I don’t have much time left.

As soon as I wrote the first draft of this article, the Toronto Real Estate Board (TREB) dispatched a team of crack mercenaries to kidnap me.  It’s a little known fact that TREB monitors all Realtor computers and as soon as one of us starts talking about the market correcting, they take action.

It’s even worse if a Realtor uses the words “crash” and “market” in the same paragraph.  If that happens, they disappear within 48 hours.  I had a friend who emailed me about a car accident at the local farmer’s market on a Sunday and by Tuesday he was “finding himself” in Peru.

So I’m going to keep this brief because I don’t how long I have before they arrive.

This seller’s market is bananas.

I’ve talked about stats each month (here’s the December one) and the unbelievable rate of appreciation we are seeing in Toronto and the outlying 905 area.

As each successive year of tremendous appreciation passes, we become blasé about people saying this isn’t sustainable.  There are only so many headlines warning us the end is nigh, before we start to ignore them.

Imminent market crashes, real estate bubbles, economist predictions of 25% price corrections – when the predicted crash time comes and go without any crash, again and again, we all start to feel like the villagers near the boy who cries wolf.

If you remember the end of that story, a wolf does eventually appear and no one listens to the boy.  I believe he’s eaten or forced to work in a call centre or something horrible.

Let me be very clear.  There is a wolf and he will eventually arrive.

The factors that influence the real estate market are varied and complex.  They include bond rates and accompanying interest rates, population demographics (particularly age), employment rates, immigration, currency rates, municipal and provincial government policies and many more.
Predicting when the real estate market will correct or crash is an extremely difficult thing to do, as evidenced by all the professors, economists and pundits who keep getting it wrong.

So I’m just going to say this.

When the market corrects or crashes, the homes that are going to see massive price drops are the ones that are fundamentally flawed.

What’s a fundamental flaw, you ask?  Here we go.

A house located on a busy street will be worth considerably less than a house on a street a couple of blocks away from that busy street.  When a correction or crash occurs, there are more options available for purchase.  You can be sure that when a buyer has a choice between lights shining in their window and traffic noise, or a quiet street still close to a major road, it is the house on the quieter street that retains value better.

A house with an awkward layout or strange updates will not command as much of a sale price when houses with better flow and typical renovations are available for sale.  In this seller’s market, buyers are willing to overlook a barely functional bathroom shoved in under a staircase or a hallway walled off to create another bedroom.  When the market shifts, buyers will be able to be more discerning when it comes to layout and past renovations.

A house that fails a home inspection is going to be much harder to sell when buyers actually require home inspections.  With the lack of inventory on the market today, many buyers feel like they don’t have a choice when it comes to imperfections.  There is a sense that if you are lucky enough to buy a house, you have to take whatever state it is in and say thank you.  When the market corrects it will mean that you don’t automatically make a bunch of money on the house appreciating every year.  When that happens, the cost of necessary repairs to the roof, the furnace and the foundation is no longer as easy to accept.

A house with bad neighbours is not going to be able to sell for as much money. While this could include those neighbours who never mow their lawn or who keep Christmas decorations up all year long, I am specifically talking about houses that are located beside, behind or in front of undesirable properties.  If the house backs onto cemeteries or schools, has an apartment building looming over the backyard, is located near the end of the street and has commercial buildings as neighbours, or faces a Toronto Hydro or other semi-industrial space, the sale price will drop considerably once buyers have a choice of other options.

A house with a small lot or crowded position on the lot will lose value much quicker than a home on a typical lot with a good position.  Some perfectly lovely homes are on tiny lots as a result of severing larger land parcels or changes over time.  Other homes are on decent lots but for some reason were positioned in such a way that it feels crowded or too close to neighbours.  In a shifting market where buyers have more power, these homes will lose value quickly.  I particularly feel bad for people who have done great renovations to homes on such lots as they will not see a return in a different market.

I work with buyers all the time, and on a regular basis I advise against the purchase of a particular home because of one of the above factors.

If you or someone you know own a home with one or more of the above issues, sell it before the market shifts.  There are very little options out there for buyers right now and they will overlook these issues and pay a very good price.

A lateral move from a home with fundamental flaws to a home without them is going to be a very smart investment that could save you hundreds of thousands of dollars in a lower sale price at a later date.

If you or someone you know are worried about how your home will do in a more balanced or buyers market, please get in touch with me.  I’d love to be responsible for what comes next.

Regards,

Jeff

JL.COM-Design

WORKPLACE ENCLOSURE

People cannot work effectively if their workspace is too enclosed or too exposed.  A good workspace strikes the balance.

As more and more people need a home office, the place where the workplace is located becomes a discussion I have with many clients.  In many cases, there is not enough space for the workspace to be located in its own room and it needs to be fit into a room with other purposes as well.

This lesson identified 13 variables that impact how comfortable a workspace feels and when I look at how I’ve set up my home office, I’ve followed most of them.  Some key elements are having a wall behind you and ideally beside you, making you feel less exposed; open space in front of the workspace so you can shift your gaze away while thinking; a view to the outside so it isn’t simply a static room you’re looking at; and finally the number of positions you can sit in, to give you some variety to push back from the desk, lean away and so forth.