Pre-Approval

by Darrin DeRoches May 22 - 28, 2014

The infamous line that “my clients are pre–approved” holds a little weight in a typical negotiation and might sometimes help you win the sellers over, since you are truly able to buy their property. The funny thing in today’s market is that pre–approvals are a thing of the past and most people are not aware of it. A few banks still do pre–approvals, but most do not spend the time and effort to do so. In the past, you would provide the mortgage broker with all of your information and they would basically work the deal to get you the most money that a lender would “approve” you for. The lenders realized recently that they were doing all of the work twice and in a lot of cases, they would “pre–approve” you even though you would go with another institution. In today’s market, the pre–approval is more like a general over view of your income and major debts to give you a so–called ballpark rough idea of how much you can afford.     The problem arises when you ask the client to describe their income and debts and in most cases they leave out a couple of crucial items. It goes back to the old saying “buyers are liars” but this seems a little harsh. All banks have a tab on their websites that say “how much can I afford” where you list your basic information. The problem is that you want to buy a home that you probably cannot afford, so if you adjust things by a little — maybe you can afford it. You then get the idea in your head that you can afford a property in the $400 thousand dollar range and in reality, you cannot even be approved. So how can this be?     Everyone has different credit scores, issues and income so there is no secret sauce to figure out what you would be approved for until the broker inputs all your information. The problem is that this is only a general scope of what you can afford. If you are thinking of buying an income property or a second home, then other rules fall into place and you may not be approved. This is causing a lot of deals to fall through since you believe the client or the mortgage broker but the bank has the last word and they will not commit until you send them a “real deal”. So sellers have to be aware that the best deal on the table may not be the highest offer but the one where the buyer can actually close the deal. If you are considering buying in the coming months, make sure that your credit and debts are all in order so that you can get approved. Your agent will have to know even more information about your financial position to be able to sell your deal to a seller, since the phrase “don’t worry they are pre–approved” holds no weight in negotiations. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.

Agents Acting Crazy!

by Darrin DeRoches May 15 - 21, 2014

I recently wrote about multiple offers and how some are working while others are falling flat on their faces. This is a little more insight into how agents are acting crazy.     I was in a multiple offer situation with two other offers. The usual back and forth happened and it came down to my offer and another offer which had conditions. The sellers were trying to get top dollar, which is understandable. The next move was where the crazy part came in. The agent asked us to go up another ten thousand and the property would be ours, since we did not have conditions. My buyers did not want to raise their price, but the agent told us it would be ours. I stepped into the office and told them that we would go up the ten grand and sign the deal. I stepped out so that they could do the paperwork, and twenty minutes passed. The agent walked out and told me that they were going to go with the offer that had all the conditions. I asked about her ethics and the seller’s word but greed stepped in and they wanted every dollar out of the deal. Again, no sour grapes here but you told me it was ours and then you figured you could squeeze out a few more dollars and take a chance on the deal with the offer that may not close due to conditions.     The agent then has the balls to ask if we would wait the five days for the conditions to play out and if the other offer did not close, would we still be interested? It the old adage “that a bird in the hand is better...”. This agent and seller just bold faced lied to me and now they want us to wait with another ten grand in our hand to buy their property if the other offer falls through. I told them that my clients still wanted the house, but that we would not pay the extra ten grand and told them to call me when the other deal falls apart since they were over paying with conditions and I doubted that the bank would approve the deal.     I spoke with another agent who had the same type of issue this week with the same company who did a “hold off” offer where no one made an offer. This agent then made an offer just ten thousand under asking since there was no competition. The seller’s agent brought back a full price counter offer. So, you overpriced the property to where no one wanted to make an offer and you promised your sellers that they would get competition and top dollar and now you want the buyer to pay full price to make you look like you know what you are doing. The buyer agent tore a strip off the agent and then countered with just under asking. Another property this week that did not get any offers after holding off offers dropped 20 grand and the agent is calling around begging for offers. Crazy agents – price your property right and let it hit the market – cause excitement and garner multiple offers if it is worth it. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.

