Hamilton: A Life Line for Real Estate Refugees?

Because I focus largely on emerging Toronto neighbourhoods in my real estate career, I am often looking for the signs of a neighbourhood that will be ready to appreciate at a quicker rate than most, and transform into a pleasant neighbourhood where my clients would like to live.

Lately, it seems that Hamilton has garnered quite a bit of buzz. It is not exactly an emerging neighbourhood in Toronto, but I am often asked about my thoughts about Hamilton. Many buyers, whether they are first time buyers or buyers moving up, will know a friend or a colleague who has grown depressed with Toronto real estate prices and has bought a large Victorian house in Hamilton for the cost of a bachelor condo unit in Toronto. That gets many thinking:  Is it worth it to move to Hamilton? Could you acutally live in Hamilton? Would it be a wise investment?

I'm happy that Hamilton is finally having its moment. It's well deserved! Especially since I have been hearing that Hamilton will bounce back for years now, but there has been little sign of it until recently. Still,  there is a lot of optimism about the city right now, despite its rust belt past and decade after decade of decline since the de-industrialization of the Western world. These days, it has the fastest growing economy in Ontario. It is ranked as one of the best cities to invest in in Canada. The Real Estate Investment Network ranked it third after resource lucky Calgary and Edmonton.  It's been dubbed the "comback kid" of Canadian cities. And it has one of the best markers of any emerging neighbourhood or city: It is attracting artists. So much so that the James Street art crawl, or "supercrawl" as the locals call it,  brings in 1000 to 1500 folks to the event each time. It's no Nuit Blanche, but it's homegrown and it's growing.

Of course, we can't let our optimism get in the way of the reality here. Hamilton has a familiar rust belt tale, similar to many American cities like Detroit, Buffalo or Pittsburg. In the past fifty years the middle class and wealthy have traditionally left downtown for the hill or the suburbs or another place to live, and what's left behind is a lot of homelessness, drug addiction and mental health issues.  We cannot deny that Hamilton, once the booming steel town of the first half of the 20th century, fell on very tough times in the second half. You can still drive down sections of some streets like Barton and see boarded up street-front windows or mostly dismal, sad businesses that are on their last leg .

During this long period of decline from the 1950s until recently, Hamilton largely avoided what happened to prosperous, growing cities during that time. They did not tear down their historic architecture and build a large number of ugly, modern buildings and sprawling highways through downtown. The grim and poorly planned architecture of the 60s, 70s and 80s mostly bypassed this city, and what's left is a city full of incredible historic architecture from its downtown to the Victorian and Edwardian homes around the city. So, unlike suburban cities like Mississauga or Oshawa that has small historic areas, lots of highways and mostly sprawling, low density suburban housing, Hamilton has a dense, urban downtown core and blocks and blocks of red-bricked, historic homes.  It is ideal for the kind of neighbourhoods most buyers are looking for these days in Toronto. It is the Riverdale and High Park of 30 years ago.

Strangely, because Hamilton did not grow during an ugly era of architecture, by today's standards, it has become more appealing now. The old neighbourhoods are still in tact.  People want walkable neighbourhoods, local businesses, and community events. Most suburban areas don't offer this.  Hamilton has this, and more of it on the way as the downtown comes back from the brink.

Even though some credit can be given to the city of Hamilton for making the city appealing to artists and new businesses away from steel, Hamilton's success has a lot to do with the region it resides in. More and more, we will see the area stretching from Oshawa to Hamilton function as a more integrated region. In the future, it should have better and more integrated transit service between all areas. That means if you work in Toronto, Hamilton will function as a kind of urban suburb with the feel of a city but a GO train voyage away from Toronto. 

Within that context, I can safely say that Hamilton is one of Greater Toronto's most affordable emerging neighbourhood on it's western borders. I have taken a keen interest in this city and have worked on real estate transactions here from clients who want more space, historic architecture and lower prices.  More and more, I am asked about this city.  More and more, I am learning what neighbourhoods in Hamilton are worth considering, and which ones you may want to take a pass.

