Opinion

Vancouver’s proposed affordable ownership program

Oleg Articles, For Buyers, News, Opinion
Vancouver skyline / new affordability program
JENNIFER GAUTHIER/METRO

Earlier this week City of Vancouver announced that it plans to create new affordability program for local residents. The purpose of the program is to address unaffordability issues in Vancouver BC. Specifically, Vancouver’s residents not being able to afford to purchase their first home due to rapid increase in the real estate prices.

If you feel skeptical about such program, you’re not alone. However, there are similar programs already in place in Calgary, Toronto and United Kingdom.

Don’t get too excited about the program just yet. To implement this program the city needs to secure permission from the province to change the Vancouver Charter. The Charter doesn’t necessarily prevent city from having a shared homeownership program. But the council is sticking with the motto – “better safe than sorry”.

How would the program work?

Details aren’t finalized, but the program would involve the city purchasing about 20 per cent of a units in a new development so the buyer – who would be subject to numerous restrictions – wouldn’t have as high of a down payment or mortgage payments. If the value of the property goes up upon sale of one of the unit in the “affordability program” City of Vancouver would receive it’s share of profits. If there are any remaining profits, these would be shared with the homeowner. It’s a win-win situation.

Who would qualify for the program?

  • Must be a resident of the city for a minimum of five years
  • Must be a permanent resident or citizen
  • Must never have owned property before (first time buyer)
  • Must be employed in Vancouver
  • Earn less than $67,540 per year for one-bedroom units (as a household)
  • Earn less than $96,170 per year for two and three bedroom units for people with children (as a household)
  • Must complete a home buyer education course

How many units will be available in the program?

The city aims to create 300 affordable units within the next 3 years. At least half the the available units will have two to three bedrooms. City officials said they might create a lottery system to see who gets to buy in. There are estimated 30,000 qualified households in Vancouver at the moment.

In my opinion it is fantastic the City of Vancouver is creating such programs. It is no secret that there are a lot of people that can’t afford to purchase their first condo in the city. With such programs we boost economy and help first time buyers. That’s why I love Canada, more specifically Vancouver! Where else will you find government care so much about people’s well being (outside of Toronto, Calgary and United Kingdom lol)?

The truth about “shadow flipping” in Vancouver

Oleg Articles, News, Opinion

 

“Shadow flipping” is the new term thrown around quiet a bit in the last two weeks. Turn on the news or go online and all you see are evil realtors taking advantage of the public, earning 10 commission on each sale and directly causing global warming.

Let’s make sense of all of this.

What is “shadow flipping”?

It’s a controversial “sales technique” used to sell the assignment of the Contract of Purchase and Sale before the completion date. Real estate agent would collect real estate commission for each assignment of the contract.

For example:

Buyer#1 “buys” a house for $2 million. Before the sale completes (all money is paid) the contract is sold to the buyer#2 for $2.3 million. The buyer#1 who sold the contract makes $300,000 (minus the real estate commissions). The original seller is left with $2 million (minus the real estate commission and expenses). And the real estate agent collects real estate commission 2 times; once for the sale of the property to the buyer#1 and once for the sale of the contact to the buyer#2.

 

 

Most news articles use similar examples, but in their examples the contract is sold (assigned) twice and the real estate agent collects 3 real estate commissions. In my opinion these examples are ridiculous. Hypothetically speaking it is possible to assign (sell) the contract unlimited number of times but selling (assigning) the same contract twice is very very rare. These examples are used to scare the public and reinforce the message, but only make things more confusing. Nevertheless, shadow flipping is wrong and scary without ridiculous examples.

Some real estate agents and savvy investors found a way to abuse the “assignment clause” in the Contract of Purchase and Sale.  In some cases the original seller doesn’t get a full value for their property. In some cases the buyer of an assignment overpays for the property. Most of the time someone in the transaction is taken advantage of. As real estate agents we have a fiduciary duty to work in our clients best interest, however we still have to follow the code of ethics. We can not put our own interest before the interest of parties involved in the transaction and the general public.

