Tag Archives: market value
Chandler Man – Favstocks.com
The normal real estate system is facing some new issues since the Toronto housing sector has intensified. Many home shoppers are being caught off guard by a maneuver known as a bully offer, that has become a prevalent way to seize properties off the market in advance of a bid date. This situation has placed Realtors in a dilemma of how to effectively serve their clients while retaining consumer faith in the bidding process undamaged.
The bully offer tactic is a consequence of the bidding system presently favored to bring attention to a property by publishing a low price and opening the home for showings, however not entertaining offers until a specified date. If one of the interested buyers puts in a bully offer – which is usually higher than the moderate list price – the stipulation is that the offer be agreed to before the bid date specified on the listing.
The home owner recognizes their opportunity to move their property fast and often accepts the bully offer to cut steps out of the current sales plan. For buyers in Toronto who have spent countless hours hunting for houses and Toronto condominium listings coming across a bully offer can upset your plans.
The purchasers that respected the offer date have not been pleased when they learn that a bully offer has been signed on a home that they had been waiting to bid on. Objections have been raised, and as a consequence new policies are currently in effect for home owners contemplating bully offers.
This kind of scheme is used mostly in Toronto but purchasers of homes in other nearby regions are also seeing it. If a bully offer is made and the vendor wants to accept it, the Realtor has to call all the bid candidates and let them know a bully offer has been made so they can have the chance to make a counter bid. Despite the fact the concept is good, the reality is that most potential buyers are not able to drop what they are doing to rush to the agent’s office with all forms filled-out for a bid with such short warning. As a result, the complete multiple offer process is voided if the bully offer goes undisputed and is accepted by the home owner.
Some real estate professionals do urge their clients not to accept a bully offer, however to wait until the scheduled offer presentation because there could be a higher offer tabled by other purchasers. This method has been advantageous in a lot of transactions, however the allure of taking the bully offer and fast tracking the sale is often too tempting to turn down. The would-be buyers who are left out in the cold in spite of following the rules spelled out by the seller are beginning to be irritated by the rise in bully offers.
The bottom line is that bully offers are creating damage to the entire housing market by undermining consumer confidence in the offer procedure. Realtors are having to put intense consideration into how they can revamp the policies to keep it fair while representing their clients’ best interest.
A solution for potential purchasers might be to turn to the Wasaga Beach real estate market and steer clear of the Toronto region however that is clearly not workable. As long as the real estate glut in Toronto is affecting the bid process, purchasers are going to have to stay on their toes to counteract any bully offers that impede their opportunity to bid.
Any reputable Realtor should advise their purchasers not to be bullied into making an offer that is higher than the present market value for any property.
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Mark Weisleder – Toronto Star
Recently, the sellers of a home in The Beach listed their home for sale with a reputable agent. They were aware that buyers were starting to shy away from multiple offers as a result of a collective disappointment in the entire multiple offer process.
One complaint was that there were suspicions that the listing salespeople were providing unfair advantages to their own buyers, from whom they could obtain a higher commission.
Another complaint was around the practice of listing a property, but indicating that no offers would be accepted for five days, in order to permit interested buyers to conduct inspections before submitting offers. Sellers hope that this will create an atmosphere for multiple offers. However, there were examples where buyers would bring in pre-emptive offers before the five day period, and sellers were in some cases accepting them.
The agent in this case suggested a novel marketing approach. The property listing indicated that offers would not be accepted for six days and that the asking price would be $539,000. The house was priced, after a careful review of comparable prices in the neighbourhood, and the sellers hoped that with multiple offers, they might obtain $550,000 to $560,000. The realtor asked them what their “dream price” would be and they indicated $590,000.
Accordingly, the realtor included a note on the listing that simply stated “Buy tonight, $590,000″ and on her “For Sale” sign invited buyers to call for the “buy tonight price.” This appears similar to how products are sold on eBay, where the consumer is given the choice to either bid on the item in the online auction or decide to “buy now” at a set price.
In my opinion, the advertisement of a buy tonight price would probably not be enforceable by a buyer, even if an offer came in at that price. It could be argued that this was still an “invitation to treat” by the seller, thus not binding. The Statute of Frauds in Ontario requires that all real estate agreements be in writing and signed by the parties. In addition, no other terms were mentioned in the advertisement, so if a buyer brought in a full price offer, but with a closing date two years from now, and with a very low deposit, this would clearly not be what the seller had intended. In addition, what would occur if two buyers came with similar offers on the same evening?
Still, a buyer did come in and presented an offer of $590,000, which was accepted by the sellers. The buyers were very happy to avoid the multiple offer process and the sellers were very happy to obtain their price.