Hamilton does come at a price. If you do work in the city, it's a long commute. It will take up a chunk of your day. If you live in Toronto already, most of your friends and family live here too. But on real estate prices alone, you will be amazed at the kind of home you are able to afford, even in a more challenging price range. And that's what the draw is. There are many Toronto emerging neighbourhoods I would recommend as great areas to get in and as a wise place to invest, but Hamilton is in a category of its own.

As a city, it has a long way to go, but I believe it is heading in the right direction fast. Like Detroit and Pittsburg, Hamilton is finally shedding it's rusty past, but most importantly, Hamilton is not just a place where other Hamiltonians go to buy homes, but a place where Torontonians will increasingly go to find affordable homes. Unlike Mississauga, Brampton or the Durham region, Hamilton has not been a victim of suburban sprawl. It has a growing art scene, and some of the most affordable historic homes in an urban centre in the Golden Horseshoe. If this is something you can appreciate, you may want to consider an exploratory visit.

Let the Light Shine In?

People, like plants, need light. I know I feel a little light-deprived in the depths of winter despite my Vitamin D and plug-in light enhancer that shines on my face for an hour each day during the lean months of limited sun.  This desire for light is often expressed when condo shoppers go shopping for condos as well. Bright, light-infused condos are appealing. Dark ones are not. Makes sense.

The thing is, this desire for light, in the form of wall-to-wall, floor-to-ceiling condos is great for developers too. It is a lot less expensive to build a condo with a glass skin than a precast or brick skin with windows. The materials cost less and the time to put up such a condo happens faster and, in turn, costs less for developers.

There is a bit of a hitch, though, for window-clad condos. They may lead to buyers paying more for their beautiful, sun-filled view down the road. Condos whose skins are made almost exclusively of glass will need upkeep sooner than a condo mostly made of precast or brick, and that upkeep may be fairly expensive. Within twenty to twenty-five years, most of the glass on glass condos will need to be replaced, according to many engineers here in Toronto. The argon gas between the panes of glass may leak and fog up. To replace all of the glass in all of a given condo's units will lead to an increase in maintenance fees or a special assessment on top of the maintenance fees to pay for this expensive replacement.

On top of this potential expense, there is also some concern about energy efficiency with all glass-clad condos. So much so that the province of Ontario has adjusted its building code. Because a unit in a glass-clad condo is also not terribly energy efficient, the province has stepped in to make stricter building codes where only 40% of the condo's skin can be made up of glass. When the developers caught wind of this, they rushed in to apply for building permits for all glass buildings before the deadline from January of last year. So, you will see condos in the city of Toronto that are currently under construction that will have all glass skins. But in the future, this will be no longer allowed. In a sense, the older condos of yesteryear that were not all floor-to-ceiling glass but had some windows mixed with brick exteriors and cement exteriors, will be coming back. What is old will be  new again, with less light.

So, with the options to buy a glass-clad condo unit, an older condo with less light, or a future condo with less light, the question becomes: Is it smarter to buy a condo that is not all glass?

From an energy saving perspective and in terms of keeping your maintenance fees (and special assessments) of the future in check, the answer is a firm yes. There may be some creative solutions in the future to deal with all the condos that will need new windows, but for now, it is a cost that will be expensive.

Still, the new condo of the future is not the perfect solution. They will cost more to build, and the developers will likely pass on the cost to the buyers. You will get what you pay for. You are more likely to have a sturdy building that is less likely to have issues with its windows. Your energy bills will be appealing so that you will pay less to cool and heat your home.  You will, however, have less light. 

So, with that said, I encourage all condo purchasers, current and future, to take the path they feel is most suited for them. Just make sure you know the facts before you move ahead. 

The Winners and Losers of Toronto's Real Estate Future

Not very long ago, the idea of urbanization was considered a "trend".  It was like no one was really sure whether this idea of returning to the city was just a temporary lapse in judgement. It was as if there was a reluctance, a kind of sense that everyone would grow leery of this trend, and go back to the suburbs or at least not obsess on urban living so much.

