The Strange Truth About Real Estate Agents

From time to time, we all find ourselves at those parties where people like to talk about their jobs. Fair enough. It's what we do for most of our waking life.  But as we all know, not all jobs are as exciting as others, or at least they don't appear as exciting. So, if you are a lawyer working on an plot-twisting criminal case or an artist working on  a mind-bendning new gallery show,  then it is easy to get the crowd worked up about the kind of things you do. I know I'm a sucker for such things.

Many years ago, I used to work in television, mostly on HGTV shows, before I became a real estate agent. At parties, most people loved to ask about my job. They watch television.  So, it makes sense that they would want to know about the inner workings behind how the shows are made. And yes, a lot of reality on reality shows are made up.  All I would have to do is mention I worked on a given show, and the questions would start rolling in.

When I became a real estate agent, the interest in my job took a bit of a turn. There were always a lot of questions about certain neighbourhoods and my opinion about what's going on in real estate right at the moment. There were a lot of questions to pull out my expertise, but very little interest about the job itself.  As a career, real estate agents rarely inspire a gasp of excitement, usually because it is not much of a novelty these days to be one, especially in Toronto.  

So, without anyone asking me any questions directly about my full-time career, I'm going to tell you a few pretty fascinating things about real estate agents in Toronto.  With the help of the talented Mark McLean, the Manager of Bosley Real Estate at the Queen West office and the knowledgable Ann Bosley, the VP and General Manager of Bosley, let me reference their findings and graphics to show you what real estate salespersons are really like in Toronto. 

1. There are a lot of us. I've known this for awhile. You probably have too, but do you know just how many? There are approximately 33,000 real estate agents in this city. I know. Yikes. That's a lot. That's one agent for every 167 people. How can a real estate agent  possibly make any money with those kinds of numbers? Well, let me guide you to the top graphic that indicates that more than 40% of all agents are  new.  The thing is that this new category seems to stay the same size year after year. So, that means a large number of people join up and many leave. In fact, 70% of all agents will drop out in the first 2 years. 

2. We're old. Compared to many professions we are an older bunch. The largest age group falls between 51 and 60. If you want to feel like a spring chicken, become a real estate salesperson. And who wants to retire? The agents who stick around stay awhile.  2.8% of our workforce works past the age of 70. 

3. Many Toronto real estate agents do not sell very much, if any thing. This brings us back to the 33,000 agents in Toronto stat. A full 18.6% of registered real estate agents did not sell one property last year. That's over 6000 agents with no deals.  Keep in mind that we all have to pay fees to belong to the appropriate boards to keep our licence. So, this large group of agents is certainly not making any money.  And agents with just one deal a year number over 5000. So that's almost a third of all agents who have very little experience in the trenches with one deal or less per year. The lesson: Pick your agent wisely. And at the very least, pick an agent who works full-time, and takes on real estate as a full time career. Otherwise, they may be a little clueless.

So, there you have it. Maybe not as interesting as someone who saves lives each night, but still, I'll bet there are a few things in there you didn't know...

The Bidding Wars of Summer: Where You'll Find Them

Bidding Wars. Buyers hate them. Sellers love em.  They are certainly less pervasive in real estate than they were 7 years ago. In fact, some Torontonians are starting to get the impression that bidding wars have disappeared from our collective radar like Richard Simmons or Tab Cola. But they're wrong.

In the media these past few months, there have been more than the usual musings and articles on a housing correction in Canada, like it's already happened, despite the fact that prices on average are continuing to rise in Toronto.  In addition, from a personal perspective, I have found myself in bidding wars these past few weeks, despite the latest round of predictions. And this leaves some of my clients scratching their heads. "How come I'm in in bidding war with 15 other people if Toronto is going through a correction?" they ask. It's a pretty big disconnect, and it's understandable why people are confused.

The truth is, bidding wars are alive and well in this market, but it's not everywhere. So, let's explore reason why it is happing in some areas and not in others.

