Sunday, August 20, 2017

How to Buy A Home You Can Resell

Avoiding The Curse of Negative Equity

So, you’re thinking of buying. That really is exciting! But here’s a sobering thought:

We are frequently approached by potential clients who want to sell their homes. Our specialist listing agents meet with them and advise them on pricing and marketing. That is, given the choices they have made in the past (which home they bought, when they bought it, their financing arrangements), what is the best course of action to meet their goal of selling for as much money as possible?

Because home values have fallen so significantly since 2014, all too often, the result of those early meetings is that, realistically, the home is not saleable given the constraints: The mortgage balance is greater than the estimated value (a phenomenon is known as “negative equity”).

The market has forced itself into people’s personal lives: The housing & investment choices those homeowners now have are limited ones; they have a want or a need to sell (e.g. job loss, divorce, etc.), but not the ability to do so.

But what do you, as home buyer today, do to minimize the chances of later finding yourself in that tricky situation? And what can today’s homeowners do to ameliorate their situations? It is an uncertain world, so today’s post hopes to help by answering these important questions and more.

Buy The Right House

If you think there is any chance that you will want to sell in the next 5-10 years, then you need to choose a home that is easily resalable. But what does that mean?

Here’s a guide to help you:

infographic showing how to buy a home with good resale value

Don’t get me wrong: it’s crucial that you purchase a home that you love and feel at home in, as well as one that fits your wants and needs. But, especially if the planned resale date is in the nearish future, it’s good to at least hold some of these thoughts in your mind to ensure that you invest in a product that won’t pose you too many challenges later.

If you do select a property that might not be easy to resell later, that’s totally okay! Your REALTOR® should be able to price in those challenging elements before formulating the offer with you.

If you secure your home for the right price now, then that will allow you to discount your listing appropriately in the future, too.

More on pricing next...

It’s Not Just About The House

Being able to sell later isn’t all about the home you select.

In fact, the best advice is to make sure the mortgage is low when the time comes to move on. This can be done in four main ways:
Pay the minimum possible price
Maximize the down payment
Pay down the mortgage
Time your purchase like a pro

Let’s cover each of these individually:

1) Price is Everything

We commonly meet potential sellers who tell us that they know that they overpaid for their home back when they bought it.

Today’s home-buyers would do well to perform intensive due diligence when purchasing their home. A great real estate agent will ensure this is done: you will know the value story (and deeper story) of the property, prior to purchasing.

Often a great price is achieved through negotiating a significant discount.

But not always...

Different real estate agents systematically list homes for more competitive prices than others. If a home is listed on or below value, coming in with a low offer and staying stubbornly low may lead to an unbelievable deal, but the chances are that a good listing agent will defend the price and ultimately, someone else will pay more than you for the property, even in a buyer’s market. So it’s best to go into those negotiations with lower expectations.

The key is to focus less rigorously on achieving some arbitrary discount (“I want a certain discount off the list price”), but on the difference between value (estimated by your agent) and the price you pay. Snagging $20,000 or so value this way will result in lower mortgage payments and a significantly lower mortgage balance when it comes time to sell. This could make all the difference 5 or 10 years from now.

2) Save First. Then Buy.

This is a really tough one. Saving is an elusive goal for many of us, especially in the light of the ongoing downturn (lower incomes) as well as the stubbornly high cost of living in Fort McMurray.

Homes are still expensive in Fort McMurray (in nominal terms, versus the rest of Canada), but if your income is high, then they may, in fact, be cheap for you[note]Fun rule of thumb: Divide the average single family home price in Fort McMurray (about $585,000) by your family’s before-tax income. If you get a number that is less than 5, then congratulations, you should find it easier than the average Canadian to afford a home.[/note]. Either way, saving up for a chunky down payment might be a prudent goal. But why?

Saving beyond the minimum down payment can have a significant impact on your ability to sell later. Potential sellers that we meet who are not in a position to sell are often the people who put 5% or 0% down when they purchased.

In addition, in Canada, when you put less than 20% down on a mortgage, then a fee from the federal government (CHMC) is levied and added to your mortgage.

These fees have gone up a lot, to the extent that today, if you put down 5%, the fee is 4%! This will leave you with only 1% equity the day you move in. In part because of the lower fee, moving to a 10% down payment will give you 6.9% equity on possession day instead of 1%. This will help when it’s time to move on. Confused? See the chart below:

[caption id="attachment_26993" align="aligncenter" width="611"]mortgage down payment and equity table *See the CMHC website for more info.[/caption]

As REALTORS®, our role is to offer only a basic introduction to these issues. Talk to your financial advisor about the timing of your savings & investments for quality, case-specific advice.