The truth is, the return to Toronto, and in most cities in North America,  is not a trend. It's a complete paradigm shift. Many see the price of Toronto houses as sky high, and historically speaking, they are. They anticipate a time when the prices will come down. And they may, but only temporarily. The momentum has grown too much.

The boomers may have been a big part of the exodus to the suburbs in the 60s, but the millennials, the next largest demographic group, seem to be determined to be in the city. It's true that the priorities of the millennials will change for those of them who want to start a family. We do not yet know if they will opt for more space outside of the city or make a small space work inside the city.

In really doesn't matter though. The trends are pointing to more than just going where the big yards are. It is mostly about lifestyle. People want to live in the city. They don't want to commute long distances to work. They crave communities within the city.

Now, I don't want to suggest that Toronto is a kind of Utopia. In the future, houses in the city will come at a premium price. It won't be easy to afford. Only the wealthy will be living in big houses. Condos close to the city, ideally smaller, boutique ones, will be in demand. The pressure to live in the city will change how we live here in many ways. There will be more condos, more density, more businesses, and hopefully more transit. Still, buyers will need to be creative. I believe you will see an increase of co-ownership of homes. Two couples, for example, who may buy a duplex and live in different units. I'm already seeing this kind of arrangement popping up more and more. In the future it will be even more common.

Of course, I don't want to imply that everywhere outside of Toronto in the GTA and beyond will fail, because every one wants to move here. I will say that those areas that have suffered from sprawl of the past thirty years will likely go into decline. Already many businesses are leaving the areas of sprawl for well-planned parts of the city that are better integrated into neighbourhoods.

Other parts of the GTA and beyond will prosper, especially if they have their own downtown hubs made up of home-grown businesses and well-planned streets and transit. I can think of places like Port Credit, Peterborough, Guelph, and Hamilton.

Hamilton has been in decline for so many years it has literally bypassed the urban sprawl of the past thirty years, and now has a renaissance under way. It still has plenty of room for improvement, but with the new GO station to be built, many people will appreciate this alternative to Toronto since Toronto can be easily accessed from Hamilton, and the Hamilton downtown itself is becoming a lot more appealing.

So, for those of you waiting around for those house prices of 1995 or 2000 or even 2012, I'd say you are out of luck. Yes, real estate is cyclical. Prices do rise and fall, but over the long term, Toronto, and many small cities and communities around Toronto will continue to grow and become more attractive places to live. Some suburbs will fail. Some will not. The return to the city is happening all over the world. It's no longer a trend but a fact of life.  Accept and carry on.

To Gut or Not To Gut

There was a time, not long ago, where dumpy old houses that needed to be gutted were a deal. No one besides contractors would go near them. But then along came HGTV and everyone saw that it was possible to buy a dumpy house, renovate it, and then sell if for more. Flipping properties became a bit of a sport for awhile, but the success of flipping houses brought out more flippers, and now I find that the dumpy houses in a hot neighbourhood can be quite expensive, and not always worth the money. Many of the Toronto public housing that have come to market these past few years have received multiple offers. They have limited marketing, and the houses have not had any care in decades. Still, the bidders come. So, let me be clear. There are no guaranteed bargains here any more. It can happen! But don't assume.

Of course, there is an upside to doing it yourself. You can do every thing right and to the specifications you like. Sometimes, buyers have certain expectations of a fully renovated house. If the house looks amazing, it is often assumed that all of the stuff behind the walls is in good working order like the plumbing and the wiring. That's not always the case. The benefit of gutting a house: You see the house stripped down and there are no secrets hiding behind the walls.

TO BUY A RENOVATED HOME

Buying a renovated home has its perks though. The biggest one: You don't have to do any of the renovation work, and you simply move in and enjoy! Of course, the downside, if you find the prettiest house on the block, you will have some serious competition. Though gut-worthy house are not the deal they used to be, renovated houses are like catnip for most buyers. The bidding wars can be tougher here, but if you are able acquire the house, it is easier than the gut-job home.  You won't have to spend a year or more pulled away from your career to tend to a renovation or to apply for the necessary permits. I would say most people do choose this easier route. And who can blame them, really.