“Shadow flipping” is not a new concept. In fact a lot of “get rich quick from real estate” schemes depend on this strategy. You’ve seen the infomercials. It has been around for a long time. “Shadow flipping” is not limited to British Columbia either. Most of Canada and the US have the “assignment clause” in their Contacts of Purchase and Sale. It’s actually a beneficial clause if used right.

It is very sad to see some of my real estate colleagues participate in such shady schemes. It shines a negative light on the industry as a whole. It is not fair that a few dishonest realtors bring negative publicity to everyone. These cases should definitely  be investigated.  These responsible need to be brought to justice.

Real estate industry as a whole does not support unethical behaviour of a few.

 

$7-million mansion in Vancouver is now a tear down

Oleg Articles, News, Opinion

I was reading the news today and came across this article: The $6-million Vancouver mansion, complete with indoor pool and media centre, that’s just another tear down

Basically, Vancouver home owner has filed an application for a demolition permit for his luxury multi-million-dollar home located in Vancouver’s upscale Shaughnessy neighbourhood. The home has 7,200 square feet of living space, indoor swimming pool and a media centre. According to BC Assessments the property is worth $7.44 million today. It was purchased back in 2013 for just over $6 million.

The owner is technically not doing anything wrong. So why did this matter get so much media attention?

Vancouver is a known “green city” and tearing down a perfectly good home seems like a waste of resources. The house is not even 20 years old.

Vancouver council woman Adriane Carr plans to voice her disapproval over the application. “It’s just criminal that it should be torn down,” Carr told CTV Vancouver. “It’s an expensive home, it’s a big home, and the fact that it could be torn down and replaced, it goes against everything the city is trying to do to be the greenest city.”

We can understand both points of view. On one hand it doesn’t make sense to “waste” resources, but on the other hand private individuals can do what they want with their money. Forbidding someone to build a new home because their “old” one is a “perfectly good home” is the same as forbidding someone to buy a new television because their old one is a perfectly good television.  It is up to all of us as people to control our resources consumption.

As long as the new proposed house complies with all city by-laws and regulations, I don’t see any problem for the owner to obtain the demolition and development permits for his/her project.

$2.4 million 86-year-old Point Grey house. Is it worth it?

Oleg Articles, News, Opinion, Statistics

Last week an 86-year-old “rundown” house was listed for sale. The 4453 W 14th Street house has 2,000 square feet of living space and is located in Point Grey neighbourhood in Vancouver Westside. What’s so special about this property? The price tag of $2,398,000!

This property instantly received a lot of media attention and community outrage. Some online polls even popped up asking people  how much they would pay for this house? “Less than $500,000” is the most popular answer, followed by “you couldn’t pay me to live here” in a second place.

The house is sitting on “standard” Vancouver 33 by 122 plot. 2014 assessment value came in at $1,759,800 almost all of the value is in the land. The house is walking distance to Lord Byng Secondary and Queen Elizabeth Elementary.

So why does it have such a high listing price? 

Clearly, the house itself has little to no value. It’s the land in this prestigious Vancouver neighbourhood that dictates the listing price. 33×122 plot (also know as the Vancouver Special) is not very big. You can build almost 3,000 square foot home with a garage on it.

So is it worth $2.4 million price tag? 

In my opinion it is not. Some real estate professionals will disagree with me on this one. That’s totally fine.

There are many ways to calculate the value of the property. I based my evaluation on compatible currently active properties  on the market as well as the recently sold comparable properties. Also, I looked at the investment value of building a new home in the neighbourhood.

If I were to base my evaluation only on similar properties in the neighbourhood and their selling prices, the price tag of $2.4 million dollars would make sense. If I were a listing agent I would price it at a similar price point. There are a few examples of houses around the same age with the same lot sizes selling for $2.3-$2.4 million dollars in the Point Grey neighbourhood. Which leads me to believe that this house will sell for the asking price or maybe even for more than the asking price.

