Are there opportunities to buy real-estate in a cooling market?

20th September, 2018

On September 6th, Mark Ting discussed the lower mainland’s recent drop in real-estate sales and prices. Below are the highlights of his CBC “On the Coast” interview with host Gloria Macarenko.

The spring and fall are generally considered the “hot” seasons for real estate. Should prospective buyers wait until the fall before making an offer?

I think August is a great time to buy real estate (also the Christmas break) as there are fewer buyers to compete with and the sellers who list during the slower months usually do so because they are under pressure to sell. That said, many people prefer to wait until the “hot” seasons as there is more inventory to pick from.

Back in January people were lining up buy pre-sales but that is no longer the case, what has changed?

There are fewer buyers compared to the beginning of the year. The stress test, foreign buyers’ tax and other governmental policies have had the desired effect: demand is dropping. As a result, sellers are dropping their prices or offering incentives to close a deal. Real estate flipping (homes that are bought and sold within 24 months) is at a 6-year low (30 year low for single family homes). There is a lot less FOMO (fear of missing out) compared to earlier in the year.

For potential buyers, are there still opportunities?

There are a record number of pre-sales that are nearing completion. Due to the higher interest rates and the new stress test, I suspect many buyers will have difficulty securing the necessary financing to fulfill their obligation.

If they fail to get financing, they can either walk away from the deal, lose their deposit, and risk being sued by the developer for any losses, or they can assign their contract to someone who can complete the deal. The latter is usually the preferable option. If it comes to that, whoever buys their unit will be in a strong negotiating position. That is were I see opportunity, buying the contracts from over-levered speculators who must sell/assign their unit before it completes.

How would someone find these speculators- the ones that are forced to sell as they can not complete on a deal?

No one is going to advertise that they are desperate to sell so you will have to fish them out by making a lot of low ball offers, if someone counters, they are likely a motivated seller.

It is a good idea to work with a realtor; it is their job to sus out the best deals. The realtor I’ve worked with has had some success scouring Craigslist and Kijiji for well-priced assignment sales and then negotiating a better price. You can also go directly to the developers as they often compile a list of back-up buyers in case some of the original buyers’ financing falls through. They may sell you the unit at a discount so that they can move on to their next project.

Are you expecting the market to rebound in the fall?

September is the litmus test month. The spring and summer numbers were dismal. If that trend continues through September, the remainder of 2018 doesn’t look good. However, if September turns out to be a bounce-back month, and there is an upward trend then all those people that thought the bottom would drop out of the market will be disappointed.

What advice do you offer to people that are considering selling for fear that prices are heading lower?

If you don’t need to sell, I would wait it out. I’m not selling any of my real estate as I think the market will continue to move higher over time.

If you need to sell because your retirement depends on it or because you will be moving in the next 6 months, then sell. It isn’t worth trying to time the market. I would get a proven realtor, forget about last year’s prices when they were peaking, accept that we are in a more balanced real estate market, and price accordingly.

Thanks for reading Mark Ting @MarkTingCFP
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