Here is why  it is happening in some locations:

1. First Time Buyer Houses. Under 600K for a house is a hot place to be in most parts of this city, especially if you are close to a subway line in an emerging neighhourhood like the Danforth Village or the Junction Triangle. In these neigbhourhoods, you will likely see more bidding wars. Because of our green belt policy, the city is undergoing a lot more intensification. And building more houses do not intensify any thing. Simply put, houses are in short supply and few new ones are added. And because of that, there are fewer houses to buy.  So, the first time buyer are heading out to buy what's left while they can still afford them. If it's in a neighbourhood with an improving commercial strip and good transit, even better!

2. The Local Expectation.  I notice that some neigbourhoods have far more bidding wars than others. And a lot of it has to do with how homes in a given neighbourhood have sold in the months previous. If every seller is pricing their home below market value and receives a lot of offers, then this becomes the common practice in the neighbourhood. In some neighbourhoods, like Cabbagetown, I find that there are currently fewer bidding wars because agents and sellers seem to prefer to price their homes closer to market value or even a little higher. In other neighbouroods, like Parkdale right now, homes are more likely listed below market value, and then the bidding wars bring it up to market value or beyond.

3. Interest Rates: Sure, interest rates are low, but in the past few weeks they have crept up, just a bit. So, the buyer who locked in at a rate of 2. 89% for a 5 year term that is good until August will be more likely to buy before that rate expires when he or she would roughly have a new rate of 3.39% for a 5 year term. This probably won't make a huge different, but it does, in all areas of the city.

And here is why it is not happening everywhere:

1 High End Homes - High end homes where we're clearing about $1. 4 to $1.6 million just have fewer buyers coming to the table. The vast majority of people can't afford this kind of home. So, they take longer to sell. It's also a segment of the housing market that is just not moving much these days. There's a lot fewer  people buying expensive houses or condos than there are buying a smaller condo, townhouse or starter home. So, bidding wars are unlikely.

2. New Construction: You really don't have bidding wars for new construction, but I mention it here because it seems that some of the sizzle has fizzled these days from new construction. There was a time when people used to line up overnight to buy a condo at a certain project, and the next day it would be sold out. Those days are gone (for now). One reason is that the developers don't offer very good pricing these days. Though there are more and more appealing incentives, it is still not leading to a product that people rush to. Plus, there is a lot of new construction coming on the market. So, from a supply point of view, there is a great deal of new condos to choose from. The exception may be conversion condos and townhomes. Like houses, there is a much smaller number of these types of properties on the market than condo apartments.

3. Giant condos - Condos that are several stories high will have a few bidding wars from time to time, but generally, they don't. I think there's a belief out there that if you don't buy a certain unit you like in a large building, you can wait a month or two and a similar unit will pop up. Or maybe there are several same sized units in the building on sale at the same time. Unless there is some thing special about the unit or there is little turnover, it will likely not be sold a la the bidding war method.

All in all, I'm not saying that bidding wars necessarily mean that a given area is healthier than another. Bidding wars are not always a good thing. When one property sells for 100K over asking with 25 offers, it may have less to do with the property being fantastic, and more to do with the property being underpriced to begin with. Still, it can also indicate that the seller or buyer has  a certain confidence about their property. They feel it is important to let the property be exposed for a certain period of time. Any way you slice it, the bidding war has not gone the way of the dinosaur. As far as Toronto is concerned, the bidding war has gone the way of the raccoon. Still among us.

Toronto's Double Trouble: Why the City is Asking Too Much

We all know our city could use A LOT more love these days. And by love, I mean money. In other words, Toronto has been largely ignored in terms of its infrastructure - most painfully, it's transit system, but also its parks and libraries.  And now, reality is finding us under our comforter and mess of pillows to shake us out of our neglectful sleep, and say,"We really need to do something about this!"