So why do I say it is not worth the price tag of $2.4 million? 

This house needs to be torn-down and a new house should be build in its place. In the current market, new houses in the neighbourhood (with 33X122 lots) are selling for around $3.1-$3.3 million. It will cost around $650,000-$700,000 to build the new house. If you account for taxes and extra expenses associated with the buying, building and selling process, this house does not make for a very good investment.

I think the buyer of this property is going to be an investor. He or she will justify paying the premium price by betting on future appreciation of the neighbourhood, which is completely fine. More and more real estate developers in Vancouver bet on the future appreciation as land prices in Greater Vancouver continue to rise.

This property could be a good investment if market continues to go up over the next 12 months at the same rate. Any experienced developer will tell you that the investment property has to make sense at the current market value. And NOT solely depend on the future appreciation.

Here is a graph of the real estate prices of detached (resell) houses in Point Grey neighbourhood over the last 5 years.

DISCLAIMER: This article represent my opinion only.  Do your own independent research before making any real estate related decisions.

Should you hire an inspector for a walk-through of your new property?

Oleg Articles, For Buyers, Opinion, Tips

Inspection-Passed

As real estate professional I get asked a lot of questions. “Should I get an inspection done, when I buy a property?” is among the most frequently asked questions. Here is a simple answer – YES! YOU SHOULD GET AN INPECTION DONE WHEN BUYING  REAL ESTATE! But what about brand new properties? Should you still get an inspection for brand new properties? If so, when should you do it?

The answer is YES! Even for the brand new house or a condo you should still hire an inspector. I am not some crazy “inspector employment advocate”. Experienced inspectors will be able to find hidden issues that might need attention, even in the brand new properties. If they don’t find anything, at least you will sleep better at night. That’s a scientific fact.

The question of “IF you should get an inspection?”, becomes “WHEN should you get an inspection?”.  Brand new properties can be either move-in ready, under construction or in the development stages. 

If the house or a condo is under construction or in the development stages the only time you will be able to hire an inspector is for the final deficiency report (also referred to as “walk-through”).

The deficiency report or the final walk-through is 1-3 hours inspection booked off for you and the developer to walk through the property and look for deficiencies. This date is usually set about a month prior to the completion date. All of the deficiencies found should be fixed before the completion date at the expense of the builder/developer. Ask your real estate agent about appropriate subjects to include in your contract. Feel free to contact me as well.

The walk-through is a great time to hire an inspector. He or she will be able to point out hidden deficiencies and save you time and money in the long run. As a curtesy let the developer (or selling agent) know that you will be hiring an inspector for a final walk through.

If the new property is move-in ready, I suggest adding an inspection clause into your offer, if possible. This way you will have 5-10 days to schedule the inspection and make sure that there are no hidden problems with the property before committing to the purchase. Ask your real estate agent about “the inspection subject”.

If the inspection is not possible before subjects’ removal (or you don’t inspection subject in your offer), you can still hire an inspector for the final walk-through. The same rules apply as before.

When buying real estate, it is always better to be safe than sorry. Always hire a professional inspector even when buying brand new construction.

Will the new mortgage regulations effect Vancouver real estate market? [OPINION]

Oleg Articles, For Buyers, For Sellers, News, Opinion

 

Quick recap: New Canadian mortgage regulations will now require a minimum down payment of 10% for properties priced over $500,000 (but under $1,000,000).  The new regulations apply to all Canadian mortgages insured by the government. See full article here: link to the article.

The new down payment rules have gotten a lot of people talking. Many experts believe that these changes will have a significant effect on the real estate markets all around Canada.

I am here to offer my opinion on the subject. Keep in mind, it’s my personal opinion based on my experience and should be viewed as such.  I am an expert Metro Vancouver REALTOR®, and can only comment on the local market.

