I know what you’re thinking.
Another Friday and here Jeff is, going on and on about real estate.
At a certain point, it becomes sadly obvious that I am obsessed with real estate.
I mean, I know we are all somewhat obsessed with real estate. If you don’t believe me, next time you’re with a group of friends and the conversation lulls, throw this conversational bomb out there.
“I hear the real estate market is crashing. What do you think?”
Then sit back and watch for the next hour or so as your friends get into a heated conversation that will culminate in your one friend telling your other friend he doesn’t know what the hell he is talking about.
You see, real estate is a fascinating topic! Sure, I may talk about it more than most people. OK, more than everyone. It doesn’t mean I don’t have other things in my life.
Why just the other day I was talking with my fiancée about where we should get married and I brought up a really interesting point about rental rates in Toronto versus the greater Toronto area. Wait, that’s not a good example.
Ah, here’s a better one. I had dinner with my Mom recently and she and I got into a discussion about mortgage rates and how much her condo is worth these days. Ah…that’s not good either.
Got it. I went out for drinks last night with a buddy to celebrate my upcoming birthday. We had a great time and I was even able to clarify what happens today when his condo sale closes. I explained how the closing process works and..damnit.
I give up. I’m obsessed with real estate. I think about it all the time.
The latest focus of my real estate thinking has been the purchase decision. After all, I work with both buyers and sellers and it’s fair to say that the decision to buy or not to buy a property is the most important part of the process.
As I mentioned in my article last week, we are seeing a return to a more normal, somewhat balanced real estate market. It is still more of a seller’s market in most areas, but the sheer insanity of earlier this year has faded somewhat. More inventory is on the market and buyers have at least a bit of a choice now.
More options for buyers means that houses don’t fly off the market at the same speed as they did earlier this year. Buyers are asking themselves the same two questions they always have, but the answers are more relevant. Here is what buyers need to answer when they consider a home.
- Does it fit our needs?
This is it, the most basic of questions. Is this home suitable for us? Can we live here?
In a strong seller’s market, an acceptable answer is actually at a pretty low bar. I’ve seen motivated buyers who don’t have many options decide that though the answer is “kinda”, they still move forward with the purchase.
In a buyer’s market, the answer needs to be a lot more positive. In such a market, I’ve seen motivated buyers decide to not buy a home due to one or two relatively minor aspects. With hundreds of options, buyers don’t settle for a home that is only “kinda” right for them.
When I work with buyer clients, a big part of the journey is helping the clients hone in on what is really important to them. After all, it is difficult to say if a home fits your needs if you aren’t really that clear on what you need.
In my experience, it is quite common for a search to vary significantly from start to finish. Every journey needs to start somewhere and it is only through doing the hard work of reviewing listings and seeing homes that a buyer can understand what is most important for them.
One of the most common pieces of feedback I get from agents who show one of my listings is that the property showed great, but it’s still early days in the search for their client. I understand exactly what they mean, as sometimes buyers need to see a property that they thought they loved to realize that there are other aspects they value.
When I hear stories of agents showing upwards of hundreds of properties to a buyer client, I say to myself that agent isn’t helping their buyer client hone in on what they need in a home. If a buyer is still not sure after seeing a hundred homes, their agent isn’t doing their job. Buyers need their agent to help them identify crucial and non-crucial attributes, understand the market and move towards getting a home that fits their needs.
When I work with seller clients, an important part of the job is taking the attributes of the home, the property and the area and determining what sort of buyer will be the perfect fit.
I am absolutely a firm believer in the idea that every home is perfect for someone. The décor that one buyer finds dated is cute as a button to another. The basement that needs to be gutted is a nightmare to one buyer but a great opportunity to add value to another.
When a seller doesn’t find a buyer who is the right fit, the price is what makes a deal happen. Specifically, the seller has to lower the price in order to get the buyer to accept the home, despite the issues the buyer has with it. The better the fit with the buyer, the less of a price drop the seller needs to make.
Finding the perfect buyer for a home takes time and effort and while I do believe such matches can take place, the goal is to find as good a fit as possible in the timeframe the seller has established. The better the Realtor is at accomplishing that, the higher the price the seller receives. This leads us to the second question every buyer asks.
- What’s a good price?
Once a buyer has determined that a home fits their needs to a large extent, the next question is what’s a good price to pay?
When a buyer is looking in a strong seller’s market, the answer to this question becomes a lot less nuanced. With little inventory and lots of competition, a buyer needs to be comfortable with the overall fit and value in the home and believe that even if they pay more now than they would in a balanced market, the property is a good choice for them.
In a balanced or buyer’s market, we have the opportunity to consider the question fully.
I do a four point pricing analysis for properties I list, where we consider:
By placing the home in the context of what is going on in the real estate market, we are in a position to understand the demand for a property, both in the greater Toronto market as a whole as well as in the area and even neighbourhood.
Comparable Sold Properties
We look at the best comparable properties that have sold, both recently as well in the past, using the market data to adjust older sales to what they would receive if they were sold on the market now.
Comparable Properties Currently for Sale
By reviewing other comparable properties on the market and their asking price, we get a sense of what potential buyers have as options right now. We look at competing properties that are located nearby as well as further away properties that have similar attributes to the property.
Condition of Home
The finishes, upgrades and condition of the property has a significant impact on the appeal and therefore valuation of the home. We take the condition of the property into consideration and go beyond the attributes of the property to ensure the valuation reflects how the property feels.
I do this four point property valuation because I believe the more work a listing agent does to support a price, the easier it is to show to a prospective buyer why the home is worth the list price.
While a great fit between a buyer and a property means the buyer is interested in the home, unless the answer to what’s a good price for it is close to the listing price, a deal is not likely to happen.
The Realtor you hire needs to understand how to give buyers the answer to if the home is a fit and what’s a good price for it. If you hire the right Realtor, buyers get the help they need to answer the questions and find a home and sellers get a buyer who is the right fit and who understands the value of the home. If you or someone you like is considering buying or selling a home, don’t hesitate to reach out to me. I’d love to be responsible for what comes next.
LOOPED LOCAL ROADS
Lay out local roads so they form loops. A loop is defined as any stretch of road which makes it impossible for cars that don’t have destinations on it to use as a shortcut.
This lesson is based on the idea that nobody wants fast through traffic going by their homes. Such traffic is fast, noisy and dangerous. It limits the enjoyment of outside spaces, makes pulling in and pulling out challenging and presents a safety hazard for children and pets.
I’ve had many buyers over the years consider properties on busy roads. The proximity to transit and easy access to highways is appealing. Often, the price for such homes is lower than a similar house on a side street.
In such cases, I have been clear with my clients that the same factors that make this house sell for less now will likely be in play when they go to sell at some point. Regardless of if the busy road is a concern for them, make no mistake, it will be a consideration for lots of buyers at resale time.
Wherever possible, look for homes located in courts, cul-de-sacs and other looped roads that are not a thorough fare to another major road. Drivers will only come down the road if they have a purpose there and the street will have a quieter, more private feel.