Rates And Timing

by Darrin DeRoches February 16 - 22, 2012

Last week I wrote about when to put your property on the market and the advantages and disadvantages. I spoke with an investor this week and he is considering listing his student house in Westdale and he is considering listing it in late March, which is just in time for the spring rush. Sounds about right, but it’s actually totally wrong. Student houses should already be on the market or get up in the last week of February.     The reason a student house has to be on the market before the spring rush is because students are already looking for accommodations for next September. If you have a house that is not rented or you want to lease it out to students, the property should be on the market so you can advertise it rented or available. If you notice I would not refer to the property as vacant but available. It is not any slick real estate term or marketing jargon, it should be listed in a way that a parent is able to purchase the property with the intention of their child moving in and renting to their friends.      There are two types of buyers in the Westdale student market. The investor who is looking for a positive cash flow property that they can buy and fill it up with students who pay the cost plus profit. Then there is the investor who wants to buy a property for their child going to school that will take care of it throughout the years and when they graduate sell it for a profit. This is why a student house should be listed so you are marketing to both buyers in the next six weeks before exams and empty houses for the summer. The market pretty well dries up until August when the investors begin to reconsider buying a property for the incoming students. If you wait till the end of March, you will miss the boat!     Another interesting thing this week is the whole 2.99 percent mortgage which was based on four years and a 25 year amortization. The big banks used it as an advertising draw in January and depending on who you listen to, it was just a gimmick. The smaller banks and some mortgage brokers are still offering this low rate and First Credit Union is offering 2.89 percent. So if you did not take advantage of these offers you should talk to a mortgage broker who can sign you up and even lock in the offer for up to 90 days. Send me an email if you need a referral and I will be happy to connect you! 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 mail@uniquerealty.ca.

Low Listings

by Darrin DeRoches February 9 - 15, 2012

Sales are up in the first month of 2012, but the inventory is low. The REALTORS® Association of Hamilton–Burlington (RAHB) reported 819 property sales through the RAHB Multiple Listing Service® (MLS®) for the month of January, representing a 10.8 percent increase in sales over the same month last year. RAHB also reported that 7.7 percent fewer listings were taken in the month of January of this year compared to January of last year. Seasonally, adjusted sales of all property types were 3.3 percent higher than January 2011, with the average sale price increasing 4.6 percent for the month. Seasonally adjusted numbers of new listings, however, were over 23 percent down from the same month last year.     Residential condominiums saw the biggest gain in sale price for a January, with an increase of 7.9 percent in the average sale price and an 11 percent increase in median price. The average sale price of a freehold home was $328,526. So how does this affect the market? Traditionally the market would be referred to as a sellers’ market, since there is low competition and sellers are receiving top dollar. People need housing when they need it, so if the market has limited choices people tend to pay more when they need to buy. Traditionally this time of year the market tends to be slow until “spring has sprung” but with the warm weather and lack of snow, buyers are out there buying. Sellers tend to put their properties up in March or April but a savvy seller may want to consider getting their property up earlier since the inventory is so low.     Timing can make the seller thousands and thousands of dollars or timing can also cost the seller thousands and thousands of dollars. Today a condo or single family seller should get their house on the market as fast as they can. They stand to make a quick sale for top dollar on their property – right now. In a month, things will start to change and the same property may get lost in the shuffle and not realize the same dollar value. This can also be said for the income/student property. The window for selling a student property is shrinking daily. I just had a conversation with a seller last night about listing his student property but I will write about that next week. If you are considering selling a property this year, get it on the market now!  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 mail@uniquerealty.ca.

Take Advantage!

by Darrin DeRoches February 2 - 8, 2012

I may sound like a broken record talking about out of town buyers – again – but a new young client has a new perspective on the real estate market in Hamilton. The first scenario is a young couple who have been transferred by a pharmaceutical company to Hamilton and they are considering renting or buying. They have no idea what Hamilton has to offer and are putting their total trust in me. They believe they should rent first and get a lay of the land and then consider buying in the near future. I understand their concerns in jumping into the real estate market too fast, but after a short conversation I convince them to consider buying.     The boyfriend wants to buy and the girlfriend wants to rent. She has just finished university and is applying to Mohawk for more courses so she believes renting is the safe bet. I ask her what she currently pays in rent and how much she is comfortable paying here in Hamilton. She pays about $1,000 a month and is willing to go up to $1,400 for the right two–bedroom apartment. I send her listing for apartments in the West End of the city and steer her closer to the Aberdeen and Dundurn area.  Great apartments from $1,100 to $1,400 a month for a two–bedroom. She likes them and also asks about small homes or condos. I then send her a bunch of listings from $150,000 to $250,000 for single family homes in the same area. The boyfriend likes them, but she is still hesitant about buying and is afraid they cannot afford a home.     I then send her a breakdown of costs, five percent down, first time buyer credits and closing costs. The interesting part in today’s market is that this couple can not only afford to buy a home it will cost them less than renting. A $250,000 dollar home with the 2.99 percent,  four–year term will cost them about $1,100 a month and with taxes it will fall in the $1,400 a month comfort zone. If they were to buy a home in the $200,000 range it will cost them a couple of hundred dollars less. The 5 percent down is about $10,000 dollars but if they rented for the year it would cost them about $17,000 dollars. Take this into consideration and then they could also consider a mortgage that allows a first time buyer to get a five percent cash–back on their mortgage it seems even more enticing.      I left all the information with the young couple and they are not only looking to buy in our great city, they are even considering on buying an income property so someone else can help pay their mortgage. So if you have good credit and are considering on buying or currently rent – take advantage of the low rates, give us a call and we will align you with the right people. Numbers don’t lie and greed is good! 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 mail@uniquerealty.ca.