I don’t think that new mortgage regulations will have any significant effect on the Greater Vancouver real estate market.

It is true that a lot of Vancouver properties are priced over $500,000. It is also true that more properties will be reaching that price mark in the near future. In my estimate 90% of all one bedroom condos in downtown Vancouver will cost over $500,000 within the next 5 years.

So why do I say that this rules change will have no significant effect on the local real estate market? In my experience most people buying properties over $500,000 have at least 20-25% down payments. Let me explain…

  • Usually, the buyers of five hundred thousand dollar properties are upsizing from smaller cheaper condos or townhouses. They have gained some equity in their starter home and are ready to move into something larger and more expensive. More often than not, “upsizers” have enough equity in their home for at least 15-20% down payment for the new house.
  • Most first time home buyers will not qualify for a $475,000 mortgage with a 5% down payment. The first time buyers who buy condos or houses over $500,000 have their families help with a portion or the entire amount of a down payment. Most of the time these down payments are well over 10% mark (closer to 20-25%).
  • International buyers and new-comers to Canada will rarely qualify for a mortgage in Canada. And if they do, it’s usually for a special “new-comers to Canada” program. Most of these programs require a minimum of 35% down payment.
  • Of course there are exceptions. Some people will be effected by the change. Young professionals trying to buy their first house or a condo. Families who want to get their starter home. And migrants from other Canadian provinces starting their lives in Vancouver.

From my experience the percentage of the Vancouver buyers that will be effected by this change is very small. This small percentage will not have a substantial impact on the overall Vancouver real estate market.

In my opinion, there will be no real estate crash and no major changes to the market activity in Vancouver. Business as usual! The best advice I can give to someone who is looking to buy their first home or a condo – start saving your money for a down payment today and buy it as soon as you can. The prices are not likely to go down.

 

DISCLAIMER: I am not a licensed mortgage broker. This article expresses my personal opinion only! Do your own independent research before making any real estate decisions.

Should Trump Tower Vancouver change the name? [OPINION]

Oleg Articles, Opinion
Image from: www.trumpvancouver.com/
Image from: www.trumpvancouver.com/

You have most likely heard about Donald Trump running for the President of United States of America. Donald is a bit of a character and likes to say/do a lot of controversial “stuff”. His racist and sexist remarks offended thousands if not millions of people. Among the offend people are many Vancouverites.

Trump happen to have his name on one of the tallest (second tallest after Shangri-La) buildings in Vancouver. “Some” Vancouver residents (at least 50,000 singed online petition) including former city planner Brent Toderian and Vancouver Mayor Gregor Robertson are against having Trump name as part of the Vancouver skyline.

Vancouver Mayor even wrote a letter to Holborn Group (more about them later) expressing his opinion and asking them to change the name of the building.

“As mayor, I’m proud that Vancouver is known throughout the world for our steadfast commitment to diversity, equality and freedom from discrimination and hatred,” he wrote.

“In contrast, Donald Trump’s hateful positions and commentary remind us all of much darker times in our world’s past — and it is incumbent on all of us to forcefully challenge hatred in all of the ways it confronts us.”

So should the name of the tower be changed? In ideal world the answer is – YES! Of course, it should be changed. Unfortunately, we don’t live in an ideal world. Changing the name of this tower is not that simple.

Holborn Group is the owner and the developer for The Trump tower. They have licensed “Trump” name from Donal Trump. Plus Trump Organization was chosen to operate the hotel inside of the tower. Holborn Group and Trump Organization have strong contractual ties. Not to mention the fact that a majority of 217 condos have already been sold. I would imagine that some of these buyers purchased their condos based on what Trump’s name represents in the world of real estate luxury. Not based on his personal political views.

Here is what Joo Kim Tiah, CEO of Holborn Group had to say on the matter.