3) Shooting for “Mortgage Free”

Talk to your mortgage advisor about options to pay your mortgage down over a smaller amortization than 25 or 30 years. This will make scheduled payments larger and result in a lower mortgage balance when it’s time to sell. Perhaps there are pre-pay options to achieve the same thing?

Here’s a wonderful article from Canadian Living that details plenty of these options and more:

5 ways to pay off your mortgage faster

2. Round up your mortgage payments
Make no mistake: Every dollar counts when it comes to paying off your mortgage. The quicker you can pay off your loan, the more you will save in interest. A painless way to make your mortgage disappear faster is to round up your mortgage payments. So if your accelerated bi-weekly mortgage payments are $543, consider rounding up to $600 instead. The extra $57 will do wonders for your mortgage and chances are you will barely notice a difference in your monthly budget.

If you receive a raise, instead of increasing the cost of your lifestyle in the short term, consider throwing the extra amount you make onto your mortgage instead. read more...

We have found that today’s sellers often have negative equity, in part because of the longer amortizations (35 and 40 years) that were common in the past.

On the flip side, a lot of our successful seller clients have either paid down their mortgages or saved money to one side in case of this “rainy day” scenario. These funds can be used to pay off the mortgage when it’s your time to sell (this is a deeply personal decision).

In a similar vein, your choice of home budget will impact your ability to make extra mortgage payments, etc. A conservative choice today can lead you to be able to successfully “move up” into your dream home tomorrow.

I am conscious that a lot of this advice might seem a bit “boring” and that I sound a lot like my Dad (he’s British). But spending time advising buyers and sellers in Fort McMurray over the last 3 years has caused us to become even more conservative in our advice.

4) Buy Low, Sell High

Okay so this sounds impossible, but it’s not entirely silly so please bare with me. Note, these are my opinions:

Is it possible to predict the future? Maybe for the next few months. Not in the long run, no.

Will prices be higher 5-10 years from now? Unknowable. What’s your view of the future?

Are prices lower than in the past? Yes

Are prices falling now? Yes

Will prices fall forever? No. All markets eventually balance.

What determines the short-run future of prices? Supply and demand.

What are they saying now? Supply is in line with previous years at this time of the year. Demand is still reduced approximately 40-50% versus the boom years.

Timing purchases and sales is, to some extent, a fool’s game, especially when talking about your primary residence (typically people buy for personal, not financial reasons), but let’s say you want to give it a go...

Imagine: Prices are falling (it’s a buyer’s market) and you have a savings goal of 10% to 20% down anyway. Let’s say your real estate agent gives you guidance that the market is not showing imminent signs of rebalancing yet. Perhaps there is an argument for waiting? This will likely depend on your view of the world and of the future, as well as why you are buying (can you wait?).

It does go without saying, however, that the primary reason why potential Fort McMurray sellers ended up in an uncomfortable negative equity position is that they had the misfortune of bad timing...

Very few people saw the lasting structural changes in the oil market coming. But those changes (and other causes) have led to a multi-year demand depression which has, in turn, led to the long-term slide in prices. See our blog about the Fort McMurray real estate crash to learn more.

Timing is almost impossible in the big scheme of things (you’ll do well to pick a good year), but when prices are adjusting rapidly, buying a month or two earlier (or later), can have a material impact on your ability to sell in future. You want to find a buyer’s agent who is an amazing REALTOR® who can give you quality, honest, unbiased advice.

A Bright Future For You

Buying a home is pretty much the coolest thing you can do. Super fun. But as we all know, life is not always sunshine and lollipops.

Hopefully, today’s buyers will find some of these ideas helpful. It is an uncertain world, and prices are still falling, but we have systematically found that the people who make these choices tend to be more likely to be able to sell when their time comes. A lot is out of your control, but the biggest determinants seem to be peoples’:

a) Timing (partly in your control?)
b) Ability & willingness to save (partly in your control)

We wish everyone out there the best of luck as we navigate through this downturn as a community. Fort McMurray is hard-working and caring. For me, those are the things that make this community my forever home.

How to Buy A Home You Can Resell See more on: The A-Team, RE/MAX Fort McMurray

Friday, August 18, 2017

Around Town: Fort McMurray News (Week of August 18)

It's been a busy week for Fort McMurray, especially in the real estate industry. As real estate agents, that sits especially fine with us. Let's get into the top developments!

