Winnipeg's Real Estate Blog

Selling your Home on your own? The Market IS Changing!

Update for October, 2008

"The Market IS Changing!"

By now everyone has heard about the US market and housing melt-down.  While we here in Manitoba are somewhat insulated from this, we are beginning to feel a change in the market.

Houses which were getting multiple offers, are now selling at 'list price', and other are taking longer to sell.

The first ones to feel the pinch will be (and are) the Private Sellers, who for years have been told that its 'easy to sell your own home'....you don't need a Realtor." 

Well, for years it was easier, mainly because there were so many buyers out there.  Once the flood of buyers has started to slow down, the remaining buyers now have a choice of homes to look at, and are doing so WITH A REALTOR.   Having a choice means "Less Competition", and so these buyers are no longer forced to consider the often overpriced, always inconvenient alternative of "private sales".

The time of being able to sell a house by simply 'plunking a colorful sign in the ground' is coming to an end.  This may have worked for some homes in a market which was flooded with buyers.  But in a more level market, where buyers no longer outnumber sellers by 10-to-1, finding the right buyer for your home requires a little more than a spot on the internet and a color ad in a magazine.  It requires teamwork and an organization with a proven track-record of over 100 years of success and service.

That type of teamwork is available ONLY thru a Realtor.  By listing your home, you will immediately gain access to all 1400 Realtors in Winnipeg, and all of the buyers working with them.

So if you are considering spending $700 on a Do-It-Yourself kit, please think about this:  Buyers who are looking for a house on their own will ALWAYS look at a "Listed House" (listed with a Realtor), but buyers who are committed to working with a Realtor will almost NEVER look at a "Private Sale".  Get access to ALL THE BUYERS.........List with a Realtor!

For a look at my marketing plan for YOUR home, click on  Marketing Plan

NOW is a very good time to buy!

The Winnipeg housing market has slowed somewhat from it's height of activity in the spring and early summer.

As evidence of this, we can see that currently there are over 1200 homes listed "For Sale" in the city, with another 245 Condos in addition to that number.

Compare this to the spring time when there were under 600 homes and under 175 condos at any one time.

Reasons for the 'blip' in activity:  it could be a number of things, such as pre-occupation with the federal election, or worries about the economy and the stock market fluctuation ("let's wait and see what happens" type of thinking).

No matter what the reasons, buyers have more choices right now than they have ever had during the year.  So NOW may be the best time to find a house and only have to compete against 1 or 2 other buyers.  But don't wait too long.....

"What's wrong with that basement floor?"

"Why is the basement floor all cracked? Is the house shifting?"  This seems to be a very common question these days.  By my count, nearly 25% of homes have basement floors which are heaving, cracking or breaking up.  This percentage is much higher in some areas, such as river Heights.  However, before we hit the panic button, or discount a potential home, lets take a look at what is really happening:

It is important to understand how homes are constructed.  After the hole is dug, the 'footings' are poured in place.

These footings are concrete and typically 16" to 24" wide by approx. 10" thick.  They basically follow the outline of the house (not including the garage).  In addition, you will find 3 or 4 square concrete blocks in the centre of the outline, which will hold future teleposts.  These footings serve to hold the weight of the house.  The next step in the constrution process is to pour the basement walls into these footings.  Following this, the entire house is built, up to and including the roof.  The last thing in the project is to pour the concrete basement floor.  This is poured on top of the footings, and not attached to them.  This is to allow the basement floor to float, much like a driveway.  The reason for this is simple:  As the ground underneath the house shifts and settles, it creates very high forces.  The 24" wide footings are able to deflect those forces sideways, however a large slab of concrete, perhaps 1400 sq ft in size, would not be able to deflect  this force, and must be allowed to move up or down.

What about piles?  A common mis-conception is that piles would prevent this from happening.  It is important to realize that the piles sit under the foundation (and footings) only, and have no impact on the basement floor.  An average home may take 20 or more piles, just to secure the foundation.

So if you see a house which has a rough and uneven basement floor, this does not mean it will ever affect the structure.  On the other hand, a pristine basement floor does not mean it will never shift or get worse, either. 

The bottom line: The basement floor does not form part of the structure of the house, and is designed to move and shift with the Manitoba Gumbo.

"WHEN" is the best time to buy a house (or condo)?

A common question among prospective home buyers is "when is the best time to buy a house"?  My (tongue-in-cheek) reply is "4 years ago".  But since we don't have a time-machine, and are forced to deal with the current reality, lets look at some realistic answers:

How about the spring-time?

While there are usually a flood of listings in the spring, this is also the most popular time for buyers.  After a long winter, home buyers come out to buy a home for early summer possession.  This means that there is usually a competition for the available homes.

