Sales will pick up this spring. Not much we can do about (not that I'm arguing we should do anything either). But we can help those smart enough to wait out the first 13% drop in prices before hopping into the market. And we can also help those of us waiting for at least the next 13% before we start shopping for boxing day deals.
This post is dedicated to arming bears with low-balling tips. If you're going to buy this spring, make sure you buy with the end in mind. Don't settle for 2007 prices when prices may head all the way down to 2005. Stephen Covey, the leadership guru, tells us in his 7 Habits book "to begin with the end in mind." For me, the end is 2005. I'll be good with 2005 prices. That's where I'm going to start.
And gosh golly gee, the good folks at BC Assessment and their friends who run my PCS service have made it that much easier for us to begin with the end in mind with their "tax info" page.
Pretty simple stuff here folks. The "real" assessed value for today is the lesser of 2008 or 2007. Ignore those numbers. Jump all the way back to 2005. Red light stop, green light go.If I were to make an offer on this over-priced fixer upper with limited square footage potential, I'd start at $285K. Seems harsh doesn't it? I might have a hard time convincing my buyer's agent to deliver that "insulting" offer, but in today's low sales market I doubt it. It's a buyer's market and, gosh darn it, it's my turn at the wheel for a change. I think the savvy REALTORS understand this and will do the buyer's bidding.
Anyway, back to the offer: $285K is a low-ball offer of 19% off the asking price of $349K. It's only $65K. Remember the vendor has already priced their property at just above 2006 prices, so they know which way the market is headed and they're trying to beat it. Good for them. Better for the buyer though.
But here's the catch for armed bears: don't get sucked into the counter offer nonsense. It's the number one tool in the car sales game and it's made its way into the real estate world too. The game is we go back and forth until we meet somewhere, the winner is usually the one who gets the other to move farther from their original position. You can beat the game by not playing it. Offer is final, and conditional to inspections. Walk away if they won't play on your rules.
If the offer is rejected, move on to the next target. This spring will be a target rich environment. So put on your dress whites, find the loving feeling you lost, and be the Maverick. You've got nothing to lose, and the best part about playing the game with this simple rule is the longer it takes the more you will save. Beautiful isn't it?
So folks, that's my one tip for arming bears. We all know there are many more out there. Please add yours in comments and do your best to serve the real estate constitution first amendment: the right to arm bears.
78 comments:
""I've often wondered if it would even be detrimental to society to only pay cash for houses - cut banks out completely. Homes would cost only what people could realistically save up""
No they wouldn't, because people with money and corporations would buy them to rent out. Only a minority of houses would be owner-occupied. This is course is exactly the way it used to be before ordinary people could get mortgages.
They would have about the same price/rent multiple as multi-unit rentals. Of course that's a lot less than houses now, but not much higher than before RE started getting overpriced in the 70's.
How do you get to the page with assessments from earlier years? Is that the part that you need a PIN for? I have been looking at the BC Assessments site to see what houses were assessed for in 2007 (the market value year for current assessments) but have not seen the earlier years.
I get that from the private client services account i have with a local realtor. It's directly off their listing service.
all realtors will have this info on specific listings even if their pcs doesn't include this feature.
hhv, 2005 prices?!
You're such an optimist, or not as bearish as I though. As far as I'm concerned, even according to your very own blog price picture, one can clearly see that the bubble started somewhere between 2002 and 2003.
13.95% asset value increase in 2003?? Yeah, like I'm paying for that.
The fall has barely began, I don't see the floor until prices fall back to somewhere between 2002/2003. If we take inflation into consideration, I guess a 2003 price isn't that bad, but accepting a 2005 price is like catching a falling knife if you're trying to time the best price. If your motives are other than price, then fine.
The really bad news is *just* starting to hit canadian newspapers. The 10 years we took to pay off those dozens/hundreds of billions of debt, will be back in a FLASH, just wait till Flaherty's federal budget announcement in a few days. Add to that interest rates dropping to 0% then printing money against thin air after that, and 2005 price will seem expensive in a couple of years or less.
Lastly, don't forget markets tend to over shoot as well on the downside, so settling for 2005 prices is way too early in my mind.
I'm not too concerned about getting the lowest price. I want value for money. 2005 is about where many SFHs in Victoria are supported by today's rents. That's good enough for me.
Some bears see prices dropping to 2002, some see them going back to the mid 90s in real dollars.
It's just a house. If I can afford it and will be happy staying longterm and can plan for the unseen (i.e. rent it out and cover costs), I'll propbably start shopping. You'll see me sitting if we're still in free fall though.
Just to put things in perspective I prepared this graph showing prices are already back to spring 2007 levels. Note that CMHC averages, that do not include waterfront, acreages or duplexes, is trending down and did not show any flattening in the Nov-Dec 2008.
