Montreal's senior monthly since 1986

Feb '10

Columns

Preparing your home for sale in a hot market

The Montreal Real Estate market is booming. Low interest rates are generating lots of buyers. Furthermore, during the first quarter of any given year, the highest sale volumes occur as buyers look eagerly. If you are thinking of selling, 2010 will be no exception. Here is some advice to help you to prepare your home for sale.

It is important to make your home appealing to as many buyers as possible, so remove personal and religious items, photos, trinkets, and memorabilia.

Buyers need to visualize themselves in your home, so remove clutter, re-organize and clean your home from top to bottom.

Odours must be eliminated. Clean the cat litter box; deodorize and disinfect surfaces; throw out old cigarette and cigar butts and the garbage. You should prepare yourself for living in total cleanliness for the time your home is for sale.

You might want to consider renting additional storage space for excess items. Rooms need to be functional and clearly defined.

Redistributing what you have can work, but consider renting furniture if a room is empty or if you have nothing appropriate. Be creative with the themes of your rooms and set a mood. Everyone loves a light-filled room. Make sure the blinds are open and the windows are cleaned. Let in as much light as possible.

Consider adding lights in a dark room that has poor sun exposure or has no windows. Light and neutral paint colours help reflect what light enters a room. Consider repainting.

Complete minor repairs and inexpensive touch-ups. This will place buyers at ease toward what they fear most—that which they cannot see! Buyers feel more comfortable purchasing a well-maintained home. Don’t give them reasons to not purchase. This includes wading through deep snow on their way to view your home. Shovel the laneway and walkways often.

If you feel that you must renovate, talk to an agent to find out what is popular in your area. They might save you from spending money on unimportant renovations. An agent might also help you with staging your home. I offer home staging advice or the services of a home staging consultant. Other agents do the same.

Examine your home as though you were the buyer and be scrutinizing.

Make the best use of what you have and spend as little money as possible. Talk to an agent to get sound real-estate market advice and to get your home staged for sale.

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The Montreal real estate market home stretch

December 2008 marked the end of a record- breaking year in the Montreal real estate market.

Average sale prices of single family dwellings, condominiums, and revenue properties all increased from one to four per cent despite a 6.6 per cent reduction in the number of sale transactions. This reduction signalled the initial effect of this year’s economic downturn.

By the end of the first quarter in March of this year, the average sale price of single family dwellings, condominiums, and revenue properties had fallen as a result of the slump in the economy.

I wrote two articles earlier this year predicting that the real estate market was going to stabilize.

By the end of the second quarter in June, the market began to recover, despite the fact sale transactions were down 1.8 per cent over the previous year. Sale prices increased by 2.3 per cent for single family dwellings, 2.7 per cent for condominiums and 6.1 per cent for revenue properties. An increase in consumer confidence – generated by the government’s economic stimulus package, implemented to reduce interest rates and generate jobs – stimulated the growth in both sale price and number of transactions. Never before had mortgage interest rates been so low. At the end of the third quarter in September, sale prices continued to increase by one to two per cent over the same time last year.

It is likely that 2009 will be another record-breaking year for average sale prices in Montreal. Were it not for the initial sensationalism of the poor economy in the first quarter, 2009 sale transaction numbers would probably finish above those of 2008. Sale times are reducing, however. It now takes about eight fewer days to sell a single-family dwelling and five fewer days for a condominium. There has been no change in sale duration among revenue properties.

Does this indicate that the market is now balanced? It is too early to tell.

Traditionally, there are two peak real estate periods: one beginning in February and the other in September. December, January, July and August are slow real estate months because of the Christmas season and summer holidays.

Currently, there are lots of buyers available and banks are making it easier to qualify for mortgages. If you are thinking of selling or buying, now may be a good time.

Comments and questions regarding this column? Call 514-941-3858.

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To buy first or to sell first: that is the question

October, 2009

Whether or not to sell your home before buying a new one is a big dilemma for most home buyers, especially if you have not paid off your mortgage.

There is no one correct answer. Your decision will depend on several factors: the number of homes for sale in the area you are interested in; your ability to compromise; the time you have available to search; how long it will take you to sell your home; the needs of the seller of the home you wish to purchase; your financial purchasing power.

You need to know what choices are available in the area(s) you want to live. If you like several areas, you will generally have more selection. Compromise is necessary when buying a home because it is rare that you will find everything you want.

You should be prepared to spend a lot of time searching for a home. The agent you choose should be committed to your needs, while you should be committed to reviewing all the listings your agent sends you and providing feedback to increase the efficiency of the search.

Also, it is important to consider that it could take a very long time to sell your home, especially if you have a lot of competition.