First up, the Canada Mortgage and Housing Corporation (CMHC) announced this week that the construction boom is continuing, with nearly 1000 homes being started since the beginning of 2017. Cullen Bird writes in the Fort McMurray Today:

Fort McMurray construction boom continues

Construction has started on nearly 1,000 homes in Fort McMurray since the beginning of 2017, with 209 housing starts in July, according to the Canada Mortgage and Housing Corporation (CMHC).

In July, the CMHC announced the pace of Fort McMurray’s post-wildfire construction boom had already exceeded expectations. Previously, the CMHC had anticipated a high of 700 housing starts in 2017, issuing a new year-end estimate of 1,000 housing starts last month. The 994 housing starts recorded by the end of July already meet the new estimate.

There were also 98 housing completions last month, making a total 243 housing starts since the beginning of the year.

It's great news for the economic fundamentals of the region (in terms of employment), as well of course as for homeowners impacted by last year's wildfire. It does not necessarily mean that a housing rebound is on the cards though, as additional supply tends to be negative for prices, all other things being equal.

Also released this week were July statistics by Fort McMurray REALTORS®, showing an increase in houses listed on the market, along with a decrease in sales. The average sale price was up, but this was due to a few anomalous high prices sales, and not the current downward trend. From MyMcMurray:

Fort McMurray REALTORS say as we recover, more homes listed

July statistics released by Fort McMurray REALTORS show that more single-family detached homes were listed on the market with fewer being sold.

The stats also show that Fort McMurray saw its highest average price in July 2017.

However, the average selling price decreased in July by seven per cent compared to 2016, from $686,060 to $635,433.

Fort McMurray REALTORS® stated in a press release that as the community continues to recovery from the 2016 wildfire there is a great variety of properties available causing ongoing change to the average prices month over month. read more at

And in environmental news, Syncrude is beginning the process of reclaiming a former mine by taking influence from a past project. The company previously transformed a tailings pond into a wetland in a process started 5 years ago:

Land Reclamation at Syncrude Taking Form After Research Project

Syncrude’s Vegetation Specialist Eric Girard says they’re taking lessons from the research project, most importantly, managing water.

“It’s a big challenge, so it means we have to build the surrounding watershed so the water would come in large amounts to maintain a water level high enough to have a wetland.”

Girard notes they don’t have any set results.

The oil company still monitor’s the Sandhill Fen with water continuing to be an important aspect of the area as more will be needed as the vegetation continues to evolve.

Besides water, Girard adds soil plays a big part in the reclamation as different types, mineral, and peat, are needed “to get the wide range of species.” read more...

The success of the previous project is a good sign that future land reclamation operations will turn out well for the environment.

That’s all for this weeks’ roundup. Check back on The A-Team blog for more news and updates on the Fort McMurray area!

The following post Around Town: Fort McMurray News (Week of August 18) Find more on: The A-Team LLC

Thursday, August 17, 2017

Aleaha Answers: Fort McMurray Real Estate Statistics

The housing market in Fort McMurray is in an adjustment period, so people are understandably nervous about buying a house. Is the average house price important these days? What statistics should you pay attention to? Buyer's agent Aleaha tells potential buyers what they need to know.

Thinking of buying a home in Fort McMurray? The right help can make all the difference. Call The A-Team today!

The following post Aleaha Answers: Fort McMurray Real Estate Statistics Read more on:

Fort McMurray Real Estate Statistics

Watch on YouTube here: Fort McMurray Real Estate Statistics

191 Woodpecker Way | $692,900

Watch on YouTube here: 191 Woodpecker Way | $692,900

272 Harpe Way | $317,000

Watch on YouTube here: 272 Harpe Way | $317,000

Wednesday, August 16, 2017

Selling Your Rebuilt Home Doesn’t Have to be Stressful

We've been working for families that are looking to sell their homes that are being rebuilt to replace those which they lost in the 2016 wildfire.

It is an ongoing tragedy and it’s an honor to be able to help.

Families come to us anywhere from the blueprint stage to the final inspection, but they have similar (great) questions such as:

  • “What kind of problems can arise?”
  • “What happens if things get delayed?”

This post answers those questions and helps give some solutions.

The Offer Stage

Fast forward and let’s imagine your home is pending (we have successfully negotiated a purchase contract), and the buyer is working through their financing and inspection conditions.