Raising The Red Flags

by Darrin DeRoches January 26 - February 1, 2012

I have a client that is looking to buy a condominium in the Oakville and Mississauga area. He works in Brampton four days a week and he decided to go to his bank to get pre–approved. With interest rates at an all–time low it is a great time to get a mortgage. He goes into his bank last Friday and within an hour his bank has pre–approved him for $187,000 dollars for a mortgage at 2.99 percent on a four year term. It all sounds good so as a real estate broker I should just start showing him condos in his preferred area and be done with it.     Unfortunately I can see a bunch of red flags so instead of just jumping into showing him condos I start to make a few observations. I am aware of his income and debts and feel he should be approved for a higher mortgage than $187,000. So when I start to ask him what information the bank gave him I realize they are covering their ass–sets. They suggest to him to include his car loan into the new mortgage, sounds great as it is only about $10,000 and it will make for one easy payment. So being the devil’s advocate is to point out that the $10,000 will increase his mortgage amount but not allow him to purchase a bigger property. If he is able to spend $200,000 instead of the $187,000 he may be able to get a second bedroom in the condo. The bigger issue is not just increasing his mortgage amount but the financial decision to have the $10,000 car being added to a mortgage that will take 25 years to pay off. So it may be a great rate at 2.99 percent but the $10,000 on the car will cost near $12,000 in interest over the 25 years of amortization of the mortgage.     I then went on to explain to my client that a condo in Oakville/Mississauga will have a condo fee in the $400–500 a month range. If he was to consider talking to a mortgage broker and see if they can get him a mortgage in the $200 range without including his car and if he would consider living in a house in Hamilton, he would make more money on his real estate investment. A home will not have the $500 a month condo fee and if he took half of that towards improvements and the other half to the extra gas it may cost him to drive 20 minutes more into Hamilton, he would still be ahead of the game.      A home in Hamilton will increase in value at a greater rate than a small one bedroom condo in the GTA. Plus the thousands a year he can save in condo fees can be reinvested into the property or enjoyed for a 20 minute drive down the highway. I gave him food for thought to look down the road in five years and see what his real estate investment can be, but it is his decision and lifestyle he needs to consider. 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 mail@uniquerealty.ca.

Rates Are Down

by Darrin DeRoches January 19 - 25, 2012

The bank rate has remained unchanged once again. It has stayed the same since mid–2010 and the outlook seems it will remain the same in the near future. A couple of weeks ago, I made my predictions that the rate will rise this year and I am sticking to it. Last week there was a big deal made about dropping mortgage rates. The Bank of Montreal lowered its five–year rate down to 2.99 percent with a 25 year amortization which similar banks have the rate at 3.29 percent for special deals. TD Canada Trust also dropped their five–year rate and everyone expects all the banks to follow now since the bank rate has stayed the same.     The real reason that BMO dropped their rate to 2.99 percent is to entice mortgage holders to come in the door and discuss their upcoming mortgages. It is kind of a “door crasher deal” in January since it is usually a slow month. The deal at 2.99 percent has a lot or restrictions about terms and payouts – but if you do sign the deal it is a great deal for five years at this low rate. Coincidentally, I received a “special offer” on one of my mortgages that isn’t due for six months and Scotiabank offered a 3.29 percent five–year mortgage but we have to sign before Jan 31st.     With all the turmoil in the world markets, investors are looking into the Canadian mortgage market as a safe place to invest. This will keep the rates low since an influx of money is coming in for now. Once the world markets start to climb they will take the money out, since they are getting low returns, and they will start to invest in other markets.     Five years ago when I signed the mortgage that is coming due it was for 5.1 percent and I was ecstatic to get a good rate. I can now sign for 2.99 percent for five years and save hundreds of dollars a month that will equate to thousands over the term. This cheap money is allowing for investments in real estate across the board, from commercial to residential. Investors are asking top dollar for their investment properties since the rates are so low you can easily service the loan with the income on a student house, duplex or triplex. Just be very careful when you buy at a high price today and have to renew in five years when the rent will cover today’s rates but will fall short in five years. Take the cheap money today but be very frugal when negotiating for a property that will take 25 years to pay off. If the rates go up to 5 percent in five years you will be paying hundreds of dollars more a month when you renew, just keep it in mind when you are negotiating for that investment property, do the math and make sure the property has positive cash flow today to cover tomorrows rates! 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 mail@uniquerealty.ca.