Let’s assume that you found the home you want to buy and you make an offer. Your agent will advise you that you will be making an offer conditional on selling your home and that you will you will probably have to accept a 72-hour right of first refusal. This means that if your offer is accepted, the seller will continue to entertain other offers and can even accept one without telling you. Once all the conditions of the newly accepted offer have been fulfilled, you will be informed that another offer has been accepted and that all conditions have been removed. The seller is giving you 72 hours to remove all your conditions or else the new offer takes effect and yours becomes null and void. This means you have to show proof that your bank will provide you with an unconditional mortgage to purchase.

If you can afford two mortgages, which not many of us can, you can remove your conditions once you have the mortgage letter from the bank. A bridge loan is another option, but you must be able to qualify and you have to find a bank that will provide you with this letter within 72 hours.

Selling your home before looking for a new one has some advantages. It strengthens your bargaining position, especially if the home you are bidding on gets a second offer. Let’s face it: A conditional offer is less attractive than one that is not conditional.

The downside to selling your home prior to purchasing a new one is you might have to rent until you find a new home.

Furthermore, you might feel pressured into buying a home that is not what you want because you are simply running out of time.

It can be difficult to determine what to do first: buy or sell. If you need more information about this topic, do not hesitate to call and ask questions.

Daniel Smyth, Affiliated Real Estate Agent, Groupe Sutton-Clodem Inc., 514-941-3858.

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Should sellers hire agents offering lower commissions?

September, 2009

Should sellers use real estate agents offering the lowest commission rates?

Not necessarily, since sellers could face a trade-off. It is crucial to generate numerous interested buyers to increase the odds of negotiations commencing and competitive bidding situations occurring; marketing budgets are proportional to commissions. Smaller marketing budgets could equal fewer numbers of buyers. This is not to say that agents demonstrate less effort at lower commissions, but rather that their abilities are budgeted. Furthermore, the longer a property stays on the market, the greater the difference between the initial asking and sold prices: Fewer buyers means longer sales.

The sale of a property usually occurs between agents, a testament to the number of property owners using our services. Some selling agents offer less than half the total commission to the buying agent. Since commissions attract agents, who represent buyers, it is important to consider what it could mean if your agent offers less than half the commission. While some buyers look for properties independent of what their agents provide, alleviating a potential commission issue, most buyers working with agents prefer their services, which include research.

Sometimes properties have difficulty selling because of their features, location, staging, competition, and price. When you are dealt a “low hand,” sometimes no commission will be effective in selling the property. A good agent can make your “hand” stronger. A “strong hand” is analogous to having knowledge of market conditions, staging and competition, providing amazing listing details and photos, having effective marketing plans, selling and negotiating skills, not to mention numerous contacts and buyers in the field. There is a connection between quality and quantity of service and cost, since it is very difficult to provide valuable services for cheap prices.

It is imperative to understand that the selling agent does not keep all the commission. Half usually goes to the buying agent. Then the broker needs to be paid, usually between 10 and 25 per cent of the compensation. Then there are marketing costs, insurance and real estate board membership fees, government agency fees, and taxes. It is clear why some agents refuse to negotiate commissions.

However, agents’ commissions generally range between five and seven per cent, which demonstrates flexibility. As long as property owners understand the potential trade-offs related to low commissions, they should be able to find an agent willing to sell their property. I generally work for the average, charging lower and higher commissions depending on the goals of the seller. Commissions can be useful in negotiations, but no agent will give away hard work and well-deserved success; agents also lose money when properties do not sell. In the end, the key insight to all of this is that homeowners do not necessarily benefit from agents offering the lowest commissions.

To find out more, contact Daniel Smyth at 514-941-3858.

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Why it’s worthwhile to hire a real estate agent

July 2009

I recently had a conversation with a man looking for information about the real estate market, competition, interest rates, listing price vs selling price, sale duration, and renovating to sell vs not renovating to sell. I knew that this person was questioning me so that he could sell his home privately, so I asked him if that was his intention. He responded by saying, “There is so much information available online, why would I need an agent?” I responded by saying,“for the very reasons that you are calling me now.”

To begin, there are many factors to consider when pricing a home. Where would you find recent sale and market information to determine the asking price? Agents will inform you of this and will guide you toward making informed selling decisions, and can provide you with an opinion of the estimated sale price of a property that you wish to purchase, saving you from paying too much for it.

An agent can make suggestions to help you save time and resources by referring you to a network of professionals that you could potentially use to buy or sell with. These include notaries, property inspectors, mortgage brokers, land surveyors, building/soil engineers, and renovators/movers. Even if you have a successfully accepted promise to purchase in hand, there are hurdles – inspection and mortgage – to overcome. Furthermore, I represent one network of buyers, but when combined with other agents, we represent hundreds of potential buyers.