And because of this reality check, those who make rules for the city of Toronto are considering new ways to generate revenue. Their latest consideration: Nearly doubling the development fees charged to developers before they build a new project. That means, for developers, the City would collect a much larger fee each time a new project is launched.

Instead of implementing a 10% or 20% increase, they have decided to go way beyond that. So, for example, the fee to build a large apartment with two or more bedroom would rise 86%  from $12, 412 today to $23, 036 next July, if this increase goes through. So what you say? Those developers make enough money?! Those greedy bastards! Well, you may be right, but the developers won't carry those costs. They will likely pass it on to the buyer who would pay more for a given property or unit.

In truth, Toronto does not have the highest development fees in the land. In fact, compared to other municipalities, it's one of the lowest in the GTA. So, there is room for increases. It's similar to our property taxer , lower than other parts of the GTA.

The thing is, development fees are low because Toronto is one of the few municipalities to charge municipal land transfer taxes in addition to the provincial one. In fact, David Miller cushioned the blow of the new municipal land transfer tax a few years ago by freezing development charges.

So, Toronto has essentially doubled the cost of land transfer taxes and now development fees leading to a city where buying and selling will cost way more than it used to. Now, that's what I call a double double! Sorry, couldn't resists...

To be honest here, I'm a little conflicted. I know the city needs to raise more money. I can see how much improvement our city needs in terms of infrastructure, but a double blow of the land transfer tax and the development fees dump a lot on the individuals buying and selling their homes. Not only does it strike me as unfair, but financially shortsighted.

A large increase in both the land transfer tax and the development fees, by nature, work against raising money. They will make both buyers and sellers think twice about a purchase or a sale because of the extra money it will costs them. So, if fewer people sell because land transfer taxes are so high, and there are less buys because the development fees are so high, then the city makes less money because no one will pay for their fees. Not to mention that developers will not develop if their fees are high. In fact, if the market were to slow down, then the city will not collect the money it needs because the revenue stream won't produce as much revenue. And, in the end, our city doesn't have a reliable revenue stream.

It's simply not a good way to make money. I do agree, the city does need to create new revenue streams, but one that consistently delivers a predictable amount of funds seems wiser. Why not try road tolls? That would be consistent. A regular influx of cash. How about raising property taxes? Sure, I don't want to pay more, but at least the burden of the city's taxes won't be on the shoulders of buyers and sellers, but all Torontonians would pay for the improvement to their city.

Rising Interest Rates:For Real This Time?

I think for many of us, we never thought the day would come. We have been warned over and over again, for years and years, that rates are going to start to go up very soon, but these frequent warnings have become as effective as a car alarm.

There has, however, been some changes in the past few weeks with the banks, and I think it's time to start paying attention to rate hikes. And by paying attention, I don't mean panicking that rates are going to return to the terrifying heights of 22.75%, as it did in August of 1981. That was a different time with a very different set of circumstances.

In the here and now, banks have been gently, but repeatedly, bumping up their rates. In the last week, rates have gone from 2.79 to 3.29%. My mortgage broker tells me she can barely keep up with the changes. Five year bonds keep going up, and the interest rates keep rising in step.  Though the rate hikes so far may be a bummer for any one with a variable mortgage, it probably won't change the world for most. Still, some believe this is the beginning of continuous rising rates. They have been so low for so long there is really no reason why they wouldn't go up. They certainly couldn't go down any more.

But what does that mean for the housing market? In the short term, it's making buyers move a bit more quickly to the buy. Many current buyers who have locked in their rates before they went up last week, have become more keen to buy now, before their pre-approved rate expires. So, if you were lucky enough to get locked in at 2.79 or 2.89, you will likely be a lot more keen on buying some thing with that rate while you have it. If you wait, you may lose that rate and have to take the higher rate.