It is very common that the home and other improvements to the land (for example, a deck or a concrete parking pad) might not be complete at the time of the offer coming in. If this happens, it’s actually a good thing since it means we must be selling the home quickly which means no carrying costs once it’s built (it will become the property of the buyers as soon as the last nail is driven)!

It can be a nervous time, but there’s no need to worry. A REALTOR®’s job is very varied, and we help out wherever we can. So, for example, if that means working for you in discussions with your builder, that’s what we will do. It’s all about putting a contract in place that offers some flexibility and that has realistic timelines that your builder can work within.

What might a sound agreement look like? There might be...

  1. An option for a buyer hold-back for any agreed items that may not be completed before possession. This takes some pressure off you the seller (and your builder).
  2. A seller’s legal condition. This gives you a chance to have the (often complex) purchase contract reviewed by a lawyer prior to you signing off on it.

Communication While Building

All the work that is still required to be completed can fit into two groups. Group one is items that the negotiated contract allows to be finished post-possession (with hold-backs). This group is not the priority at this stage.

There’s another group: Those pesky items that need to be completed before the new homeowner calls the property their home. This is where a good relationship with your builder and clear communication is key…

While negotiating the purchase contract with the buyers, we like to keep your builder in the loop. We are doing our due diligence that the timelines we are promising to the buyers can be executed by the builder.

Once the home is pending, let’s get that contract into the hands of the builder and communicate it effectively to them. This will ensure that they have ample time to address the issues and can make a plan to get them complete. Because builders are working on multiple projects, we do want to give them as much notice as possible to ensure that they have time to schedule the remaining work within the required timelines. We will also ask the builder to keep us in the loop regarding the schedule.

There are definitely going to be bumps in the road, it is best that you expect that up front.

Weather will delay outside work.

Lack of materials will delay inside work.

As unexpected issues arise, we ask that you please keep us in the loop. Here’s why that’s helpful:

  1. We can act as an intermediary between you and your builder (or just another squeaky wheel). We can help by communicating your questions or concerns on your behalf.
  2. Our role is to advocate for your interests to the buyer’s agent in the run-up to possession (and beyond).

Home Warranty & Quality Builders

Here is a little nugget of solid information. When working with a builder, get really detailed information on how the new home warranty works. This can then be passed on to the buyer’s agent for communication to the buyers. When hiring a builder, finding out how long the builder plans to stay in town might be important...

Quality builders show their professionalism by being there for the new homeowner, long after the owner receives the keys. The builder’s performance impacts their reputation, and therefore, their future sales.  Local builders who plan to be around for a while (or for good) are surely more likely to be there for the buyers than those who are here only for the rebuild. Warranty companies are there as an additional backstop.

All of this, when communicated effectively to the buyers (through their agent), can help in the event that some of those aforementioned “pesky items” cannot be completed by possession. It’s okay because under the warranty, noted deficiencies must be completed under the home warranty! This will go some way to calming the nerves of the buyers (and therefore the nerves of you, the seller).

The Walk-Through

So you’ve done all that, and now it’s the witching hour; the buyers are coming to do their walk-through!

Your heartbeat accelerates.

You cross your fingers.

One of two things might happen:

  1. A) It’s a clean, successful walk-through. You naturally stay calm.
  2. B) A few deficient items come up. The buyer is feeling several different feelings. This causes you to feel several different feelings. But again, miraculously, you can stay calm.

Why do you ultimately feel calm in either circumstance?

Because you and your agent worked as a team.

Teamwork = Happiness

You and your specialist A-Team listing agent worked as a team: Together, you talked to the builder, and your agent spoke to the buyer's agent regularly also.  Throughout the process, all parties always had a deep understanding of the build and a good agreement was written up as well as checked by your lawyer. Through the warranty, you have in writing that all remaining issues will be rectified soon after possession.

It’s all kosher.

Here’s a reality: Unexpected events will happen because a rebuild is a complicated process with multiple stakeholders & suppliers. At the core of a stress-free transaction is a seamless, trusting relationship between you and your listing agent. You can share your concerns along the way, and a great agent will put solutions in place, and sometimes just be a shoulder to cry on (or someone to vent to).

Moving On

It is going to be a tremendous feeling when we call to let you know that keys have been released. It’s a challenging process, but with the right team, there’s nothing to fear. You can allow yourself to get excited about what’s next for you in life!


Selling Your Rebuilt Home Doesn’t Have to be Stressful was originally published on The A-Team, RE/MAX Fort McMurray