Thoughts about real estate from the buyer's point of view

Making haste slowly

We saw some changes in our local market last year, especially in its closing months.  There was much less choice available and competing offers weren't unusual.  It was also not uncommon to find that listings had been sold before they appeared in the latest MLS book -- and never mind when an appointment to view them was being asked for.
But did this mean that listing agents and their vendors were back in the driving seat?
No, not in my opinion!
Certainly, there was some pressure on potential purchasers in terms of how quickly they needed to take decisions, but this wasn't matched by any significant increase in selling prices.  Despite what listing agents and their vendors were perhaps hoping for, buyers didn't really show any greater interest in paying more than they thought properties were worth.
In effect, value was still the essential requirement last year  -- and I'll be greatly surprised if this situation changes as 2004 progresses.
Needless to say, what I consider to be the continued existence of a Buyer's Market helps me in my role as an Exclusive Buyer Broker.  I've an easier task in making sure people get the "most house for the money" (as opposed to a listing agent's wish to get the "most money for the house") if prices haven't -- at least as I see things -- returned to the upward spiral of the past.
At the same, though, there are some steps you can usefully take if you're interested in buying something now, in the coming months, or, for that matter, in the foreseeable future.  I touched on them in my newsletters last year, but I think it's worthwhile reprising two ideas here, as well as elaborating on some of their implications.
So then ....

1.   Strengthen your ability to get financing
Although banks and mortgage brokers are quick enough to offer you a pre-approval (even if you don't need or want it!), there are two factors that can lead to last minute turn-downs.
One is the likelihood that a credit check hasn't been made beforehand, the calculation simply being based on your debt handling ability (which may be well within the limits) but without any look at your debt handling history (which, heaven forfend, may not be quite as acceptable).
The other is an appraisal that won't, of course, be forthcoming until after your offer has been accepted but can end up with a figure that's less than the  price you've agreed to pay.
However, there are ways in which you can minimize the likelihood -- and, of course, the effects -- of these surprises.
On the one hand, there's no reason why you can't insist on having a credit check included in your application for financing pre-approval. You may -- but only may -- be asked to pay for this to be done, but it shouldn't involve any more than $20 and is better spent in the beginning than too late in the day.
On the other hand, you should be able to get an advanced view of the consequences if you're faced with a mortgage shortfall.  For instance, could you get a higher ratio mortgage or would a second mortgage be possible? It may even be advisable to anticipate any such difficulty by having the seller agree to a short term "bridging loan" as a condition of your offer.

2.   Make yourself available at a moment's notice
Especially if you've already narrowed things down to exactly what kind of property you want and in what price range, be prepared to see new listings as soon as they appear. Don't run the risk of seeing them snapped up by someone else while you're waiting for a convenient time to view them. It's not quite the same as in the January Sales, but "it won't last" is sometimes more truth than mere hyperbole.
If you've yet to zero in on the market, it's still a good idea to both take and make the time to look at what's presently available, particularly in the case of listings that haven't been around long enough to become tired.  In fact, the sooner you get a measure of the market, the better you'll be able to make the right choice when you're ready to become serious.
In other words, today's market isn't going to be kind to you if you procrastinate unduly. To call on an old saying: the race nowadays is to the swift.

Despite all this, my advice is don't panic, even if I seem to be suggesting a need for it.
There are several reasons for the lack of listings, and among them is the realization by many would-be sellers that they won't get what they want.  In turn, this is often enough confirmed by could-be listing agents who, when they're being honest with themselves, see little benefit in taking or servicing overpriced listings.  Given this, much of what's on the market today is realistically priced and gives you the chance of getting good value.
In addition, once you've settled on a property, you can rely on your lender to objectively decide its value based on the appraisal they order.  Regardless of what people hear or read in the newspapers, values hereabouts are holding rather than rising.  Indeed, reports of an increase in average selling prices are more a reflection of greater affordability than anything else -- the fact that first time buyers can now buy something for $100,000 instead of the $80,000 figure they previously envisaged translates into an ability to purchase a better house rather than one that's gone up in price.  And, with all due respect, the hopes of the listing agent and his/her vendor are unlikely to have taken this fact into account.  In contrast, your lender and the appraiser will look only at comparable properties and what they sold for, rather than paying heed to what average purchase prices may have become.
In any case, the need to offer -- and obtain -- value is, beyond question, the  governing principle in the marketplace.  If it wasn't so obvious in the past,  it is now and, in my view,  will remain so  for some long to come -- whatever the press, numerous listing agents, and perhaps too many vendors prefer to think.
So by all means make haste -- but do it slowly.  In other words, don't let the shortage of listings stampede you into paying more than you ought -- or really need -- to do.
If the market isn't going to be as kind to you as it was, your answer, as a buyer,  lies in being well prepared for it so you don't end up as one of its hapless victims.

Duncan Pollock, Exclusive Buyer Broker

Duncan Pollock, Real Estate Broker,
427 Gate Street, Niagara-on-the-Lake, Ontario, Canada L0S 1J0
Tel: 905-468-3154 Fax: 905-468-3812 Cellular: 905-704-9037
email: duncanpollock@sympatico.ca
Note: E-mail addressed changed as above on Nov 3 2007
website: http://www.duncanpollock.com


This is an online copy of my February 2004 newsletter -- and you can find a list of the other ones I've sent out by clicking here.
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There's nothing hard sell involved, I can assure you.  Rather, the idea is to share my thoughts with you about how I believe buyers can be better served by the real estate industry.
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