In the short term, this is good for sellers too since it brings more buyers to the table. So, perhaps you own a property that has been sitting on the market for a month with no showings. This week you'll probably get three or four viewings.  One property in the east end received 18 offers this past week, way more than any one has expected - or at least me.  And I'm pretty sure this has something to do with these buyers who would like to buy with the better rate. Of course, this is not the norm. It doesn't mean all properties are selling off in huge bidding wars. It means there is a slight uptick in buyer activity and sales.

If rates continue to go up in the long term, it may effect the affordability of Toronto properties, effectively putting downward pressure on the rise of the value of homes. For buyers it simply means there money won't go as far. So, on the down side, paying off a new mortgage of $600,000 may cost you more in the months to come than it done a few months ago.  But rising rates can also mean that prices won't increase as much as they do when rates are low.

Also on the plus side for buyers, you will have less competition for condo units and houses. Because of the rising rates, some investors may start to find better returns on different kinds of investments, like a simple GIC, that will become more appealing at a higher interest rate.

If the government, like the banks, also raises rates, they will create some needed wiggle room. If the economy decides to tank again, the government will have a buffer. They can lower the rates and stimulate the economy, if necessary.  That would be pretty hard to do with today's interest rates.

In many ways,  we may be returning to more "normal" interest rates. But if you are a buyer, you may want to get pre-approved and lock in your interest rate as soon as you can, and get out there and buy something. Sellers, your property will be a lot more appealing when rates are low. It's one of the few times where buyer and seller can benefit at the same time.

What's the Most Important Part of a Real Estate Listing?

I know you're out there. You busy folks who spend your spare moments cruising the MLS and realtor.ca to see what's new and what's coming on the market in your favourite neighbourhood. You may not even be buying a house or condo. Maybe you're just curious what price your neighbours are listing their home.  But now you have become hooked on looking at properties at lunch, on your break, during dinner.  Maybe you're a binge MLSer who plans to look at a listing or two after dinner, and by midnight you're still online. Well, I'm not here to help you with your problem, but I have come across some info that may put your search into perspective. And if you are planning to sell your home, it may give you a sense what's important and not so important to marketing your home in a listing. 

According to a University of Norfolk study lengthily entitled "Toward an Understanding of Real Estate Home Buyer Internet Search Behaviour: An Application of Ocular Tracking Technology", those who look at real estate on the internet tend to favour some parts of the listing over other parts.  In fact, Professor Seiler and his researchers have tracked subjects who look at online listings, and found that first impressions make a big difference, like dating or a job interview. This study may not be the most definitely thing I have ever read, and I'm not sure I agree with it entirely, but there are some interesting findings.

The study finds that photos do make a huge difference to your listing. But what photo does the average viewer of real estate listings gravitate to first? Is it the stunning open concept living/dining areas?  The huge bedroom with a walk-in closet? Nope, they go to the exterior shot of the property, whether it's the exterior of a condo building or a house. In fact, 95% of viewers, according to this study, went to the exterior of the home first and dwelled on it for 20 seconds. So, the lesson here, if you are selling you house or condo, get an excellent shot of the exterior, because that is what's going to matter most. 

Following the exterior, kitchens are the second most viewed photo, followed by the living room and the master bedroom. The backyard receives the fewest views. 

As for the remarks online, people tend to prefer short descriptions. It appears that real estate online viewers grow bored when you rattle off name brands and appliances. They respond more to lifestyle and neighbourhood information. 

All in all, the study indicates that pretty pictures are looked at first, followed by the description of the property, location and price, and lastly were the remarks added by the real estate agent. 

But what does this mean to you? Well, maybe nothing at all. But if you are selling your house, you may want to put a bit more attention into the photos. Personally, I'm not convinced that a condo exterior will have as much of an impact as a house exterior. The condo's appeal really does rely on what lies in the interior.

I know when I'm looking at properties for my buyers, if I see a listing that shows the exterior of the building and all the amenities, and no photos inside, I feel that the seller or the salesperson in hiding some thing. Same goes for houses that show the exterior from 3 or 4 different angles accompanied by a photo of the yard.  With no interior shots, a viewer's mind will start to wander...  Why did they not include any indoor pics? What is going on inside? Decades of neglect, horders, devil worshippers, a portal to a magical kingdom?  Your imagination can go wild. Even if it's bad, I say put am inside pic in the listing. 