So perhaps the middle of summer?

This used to be a case.  Most buyers take a break from home-shopping in the middle of summer, instead heading on vacation, the lake etc etc.  I have found there are 2 types of home-buyers:  Those who want a home, and those who really really want a home.  While in the spring time, both groups come out to look and shop, the second ground (the one who really really wants or needs a home) comes out all year long.  So where a home might receive 10 offers in May, it may only receive 3 in July, but those 3 are the really serious buyers.

Add to this the fact that there are generally fewer listings to choose from, and the end result is pretty much the same.

In the fall-time we usually see an increase in activity once again, as buyers want to get a home before christmas.  I see the fall market as a smaller version of the spring market:  more listings, but also more buyers.

So what then is the answer to the question:  I have found that perserverance and persistency pay off.  Don't give up, just because you lost 2 or 3 offers.  Many times I have had a buyer say "This is my last attempt" ....and then get the house they wanted. 

You may also be rewarded by occasional 'blips' in the market:  perhaps a listing has been just slightly overpriced, or a poor-weather weekend has kept other buyers away from the showings.  Any number of things can happen, but if you don't try, you won't succeed.

Perhaps the worst advice has been to wait until the market cools down:  I've known buyers who gave up their search for a home a couple of years ago.  The homes which sold for $125,000 at that time are now commanding $170,000 plus...   

As a real-life example I will leave you with this:  a young gentlemen bought a condo thru me in the fall of 2006.  At $79,000 I felt that the 2 BR condo was a very good value.  He lived in it for 18 months, and the only alteration he made to the condo was to allow his cat to destroy the carpeting.  We just sold that unit for $124,000, a 57% return.

While this type of increase is not typical, it does go to the point of this article:  the best time to buy....is right now!

Open Houses: Do they produce results?

With the spring market comes new listings for homes, and Open Houses to bring buyers into the house.  This strategy (holding Open Houses) is a favorite of "Private Sellers"  who are being told that this method is a great way to showcase the home.  But is it?  Lets take a look at some stats:

The National Association of Realtors has conducted a study and discovered that 1-in-400 visits to an Open House results in a sale.  One-In-400???  Great odds if you're playing the lottery, but for selling a home?  By contrast, in Winnipeg, approx. 1-in 5 showings by a Realtor results in an offer.  In other words, for homes that are priced accurately, 20 showings by Realtors should, and in most cases will, produce between 4 and 6 offers on that house.

Putting Boots on the ground in your home:  No doubt that Open Houses attract a large number of visitors!  But consider this: When home-buyers first start to look at homes, they start out by going to Open Houses (especially Open Houses at Private Sellers), because they feel there will be no pressure on them, no committment!   Since they are not ready to buy (we're 'just looking', thanks), they do not want to be contacted by a Realtor, or give out their personal information.  This also means that the vast majority of Open House visitors are simply not ready to buy..... they really are 'just looking'.  There is certainly nothing wrong with that, but is this really what the homeOWNER needs?

On the other hand, once buyers are ready and committed to finding a home, most of them will work with a Realtor.  In doing so, they become pre-approved by a bank and are truly ready to buy NOW.  So the 20-or-so showings a home gets via Realtors are far more valuable than getting 50 visitors to an Open House. 

As an anecdotal story, I can point to a recent Open House in Linden Woods.  During the week, 12 Realtors showed this home, and during our Open House we had 20 couples come thru the house.  None of the Open House visitors wrote an offer, but 2 of the buyers with Realtors did!

So if you are a home-buyer who is just starting to look and want to get a 'feel for the market', Open Houses are a great way to start.  You may find however that, depending on the homes' location and price, you end up rubbing elbows with 30 other Open House Visitors, and may decide that this is not an enjoyable way to shop.  Consider that, if you are working with a Realtor, ANY home can be an OPEN HOUSE, ALL the time.

But if you are the Home OWNER, throwing your doors open to anyone with no more motivation than a few spare minutes to kill, might not be the most valuable strategy.

Buyers ask: "How Much Should We Offer For This House?"

Perhaps the most common question would-be home buyers ask me is "What do you think this house will sell for?".  (Actually, homeOWNERS ask the same question).

The real, honest answer is: "Whatever someone is willing to pay for it."  Since we don't have a Crystal Ball, no one can predict the final selling price.  It all depends on how many offers there are on a house, and how badly someone wants it.  Incidentally, I don't like the term "bidding war", because that is really not correct or descriptive of the process.  But here are a couple of guidelines to help us along in the process:

If the house has been on the market for a few weeks, or even months (yes, that DOES happen, even in Winnipeg), and the owner and their agent have never adjusted the price, the buyer might try something a little lower than asking-price.  Provided that the buyer (with his own agent)  has done some comparing and homework, and assuming that the listing price of the house is not 'pie-in-the-sky-dreamin', an offer of a few thousand below asking price might be accepted.