SFH prices - 3 month averages
The reason I use 3 month averages is because there is considerable variance in the stats if you look at the data on a month to month basis. This is readily observed in slow months like November, December and January. Here is the same data without averaging.
SFH prices - no averaging
Good tips re lowballing (bad term-lets call it offering a reasonable price under current economic conditions)
MORE:
--Make sure that your realtor KNOWS you're offer is final and you're not going to negotiate up AND ALSO passes that along to the sellers realtor.
It also doesn't hurt to have a few similarly priced properties, that YOUR realtor thinks you are possibly interested in (whether you really are or NOT). Your realtor IS not your confidant--he/she is your paid AGENT.
Also no matter how much you want the place- always bear in mind that the seller is usually MORE anxious to sell it-so keep your "buying your home" lust under control.
You are negotiating with the AGENT, not the seller.
The agent is a buffer between buyer and seller. Much of your tactics will never reach the ear of the vendor.
Apeal to the agent's greed and fear. The amount of the deposit being their commission and the real threat of moving on to another property and another agent.
And have alternative properties that you ARE willing to go forward on. Nothing rings less true than false threats. If you say this is your final bid - then it should be your final bid. Otherwise, you have lost all credibility.
Allow enough time to remove subject clauses and to get financing inplace. These things take time. Set up an appointment with your lender to get pre-approved for a mortgage. Make sure you ask your lender how much time they will need to process the loan.
Agents in Victoria, do the hard sell by not allowing enough time for the process. This keeps the prospective purchaser "hot" and not allowing the prospective purchaser second thoughts.
Learn to say no. If you are feeling pressure, tell the agent that you are not comfortable with this hurried decision.
Oh yeah, make your offer and go out for dinner, leaving your cell phone at home.
Just Jack,
Let me run something by you. Neither the buyer or the seller likes to deal with someone that seems arrogant. I think sending a lowball, one time offer might get the seller's back up because people want some negotiation to take place. In all likelihood the seller will make an emotional response. and reject the offer.
How about this strategy. Do not tell your agent your maximum price for the property. Offer 5K less than you are willing to pay but keep that to yourself. Prior to making the offer ask about the closing date that the vendor wants and if that is reasonable use that in the offer. Use a good deposit of around 10-15K to show that you are serious. If the vendor comes back with a counteroffer return it with the 5K bump in price and the minimum of time to accept the offer (4-12 hours). At this point tell your agent to let the vendor's agent know that this is your last and final offer and that you have other properties under consideration (make sure you do). If the vendor tries to counter tell your agent o let the deal die - you meant what you said.
The twist here is that once the vendor counters he has made an emotional commitment to sell. Both agents are now eager to close a deal. The pressure is on the vendor and the agents because you are out for dinner and away from your cellphone.
Just Jack,
We are 3 weeks into January and it seems like there are few sales on PCS/Matrix.
Any chance you can tell us how many sales so far in January?
We are on the market at the moment and priced reasonably IMO - and not under any pressure to sell. I promise to return any low ball offer within 1/2 hour with a counter of five cents plus a package of Kraft Dinner. You'll know it's me.
Noah
JJ. RE:
"Apeal to the agent's greed and fear."
Agreed---Thats EXACTLY what i'm suggesting (although I don't know about "fear". Is that a motivation at your shop?)
A.
I never said anything about threatening- just indicating other REAL properties as possibly interesting to you-which they may or may not be.
B.
And I never said anything about not being serious about a final bid actually being your final bid.
RE:"Much of your tactics will never reach the ear of the vendor."
And I DID say to make sure that your agent passes both A. and B. above to the other agent. Are you saying that the sellers agent will NOT communicate that to the vendor?
Garth Turner put out a list of lowball tactics in a post called "How to be a Vulture".
http://www.greaterfool.ca/2008/11/26/how-to-be-a-vulture/
He suggested that if you make a low offer, and the seller comes back with a higher counter offer, let the offer die. Then come back a week or two later with the same offer.
hp
noah said:
We are on the market at the moment and priced reasonably IMO - and not under any pressure to sell.
You are not a candidate for lowballs because you only want to sell and presumably have set a reasonable price.
The point is there are owners that have to sell and they may accept a lowball. Especially if they have been on the market for awhile.
Those that have to sell are the ones that drive the market values down in a given area. Owners like yourself will find that a realistic price today will be too high in a few months! I hope you sell soon.
My expierence has been that low ball offers, with some exceptions, do not work. What they tend to do is give the agent a lead on a prospective purchaser or worse get you to you enter into a contract with them as your agent.
If you want to go the counter and counter offer route, then you are going to have to discipline yourself. No not that way!
Make a decision as to your maximum bid and do not go over it. I suggest you do this style of bidding by fax and not trapped in an agent's office or have them directly across the table from you. You want to be emotionally and physically detached from the agent as possible.
