Doomsayers - World Enders and Now Crashers

I received this recently and wanted to share;

Dear David,

I wanted to take a moment to reach out to you again. We've talked a few times on the phone, on twitter and through emails. I enjoyed reading your responses to my blog posts although I cannot respond on my website so I thought I would email you. I truly believe that the market is going to tank this year and see some declining values over the next 3 years. I myself, have sold all my properties and have begun renting. If your asking what I personally think, there’s no justifiable economic case to be made for buying a house at this time. The value of the asset will go down and the carrying costs will go up. That rules out a capital gain and promises you’ll have less cash flow. Renting a similar property can be done with far less dough. And investing your money in assets that actually pay you to own them, like a nice balanced portfolio giving 8% or so, means renting and investing actually makes you wealthier.

Here was my response;

IMHO

The fairly balanced portfolio you refer to does not exist, Stocks have not rebounded from 2008

TSE index is still down, Gold is skyrocketing as people seek refuge

Inflation is at 3% or higher. Bank interest deposits pay 1% to 1.5%

House Values have returned a 4 – 5% return for the last 17 years

Yes I see potential for fewer sales

Yes I see Potential for people walking away from their homes....

BUT they are walking away because of Hydro costs? Travel? Fuel? Insurance? Commuting? Changing Employment? Have the GAS prices push commuting too far from their place of employment? Are they walking away because of a 1% Variable interest rate differential on an average of $300 in mortgaging? I doubt it…

They still have their leveraged return on their investment.

Canadian Unemployment is < 8%

CAAMP (Canadian Association of Accredited Mortgage Professionals)

Says that 1/3 rd or Canadian Homeowners have no mortgage, One third have an average outstanding of $253,000 . The average rate was at 2.5% Variable Rate

Lets RECAP

A 20 year home owner in the same house now owes less than 1/3 rd on his home (debt versus market value) although adjusted for inflation they may collectively owe 75% of what they paid for the property.

A dual income.. nearing retirement… their major expenditure is planning weddings and UNIV fees. They are just turning 60's and have loads of energy. Maybe they have a cottage… They will inherit LARGE.

Do you believe that all home owners are over extended? CMHC 's annual statistics indicate a National default rate of 1.5% at 90 days. Many family’s that I interview are debt free.

Why you need an Accredited Senior Agent?

Why should I have an ASA? Why should I get my accredited Senior Agent designation?

The Accredited Senior Agent program is a simplistic one. Its there for the public. Any good realtor can sell a house. It doesn't take a genius to figure that out. But what happens is ... Only an Accredited Senior Agent can go in and deal with the contents; you've got houses with 30 or 40 years with the same family in there. We have to deal with the emotional, we may have a family dispute that we have to deal with and need to bring in professionals.

We recognise tax problems talking Income tax problems, We recognize estate work and probate, we're trained to look at a lot factors beyond the scope of typical realtors. Good Realtors can sell that house. An Accredited Senior Agent can handle all aspects of that sale.

Are you also able to provide guidance for things like CHIP Canadian Home Income Plan versus a Home Equity Line of Credit?

Well Absolutely - We're trained - because - There is a question unto itself, The CHIP program The reverse mortgage - Is it a PRO or is it a CON?

And the answer is Its Both - For some people its a very - Reverse mortgages are excellent For other people its doom. You have to understand a lot about it, and for Accredited Senior Agents are trained to talk about it, and give alternatives by the way there are alternatives for people besides reverse mortgages.

What are the cut off dates that are important for appraisals on properties?

Well we have for instance if you have owned property for many years, its been in the family,

you got to know Dec 31 st 1971 when they brought in V day - Evaluation Day. That's when Canada adapted a very simple thing - Capital Gains. So we have to recognise - Do you have a Capital Gain? Not on your principal residence, thats exempt, but investment property, cottages, there is a lot of complexities and only a certain type of realtor is trained and that's an ACCREDITED SENIOR AGENT.

You made a very interesting point about maintaining a secondary residence and although on paper it sounds fine that each spouse designates one home individually they actually have to prove that they occupy?

You cannot have two principal residences. If you are married, you can have one. Years ago there was an exemption with the cottage versus or the condo versus. You can only have one. The only way to get around it - I hate to be cruel - but you have to legally separate. AND really separate, not just on paper.

So there you have the one perfect reason to leave your spouse.