Still, there are benefits to both.  if you are the kind of person who likes a project and dreams of putting your mark on you home, then I say, "Get your gut on!" Just make sure you are fully aware of the time and cash commitment will be required. If you prefer the thing done, then that's okay too. Just don't assume it will be perfect. All old houses have their issues, even after renovations.

Bidding War Tactic #547: The Last Minute Surprise Attack Offer

Participating in a bidding war is a strange practice.  If you're working for the seller, it can make your life a whole lot easier. Sellers sit back and have buyers and their agents present offers and gush all over them. They simply have to pick their favourite one, which is usually the one with the best price. Buyers and their agents wait in cars parked outside the seller's house or the listing brokerage hoping they are the one. It sometimes feels like a sad version of The Bachelor.

From the buyers' side, it's tough. You can spend a lot of time preparing for a bidding war and then get your ass kicked. Not a good feeling. It takes time to line up your financing and possibly conduct a home inspection. You may be emotionally invested. It may be the house you have been dreaming of since you were seven years old. And sadly this may be the case for several other buyers too.

I think it is quite human to have an aversion to bidding wars. A lot of people feel uncomfortable being a part of something so mysterious. Even if you are the one whose offer is accepted, you may wonder if you've gone too high on price since the selling agent cannot divulge the contents of the other offers. They are, however, a fact of life in many parts of Toronto with many kinds of properties. Just last month alone 62.3% of all transactions on houses at Bosley Real Estate received multiple offers. So, if you must go into battle, it's best to be prepared.

There are no guarantees with bidding wars, but from a buyer's perspective I think it is a good idea to have a plan. Usually, it is wise to do your due diligence in advance of offer night - line up your financing and do your own home and termite inspection. But that's not the plan I'm taking about. I think you have to be prepared for any surprises that may come along.

So, with most sale representatives who are holding back offers, they will ask buyers and their representative to register any offers by a certain time, like 5pm and they will start reviewing offers by 7pm. Now, if most buyers are told this, they believe that they must register an offer by 5pm and be ready to present their offer to the sellers by 7pm. And that would be understandable.

Of course, life does not always happen on schedule. So, if an offer comes in at 6pm or even 7pm, will a seller say "No, I will not see it!"?  Of course not. They will want to see it. Now, according to the rules of real estate in this province, the selling agent needs to inform all interested parties who have registered an offer with an update of how many offers are on the table. Some times, this does not always happen, and sometimes offers come in at the last minute.

There are some real estate representatives on the buyer side who use this last minute surprise offer as a kind of tactic. They will call at the very last minute to register an offer. Many feel this will throw off their competition this way.  Sometimes this tactic works, but I always tell my buyers that an offer can come in at any time up until you have a signed contract. Be prepared!

Let me illustrate this by an experience I had this year. I was representing a very nice couple who had found a home that they loved. Offers were to be presented at the owners house. Buyers and their agents walked up to the door, one by one, to present their offers. I was the third person to offer on what I thought was the last offer presentation of the night. When it was my turn, as soon as I walked in, I greeted the listing agent and the seller, and asked: "How many offers are you reviewing tonight?" Now let me remind you that my clients and I were told three offers, but when I asked this question again, I was told five. So, I excused myself and told the sellers and their agent that I needed to review this information with my clients before I could present my offer. I walked back to my car, spoke to my clients who felt they would like to raise the offer a certain amount now that we had five purchasers in the running to buy this house instead of three. Then I walked back into the house and presented my offer fully aware of ALL the offers that had come in.

What is the point to all of this? Well, I think buyers should be prepared for several scenarios. I always suggest to my buyers that they have a price they are willing to pay, within a reasonable range of market value, when there are no other offers on the property, one or two other buyers, or five or more offers on the property. That way, no one is caught off guard if the last minute offer tactic is pulled out and buyers feel unprepared.