The multiple offer process is not easy. You require an experienced real estate salesperson to guide you through the process.
For a seller, it means understanding not only the prices that other properties have sold for, but also what the mood or pulse of the market is at that exact point in time, so that a strategic marketing plan can be put into place to obtain the maximum price.
For a buyer, it mean understanding what the fair market value of the home is and not getting caught up in the emotion of the bidding process, to ensure that you only spend what you can afford.
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Toronto’s extraordinary condominium boom continues
Shlomo Sharon, National Post
Condominiums have recently become the dominant form of housing in Toronto. Condo living attracts many types of buyers, who are trying this lifestyle for the first time, including singles, young couples, families, empty nesters or retirees. They each have individual expectations of what condominium living will be like. The owner of a 500-square-foot unit wants different things than the owner of a 2,000-sq.-ft. unit in the same building. The retiree’s expectation differs from the investor who has rented out his unit. The dog owner’s view of the common elements differs from a condo owner’s without a pet. The owner of a more expensive unit may want a concierge and valet parking, while someone with a smaller unit may feel such services are unnecessary.
Here are tips to ease the transition into this type of homeownership.
Many first-time condo buyers may not know that a developer is only required to complete a unit to the satisfaction of municipal requirements (which is providing water and electricity to the unit). They can leave unfinished items to be completed after the move-in date. Most agreements of purchase and sale say that buyers must complete their interim closing regardless (but checking in with a lawyer is certainly recommended).
After the interim closing and the payment of further deposits and adjustments, it may be a few months or more before the developer is able to register the development as a condominium corporation through the land registrar. Until that is done, final closing cannot occur (and a mortgage cannot be registered against the unit). During this time, the purchaser will live in a construction zone and pay monthly interim occupancy fees. Occupancy fees are made up of three main components: common expense fees, property taxes and interest on the unpaid balance of the purchase price. Purchasers are often not aware they have to complete two closings, and are surprised to learn that this occupancy fee is essentially “rent” paid to the developer.
We often hear from buyers: “Why do I pay occupancy fees? I don’t own the unit yet and I don’t receive any services.” It is a payment to the developer to cover the expenses of the building during the occupancy period. These occupancy fees can be used as the developer sees fit, except the portion of the fee slated for the reserve fund, which, after an occupancy period lasts more than six months, must go to into the reserve fund (essentially an enforced bank account that ensures there will be enough funds down the road for major common element repairs).
Once the condominium corporation is registered and final closing has occurred for the majority of the units, a turnover meeting must be called; all unit owners are invited to attend. The unit owners are, in effect, taking control of the condominium corporation by electing a board of directors to look after the building’s day-to-day operations, with the assistance of the property management company and the guidance of the corporation’s lawyer.
Unit owners often have a misconception that the management company is an extension of the developer and ask them to fix deficiencies in their unit. But the property management’s scope is limited to common elements. It is not unusual for a property manager to be asked by an owner to repair a faucet “since I have paid my rent on time.” Unit owners do not pay rent, they pay common expense fees, which cover the common elements of the building and not maintenance on a unit.
In some cases, the management company is appointed by the developer, however, the management agreement is with the condominium corporation and is for managing the common elements. The property management company communicates and receives instruction from the board of directors. A good management company can also help reach an amicable resolution to issues between the developer and the condominium corporation, to try to save on legal fees.
Buyers should also be aware that what is in a marketing brochure at the time of sale may not be what the developer delivers. The developer always reserves the right, as stated in the fine print, to make changes. A lawyer familiar with condo contracts can identify what items are subject to change and what are included.
Most buyers know that when the developer begins selling units, it can be two to three years before occupancy takes place. So it’s important to note that, while the expenses set out in the budget at that time are prepared with the best estimates, they will be on the conservative side. It is very common for expenses to go up after the first year, sometimes by 25%, and will go even higher with the HST. These increases are mostly for utilities (hydro, gas and water/sewer) and would have originally been based on estimates of a similar building.
The reserve fund contribution also sees increases. The fund must be in compliance with the Reserve Fund Study, a requirement under the Condominium Act of Ontario. Having a healthy reserve fund is important for any unit owner who wants to maintain and increase his building’s and his unit’s market value. Down the road, resale buyers will want to see sufficient reserve funds when deciding whether to buy into a particular condominium corporation.
Sometimes unit owners will compare their common expense fees to those of other buildings, but those fees depend on many factors, including the services that are provided, the number of units in the building and the expenses that are included.
While the developer is usually responsible for any first-year shortfall in the reserve fund, condominium corporations should not take it to the bank. Developers tend to review the first-year financial statements and challenge the amount of the deficit– and, if they’re successful, the owners will be responsible for the shortfall.
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