In your example, I could get you to go up 5 grand in a heart beat by simply changing your thought from the amount, to the monthly payment. How much more a month will another 5 grand cost you? Are you really going to let, this home, your home go for less than you spend on coffee a week? Payment still too high, I know a broker that can get you a better rate. Still too high, how about 30 years rather than 25. My point is, when you enter into this back and forth discussion you are at a disadvantage.
It's better to keep distance between you and the agent. If you feel your losing control. Tell the agent to fax you the offer and you will look it over. That will give you time to cool down.
Do your homework. Determine your maximum bid. And stick to it. And put things, like washer, dryer, blinds, carpets the easy chair in the corner and the pet cat into the offer. These are things that you will negotiate out giving the vendor a sense of acomplishment.
Just Jack,
Thanks for the response. Good idea about the fax. I could do the 5K bump over the fax from home.
But what about my approach with the vendor and the agents?? Do you think this 5K bump approach has a better chance than HHV's all or nothing statement with the initial offer?
Well Roger, nothing wrong with the bump. I understand that you want to develop a dialoque with the vendor, because as long as both parties are talking, then a deal can be made.
The problem is that the vendor has conditioned themselves to a price, and has already thought of the many ways they will be spending the money. Returning a bump of $5,000 won't do this.
How about, if you go lower on your counter, but exclude the cat and the blinds? You see, vendors are not that sure of market value themselves. What they have done is conditioned themselves into believing their home is worth this amount. A lower counter offer may have them think that you are more informed than they are. You also might want to use the building inspection report as a tool in your negotiations.
When they reject your counter offer. You can also counter with the same offer except that the offer will remain for them to accept for 48 hours, after which the deal is dead.
The obama rally in the real estate market has begun. So far I've counted three sold signs in my neighborhood alone. Fairfield is BOOMING again. Get in now before prices take off in the spring thanks to Obama.
Just Jack,
Good points. Curious as to what you might consider a lowball offer. If a house was on the market for 60 days (no relisting) and was 500K what would you consider a lowball offer? What would be a reasonable starting offer to most agents?
I dropped by Paul B's site tonight and took a look at this weeks sales stats for Vancouver.
Sales/New Listing Ratio is around 23% for SFH indicates a strong buyer's market. In a balanced market it would be 40-60%
Sales price/list price ratio for SFH is 93% so buyers are knocking 7% off the listing price. In a typical market the ratio is 97-98%. So properties are being overpriced and/or buyers are being aggressive with their offers.
Total active listings increased by 3% in one week.
Makes one wonder what is happening in Victoria this week.
JJ,
Interesting. I have an agent that I'm getting PCS listings from since Jan 2007. I like him. I'll buy thru him whn I buy if he's still selling RE.
I won't sign a contract with him though. I'm like the dad of the football kid in Jerry Maguire... except my word is as good as oak.
Am I kidding myself to think that I can make offers through him without signing a buyer's agent contract? I know he'll want me to, I've already stated very clearly that I have no interest in locking myself into any kind of purchase scenario I am not in complete control of.
I have no intention of low-balling for the sake of low-balling in an innappropriate market environment or on a property that I think is fairly valued. I'll use my own measures for that and I'll make an offer on a property based on the circumstances at the time.
The last person that tried to sell me a car used the "monthly payment tactic." He used it the whole time he followed me out to my car after I left his office and was probably still flapping his gums when I drove off never to be seen again.
Well here are two condominium complexes that I would low ball.
The Mosaic and Mermaid Wharf.
The market for condominiums has really slowed. And these are normal sized condominiums that would appeal to most people. These two complexes have really small suites and in my opinion if the market for regular condos is weak, the market for these small units is almost non existent.
I know what your thinking. I don't want to live in one of these! And that is just why the low ball might work. Just like it worked on leaky condominiums a decade ago.
Its the physical aspects of the property that assist you in determining your offer along with factors that affect the seller such as divorce, estate, court ordered sale, relocation, etc.
The lower the demand the greater the discount.
All this nonsense and games with realtors so that you can buy a freggin house at a price you think is fair.
I especially love the spin part where a realtor tries to convince you that you will benefit from their negotiating skills.
Which businessman ever thought that the more men-in-the-middle you add to a negotiation that the more chance you have at successfuly getting what you want? And on top of that pay for that?
You have got to be kidding me.
I would rather pay them to get out of my way, so I can use my own skills and intuition to negotiate with the seller.
A long time ago, I read an article on the odds of selling your property through a realtor versus by yourself.
It basically said that you have a better chance of selling the property yourself than using a realtor. The reason being that you negotiated face to face with the prospective purchaser, concessions were easily arrived at, conditions and dates were quickly determined. It seemed that having a buffer of two agents caused more tension and misunderstandings between the parties.