CHMC Cuts Second Mortgage

by Darrin DeRoches May 8 - 14, 2014

Here we go again with the mortgage rules getting tougher and tougher. The CHMC has decided, in all their wisdom, not to insure a second home for individuals looking to buy either a cottage, income property or even a second home in a divorce. They will not insure the mortgage to a second property and without insurance you cannot secure a mortgage unless you put down 20 per cent, which in turn will save you thousands of dollars on the insurance.     So what are you options with this new rule? As we just mentioned, you put down 20 per cent and you can get a mortgage just about anywhere. You put the second mortgage into a family member’s name and gift them the down payment. The last option is not to buy the second home. Actually, there is another option by using private–sector mortgage insurers.     Genworth is the most popular insurer who will still allow a second mortgage but they tightened up their lending practices. The property can only have one unit in it. So no income properties with them. You can buy the cottage but no duplex or even a nanny suite for your aging parents if it has a self–enclosed apartment in the house. Genworth would allow you to buy a property for yourself to live in or a family member, but not now. Think of a divorce situation and you would like to have income coming in with a second unit — not now. Rent or hope your ex–spouse can qualify on their own.     This new rule will allow the secondary market to charge even higher insurance rates for these second homes and devalue the price of income properties since only those with 20 per cent down will be able to buy them. If you are thinking of buying a home in the near future, you may want to consider buying an income property first and qualifying with as little down as 5 per cent. This will then create a great investment and in a few years look to buy a second home for yourself since it will be only one unit and all of the insurers will give you insurance with 10 per cent down instead of paying 20 per cent and higher rate of insurance.     I have clients this week who are using this strategy so that they can look back in 20 years with a great investment property and a family home. This may seem simple but it can make them over a half of a million dollars by buying the income property first and qualifying for more and putting down less.     This change of insurance by CHMC happens on May 30th so most people would not be able to do anything about it and worst of all, most people do not even know anything about it. Information is key and using a broker who is on top of the market can save you thousands today and make you a million over the next 20 years. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.

Multiple Offers

by Darrin DeRoches May 1- 7, 2014

It’s the time of year for the event of bidding wars which bring multiple offers. Many agents try to drive up the price by “holding back” offers until a certain date and create multiple offers. The problem is that it can also backfire on you and actually cost you money.  This past week my clients looked at three properties that came on the market with a fixed date for offers.  All three were good homes and two of them should sell over asking.  The dates for offers came up and all three agents called me to see if we had any interest on making an offer and the funny thing was, all three had only one offer registered.      When you get into a multiple offer situation, you must call the brokerage and “register” your offer and then the agent will present “all offers” at a determined time.  The properties were all priced properly but many people in Hamilton do not want to get into a “bidding war”.  The fact that there were not more offers registered and the agents were calling around trying to drum some up makes the whole industry look a little desperate.  There was a story about a property going 195% over asking and everyone gets excited that the market has gone crazy and you can sell your property for top dollar.  The problem with this agent pricing the property was it was priced at a selling price from 15 years ago.  The property got a ton of attention and it also brought 70 plus offers but what did that really prove? Yes, there is a shortage of listings and obviously there are a lot of buyers out there looking for a property but the buzz he created was exactly that – created.     If I was to list a property at a price level from 15 years ago, it too would create a buzz in the Hamilton market but that buzz would be other agent talking shit about me. It would actually hurt the sale of the property and it may even garner a lower sale price.  Everyone keeps saying the “Toronto buyer” will come in and pay the higher price but that is total bullshit and if their agent is even remotely good and can work a computer they will realize it is overpriced and move on to another property.  A properly priced property will create its own buzz in this sellers’ market and garner multiple offers which will hopefully result in a great price and a quick sale.  If your strategy is to get multiple offers and your agent comes up with these far out strategies — kick them out of your house.  A home located in the west end will not sell the same way as a home on the mountain. Different buyers react to pricing and buzz in many different ways so what works in Toronto will definitely not work here.  V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.

Lobbyist Registry

by Darrin DeRoches April 17 - 23, 2014

The Lobbyist Registry will go right up beside the ‘bus lanes’ as the biggest blunders of the year, and it is only April. For those who do not know what a Lobbyist Registry is, it is a “sign in sheet” for anyone who wants to do business with the city. Its intention is to create transparency and eliminate the opportunity for “back room deals”. The only thing it will create is more “red tape”. Have we not learned the lessons from our past, when no one wanted to do business in our city? The numerous complaints about the city moving at a snails pace to get things done. So let’s add another level of red tape and scare away potential business from our city.     The best example of doing it right was the deal to bring Canada Bread to our community and create jobs and new taxes. The councilors had no idea about the deal until they needed to know and vote. That is their job, to vote – not to make the deal but to vote on a deal. A politician is not a business man and should stick to being a politician. A businessman wants to open a business without politics. By creating this registry, it will only bring unwanted attention to proposed deals which may or may not come to fruition. The registry will become public information where politicians will try to use it as a “grandstand” and the media will use it as a honey pot to write about businesses that are coming to town. The thing is, neither the media nor a politician understands how business works. They do not want to be announced to the community or their competition until they are ready to open. Several new restaurants in downtown have been announced by the media and city but they still are not open until a year later. This brings negative buzz before they even open and everyone wonders what is going wrong with these locations and King William. The best thing is for you to do is a soft opening and let the buzz build, then have an announcement with the mayor cutting the ribbon and the media exposes it – not the other way around.     A registry will not help our city and its negatives will outweigh any possible positives of these so–called backroom deals. Do you really think they exist? Is there a line of people, with millions of dollars to invest, missing out on opportunities in the city? Hell no. Let the businessmen do business and stop adding more red tape to the process. Everyone can have an opinion on the matter but those who have created business in this city and deal with the process of doing business on a daily basis know that investors will move on to another city if they keep running into red tape. They do not want their competitors knowing what they are doing until it is time to open and compete. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.