The perfect reason, to leave your spouse, for Real Estate. Yes.

Should you sign the SPIS?

Are you for or against the Seller's Property Information Statement?

In its present form I am not happy with it at all. Am I happy with the concept of disclosure?

Absolutely!

The trouble is David, that today, the disclosures make experts out of amateurs. In other words, People do not know enough about their homes to answer the questions, that are there. I don't like the questions. Pardon me, Let me rephrase that. I don't like all the questions, and there are a lot of questions omitted.

For instance, Under the law today, A real estate agent has to disclose a material fact. The argument becomes "What is a material Fact?" One thing that is not on the form is.. Was the house ever used for notorious means? Such as... Was it a grow op? Was it a Crack House?

Had there been a murder? How about Suicide? We dont have that addressed properly or are we next door to a Chapter of the Hell's Angels?

I am aware of an instance where there was lawsuit that the agent selling the property "OUGHT TO" have known about the history of the property..

Let me go into a little history about lawsuits. As it stands today, I have testified in between 500 and 600 trials in the Province of Ontario, all in real estate cases. I got my big experience in the 80's doing Urea Formaldehyde cases where people were swearing they did not have UFFI in their houses, and in turn we sometimes found when we digged through the records we find people Appealed their Assessment two years earlier because they did have UFFI. People lied.

As a matter of fact, the first fraud conviction was a case I was involved in with the Police department. From there I got involved in Stigma. A lot of real estate stigma, hidden defects and what have you. A large percentage of them include agency, real estate agents.

The question becomes; Does a real estate agent knock on a door next door to the neighbour and ask Do you know if there was ever a grow op here? Do you know if? Do they go three doors over? Four doors over? Do they canvass the neighbourhood? Where does it stop?

What are the questions that should be on the SPIS?

If I had my choice there would only be three questions with the potential for a fourth.

And 3 to 4 questions are as follows - for sellers.

Question Number One - As a buyer... Is there anything in your home that you are aware of that could negatively impact my buying decision.

Question Two - Almost the same, Is there anything in, on the surface or below the surface of your land of your site, your land that could negatively impact my buying decision and

Question three which is not addressed at all in a SPIS... Is there anything within the neighbourhood either enforce or pending that I should know about that could negatively impact my decision? I want to elaborate on this;

What if they are moving because they found out a released pedophile was taking up residence...

What if they are moving because they found out the airport is

shifting a runway and the increased traffic will be right over their head or they will be putting a recycling plant in so close that [IT] could result in obnoxious odours...

The last question someone else brought to my attention...

Is there anything about your house that would negate getting a mortgage or insurance? I thought those are the only questions to ask.

So to put it very Simply, If a client asked me Should I or should I not sign a Sellers Property Information Statement you would say?

No.

In an odd bit of timing; Serendipity I am told. Bob Aaron posted a link to the last 13 years of SPIS lawsuits including links and context. http://www.aaron.ca/columns/seller%20property%20information%20statement.htm

Toronto is the Best because.....

But we have known this all along

“Toronto is a really attractive place for smart people around the world to come,” said Sand. “It’s good to do business there, it’s open to different people . . . it’s a nice, welcoming city, with good education for my kids. That’s the message about Toronto from our report.”

Do you agree? Where is a better place to live?

Dear For Sale By Owner

The Next time a For sale By Owner opens up to me about how agents do nothing...

I help them overcome their fear, uncertainty and doubt; I help assage their insecurities, I help them secure financing and move forward with the first or second large ticket purchase of their lives.

Selling is a profession. It's hard work. Ultimately, it's rewarding, because the thing you're selling delivers real value to the purchaser, and your job is to counsel them so they can get the benefit. http://sethgodin.typepad.com/seths_blog/2011/05/selling-vs-inviting.html

I am observing a situation right now where a [FSBO] is selling their "nest egg" and a very pretty custom built home in Etobicoke. Each time an agent is hired; the [FSBO] micro manages the events, photos, signage, Video marketing, Online Presentations, Brochures and hand outs, advertising.... I have a 3' x 5' sign, "Its ok I have my own." You get it.

What is the result?

Crash and Burn! The listing expires and yet again the [FSBO] blames the agents. How they.... Two people struggling for control be it a bus ride, or a plane landing there can only be one in command.