Having said that. I do believe that agents can fill an important niche. Namely working for absentee owners, and marketing difficult properties like acreage and water front where buyers are scarce and may not be locals.
But heck, if you got a Gordon Head box, and if you have the time and know how. This is not rocket science. As long as you keep the deals simple and you have a lawyer. Why not sell it yourself?
We are on the market at the moment and priced reasonably IMO - and not under any pressure to sell.
Well that's nice. So why have you put the property up for sale in the first place?
Don't tell me - you want to move up to a more expensive property. So if you don't sell, is that positive or negative for market demand?
Oh BTW, a property is "priced reasonably" when a buyer is willing to pay that price. The opinion of the seller is irrelevant.
I'm lowballing with late 80's prices, and I will get a taker, and soon enough for me.
Remember folks... in the real world, houses fall to pieces... they DEPRECIATE over the years.
Welcome to the real world. FINALLY.
Anonymous at 5:23 am: Good find, the foreclosure wave has started early.
That house has a BC assessment value of $452k (2007) and was sold in April/08 for $517,750. Asking price is now $475k.
Possibly a flip gone bad, or a zero down buyer bailing out?
hp
April/08 - ouch! Top of the market. We have found the greatest fool.
That house is not going to sell for over 2007 assessment - many houses for sale are asking less than that already. Might sell for, say, 425K, take off expenses and the bank might see 400K. CMHC holds the bag for the other 100K+ and can go after the "owner" in the unlikely event he doesn't declare bankruptcy.
re--FSOB vs. using a REALTOR.
My perspective on this--having done it quite a few times both ways--is that listing through a realtor gets you (only) ONE important (but expensive) thing, and thats MLS exposure. Even with the proliferation of FSBO sites, MANY buyers STILL consider their job done after checking MLS listings and being driven around by an agent--and never actually get around to looking seriously for private sales. Even this blog depends strictly on MLS data for its stats and analysis.
This may change over time but for now MLS (ie. Realtors) is pretty entrenched in the way people buy and sell homes.ALSO-I think that many buyers (and sellers) really prefer NOT to be in direct contact with the counterparty and prefer to have a third party involved.
Bought in April 2008 and already being foreclosed? That's pretty quick. I thought foreclosures generally took about a year once the owner stopped making payments.
There is a difference between those who "want to sell" and those that "need to sell". Here is an example of how "need to sell" will change market value in one neighbourhood.
Gordon Head Estate Sale
The chartered banks usually start the process to get conduct of sale around 6 months. The chartered banks do not like bad press, so they tend to have a longer process. Near banks, like Trust, and Credit Unions move much more quickly into the court process.
So, when you went to your broker and they shopped your mortgage around for the lowest interest rate, and your mortgage ended up with Bob's Savings and Midnight Loans because you saved yourself a quarter point of interest (and Bob paid your broker a grand for your paper) and you told all your friends how you stuck it to the big banks.
does not look so good now
Bob's now getting more than the quarter point back just in penalties.
Looks like this owner also "needed to sell".
Is this what we call a haircut?
"Gordon Head Estate Sale by Anonymous"
That house sold for $525k, but had a 2008 BC assessment value of $648k. That definitely looks like a "need to sell"!
That's pretty quick. I thought foreclosures generally took about a year once the owner stopped making payments.
If the owner walks away, the house could go into foreclosure immediately. In the crash of '80 there were stories of owners mailing in their keys to the bank. In theory, it's in an owner's best interest to get a pre-foreclosure grace period to sell the house himself, but maybe he's so far underwater that he's given up.
A few weeks ago, there were at least five properties in foreclosure for sale in South Nanaimo. I just checked now and saw only one (mls#266576). Does anyone have access to info about how much the foreclosures sold for? Sorry, I didn't note their numbers.
No foreclosures in Fairfield especially now that the Obama helicopter is flying around dumping money everywhere. Just got a big raise because I work for an infrastructure company that makes cheese whiz for orphanages.
Observations from my recent 2 week vacation to southern California.
1. Lots of BC, Alberta, Saskatchewan (and the odd Manitoba) license plates. The Canadians were everywhere. At the grocery stores, at the malls, at the Golf courses and the street fairs. This means they are NOT in Victoria. Heck, I don't even think I have seen that many Alberta plates in this town in the past year.
2. Closed out stores and strip malls. I saw established strip malls -- ones I have been going to for the past 10 years with only 3 of 12 tenants in place. City cores are flush with commercial property to rent. Vacancy signs are everywhere. We have NOTHING like this here. Will it come? I don't know but if it does it will be disastrous.
3. People own more than one house. Yup big shock to all you readers right? Ok, so not a big shock. I met US a fellow that owns three houses and a business. Yes you read that right THREE houses! Every one of them is up for sale. The houses are all listed at over 1 million each. A Canadian woman on the flight down to California let me know that she has 2 condo's available for rent. Her tenant just departed one and the second has been vacant for over a year.