Price It Right

by Darrin DeRoches January 12 - 18, 2012

I spoke with an agent last night about a new listing he was pursuing and the discussion led itself to pricing. Ironically I had just completed an update course on the very subject so it was interesting to get a colleague’s take on properly pricing a property. How do you come up with the right price?     The standard way of pricing a property is to look at the “comparables.’ If you are selling a two–bedroom condo in a certain building then the last two–bedroom condo in the same building sold would be the best comparable. It makes it pretty easy to come up with a fair market price when you have a near exact match to compare it to. The problem arises when the owner of a condo ‘believes’ his condo is worth more due to upgrades, view, and which floor it is on. Some people believe their property is worth more than the comparable no matter what an agent says. How much is an upgrade, view and floor really worth?     The agent I was speaking to brought all the comparables to assess the property and when he went into the home he was surprised at how bad of shape it was in. He showed the family that comparable properties sold for around $190,000 and he was going to suggest that price range, but when he saw the stains in the carpet and appliances falling apart, it wasn’t pretty. So when he started to make his case that work had to be done and money would have to spent on staging etc., the family started to balk. He realized that he was losing them in the discussion of price so he went up to $189,000 in price where he really believed it should be at $179,000. The family had something else in mind. They want to list at $219,000. Big difference.     So what to do in this situation? Most agents  would try to talk them down to a closer price to their assessment and see if there is any movement. When asked why they think their property is worth $30,000 higher than his assement their response was “we need to get at least $210,000 out of the property!” Big red flag. Once a seller uses the words “ we need to get,” a seasoned agent knows they are in financial trouble or have mortgaged the property to the hilt and need a high price to be able to move forward. The majority of agents would probably list the property for the $219,000 and hope for the best. This agent explained that the family will have to invest money to improve the property so he would list it at the $190,000 ballpark. If they do not decide to do so then he will not invest his money and time to list a property that is overpriced and in bad shape. If it is not priced right, you are just wasting your time and energy. Listen to your agent and if he is not willing to list it, something must be very wrong with your property. If the next agent you call is willing to list it at an inflated price, they are desperate for a listing and you in for a ton of disappointment. V [DARRIN DEROCHES]     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 mail@uniquerealty.ca.

Predictions For 2012

by Darrin DeRoches January 5 - 11, 2012

Let’s pull out a little crystal ball and try to make predictions for real estate in our market of the year ahead 2012. I always find it interesting when ‘the experts’ predict the future and I usually mock them for being so wrong. So in all fairness I should take a stab at making predictions so I can look back in a year and see how right or wrong I am.     First things first – Money. Interest rates have maintained for the last 18 months or so. So in a bold move I will predict that interest rates will go up this year. I know, I know – I am going out on a limb and making such a hard prediction those interest rates will rise. We have been enjoying the lowest interest rates in my lifetime and we are not even taking advantage of it. My mortgage is due in six months and if I am able to renew at current rates I will be saving hundreds of dollars a month. Five years ago, I signed a high rate, in comparison and I was happy to do so. So when it comes due I will not only sign as fast as I can I will sign for as long as I can. There is no way rates will be this low again and even though it will take years to rise, I will sign for a long term as the rates will rise and hopefully level out once my renewal comes due in 5 to 7 years.     Second would be the market itself. Over the holidays people were asking me that they think the market is going to drop due to the crisis in Europe, etc. My prediction is the market is not going to drop, though it will level out. It was predicted that the market would only rise 2 percent in 2011 and about the same in 2012. Our market actually rose above 7 percent in 2011 and it would be easy to say 2012 will stay strong, but I really believe the market has to level out sometime soon. If the market will have small gains or stay pretty level this year. The old saying ‘what goes up must come down’ is true when gravity is involved, but with the financial markets being so volatile around the world a leveling out seems to be in order. Canada has proved in the last two hard years that we have kept our conservative ways and are a leader in the world when it comes to our financial markets. We do not seem to have any ‘skeletons in our closets’ unlike the states that are tearing down homes to right their failing market.     So my two bold predictions for 2012 are that interest rates will rise slightly and the market will cool and level out. It may not be to earth shattering but a consistent and strong market is a good place to invest in. I will seek out advice from other professionals in Hamilton and add it into future articles and see what they believe our year holds for us. Happy New Year! 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 mail@uniquerealty.ca.