April Fool!

by Darrin DeRoches April 10 - 16, 2014

I went to look at a property to be listed today and when I drove down the street, I could see four other homes being worked on, ready to hit the market. The seller of this particular “flip” house had several agents come to look at his property and the first one to “bite” at his proposal would win.     The property is about 70 per cent complete and he wants to list it at a 20 per cent premium without even finishing the work. He believes that people with money can see past the unfinished work and will be willing to pay a premium for his property. It was one of those meetings where even if he was willing to give you the listing you would still have to turn it down. The outside looked great, the workmanship is good, the location is perfect but once you walk through the doors and see the unfinished work and discuss their expectations, you just have to walk away.     I have sold properties in all stages of completion. I do not believe that a property has to be finished and staged to get top dollar. I have sold homes for top dollar with swearing tenants, leaking roofs and foundations but they sold with full disclosure and fair pricing. This seller believes it is such a “hot market’ that he can sell a property that is unfinished, badly designed for a hundred thousand dollars over comparables. It has been over a year since they tried to sell before and the work is still not finished. Once you walk in the door, all the red flags start to fly. After a five minute conversation, another dozen red flags pop up. The seller believes that agents do not have vision and he wants to sue past brokers over certain promises and all the time offering a game plan to sell the home of 4 per cent commission with 3 per cent going to the buyer agent. Then a bonus if you get his ridiculous price. All I could think of was how would I get out of the house with my ethics and real estate license still intact? Any agent who would take such a listing is risking a fine, a lawsuit, or worse. I have worked with all types of sellers and I always find a way to make it work for everyone but sometimes you have to walk away.     The problem is that he did sign with an agent who agreed to his insane plan. There is no way that they can get this home sold for this “fools price”. The agent will lose money just listing the property but since it is in a great area they will risk taking a losing proposition. The listing went from a For Sale By Owner to an agent who chases FSBO to an agent who will list at any price. It is a hot market but buyers are not fools and anyone willing to list a property that is 20 per cent over comparables may be foolish.     Make sure that you do your homework and work with a broker who earns your trust. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.

Commercial Market Changes

by Darrin DeRoches April 3 - 9, 2014

Properties are slowly coming up for sale throughout downtown Hamilton and recently a couple of buildings have come up for sale and lease. Most commercial properties do not have signage on them and people wonder why. It’s pretty simple. I doubt that you have 3 million dollars burning a hole in your pocket and you drive by a property where the sign will convince you to buy it. Commercial owners also like to use out–of–town agents since they figure it will keep it quiet when they are trying to sell the property. So no sign and an out–of–town agent may keep things quiet but maybe you forgot about the little thing called the internet or worse yet — word of mouth.     I was having a beer this week — shocker, I know — and the conversation at the table turned to a local bar that is rumoured to be for sale. I know the property and had to tread softly in the conversation since I had already met with the owners and know that they are not selling it yet, but according to this guy in the bar — it’s for sale. Then they tried to figure out how much it would sell for and since I already know the listing price, I humoured them when they came up with a price. I then threw out the real price and they thought it was too much after they figured what is should be worth. I told them about a bar on Augusta priced for 2.9 million ready to go and they also figured that was too much. Of course, none of them own any commercial property but they figured it is way overpriced. These rumours can hurt a business and even a potential sale since everyone is talking about the property before it even goes on sale. Then there are properties who list at an outrageous price to “test the market” and everyone thinks some magical buyer from out of town will swoop in and buy it.     In the commercial world, the majority of deals are done over a long course of time with people who know the market and sometimes do not even list the properties. A friend or business associate will use “word of mouth” to let it be known the property is for sale and overtime they find a buyer or lease. Kijiji and other internet sites attract more interest than the commercial real estate sites. You really have to think outside of the box when marketing a commercial property in today’s market. Twitter and LinkedIn have become a useful recourse in today’s evolving commercial real estate market. The problem is the majority of commercial agents are “mature” agents who do not evolve as quickly as the market and this may be their downfall. My last few commercial deals have come down to word of mouth, signage and most importantly, Kijiji. Real estate is always changing and a good broker has to move with the times. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.