This is a wonderful example of two people fighting for control. Actually at cross purpose.

Will he listen to a sage experienced agent. "We don't need NO agent" and I watch after a few months that the same house is now listed again as a "mere" listing and the fight starts again. My responsibility is to point out your options, Market your home professionally, make suggestions and then follow your "LAWFUL" instructions. After all, it is your money.

In our local Toronto market we have been blessed with a continuous upswing that may or may not continue as it has. Imagine if this [HOUSE] was in a declining market as they have in the United States? That property could have expended 20% or more of its equity in the last 36 months.

What can I do that a FSBO cannot?

I can call a Purchasing Prospect [A BUYER] back without sounding desperate about selling my home. I can negotiate to obtain an offer without revealing MY SELLERS net bottom line position. What do you have?

As always your comments are invited. Want to sell? Call me.

Dear For Sale By Owner

The Next time a For sale By Owner opens up to me about how agents do nothing...

I help them overcome their fear, uncertainty and doubt; I help assage their insecurities, I help them secure financing and move forward with the first or second large ticket purchase of their lives.

Selling is a profession. It's hard work. Ultimately, it's rewarding, because the thing you're selling delivers real value to the purchaser, and your job is to counsel them so they can get the benefit. http://sethgodin.typepad.com/seths_blog/2011/05/selling-vs-inviting.html

I am observing a situation right now where a [FSBO] is selling their "nest egg" and a very pretty custom built home in Etobicoke. Each time an agent is hired; the [FSBO] micro manages the events, photos, signage, Video marketing, Brochures and hand outs, advertising.... I have a 3' x 5' sign, "Its ok I have my own." You get it.

What is the result?

Crash and Burn! The listing expires and yet again the [FSBO] blames the agents. How they.... Two people struggling for control be it a bus ride, or a plane landing there can only be one in command.

This is a wonderful example of two people fighting for control. Actually at cross purpose.

Will he listen to a sage experienced agent. "We don't need NO agent" and I watch after a few months that the same house is now listed again as a "mere" listing and the fight starts again. My responsibility is to point out your options, Market your home professionally, make suggestions and then follow your "LAWFUL" instructions. After all, it is your money.

In our local Toronto market we have been blessed with a continuous upswing that may or may not continue as it has. Imagine if this Pilot was in a declining market as they have in the United States? That property could have expended 20% or more of its equity in the last 36 months.

What can I do that a FSBO cannot?

I can call a Purchasing Prospect [BUYERS] back without sounding desperate about selling my home. I can negotiate to obtain an offer without revealing MY SELLERS net bottom line position. What do you have?

As always your comments are invited. Want to sell? Call me.

Will you retire as a Millionaire?

A New Survey out from Deloitte says that the number of Millionaires in Canada will increase to be one in twenty Canadians by 2020. Will you be among them?

A new study suggests that Canada's millionaire club is going to have a lot more members over the next decade. http://www.cbc.ca/news/business/story/2011/05/05/millionaires-study-deloitte.html?ref=rss

The study, released by the Deloitte Center for Financial Services, predicts the number of Canada's millionaires will surge to more than 2.5 million by 2020 — up by more than 32 per cent from the current 1.7 million.

The study also says the assets of those millionaires will reach $6.77 trillion, up from $3.35 trillion today.

The surge in wealth is partly due to Canada's strong economy, particularly in the resource sector. During that time, Canada's GDP is forecast to grow by more than three per cent per year, while the inflation rate is expected to stay around 2.5 per cent. At the same time, the report expects Canada's population to grow by less than one per cent.

The transfer of wealth that our Zoomer Generation will see is staggering yet even that pales in comparison with other Resource Rich countries. We are down the list in Global standards.

One response from the readers while 32% more millionaires by 2020 "If I am not a Millionaire How will I buy Happiness?

I can only advocate forward planning to make sure you have enough house and cash to suit your living expenses and not a grandiose place where you are hiding from the calls of collectors but have the pride of ownership.

Being a Millionaire is what you keep, Not what you spend. What do you think?

Toronto Real Estate Sales Drop 17%

The Toronto Real Estate Board released it figures for April 2011 showing that 9041 homes changed hands compared with over 11,000 for the same period last year.

While the drop sounds significant the shining fact is that the available inventory ( homes for sale ) in the same period dropped proportionately. Homes are taking an average of 22 days to sell. More desirable neighbourhoods in Etobicoke are moving immediately to multiple offer country.

