February 13, 2014 | buying, buying new, selling, timing, Toronto Real Estate Market
Timing the real estate market. So many believe you could make buckets of money if you could master it. To be honest, I think this is a tough thing to rely upon to make your fortune in real estate. I see buyers standing on the sidelines for years as Toronto prices continue to go up, and they miss out on buying a house for half the price it was 10 years ago. I’m not talking about that kind of timing. This kind of timing can be unpredictable. Should you buy in 2018? Will the market crash? This is not the kind of timing on my mind.
In this blog, I’m talking about something more specific, particularly when it comes to condos. It is something that could be applied in any market to improve your chances of getting a better deal. No guarantees, but better chances. Some condos will sell well at any time because they are in great location and have grown a waiting list of people who are trying to get in. Then there are those condos that have a certain amount of stigma, rumours (or truths) of bad construction, poor quality, or poor management. Let’s assume, we are dealing with condos that are well run and well located.
For buyers, when it comes to timing, you may want to consider the following:
1. WHEN BUYING NEW
When developers first go on sale with a new condo, they offer their standard prices. If they do a good job advertising, everyone will run out and buy a condo unit until there are none left. This doesn’t happen quite so often nowadays. Since there are more new condos for sale at the moment, not all developers are hitting their 70% sold units they require before they start construction. Without that 70%, they cannot build their condo in Toronto. For example, if units that have sold are stuck at 60%, developers will be willing to bargain since they want to go that extra 10% to get their project off the ground. Rarely do they lower the price. Instead, they start offering incentives to push themselves over than 70% hump. They’ll offer things like: a free parking spot, a free locker, upgrades to the kitchen or free maintenance for a year. So, as far as timing goes, this would be a good time to make your move to buy new.
2.RIGHT AFTER A NEW CONDO IS REGISTERED
Once a condo is registered, buyers start paying a mortgage to live in their units, and a condo board is formed. Construction is done. It is the birth of a condo. At this point, buyers can become sellers. That is, they are free to sell their properties for the first time. More often than not, a bottleneck of sellers forms. Since the two or three or five years that those original buyers bought a preconstruction condo off of the floor plans, many of their lives have changed. They fell in love, had a baby, had a divorce, or found a job far away. In turn, their lives are no longer harmonious with the condo they bought many years ago. So, they try to sell them. In addition, there are the condo investors. These folks bought a unit in a condo building with the purpose of renting it or selling it once it was completed. Most will hold on to the unit and rent, but some will try to sell. With those two groups combined, there are often many sellers ready to sell all at once when a condo registers. This, in turn, may lead to a temporary lull in prices since new buyers have so many units to pick from. They can negotiate a lower price. Again, no guarantee this will happen with all condos, but it happens.
3. OLDER CONDOS
This timing method is not for everyone, but if you like space, you may want to purchase a condo that has been around a long time. Not just any old condo. Make sure it has a healthy reserve fund and is not falling apart. If you are open to an old one, chances are your maintenance fees are a little higher, but back in the 80s, wow, they knew how to make condos big! Many other buyers will poo poo an old condo since they look dated and don’t show well. So your competition will be minimal. If you’re up for a little renovation, you can probably get a larger condo for less.
For Sellers, you need to look at things a little differently. This is how I think sellers can benefit from timing:
1. THE FIVE YEAR MARK
If you have lived in condo that is roughly five years old, you are at peak selling potential. Why? Well, your condo is old enough to have built up a strong reserve fund for future repairs and updates to the condo. Also, after five years, the common elements are usually still in pretty good shape. The fixtures on the lights are still modern. The machines at the gym are all operational. Plus, the design and the style of your unit does not look old fashioned. Essentially your condo will not be upstaged by newer more modern condos. Finally, nothing has broken down yet. No big costs to fix the roof, the elevator, the windows. All these things put a buyer’s anxieties at ease and provide the visuals that appeals to many buyers. It’s a good time to sell.
2. NOW
This winter has provided a very low supply of houses and condos. Though houses are in higher demand, condos are much more available. Still, there are less condos for sale now than this time last year, and they are selling faster and at slightly better prices than the Fall. I’m not sure this will last until the Spring, but if you can pull it off, get out there now if you want to sell a condo this year.
3. AFTER A CONDO RENO
So maybe your condo is older, and maybe less desirable in the eyes of some buyers, but if your condo building has recently done a renovation of the common elements – a new carpet in the hall, a more modern lobby, and a fresh paint job, your chances of having more success with a sale will improve. Even if the condo is about to have a renovation, then that can be an incentive for buyers to get in there. Hopefully this renovation has been done after those running the condo have saved the money to update the amenities as opposed to depleting the reserve fund.
Now, I’d like to say it again: Timing isn’t everything. This is true especially for sellers where having a great marketing plan is key. You need to know how you and your salesperson are going to advertise your property beyond a posting on MLS, how you will stage it, how you will stand out from other units in your building, and how you will negotiate your sales price. You need a strong marketing plan to attract those buyers.