Furthermore, an agent should be better at negotiating the sale process than you because the emotional aspects of the sale transaction are removed. As well, purchase agreements can be very long and complicated, requiring knowledge of the Civil Code and the Brokerage Act. Mistakes are less likely to occur with someone who works in the field of real estate on a daily basis.

Post sale problems are also usually managed by agents. Even the smoothest transaction can come back to haunt you. A good agent will not leave you once the Act of Sale has occurred because integral to the success of an agent is having satisfied customers with whom to conduct future business. Consider referrals as well.

Hire someone who knows more about selling real estate than you do because it is difficult and time-consuming to research this topic enough to do a good job yourself. Consider the advertisements to produce, phone calls to receive, questions to answer, research to conduct, and showings to perform just to find that serious buyer. Now balance these against the modern demands of family and career, not to mention the cost associated with marketing your property. It is tougher than you think, because there is lots of “fluff” to weed through before finally selling, which could take months.

There are many other reasons to use an agent for selling or buying that are beyond the scope of this article. For more information, please call: Daniel Smyth, Affiliated Real Estate Agent, Groupe Sutton-Clodem Inc., 514-941-3858

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Revenue properties: Invest in your future

June 2009

A growing percentage of my real estate practice has centred on revenue properties, because of the changing needs of my clients. When clients first approach me to help them buy a rental property, the conversation generally begins like this: “Find me a good deal – a duplex or triplex – something small and not too much trouble.” Remember, a “deal” is very specific to individual goals and needs.

Take a duplex or triplex in LaSalle, for example, which costs approximately $345,000 and $415,000, respectively, and generates between $11,000/year and $18,000/year, respectively. Revenues are obviously higher when all units are rented and if there is a “bachelor.” However, if you consider what a triplex in LaSalle costs relative to a 6-plex ($433,000) in Verdun, the investment becomes more interesting when the latter generates an average of $39,000/year. This is a better “deal” as far as “bang for your buck.” However, if you are the type of investor who likes living in 1,000 to 1,200 square feet on the main floor with the possibility of a finished basement, a yard and tenants above you paying on your mortgage, then a duplex or a triplex is a great choice.

Also, the age of the property is important, but renovations are even more critical. A renovated full electric plex with breakers is always more desirable, especially when the tenants pay their own heat. Location is an important factor, too. For example, the design of the city of Verdun places a metro close to just about everyone. Owning a plex near a metro helps to attract and secure tenants. Parking is usually a premium, so tenants without vehicles live near services and public transportation.

What if one or more of the tenants does not pay the rent? Fortunately, this does not happen often, but the risk is highest in a duplex and lowest in a 6-plex. The greater the fractioning of the total revenue generated by the tenants, the lower the risk to the owner for covering the cost of the total mortgage.

Also, you must grow your revenues to increase the return on your investment, but it is always a “work in progress.” What can be renovated? Are the revenues maxed for the area or is there room to grow? A 6-plex with a vacancy can be an attractive purchase because it allows you to increase unreasonably low rent(s) toward market value. Nearly 75 per cent of the estimated sale price of a 6-plex in Verdun is based on the revenues generated, but this relationship is considerably weaker for a duplex or a triplex.

Finally, a rental property pays you in three ways: 1) revenues; 2) property appreciation; and 3) tax benefits. Consider that the average price of a 6-plex in Verdun at the end of 2008 was 5 times greater than that in 1985. The mortgage, heating, maintenance, insurance, and tax costs are all tax deductable, too.

Contact Daniel Smyth at 514-941-3858

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Spring into recession realities

May, 2009

In February 2009, U.S. reports showed that seasonally adjusted sales of existing homes increased by 5.1% and new homes increased by 22% compared to January; the latter increase followed 7 consecutive months of decreases.

This is good news and may signal the beginning of recovery in the U.S. First-time buyers took advantage of lower prices, interest rates and tax credits (a maximum of $8,000). In Canada, the Real Estate Market is also being affected by the global recession measured, in part, by a reduction in the number of sales and by the average sale price. Recovery is expected to be some time in 2010, but this estimate is later than first announced by the Bank of Canada. No one has a “crystal ball” that predicts with certainty.

The Canadian Real Estate Association in February 2009 announced that while all provinces reported a reduction in the number of sales compared to 2008, not every province reported a price reduction. Western provinces (-5.0% to -10.6%) were hit worst but Quebec and eastern provinces (0.0% to -0.1%) reported virtually no change. Newfoundland actually reported an increase (+4.8%).

