The Montreal Real Estate Blog

You started out with a high listing price. It’s been a while since your property is for sale…and no offers.

What could be wrong?

The property is in a hot neighbourhood, so the location is not the problem.

The conditions are great; top-notch with lots of renovations. You even got complemented on the décor and how well maintained it was.

Then why are there no offers?

Could it be the price?

After giving it some thought, you realized that perhaps, the reason why those few visitors never made an offer is because your property might be over the market value.

And you should know what the market value is…

Before listing your property, you checked the MLS for the current listings in your area, compared to similar properties, called an agent to give you a free home evaluation (just to make sure) and got a sheet called the “Comparable Market Analysis” (CMA), then decided what the asking price should be - regardless of what that CMA thingy said about the suggested asking price. Did you not?

Ok.

Now your property is NOT selling. What do you do next?

You drop the price. But, by now it might be a little too late. Your property is old news.

(The Risks of) selling your home above market price.

Let’s say you finally get an accepted offer for your house, from an uninformed buyer.

Like most buyers out there, they will need a mortgage; in these situations the offer to purchase is conditional to mortgage approval. No mortgage, no deal.

When receiving the (signed and final) offer to purchase, the mortgage lender requires an appraisal of the property before they consent to the financing. If the current market conditions and the comparable sales for the last six months do not support your sales price, the banks won’t approve it.

The lender will give their own appraisal to the buyer, and the amount they are willing to lend based on that evaluation. If the buyer is putting 20% down payment, the bank will finance 80%. Not a penny more. Which means: the buyers have to get more money, so they can afford your property.

And your deal falls through.

If the buyer is still interested, you can try to re-negotiate the price or the terms. But if not, your property could go back on the market.

Remember:

The longer a home sits on the market, the harder it is to get a good offer.

Once the offer expires, your property is available for new visits, but by now any informed potential buyer who kept an eye on your property will know there were offers on the table, and if they don’t know they will ask. It is your responsibility (or your listing agent’s) to reveal the reasons why the deal didn’t go through, without disclosing the previous accepted price.

There’s nothing more frustrating than having all the ingredients for a successful sale, (pre-approved buyer, a good inspection report, etc.) and then having the bank refusing to lend the money because the property “Is not worth that amount”

New buyers interested in making an offer will think that since the property has been on the market so long; the owner might be desperate to sell by now, and making a low-ball offer will probably get accepted.

By starting out with a high listing price, you could end up selling for a much lower price.

Here are a few more reasons why you should not overprice your home

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Early on and even before you start home shopping , you need to determine the price range that suits you. If you plan to finance your purchase with a mortgage loan, sit down with your lender or mortgage specialist to discuss your needs and get mortgage pre-approval. That way, you know exactly how much you can spend on your new home.

• Pre-approval means that your lender commits to giving you a mortgage loan up to a specified amount at certain terms and conditions, including the interest rate.
• Pre-approval are only valid for a specific period.
• Pre-approval doesn’t lock you into the mortgage. You are still free to pursue other arrangements, including getting a mortgage loan through another bank instead.

The benefits of having a pre approval letter with you before starting the home hunting are numerous since it gives you advantage over those home shoppers who have no clue on what their factual financial limitations are.

Read more »»

Is the air in your home making you sick?

It can be as innocuous as a persistent cough, rash or headache. But, for the very young, the elderly and those with respiratory disease, the effects of indoor air contamination can be far more serious. The very air you breathe could be affecting the comfort and health of your family. Recognizing the symptoms of poor air quality is the first step toward fixing the problem. Bad air can be the cause any of the following symptoms:

• fatigue
• headaches
• cold or flu symptoms such as coughing, congestion and sneezing
• redness or irritation of the eyes
• irritation of the nose or throat
• dry, chapped or irritated skin
• allergies
• asthma attacks

Your home may have bad air if you or your family continuously experience any of these indicators, primarily when spending time at home. Read more »»

So, you’ve finally decided that homeownership is right for you. Now you need to determine if you are financially ready to buy a house. Check out these formulas to calculate the size of your loan and evaluate your current financial situation.

Knowing your net worth is important because you will need this information when you discuss a mortgage with your lender.
Your net worth is the amount left over once you’ve subtracted your total liabilities from your total assets. It will also give you a snapshot of your current financial situation and show you how much you can afford to put as a down payment. Read more »»

This very complete article was released this morning by the Financial Post. Richard Croft goes on to explain why is real estate a good diversifier in your portfolio: from owning a home to becoming an investor in Real Estate and it’s positives aspects as well as the negative ones.

Richard Croft, Financial Post
Their principal residence is most people’s primary exposure to real estate as an investment vehicle.

“…Real estate is an excellent diversifier within a portfolio, and in the case of real estate investment trusts (REITs), can provide some decent tax-advantaged cash flow to your portfolio. So here’s the question: Is your home a place to live or is it an investment that will at some point be sold to capitalize your retirement years?

If the former, then by all means include real estate in your portfolio. If the latter, then adding real estate to your portfolio would defeat the purpose of optimum portfolio diversification.

Assuming real estate should be in your investment portfolio, the next step is to understand what it brings to the portfolio in terms of performance enhancement and risk reduction.

As an investment, the real value in real estate is its cash flow. If you buy a rental property, for example, you buy it on the basis of some cap rate, which is really just another way of saying the property value is based on some multiple of its cash flow.

Like any other asset, the multiple accorded to that cash flow is determined by the stability of the cash flow. If you are buying a property with a solid, long-term tenant who pays the rent –like a major Canadian bank– the cash flow is stable and the property will fetch a higher valuation.

Another way to look at cash flow is in terms of how real estate is financed. In Canada, you can borrow 75% (sometimes you can borrow even more of the purchase price) of the value of your real estate, usually financed over a 25-year term. If your cash flow is stable, you can use the excess cash flow to pay down the mortgage, and at the end of 25 years, you own the property free and clear.”

Read the complete article at The Financial Post

Because of the constant changes in real estate market conditions, more sellers are competing for fewer buyers. And most buyers are not jumping at the first property they fall in love with.
“The initial asking price is NOT that important because it can always be lowered later.”

Wrong! The original asking price is very important. Specially when working with the new generation of buyers who are well informed on the market conditions. But many homeowners still believe over pricing a listing is the way to go. And they couldn’t be further from the truth. It is a myth. It’s a time wasting myth.

Find out more… Read more »»