Luckily, two last minute surprise attack offers did not prevent our offer from being the chosen one!  And on behalf of my clients, I can safely say that it was even better than landing the Bachelor!

How To Be A Better Seller

When it comes to buying some properties in Toronto right now, you need to put up your mitts and get ready to battle. We hear so much about the bidding wars and the resulting out-of-this world sold prices on Toronto homes.  Neighbours are thrilled. Buyers are depressed. Even if you are the lucky buyer to land a property in a bidding war, you fear that you have paid way more than market value after getting caught up in the spirit of the battle. 

The truth of the matter is, many properties don't sell this way. In fact, there are properties that do sell for what I consider less than their market value. It's very rare in this current market, but it can happen. And it usually has to do with less-than-stellar marketing of a property. So, just how does this happen in Toronto? How can you possibly land a deal as a buyer or avoid becoming the owner of a house that sells for under value as a seller? Well, here are my thoughts on why some properties sell below market value. 

1. The Commission Gap. Many sellers do not understand what is going to attract the most buyers. They focus on saving money by asking the selling agent for a reduced commission. Fair enough, it is your prerogative to negotiate. But be careful. If, as a seller, you only offers 2% to the buyer agent for bringing in the buyer when the overwhelming norm is 2.5%,  then the buyer may be on the hook for the extra .5% if the buyer is in a contract with a real estate sales person where he or she are to be compensated 2.5%. Buyers have enough to pay for while buying a home including land transfer tax and lawyers. The last thing they want is an additional cost .5% to make up for the shortfall the seller isn't offering. So, the seller can lose a lot of potential buyers this way, and receive a lower price on their property,  a price even less than the .5% they are trying to save. 

2. Dreaming too Big. When a seller is ready to sell his or her home, they may interview a few agents to see who would be best suited for them. It's a good practice. I recommend it. When the seller should be focusing on the marketing plan that will yield the best price for their home, they sometimes  fall victim to the real estate agent who promises the highest price. The problem with a home priced higher than everything in the building or the neighbourhood is that it tends to help sell the more reasonable priced homes nearby. So, you are overlooked as a seller. Your property receives few visits and your home may not sell for weeks. Then, after enough time, the property becomes stale, and you either need to reduce your price or accept  a low ball offer. It's not always a poor strategy to list higher with the knowledge that you may accept something less. But if you are expecting a certain number out of wack for your neighbourhood, without anything extraordinary about your home, then you are doing yourself a disservice. 

3. Doing It Alone. First of all, I'm not down on these  For-Sale-By-Owner (FSBO) folks. I think some sellers can sell their home on their own, but this is a very rare breed. Most of the time, sellers do not understand what kind of work is involved, and they often don't know how to market their home, attract buyers or price their home. In Toronto, many For-Sale-By-Owners will fail.  There is a reason why there are agents who focus exclusively on picking up FSBO listings. Many FSBOs cannot sell their home on their own. They often price too high or do not market it properly, even with the MLS.

So, with all those do nots, what should sellers do? Well, you need to make sure you choose a real estate salesperson who presents the best marketing plan and a selling strategy that will yield the best price for your place. When the focus is saving money or dreaming of a big price, the real focus is ignored. 

Let me illustrate this by a recent experience I had with two clients. These buyers were able to obtain a house that I believe was under market value. The sellers offered less commission than the regular amount.  They didn't develop a strategy for selling their home. And they did not put up any photos of the inside of their home. Most of the time when there are not photos on a listing, it's like saying the inside looks like a serial killer and a hoarder exploded from a blender. But this place looked amazing. The sellers kept it tidy and maintained it beautifully, but for whatever reason, there were no photos and you did not get a sense of how great the place was. 

So, sellers, when you're ready to sell your home, look for the salesperson who offers you the best marketing strategy, not the highest price or cheapest commission. 

Buyers, deals are are hard to come by in Toronto but you may want to revisit some of the stale listings that have not sold. Most will have not sold for a good reason, but there may be a few in there that have slipped through the cracks, ripe for the plucking at a lower price.