The Bank of Canada’s efforts to stimulate the economy by lowering the prime lending rate is making it easier to obtain an affordable mortgage. According to canequity, the 5 year fixed rate is around 3.95% but the variable rate is at 2.5%. Furthermore, the Home Buyers’ Plan (HBP) introduced in 1992, which allowed first time buyers to use RRSPs as a down payment on a residential property, a major factor in affordability, has been increased from $20,000 to $25,000.

Despite the lower number of sales this spring vs last spring in Montreal, the bulk of sales in a given year occur during this period and like other years, this spring is no exception. Reports from the Greater Montreal Real Estate Board disclosed that the median price of a Home (+1%), Condominium (+2%) and Plex (+3%) was up from the same time last year.

The unemployment rate (+1.4%) in Montreal this year is higher than last but consumer confidence appears healthy. This year when asked if now was a good time to buy, a greater number of consumers reported yes in March (39%) compared to February (29%). But more expensive properties may be less affordable, as buyers look to compromise. It is certain that properties are taking longer to sell and there are more expired listings in the MLS. Buyers just don’t know what price to pay in this market, while sellers are holding onto their price.

For sellers: set a realistic sale price; know the market and your competition; have a good marketing plan and reasonable budget; be prepared for a longer sale; keep negotiations going; work closely with your agent; and think like a buyer. For buyers: ask yourself why you are buying and where; shop around for a mortgage estimate before looking to buy; do not think of flipping a home if you are a conservative thinker; keep negotiations going; work closely with your agent; think like a seller.

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Real estate market certainly isn't all doom and gloom

The more I hear about “the economy” the more frustrated I become as a real estate agent. Everyone talks about the doom and gloom, which only puts buyers and sellers on edge.

The unemployment rate is up but it is not soaring. Average prices have increased despite fewer sales, so buyers are obviously able to purchase at higher prices in “this economy.” Consumer confidence is down, but I think this is a result of sensationalizing matters instead of putting them into perspective.

Interest rates are low, so why not take advantage of them? As well, Canadian mortgage products and insurances (CMHC), government and bank guidelines are stricter than in the US. In short, Canadians enjoy a healthier real estate market compared to the US.

Though the growth in real estate in Montreal has not been as big historically as some Canadian cities, it is this steady growth that has saved Montrealers from an imploding real estate market, as demonstrated elsewhere.

If you are thinking about selling your home in this economy, the asking price is very important. Just 5 per cent above the average could eliminate potential buyers. Some will not qualify. Others may just qualify but the bank may ask that they put more money down and the buyer is not able to.

Ask your agent to provide you with a detailed market analysis to demonstrate what your home could sell for. This should contain comparable sales in the last six months and include active competition in your area, which is your real asking price cap.

There are always buyers, no matter what state the economy is in. Sellers should expect that the average sale time may increase and that buyers may be more cautious. Buyers may want to negotiate more, so don’t be so quick to refuse an offer. Keep negotiations moving forward.

For readers thinking about buying a condo in Montreal, it’s all about resale. Parking, garage space, and an elevator are sought after features. Also, condos with thick concrete floors are more desirable because they are quieter. Location is important, as is proximity to public transportation and other services. However, it is rare to get everything you want in a property and if you do, you will probably pay a premium for it.

The average sale price of condos continues to increase. Fuelling this could be the “Baby Boomer Echo.” They are starting to retire, which may help to maintain the demand. They are looking for smaller homes and conveniences now that the kids have moved out.

If you’re thinking about buying a condo or home in the US, no one has a crystal ball that will predict what the country’s economy will be like in six months, let alone a year from now. Some reports have suggested that the US real estate market has reached its lowest, and in some areas there are reports of positive average sale price increases. It really depends on where in the US you want to buy.

Also, there are so many homes for sale in the US that it makes looking almost impossible, unless you have a single location in mind. There are hundreds of thousands of properties for sale in Florida alone. One should really focus and be prepared to research for a while. A real estate agent can help you find something but he/she is also limited to the same factor as you – time. Be patient.

Buying for investment with the thought of renting is different from purchasing to occupy. You need to talk to a real estate agent to understand what is involved to be sure that your reasons match the desired goal. If a Canadian were to purchase now, it is very likely that in years to come, a nice profit will be made. But one buys real estate for a reason and depending on that reason, it will either be a good time or a bad time. Talk to a real estate agent and explain your purpose and goals, both short-and long-term. The advice you get is usually free.

Daniel Smyth is a real estate agent with Groupe Sutton-Cloden Inc. in LaSalle.

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