What did I learn from this? The recession has not even started in Canada yet. If we go where the US goes (and I think we will), we are only at the very, very start.
good observations from the U.S. - and to think they still have ARMS to reset, derivatives to unwind and problems with commercial loans and credit cards are just beginning.
Two pieces of advice I love...
"Also no matter how much you want the place- always bear in mind that the seller is usually MORE anxious to sell it-so keep your "buying your home" lust under control."
and
"Oh yeah, make your offer and go out for dinner, leaving your cell phone at home."
Just at the Mayfair mall and the place is packed full of rich shoppers. Recession non-existant in boom town Victoria. No problem here thanks Obama!
If it's like that at Mayfair, imagine how good the shopping is in Fairfield!
I was shocked when I opened the Homes section of the Times Colonist today. Did anyone think this could happen? What will the current owners think?
Juliet
Admirals Landing
Too late juliet sold out thanks to boom town Obama time.
Hey everyone, just wanted to let you know about this condo: MLS# 257875 over on Goldstream avenue.
The listing says A rare opportunity to enjoy a luxury condominium lifestyle in Vancouver Island's most vibrant neighborhood.
Wow, I just didn't know owning a condo in Langford was a rare opportunity!?!? Nor did I realize that Langford is Vancouver Island's most vibrant community!
I have read these comments with interest, as I now live in Vic (as a renter) but have lived in the UK and the US (where I have bought and sold my private residence several times over the years).
A few things puzzle me:
1. Why the interest in what a property is assessed for? I have never paid much it any attention, and don't really care much. What is important to me is to know the neighborhood I am interested in very well, and to have a good idea what I think the property is worth (e.g., versus other recent sales of similar homes in the area).
2. The discussion over what constitutes a low-ball offer seems, to me, to be based on your experiences of living in an over-inflated market. Buyers in the UK were acting the same way when I lived there in 2006. To me, a low-ball offer is offering less than 90% of the asking price (this is my private rule of thumb). For me, I want to offer just above the seller's walk-away price, i.e, just above what would insult them. I also think that offering ~10% below is a way of testing for desperation. If a house is offered for 500, and I offer 450 or 440, perhaps the seller will be offended, but it may also jolt them into thinking that they may have mis-judged the market. If I hold to my stated objective of never falling in love with a house so that I "have to have it" then if the worst case happens, and the seller simply won't respond to my offer because they are insulted, then I'll move on.
3. Do people here actually trust realtors??!! I have worked with several realtors, some multiple times, and I have never found one that didn't, at some point, twist things to their advantage, i.e., to make the sale so they can collect their commission. ----- So, I find myself guarding very carefully how much I am willing to pay for a house, and never let on how much I like a place. Even when you have a "buyer's agent" -- they aren't going to make any money until you buy, and if you save 10,000 on a sale, they have lost 600. So, what is their incentive? They want the sale done, period. It's not that I don't trust them to negotiate for me, it's just that they don't stand to gain much by helping.
What I do want from my realtor is to know everything they know about the market, about the neighborhood, about the seller's realtor, and about the sellers themselves. I want to know if the seller is moving out of town for another job, or moving up to a bigger house. I want to know how long the house has been on the market, etc etc etc etc. I'll make my mind up about what to offer, and I won't counteroffer except in writing. And, I won't accept a counter offer except in writing.
One real estate agent told me once that they all have a saying . . . "buyers are liars." To which I responded . . . so are real estate agents! I don't think I'm cynical, but I sure am skeptical!
Anyway, these are just my opinions, and my 2 cents. Cheers, Dirk.
Dirk,
Interesting post with good comments.
There is an interest in BC assessments because unlike many other places they are done every year and are supposed to represent what a willing buyer and a willing seller would agree to as of July 1st. They can be way off for older properties but are fairly accurate for newer subdivisions and condos. That said a current market analysis done by a realtor or Landcor gives a better estimate of market value.
The issue of lowballing has been discussed recently because we have had a sharp downturn here of at leat 10% in 8 months. Some sellers are in denial and asking way more than the property is worth today. Some are realistically priced and are selling. I have seen some sales on PCS where lowballing has been successful.
You asked if people really trust realtors. Depends who you are ask I guess. FTB's are probably more trusting but experienced buyers/sellers are just like you and many keep their cards pretty close to their chest. I personally don't tell them anything that I don't want told to anyone else. And yes they are commission driven and I believe are representing their interests not mine.
Anon, 6:39... Victoria sellers in general NEED DESPERATELY to be insulted with low-ball offers, over and over and over again, until they get the message.
Whatever it takes. I recommend 50% of asking price at the very maximum. To start with. And go down from there.
Sellers will get over their indignation, and fast.