If the house is 'taking offers' on a given date, and the buyer is lucky enough not to have to compete, putting in an offer of full-asking price might not be a bad idea.  Again, I stress that the buyer thru his agent, has performed a comparison-study of the house, and assured that it is fairly priced.  Assuming the asking price is realistic, a buyer might be well advised to count their blessings for not having to compete against a number of other buyers.

If the house in question is receiving 5, 6, (thirty?) offers, then all bets are off.  I've seen some pretty scary and ridiculous things happen in a case like this, and my best advice to my buyer would be: "Write your best offer....your walk-away price".  In other words, if the house goes for more than your offer, you feel you've given it your best shot and don't wake up the next day going "Doh" ala Homer Simpson.

The reason that 'bidding war' is somewhat of a misnomer: In a case of so many offers, the process is really pretty simple.....put your best offer forward and hope for the best.  On the plus side, at least you will find out almost immediately (within hours, anyway) whether your offer is accepted.

I've had a few buyers who have tried to buy a "Private Sale", and were left hanging for a week before being rejected.  In their case, they could not go out and pursue other homes, while their offers, (along with the deposit cheques) languished in the home-owners hands.  It seems that some private sellers are being 'coached' to hold on to offers and tell the buyers that they have to "think about it?".  Then, during the next week, while they are no doubt thinking hard, they are also 'shopping the offer around'. 

Please remember this:  yes, the market is hot, competition for homes is fierce.  However, homes listed with Realtors still have certain rules to follow, whereas private sellers are pretty much left unregulated.  Its 'buyer beware' to the extreme...

Mortgage Pre-Approval and C.M.H.C.: What Buyers need to know!

Being pre-approved by a mortgage lender is, today, the absolute minimum requirement before looking at, or making offers on, homes or condos.  In this day of 'multiple offers', homeowners can not take your offer seriously unless they know that you are pre-approved by a lender.  But there is a bit more to this story:

In Canada, Banks are permitted to loan out (mortgage) up to 75% of the value of the home.  For a $160,000 home, they can loan out up to $120,000 to the buyer.  The rest, in this case $40,000, has to come by way of a down-payment, or be insured by a Mortgage Insurance Company.  In Canada we have Canada Mortgage & Housing Corporation (CMHC)  and GE Mortgage Insurance Canada.

Here is how it works:  Mr. & Mrs. Smith want to purchase that $160,000 home, but only have 5% down payment ($8,000).  This means that they will require the above "Mortgage Insurance", and CMHC or GE will be happy to do so, provided that the Smith's qualify (i.e. have a clean financial history, with no defaults or bad credit).  Of course, either company will charge for this service, and this amount, usually several percent of the value of the mortgage, will be added onto the monthly payments.

Here is where it gets interesting:  Banks (or Credit Unions for that matter) may 'pre-approve' the buyers, but they can not speak for CMHC or GE.  The final word is up to these insurers.   So we could have a situation where the Smith's are pre-approved, and their offer is accepted, however once the entire deal is shipped to CMHC (or GE) for approval, it could still fall apart.

If that happens, the Smiths could loose their deposit, if they were not careful in how their offer was worded.  For example, if they wrote an 'unconditional offer', and CMHC denies their application, they will not get a mortgage, will not get the house, and thus loose the deposit.

Must Read:  Deposits: Why do we need it and is it safe?

“Where will the Winnipeg market go, and when will it end?

Trying to predict the market is like trying to predict the weather: there are simply too many factors involved to do it accurately.  Some of my colleagues thought it might have ended in 2006, but that was not the case.

This market is fuelled by several factors:  First time home buyers looking for their home and 'empty-nesters' looking to downsize.  Since both of these groups of people are looking for the same type of home, these smaller, entry-level homes, especially in the range of $150,000 to $200,000 are the big factor in this boom. We’ve now seen 1000-ft side-by-sides, without a garage, in the south end of the city, selling for around $170,000. Townhouse condos in one project jumped over 20%.

Another factor appears to be ex-patriots returning from other provinces, such as Alberta and Ontario.  Having sold their modest homes for HUGE dollars, these folks are returning to find that YES, $300,000 still buys a very nice home in Winnipeg.

So, if you are a home-owner, enjoy.

If you are home-buyer, waiting for this market to end may not be the best strategy. Annual price increases of 15 to 20% far outpace wage-hikes, so waiting to save a bit more money for that first home could mean falling further behind. 