And let this study be a wake up call to those sellers and/or agents who take their own unprofessional photos with a lousy camera or their phone. As someone who knows a thing or two about lighting, I say it is the most important thing, next to a good camera. If you pick a discount agent, you may get photos that just don't stack up against the other listings.

And since so many people go online first to start their property purchase, it's worth spending some time staging and taking the right photos to draw in those MLSers out there. That's not from any study, but I think it's a pretty good opinion based on my experience.

What Deals are Real in Toronto Real Estate?

Everyone loves a deal. Especially, if it's the real deal.  Last week, for example, I went into a grocery store, and found out that every item for purchase in the store would have no HST charge for one day. So, 13% off. Really, it was just dumb luck and walking in at the right time. But it feels good to get a deal.

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.  

The Financial Benefits of Happy Neighbours

Last week, I was staging a  house I had coming to the market. When I was done, I stepped outside to see about 20 neighbours waiting for me. As I walked passed them en route to my car, they closed in around me like a swarm of zombies. As most people know, it's not unusual to have nosy neighbours. If I was not working in real estate myself, I would be curious to know what my neighbour's house was selling for.  It's a natural state to be curious.  These particular neighbours asked the usual questions about prices on their street, but what I was noticing about them: They were a very united and diverse group who all seem to be buddies. It wasn't like some burbs where all the people with kids live in this area and all the people who are old live in that area. They were a mix of young and old, parents of kids and parents of dogs, singles and couples, the tres cool and the uncool.

Now, don't worry...This isn't a riff on how diverse Toronto can be, but I warn you that it does have a warm and fuzzy feel, with a financial benefit.

For me, it is very important to have a sense of community where you live, whether it's a condo building or a street that you bought your house.  I believe that a community needs to have a healthy mix of many kinds of Torontonians.

The listing I had coming up was in Cabbagetown.  It's in an established neighbourhood where walking down the street on a warm day can be a pleasure.  You have a great local butcher, long-time local pet store, and a diverse population. Plus, it's quiet and green. People take care of their properties. You know you are getting a ready-made community with a walkable main street nearby.

Emerging neighbourhoods are different from established ones like Cabbagetown. They are still forming. So in an emerging area like the Junction, you have the excitement of being one of the makers of a community. There's a group there now trying to turn an old police station into a community space for every one in the neighbourhood. In recent years, The Junction residents have formed a farmer's market and a flea market. This particular flea market was recently mentioned in Toronto Life as one of those things that makes Toronto so great.

But maybe you are not one who really wants to take part in the community, wherever it is. You may cower in fear at being invited to a neighbourhood potluck. And that's fine. But if you consider your big investment, a good community makes for a desired location, and an increase in the value of you home.

Buyers who are not as familiar with Toronto or a certain area want to feel welcome, and if they see nice neighbourly things happening, they will more likely want to buy there, even if they are not the friendly type themselves. They often carry around a certain amount of anxiety, and a little happy puts them at ease, and leaves them with a good feeling when they go home to consider what to buy. Even on the elevator ride up to a condo unit, you can get a sense of your neighbourhood. Happy condo people usually say hello or smile. Otherwise, no eye contact can make you feel like you're in a crabby office building.

I can say that those buildings or neighbourhoods that lack community involvement and are not near a vibrant main street where locals can bump into the locals, don't sell as easily.

Basically, there's really no way you can lose with a cohesive, well-mixed and involved community. If you are the neighbourly sort, then you will be happy in an area or building where things are happening and people are interacting. And if you would prefer to keep to yourself, then you can, and just reap the benefits of your neighbours doing neighbourly things. The better and stronger and more diverse your community, the better resale value for your house and condo.