No need to insult them with low ball offers. They are already being insulted with no offers.
In my opinion FTB's rely too heavily on the assessed value as this is their starting point in understanding the worth of a property. Those that are selling their home and buying up, have an easier time because they can use their current home as a benchmark.
Myself, I really don't care about the assessed value. It can be so wrong and misleading. I prefer looking at the property's sales history, neighbourhood medians for similar homes and recent sales.
As for timing the bottom of the market. My opinion is that the sales to listing ratio must dramatically improve and be over 60 percent for at least two consecutive quarters before I would call it a bull market. And I see no indication that this is going to happen until the US pulls out of its recession. When I see homes in Arizona and San Diego going up in price, that might be a good time to look at buying again.
Why the interest in what a property is assessed for?
Property assessments are the only comprehensive estimate of market value. As already noted, they are for July 1 of the previous year. They are not an estimate of market value now.
However, if property A was assessed the same as property B, you can reasonably assume their market value should be about the same today. So if property A was assessed for 500K and just sold for 400K, you can assume that property B which was also assessed for 500k is worth 400K today as well.
For many people, the BC assessment value is the only one they have access to for individual properties.
Yet again, nope...is that actually a word? Actually it's a shotgun approach to valuation for tax purposes only. There is generally no attempt to assess a true valuation in any way.
It does not consider the state of the house, it intentionally undervalues the property by as much as 15% to avoid unneccesary disputes.
It's unwise to assume anything from the BCAA assessment.
I don't argue that the assessed price is the market price. But the assessed price is applied to all properties equally, so it can act as a baseline. That's all I will use it for.
I'm not claiming the assessments are 100% accurate. The only way to find the market value of any property is to sell it.
But look through the assessments and find properties that sold around the assessment date. The assessment will be very close to the sale price.
The change in that sale price from the previous assessment is used to adjust the assessments for the other properties. Not perfect of course, but it's the best they can do. They do not have the manpower to inspect the property as an appraiser would (or should: do we have "drive-by" appraisals like in the US?),
Assessments are a valuable tool in seeing which way the market is going and in estimating the relative value of properties. When I buy, the price I offer will not be based on the assessment, which is just an estimate of last year's market price, or even recent sales, which are someone else's opinion of what a property is worth. It will be based on what I think a property is worth.
Anonymous 10:36 Said:
"Yet again, nope...is that actually a word? Actually it's a shotgun approach to valuation for tax purposes only. There is generally no attempt to assess a true valuation in any way.
It does not consider the state of the house, it intentionally undervalues the property by as much as 15% to avoid unneccesary disputes. "
The mandate of the assessment authority is estimate the actual value of all properties in the province of BC. This includes railroad sidings, navy bases, schools, churches, water lots, air leases, etc.
Not just houses. Obviously, there is not enough employees to physically inspect all of these properties, every year. So BC Assessment performs mass appraisals which heavily rely on computer programmes for analysis.
However, computer programmes can not assess things like views, beauty, neighbours, cleanliness and other things that are judged highly by humans, nor can a programme tell if you have finished your basement with a suite, put a new roof on, updated the kitchen and bathrooms. If the inital information is incorrect it will cause problems in other areas. Suppose the initial data for a home sale was flawed, in that the property oversold. Say a rich American bought a waterfront lot, not caring about the price as he had made a bundle on hedge funds. Since this sale occurred around the assessment date, this sale is used to value ALL water front lots. See the problem!
Since, many people have come to believe that there is a government conspiracy to determine a property's actual value then the BC assessment subtract 15% they look at the assessed value of the water front home and you guessed it over pay for their property. These sales then form next years assessed value.
BC Assessment employs a lot of dedicated people and are faced with an incredible task each year. A single assessor may be responsible for several thousand properties in one jursidiction. For what they do, I applaude them. On a mass basis the assessments provide a reasonable estimate of value on July of that year for tax purposes. However, on an individual basis, its hit and miss.
And no, they do not subtract 15%. This is just one of those myths used to sell homes which is easily forgotten when the market turns in the other direction.
HHV,
I think you will find this interesting and useful.
Many readers visit other blogs to get a perspective on real estate in Victoria. Some realtors do not understand how VREB calculates their sales stats and are misinforming the public. Others like Tim Ayres accurately portray market conditions.
It is important to realize that there are three phases in the "sale" of a property.
1. A purchase and sale agreement that has been agreed to by the buyer and seller will often have several subject conditions which need to be removed prior to a time/date deadline in the agreement. At this point it is a conditional offer and is recorded as such in the VREB database.
2. Once all the subject conditions have been removed (usuall less than 2 weeks) it is considered a pending sale and the realtor should inform VREB so that the database can be updated. VREB uses this pending sale data to generate the monthly sales reports that are produced at the end of each month.
