In 2010:
Goverment kept rates at emergency lows
Gvt introduced HST on new home purchases
Gvt made mortgage rules tighter so that it was more difficult to get a mortgage
Gvt offered no home tax credits
Net Result:
After a 20 percent leap in prices post 2008 recession in 09, prices continued to grow in 2010 more modestly.
Inventories for back half of year were down in many neighborhoods
Canadian household debt hits damn near 150% of income (thats very high)
So...what's in store for 2011??
Canada not really in position with dollar at par to increase interest rates to further strengthen dollar and cripple manufacturing so tough talk is that there may be further mortgage crunching to make even more difficult to get a mortgage
Inventory always increases in the summer months
Ford may tackle second land transfer tax
Once stimulus wears off in US so long as employment doesnt go up, rates should go up and as rates go up, typically fixed rates on mortgages increase
It really will boil down to supply and demand. How many ppl will list their homes. Theres always a ready supply of buyers. If buyers with good credit are out and sellers are scarce then prices will moderate.
530 pm BNN is going to make an arguement about the success of the 2011 real estate market. I will be tuned in.
Happy New Year to all.
******Sign up to get free listings sent to your inbox 24-48 hrs in advance of mls.ca. Your competition is on it.
Michael -
http://www.TheSmithsBuyAHouse.com
mgruenstein@trebnet.com
To be fair were going into 2011 with much of 2010.
In 2010:
Goverment kept rates at emergency lows
Gvt introduced HST on new home purchases
Gvt made mortgage rules tighter so that it was more difficult to get a mortgage
Gvt offered no home tax credits
Net Result:
After a 20 percent leap in prices post 2008 recession in 09, prices continued to grow in 2010 more modestly.
Inventories for back half of year were down in many neighborhoods
Canadian household debt hits damn near 150% of income (thats very high)
So...what's in store for 2011??
Canada not really in position with dollar at par to increase interest rates to further strengthen dollar and cripple manufacturing so tough talk is that there may be further mortgage crunching to make even more difficult to get a mortgage
Inventory always increases in the summer months
Ford may tackle second land transfer tax
Once stimulus wears off in US so long as employment doesnt go up, rates should go up and as rates go up, typically fixed rates on mortgages increase
It really will boil down to supply and demand. How many ppl will list their homes. Theres always a ready supply of buyers. If buyers with good credit are out and sellers are scarce then prices will moderate.
530 pm BNN is going to make an arguement about the success of the 2011 real estate market. I will be tuned in.
Happy New Year to all.
******Sign up to get free listings sent to your inbox 24-48 hrs in advance of mls.ca. Your competition is on it.
Michael -
http://www.TheSmithsBuyAHouse.com
mgruenstein@trebnet.com
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