We have just come off an election that hopes our economy and governance will be stable. The dollar is slightly over the US greenback. Interest rates appear to be holding with modest if not quarter point adjustments for the near future.

Of greater concern for many, is the increase in gasoline prices and how far they can afford-ably travel to purchase a starter home with the average Toronto detached property trading at 477K. SO lets really say $ 500 thousand. That makes an outlying townhouse or semi affordable at $400 with some commuting added.

This economic reality helps you better understand why the homes are selling so well ( fast) in North Mississauga, Brampton, Milton and Georgetown, (Homes in the 905) Indeed from the stats of the Toronto Real Estate Board fully 5500 homes traded in the west end.

If you would like somewhere to live that is Etobicoke, Humber Bay Shore, Markland Wood or Centennial Park, into Mississauga 's reviving Lakeview and Port Credit, feel free to reach out. Always have time for just one more shopper.

Its your right to sell it yourself

The competition bureau is again being dragged into the fray between Brokers and their "right" to post listings Nationally. Although I an licensed only in Ontario I should have the right to (MERE) list your house in BC. UMM because....

MERE listing? I am just putting it online for you since anyone can fill out a form. I don't represent you, open any doors, make any promises, I just load your listing to MLS.ca

At the centre of the fight is a deceptively complex question – are flat-fee agents trading in real estate, or simply posting a listing to an online forum? If they are indeed trading, provincial regulators require them to be licensed in a province before accepting a listing. http://www.theglobeandmail.com/report-on-business/competition-bureau-asked-to-settle-new-fight-over-mls-listings/article2006060/

On the other side of the fence is a lengthy but well written piece from Property Line that says although Canadians understand the MLS moderately, a full 45% think they could go it alone.

Bravo! The lawyers must be rubbing their hands with glee.

Don’t bite off more than you can chew

Regardless of motivation to sell privately or not- it is the sheer size of the transaction within one’s financial portfolio- that should be reason to pause and fully take stock.

In taking on something so financially substantial- there comes an inherent presence of risk- and that is why, at the very least, the transactional component of sales process cannot be left to amateurs. Risk, however, can be mitigated by education and access to information. http://propertywire.ca/features/features/market-intelligence/1045-seeking-advice-and-other-necessary-tools-to-sell-your-house.html

Weigh all the facts

Seemingly, the motivations of selling privately are largely financial- but the risks of doing the entire transaction on your own are substantial. If all the facts are not considered, then there remains the possibility that you may ending up losing money through carrying costs and through other avenues- which outweighs the savings made on commission.

There is the possibility that a private seller may luck into a sale immediately, and save not only lots of money on commissions, but also save money on carrying costs.

In this environment, luck must be contrived, not hoped for. In order to mitigate risk, a private seller must understand everything right from the get go- even if they end up selling privately; they must understand all scenarios- and that involves understanding all the variables, whether though consultation at the beginning of the process with a Real Estate Lawyer- or with a Realtor

Lets recap. I have an office that calls and books appointments, maintains records, Abides by Privacy Legislation and PIPEDA. We have an appointed individual for FINTRAC compliance. (collects data about who you are from Birth Certificates, Driver's License and Passports.

I video, digital camera your house, provide picture frame digital players, upload your Movie to servers, add your photo stream, produce colour brochures to market your property, keep your secrets, disclose only what is lawful to share, Guarantee your deposits and carry Errors and Omissions Insurance. Attend with you at your closing. Have I missed a few things?

Since obtaining my Accredited Senior Agent designation I am more versed n Senior and elder issues; trained to recognize potential tax and legal pitfalls and direct you to suitable tax, legal and accounting professionals.

Are you getting along in years but want to stay in the house? I can help with that too. Firstly to direct you to services and personnel that can provide in home care or assisted living. Maybe its hardware and extra handles. But what about money? Lets examine Pension erosion vs expenses and taxes. Could you use a CHIP, Line of Credit or Equity Mortgage? Depends how long you are staying...

Let's say that you separated from Wife no #1 in the marital home, never divorced and now are living in that same house with Wife no #2 as a Common Law relationship; while the second may sign the Agreement of Purchase and Sale it is the first that must sign the consent to the transaction. What do you think?

What are the questions you would like to ask?