3. Once the money has been paid by the buyer to the seller and the property conveyance has been completed the property is now sold. However, this date is not used by VREB in the sales statistics reports.
One can see why the VREB stats are quite timely and predict what actually took place in the market over the last 4-6 weeks. For example December had very low reported pending sales because there were few conditional sales in late November and early January. The subjects that were removed resulted in few pending sales to report.
Further to my last post....
My charts and stats are produced using VREB and CMHC data. The data these organizations publish is pending sales which are sometimes referred to as unconditional sales by some realtors or real estate boards.
Just so that readers are clear the date where the property actually changes hands (conveyance or sold date) is not used by CMHC or the Real Estate Boards to generate stats and reports. Realtors that tell you that the market stats are months behind what is happening in the market are either badly misinformed or trying to mislead you.
Oops...
The line "For example December had very low reported pending sales because there were few conditional sales in late November and early January."
should read "For example December had very low reported pending sales because there were few conditional sales in late November and early December."
Thank you for that Roger.
I was on the ceiling and my husband had to talk me down. :-)
S2
Stats reports are coming in from Vancouver and Victoria of very low sales so far this January. But there are anecdotal stories from local real estate agents of the market picking up in the latter half of January. What might be happening?
- Historically, sales always increase every month in the January to June time frame. It is not surprising that the second half of January would have more activity than the first half especially with the cold weather earlier in the month.
- Interest rates dropped recently and there will be more buyers wanting to take advantage of the lower interest rates. This is particularly true of FTB's and entry level properties. Given the lower rates a home is within their grasp and they will jump into the market even though prices are heading down.
It is interesting to note that in a rising market the high end properties are the first to experience significant price gains. During a downturn this segment is first again; with price decreases. This might be due to the "smart money" being the first to recognize a change in the market and moving to the sidelines. Also the "move up" market is the first to strengthen/weaken with a resultant shift in supply and demand in that market segment.
What does all this mean for bears like me? The more low end sales the better. This will drive down reported median and average price stats and accelerate the market downturn. Prices will ripple down the price ladder and eventually those patient, entry level buyers will see better deals. Unfortunately, today's impatient FTB will look back on their purchase with some reticence.
S2 said:
Thank you for that Roger.
I was on the ceiling and my husband had to talk me down. :-)
Glad you enjoyed the post. There are some agents in town that are trying to give a reasonably unbiased view of the market. This realtor uses annual and quarterly data in his extensive monthly report:
Properties in Victoria
One can draw false conclusions from annual data, especially in a period of market volatility. Quarterly data, on the other hand, can show interesting trends. This is the first time I have seen a local real estate agent publish and analyze quarterly data. The report is a good read and refreshing compared to the usual spin.
Follow up to previous post....
Many folks are suspicious of stats and analysis prepared by bloggers and independent real estate analysts. However they seem to trust "real estate professionals"
So I encourage readers to distribute the local realtor report I mentioned earlier. Here is a short link to the pdf file.
http://tinyurl.com/realtor-report
At least there will be some balance presented to potential buyers and sellers.
Roger,
Apparently you've been reading jj's thread on KIV ;-)...
Has anyone completed the CSC (securities course)? Any tips?
yup -in 1974
tip--if they ask a question about the viability of a cashless society, answer in the affirmative..
lol
Just a quick thanks for the links and info. Gets me back to used to dealing with real estate, some thing I haven't done in quite a while.
My impression is that we are somewhat insulated here in Vic, but not as much as some say. I suspect this insulation will only bring a delay before we see the same as the rest of the country. Our market isn't an Island as the retirees have to sell their homes before moving here.
We live in Oak bay and I don't see the sea of Alberta licence plates that has been feeding the mania for any old shack in this neighbourhood. I don't know of any other group that will be replacing them. These prices are falling far faster than other areas and can only put pressure on the other areas. Why anyone would buy a house on Gordon head for $500k is beyond me.
We haven't seen many layoffs here, and probably won't until summer. Watch out lower ends of the market when it does. That high tech is some how immune is crazy. microsoft any one?
Do these REALTORS® actually believe what they say? Is the Koolaid really that powerful?
Why a buyer's market is a first-timer's market
Some notable quotes in this article:
Most first-time buyers today are hesitant and will end up waiting too long before getting into the market, David Watt of the Real Estate Board of Greater Vancouver says.
"It takes more courage to go against the crowd and buy in a buyer's market."
"People will buy but they just need to know they have a really good deal. The problem is they don't know it's a good deal and that insecurity breeds inaction," Cam Good of Mac Real Estate Marketing Solutions says.
Good believes the time is right now, particularly for first-time buyers because of the affordability. "It's as good as it gets now in terms of affordability. It's been a long time coming."