“While Holborn Group owns Trump Vancouver, we have contractual obligations to the Trump Organization, banks, purchasers, consultants, trades and business partners. These legally-binding contracts cannot be altered,”

In my opinion, the name of the tower should definitely change. It will probably change in the years to come. One thing is certain – there are a lot of angry buyers who want their money back.

Property Assessments grew by 16% in 2016

Oleg Articles, News, Opinion, Statistics

02

Within the next few days owners of more than 500,000 residences in Greater Vancouver will be receiving their 2016 Annual BC Property Assessments in the mail. These assessments will reflect property values as July 1, 2015.

What are property assessments and why are they important? Well, property assessments is an estimated value of your house or a condo by a government agency – BC Assessments. Based on this calculated value the annual property taxes are paid. The higher the BC Assessments value is, the higher annual property taxes are.

There is another important function BC Assessments serve – determining property’s value. Often times when the listing agent tries to determine a listing price of a property he or she will take BC Assessments value into the consideration (not always as each agent has a different way of determining a listing price).  Other times potential buyers will look to BC Assessments or Tax value and try to determine a fair price for a property (that seems not to apply to a current real estate market).

What can owners expect to see this year in their property BC Assessments? Based on the released BC Assessment for this year an increase of 15-20 percent will be typical for a single-family homes in Vancouver, North Vancouver, West Vancouver, Burnaby, Tri-Cities, New Westminster and Squamish (See chart below of a complete breakdown). Don’t be surprised if your home BC Assessments value comes with an increase of 25%.

Overall, Greater Vancouver’s region total assessments increased from $546.7 billion in 2015 to $636.2 billion in 2016. A total increase of about 16% in one year. Almost $8.3 billion of that increase is due to new construction, subdivision and reasoning of properties. Take a drive down Cambie Street and you can witness rezoning of properties working at its finest.

All of this is good news for homeowners who are planning to sell their properties in a near future. However, many homeowners who were not planning to sell this year might be forced to do so because of the high property taxes. At least their properties have gone up in value.

If you are a property owner and need more information or have additional questions you can visit www.bcassessment.ca website for all of that.

Here is an example table showing some of the increases for single-family homes and residential strata units for sample Greater Vancouver communities.

BC Assessments Data for 2016
Image: BC Assessment

What do you think about the increase of BC Assessments? Leave your comments below.

3 Tips for selling your home or a condo in a “HOT” Vancouver market

Oleg Articles, For Sellers, Opinion, Tips

Miniature house with sold sign

Greater Vancouver market continues to be very active late into the fall of 2015. Metro Vancouver has a very strong sellers market, for the most part . That’s great news if you are planning to sell your house or a condo.

To find out if your neighbourhood and a property are in a sellers’ market you can contact me (or your real estate agent) directly or check the statistics here – the latest real estate market statistics for September 2015 from the Greater Vancouver Real Estate Board. If your home is in fact in a “HOT” sellers’ market what is the best way of selling it and making sure that you don’t leave any money on the table?

  1. Price is everything.  One of the main services that your real estate agent provides is figuring out the exact value of your property. To figure out the value (price) of the property recent sales, available inventory and even tax assessments are all taken into account. Every agent has a different strategy to find the value of the property. I will share mine in another blog post. After the value of your property is established; take away 3-5% and that should be your listing price.  Listing your property 3-5% below market value is very important step. This will generate a lot of buyer interest.
  2. “Hold” your property for at least 5-7 days on the market. In a hot sellers’ market you will be receiving offers on the very first day your property is being listed. Accepting an offer on the first or second day of your property being listed is a mistake and will most likely cost you thousands of dollars. It is very important to hold off all offers for at least 5-7 days. This way your property will get appropriate market exposure.  Set a date for the offer presentation. More often than not your will have a bidding war. Buyers will be lining up to present their offers.
  3.  Do Friday showings and an open house on the weekend. There are circumstances where open houses are not an option. For example it’s against the strata bylaws. In these instances regular showings should be scheduled for the weekend.  Assuming you are able to host an open house you should definitely do it.  Friday showings will be mostly for the agents and for the buyers who can’t make it to the open houses on the weekend. The weekend open houses are what really sells the property. If you followed tip #1. You will have people lining up outside of your front door to view the property. More people = urgency = higher offers.