Some buyers have expressed concern (or hope) that the bubble will burst, much like it has done in the U.S The U.S. market-drop came when several different problems combined to create a 'perfect storm' of sorts.

First, home-builders in the U.S. follow a different business plan than their Canadian counterparts:  For one thing, in the U.S. they build homes 'on spec', meaning that they just build them and hold them in inventory.  Builders may have a hundred or more homes, just sitting and waiting to be purchased, whereas in Canada, for the most part, the home is pretty much pre-sold. When a small drop in activity led to an overstock of homes, builders got scared and dropped prices and offered incentives so that first-time homebuyers could afford to buy these homes.

This led to storm #2:  Under-qualified buyers overextended their credit and purchased homes which were normally out of their price range.  When the short (6 month) mortgage re-opened at a higher rate, they suddenly could not afford to keep the house, and it went on the market, competing with other, new homes. This caused a drop in prices, in an effort to chase after buyers who were quickly starting to loose interest in what they saw was a burst in the market bubble.

This may be a bit of an over-simplification, however I hope it goes a little way to explaining what happened.  Aside from the difference in home-builder philosophies, our Canadian banks also have higher standards than their U.S. counterparts, further protecting the industry and home-buyers alike. While no one can predict where this will go, I also know some of my buyers who purchased a nice home 2 years ago for around $50,000 less than they would have paid today.

"Free 'Over-The-Net' Home Evaluation: What are they worth?

Over the past few years, advertisements for "Free "Over-The-Internet" home evaluations have increased in frequency.  Some ads even offer to do the evaluation based on only your postal code.  Recently, a home-owner made such a request of me, wanting an evaluation without my actually attending the home in question.  This has caused me to consider this issue and write about it.  Let's take a look at how value is determined in the first place:

The Owner sets the "Asking Price",....the Buyer determines "Value":  This adage is very true.  Quite frankly, the buyer does not care what the owner (or his agent) want for the house....buyers still shop the same way they always have, by comparison.  No one is likely to buy your home off the Internet, they have to come out and see it.  Makes sense, doesn't it?  So how could an evaluation, over the Internet and without physical examination of the home, be of ANY value? 

To make matters worse, there are now companies which have nothing whatsoever to do with Real Estate, but have been advertising these 'free evaluations'.  Once the home-owner contacts them, these companies then sell your information to a real estate agent who still has to come out and see your home to provide any useful appraisal or opinion.

So, best-case scenario is that the would-be seller (who asks for an over-the-net evaluation) ends up being contacted by a real estate agent who still needs to come out to the house anyway.

Worst-case scenario is that the home-owner ends up communicating with an "Internet Lead-Generating" company, who simply run an advertisement business and then sell your info back to an agent who is willing to pay for it.

Bottom Line?:  If you're thinking of selling your home, call a qualified Realtor directly.  Perhaps choose the one who sold you the home in the first place (if you can remember who that is), or pick one off a bus-bench, out of a Real Estate publication, or any other method you choose.  At least that way, YOU choose the Realtor.

Deposits: Why do we need it, and is it safe?

One question home buyers often ask is :  Why do we need to put up a deposit?

In some areas, (the U.S., for example) the deposit is referred to as "Earnest-Money".  It shows that the buyer is serious, and actually locks him/her into the deal.  Here is an example:

Mr. & Mrs. Brown put their house on the market in May, and receive an offer for $190,000 with a $500.00 deposit.  Possession date is 3 month down the road.  They (foolishly) accept this offer, and go on with their lives, perhaps buying a larger home.  3 weeks before possession date, they receive notice that the buyers have changed their minds:  perhaps they lost one of their incomes, or were transferred in their jobs, or found a better home.  No matter what the reason, the buyers want out.

The buyers would immediately lose their deposit of $500.00, and 'may' be sued by the Browns for more than that.  With the courts, who can tell what the final outcome will be, however more time and money will likely be lost in their effort to win this suit.

Now we can see why home-owners are well advised to take larger deposits.  I recently had a listing in the $140,000 range and received several offers on it.  One in particular came with a $50,000 deposit cheque......these people understood the meaning of "earnest money"......

Is the deposit safe?  Absolutely.  The cheque is made out to the Listing Company and goes into trust, where it is held until it is turned over to the homeowner on possession date.  If the offer is not accepted, the cheque is not cashed at all.  If the deal falls apart on conditions, (Ex: the buyer can't get financing, or the home inspection fails) then the deposit is returned to the buyer. 

More IS Better!  In this day of competing offers, homeowners are often impressed by larger deposits.  Naturally, the rest of the offer has to be acceptable as well, but if two offers for similar amounts are presented, the one with a $10,000 deposit may well be accepted over the one with $2,000 'earnest money'.