Cameron Muir, the B.C. Real Estate Association's chief economist, says he believes buyers today not only have more time to investigate their choices but they have the ability to negotiate an attractive price. "Affordability is much better today than it has been for two years. This bodes well for the first-time buyers, particularly when you look at low interest rates. . . . Unfortunately some buyers are sitting on the fence anticipating even lower prices."
Muir says he doesn't expect prices will make any further significant drops. And he anticipates, once buyer-confidence returns, a "modest increase" in sales by the spring.
"Muir says he doesn't expect prices will make any further significant drops. And he anticipates, once buyer-confidence returns, a "modest increase" in sales by the spring."
Um, yea, it's spring. That is what happens in the spring. Gesh, you'd think it was rocket science or something.
S2
I was out on the town on Saturday night and the place was happening thanks to the Obama parties going on. This guy has really made a huge difference in just a few days. Total turnaround world wide. The numbers next month are going to be quite surprising. Go long on booze and bling.
Just Jack 9:19: Remember that the Canadian market is lagging behind the US market about two years.
I think we can fully expect prices to continue to go down and travel to the bottom two full years after prices in San Diego and Las Vegas start going consistently back up for at least three months (to insure it isn't a fake rally.)
Cameron Muir, the B.C. Real Estate Association's chief economist, says. . . . Unfortunately some buyers are sitting on the fence anticipating even lower prices.
There's a lot of buyers sitting on the fence waiting for the bottom. And I think if they don't jump in soon, they're going to be sorry
I think that real estate agents have to be re-conditioned to the new reality in the negotiation process. Currently their mindset is that of those tourism agents in vacation spots who give "tips" on negotiating in vacation spots where an original offer is countered by a 50% counter-offer and the final price ends up at about 75% of the original, which they consider fair. Except that one ought to be paying about 10% of the original price, not 75%. Believe me, it can be done, whether it is cigars in the Dominican Republic or carpets in Marakesh.
I have a similar view to Garth Turner whereby if an original offer is countered, I would let the offer die. But instead of coming back with the same offer in a month, I would come back with 10% less.
I am quite confident that the buyer holds all the aces right now. Just don't fall in love with a place and let your emotions over rule common sense. Remember how long you anguished while watching prices rise. Enjoy the next few years observing the declines. It is amazingly cheap entertainment.
Cheap for us bears but pricey for others.
Roger - ugh... that article... it's beyond belief. I love one of the comments - "This article is criminal". I tend to agree with that.
'Scuse me while I throw up.
Today's News Headlines
January values mostly within 5% of July 2007 assessments
If you own a home in the Lower Mainland, chances are the value of your home right now is within five per cent of the value BC Assessment gave it in July 2007.
So says Landcor Data. Corp., after its proprietary computer software generated current market values for almost 466,000 residential properties in 14 Lower Mainland municipalities. The company's electronic valuations, similar to appraisals, are used widely by lenders.
Economic downturn and dampened consumer confidence caused house prices to dip during fourth quarter
TORONTO, Jan. 26 /CNW/ - During the fourth quarter of 2008, Canada's real estate market posted a decline in both unit sales and house prices, according to a House Price Survey released today by Royal LePage Real Estate Services. The combination of a global economy in recession and shrinking employment figures did much to dampen consumer confidence, diminish home sales and cause house prices to drop.
Of the housing types surveyed, the average price of detached bungalows dipped by 4.8 per cent to $319,640, followed by standard condominiums, which decreased by 5.2 per cent to $233,230, year-over-year. The average price of standard two-storey properties fell by 6.3 per cent to $376,140, year-over-year.
Boomer writes: "Make sure that your realtor KNOWS you're offer is final and you're not going to negotiate up AND ALSO passes that along to the sellers realtor.
It also doesn't hurt to have a few similarly priced properties, that YOUR realtor thinks you are possibly interested in (whether you really are or NOT). Your realtor IS not your confidant--he/she is your paid AGENT."
Under that scenario, you've set your realtor up as your adversary. That's a losing strategy. I'm sorry, but you represent that paranoid basement dweller who won't take advice from anybody. And guys like you always end up over-paying for crap housing and then spend the next 10 years telling everybody who'll listen what a genius you are.
When really, you're a dope.
Does everyone already know that Garth Turner is speaking in Victoria this Saturday? I just read it on greaterfool.ca - it was a post from today - says he's speaking on Saturday at 9am at the convention centre....
Re: Garth Turner in Victoria on Saturday
I just looked into how to get admission to the event: go to moneyexpo.ca and click on the "pre-register now" link. You fill in your name and email, and you will be mailed a ticket. Otherwise they say you have to pay $15 at the door.
Would fellow readers of hhv like to meet up for coffee after Garth's keynote? We could all wear something recognizable, like maybe a tie-dyed shirt.
Just a follow-up to my last post.
I should have said you will be emailed a ticket to the event!
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