And when it comes to real estate, the desire to get a deal comes with higher stakes than the the 20 bucks I saved at the grocery store. But you need to navigate carefully. There are not always deals in the places you think there are and there are some deals to be had, if you approach real estate with a willingness to look at things differently.
So, let's look at places where you think you may be getting a deal, but, you may find out that the deals are not really deals at all.
1. Power or Sale Properties
Many people believe the following: If the bank takes over a property because the owner cannot pay the mortgage, the owner will be desperate to sell, and therefore, sell below market value. While the owner may be in a desperate situation, the bank is not. And the bank wants to make the maximum amount of money to cover the mortgage money owed. Still, I find that these power of sales tend to attract a lot of people, people who are looking for deals. I have even seen these power of sale properties sell above market value. All you do is say "power of sale" and you end up attracting a lot of buyers on the hunt for a deal. The other down side to buying a property that is power of sale: There is no warranty on any thing. The bank doesn't know the history of the property or the state of its condition. So, what you buy is what you get. Now, that's not to say it's always a bad idea to buy power of sale, but don't assume all of them are unbelievable deals.
2. Commissions
Some people don't want to pay commissions to any real estate salespeople. They think they can sell their property on their own and save themselves the standard 5%. And there are some people who can sell their own property quickly and for good money, but they are few and far between. Why do I think this? Because there is a whole group of real estate agents who specialize in chasing FSBOS - For Sale By Owners. These sellers believe they are saving money by not paying commission. But they often don't know what is involved in selling a house from the marketing to the networking to the experience of doing sales to just answering phones and negotiating offers. They usually don't know to attract buyers. They either overprice and fail to attract any clients or underprice and sell too low to their neighbour who can't believe he or she landed such a great price. Again, there are people who have the background and the knowledge to pull this off. I do believe some folks can do it, but they are a mighty few. Don't believe you are saving yourself money when you do all the work and sell your home for less.
3. Condo Incentives
These days, some preconstruction condos are offering incentives. I think buyers should be happy about this. Condos will offer free upgrades or even a rebate when you buy. The thing is, some of these condos have set their prices too high. They can sell much higher than a comparable resale condo, and now buyers are waking up to that fact. So, instead of reducing their prices, they offer incentives. Now, I'm not against incentives. I think they're great! But it's not a deal. It's condo developers waking up to the reality around them. They've priced their units too high, and now they are putting them closer to market value.
Now, let's talk about where you may find some deals. You may have to have a bit of gumption to do some of these, but it is those who are willing to test their limits that often score big.
1. Stigmatized Properties
Now these are certainly not for everyone, but if someone had died on the property or if someone notorious has lived there, or even if it has the reputation for being haunted, then you may be able to get some thing for less. Of course, your house may be stigmatized still when you sell again, but with enough time, you can make the house feel better. I find clients are more keen on buying a property where someone had died before the previous buyer. It acts like a kind of buffer. This does not hold true for properties that have been grow ops. Yes, you can get them for less, but you can have real and serious damage to your house.
2. Emerging Neighbourhoods
You need to put on your potential goggles with some neighbourhoods. If you see properties in an area with am improving commercial strip, development in infrastructure, and it's near other neighhourhoods where prices have gone up, then you may be able to get a deal. The deal arises from the tolerance required to wait for a neighbourhood to get better. If you can suck it up early on, then you can benefit when the neighbourhood improves, hopefully fast!
3. Older Condos
Sure, the maintenance fees can be a little higher and some are in need of some updating, but if all is well in the condo's status certificate, they sure do provide excellent price per square foot. Simply put, they just don't offer prices like that with most preconstruction condos. And many older condos are central. I have one for sale now that has a walk score of 100. And let me tell you, it's pretty rare to have a property that scores a perfect 100/100. I believe that says some thing about how condos that have been around awhile have some of the best locations in the city. They were built before land in good locations became too expensive and when more land was available for development. They can be overlooked for newer flashier and tinier condos, but you can add the flashy and new yourself and keep the space.
So, that's my two cents. I wouldn't take any of this as hard and fast rules. I don't want you to buy a haunted house only to find out that a poltergeist has stolen your dog and your uncle through your spare room closet. And you may just find a power of sale that is a really great find at this point in time in Toronto. Consider these pointers more more as guides, something to point you in the right direction, and make you question what is a deal and what is not.
Thanks Daniel! Feedback appreciated:)
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