Ideally, you would want to follow this timeline in listing and selling your property for best results in a sellers’ market. Monday or Tuesday your property is live on MLS (with pictures and full description). Make sure that it’s priced 3-5% under the “market value”. No showings throughout the week until Friday. Friday, Saturday and Sunday showings and an open house. Create urgency and drive as many people to the open house as possible. Monday or Tuesday evening offers presentation. Have at least 3 offers and accept the most favorable one. Sounds easy right? The whole process is of course a little bit more complicated but this should give you a pretty good idea.

Make sure to consult with your real estate professional or call me directly 604-565-7052 before implementing any of the steps. Happy selling:)

3 tips for buying real estate in a sellers’ market

Oleg For Buyers, Opinion, Tips

BuyingYourHomeinaSellersMarket

Vancouver has a very strong sellers’ market at the moment. Houses (pretty much in every Vancouver neighbouhood) and condos in Downtown and the Olympic Village area are selling within days. Other Lower Mainland cities such as: Burnaby, Coquitlam, Port Coquitlam, some parts of Richmond, some parts of Surrey (Fraser Valley), North and West Vancouver have incredibly strong sellers’ markets as well. It isn’t uncommon for properties to have multiple offers and to sell over the asking price.

Some people argue that Vancouver is a real estate bubble. I am not going to argue that point. Although, my personal opinion is that we aren’t in a housing bubble. In fact I believe that the market has still quite a bit of room to come up before a small correction. More on that subject in another blog post.

So what defies a strong sellers’ market? Basically, if the sales ration (number of properties sold vs the number of properties listings) is over 20% we have a sellers’ market. According to the latest real estate statistics current sales ratio in Greater Vancouver is around 31%. The are a lot of buyers on the market “fighting” over a limited number of available properties.

It is certainly very frustrating to be a buyer in such market conditions. All of the power is in the hands of sellers. Here are my top 3 tips on deal with sellers’ market (as a buyer):

  1. Find a good real estate agent. It is a good idea to have a real estate agent representing your interests in any market condition.  Sellers’ market makes working with a realtor much more important. Real estate agents have access to listings 2-3 days before general public.  A good real estate agent will be able to tell you how much the property is worth (it’s very easy to overpay in a sellers’ market). Most importantly a good realtor will be able to guide you though each offer presentation. Be prepared to “lose” some multiple offer “bidding wars”.
  2. Get pre-approved. I usually advice my clients not to get pre-approved. However, searching for properties in a sellers’ market with a mortgage pre-approval is a good idea. First off, you will know your exact budget. Being pre-approved takes away a certain amount of stress. And lastly, you could always play the “no subjects offer” card. Although, you should be very careful with strategy. Make sure to talk to your agent about making offers without subjects. If you don’t have an agent feel free to call me 604 565 7052.
  3. Look at as many properties as possible. In the sellers’ market there isn’t a lot of inventory to preview. That makes looking at as many properties as possible even more important. Looking at many different houses or condos will get you familiar with the market. It will also make you more confident about making an offer on the property that you do like.

I hope you find these tips useful in your home search. Drink a cup of tea, take a deep breath and relax. Buying a property is a little stressful, sellers’ market adds a little to that stress. Be prepared for multiple offers. Be prepared to make offers on multiple properties. And be prepared to let some properties go. It is all part of the real estate buying process.

For more real estate related content follow me on social or check back on this blog. Please, share this with people that you think might find it useful. For real estate advice email me at [email protected] or call 604-565-7052.