The importance of property pricing

A very interesting real estate sale happened last week in Toronto, illustrating the importance of pricing property within reasonable limits.

A renovated home on a rather busy street in east part of Toronto was listed in mid-April for almost $450,000. This was not a reasonable price, and, typically for today's real estate reality, Realtors were reluctant to show and buyers were reluctant to come up with an offer.

After two weeks of no action, the seller, on his Realtor's advice, agreed to a price reduction. This is normal, and should be expected in such situation. What was extraordinary, though, was the amount by which the price was reduced. That amount was $150,000, or one-third of the asking price. It turned out to have been a brilliant move on their part.

They held-up offers for a week, and, in the end, sold the house, with multiple offers, for $95,000 over the asking price. It is just left for us to wonder whether a more realistic original listing price would have produced a better selling price - possibly not.

I have observed this year very aggressive real estate listing prices, resulting in multiple bids and selling prices well over asking. In prime Riverdale, for instance, the average sale-to-list price ratio in April was 105%. Out of the 32 homes reported sold, 22 were sold above asking, and the highest sale-to-list price ratio was 145%. The remaining homes were sold at an average 96.6% of asking. It took, on average, 12 days to sell a home, and it would have taken less were it not for holding back offers.

Experts to review new building projects in Toronto

New pilot project in Toronto will have a 12-member panel of experts review new real estate developments in the city. In an effort to make Toronto more visually attractive, the panel will provide advice to the city planners. The advice will focus on the height, location and materials proposed for the building being evaluated.

If the expert's advice proves successful, such design-review panel might be established on a permanent basis in Toronto. Vancouver already uses such group of experts in approval process for new construction.

Termites

Termites are most common wood-destroying pests. They need moisture to survive, and live in underground colonies with networks of tunnels connecting them to food and water. Such colonies can reach up to hundreds of feet. The colony members consist of workers, soldiers and reproductive members. The majority of colony members are workers, which are sterile, and which gather food and water, build and repair tunnels and shelter tubes above ground, feed and groom other members of the colony and care for eggs and young.

Termite damage is not easy to observe. They feed inside the wood, along its softer parts. They don't create wood particles, and don't reduce wood to powder. The excavations within wood are often packed with soil. Badlky damaged wood may sound hollow when tapped, and to detect lesser damage one can use a screwdriver or a knife looking for hollowed areas.

Termites are present in large parts of Toronto, and spread rapidly. Termite infestation may be detected by the sudden appearance of winged termites (swarmers), or by the presence of mud tubes and wood damage. Swarmers (male and female) are approximately 6 to 7 mm long, winged, and vary in colour from black to yellow-brown.

Termites need to protect their bodies from a drying effects of air. To be able to move in exposed areas, they build shelter tubes out of mud and water. Shelter tubes are usually 6 mm to 2.5 cm wide. Presence of such tubes in cracks between boards is a sign of termite infestation. To establish whether it is an active colony, shelter tubes should be broken or removed, and then monitored to determine whether they are repaired or new ones constructed.

Spring is termite-breeding season. Although they spend most of their lives in the soil, at this time of year the males and females grow wings, swarm, and mate, establishing new colonies. Swarming is very brief, usually lasting less than an hour. Swarmers quickly shed their wings. A sign that the swarming has occurred is a presence of thousands of half-inch long wings in cobwebs, on window sills, or on the basement or patio floor. The presence of winged termites or their shed wings inside a home should warn the owner of termite infestation.

A natural home owner's reaction would be one of panic. When such evidence of termites' presence is discovered inside the house or near its foundation, that may signal a problem. Termites, however, damage wood very slowly, so there is time to interview termite control companies, get estimates, and only then make a decision on the company and treatment that should be used.

There are choices of treatments to rid the house of termites. In 'barrier' treatment, chemicals are injected into the ground around the perimeter, to prevent termites from getting into the house. Another treatment uses poisons which are not noticed by termites. When the insects walk over the chemical, it gets on their bodies, and is spread within the colony by grooming. In some cases a bait stations are placed in the soil around the house. These stations contain pieces of wood. The stations are checked monthly, and if termite activity is found, the bait is replaced with poison. Again, the poison is acting slowly, and termites share it with the rest of the colony. Whole colony is usually destroyed within a couple of months.

It is advisable to employ a company that will provide follow-up and guarantees more treatments if the original treatment fails to rid the house of pests. One of the best known termite-control companies in Toronto is Aetna. Their phone number is 416-469-4111.

How to Increase Affordability

In the current real estate market it is becoming very difficult for the first time home buyers to qualify for a mortgage necessary for their purchase. Mortgage brokers deal with the affordability issue on a daily basis, and they provide the following advice:

Revisit your current debts. When applying for a mortgage, a lender will look at you total debt service (TDS) ratio, or how much of your total income is going towards various types of debts, including car loans, credit cards, and other consumer loans. An Invis Mortgage Consultant can advise on restructuring your current debt (for example, by increasing the amortization and lowering payments on your car loan), to ensure that your TDS ratio is acceptable to prospective lenders.

Increase the size of your down payment. A common way to come up with more cash for a down payment is to make use of the federal Home Buyers' Plan which allows qualifying purchasers to withdraw up to $20,000 each from their registered retirement savings plans (RRSPs) to buy or build a qualifying home without incurring tax penalties. An Invis Mortgage Consultant has full details on the ins and outs of this program.

Look into a longer amortization. Mortgages with 30- or 35-year amortizations feature lower monthly payments than the same size mortgage with a traditional 25-year amortization. While longer amortizations do entail more in interest costs, there are additional strategies to further reduce the amortization and interest costs over the life of the mortgage, such as making lump sum payments down the road or increasing monthly payments (say, after receiving a salary increase).

An Invis Mortgage Consultant can offer valuable advice throughout the financing process on ways to boost affordability.

Courtesy of Jim Rawson of Invis, 416-972-6336 ex. 30

Financing Home Renovations

Did you know that the first three months of the year are the busiest time for planning home renovations? If your spring renovation plans involve larger projects, it can pay to refinance your mortgage, which allows you to get the very best borrowing rates by using the equity in your home. A mortgage refinance will allow you to spread your payments over a longer period of time than with a line of credit.

You should be able to borrow up to 75% of your home’s value with a conventional mortgage, or up to 95% with an insured mortgage. You may also be able to consolidate a range of higher interest borrowings (credit cards and car payments, for example) at the time of your mortgage refinancing.

An Invis Mortgage Consultant can look carefully at your financing needs and advise on how best to secure additional mortgage funding. If you take the time now to establish a clear idea of the improvements to your home and how you will pay for them, you could be putting those plans into action by the time warmer weather finally arrives. Ideally, a well-planned renovation can boost both your enjoyment of your home and its equity.

Courtesy of Jim Rawson of Invis, 416-972-6336 ex. 30

February Real Estate Sales Strong

Resale housing activity in the month of February was slightly higher than a year ago, Toronto Real Estate Board President Dorothy Mason announced today. A total of 6,772 transactions took place in the month, as compared to 6,756 in February 2006.

"Sales activity has been strong to begin the year," Mrs. Mason said. "Results from the first two months show that so far 2007 is five per cent ahead of last year’s pace."

"The important thing is that we are seeing strong results on a consistent basis, which speaks volumes about the stability of the market," Mrs. Mason added. "As we head into the most active part of the year, it's an excellent time to get into the market for the first time or make a switch to a different home."

In Toronto's west end Bloor West Village neighbourhood TREB reported 13 sales in February, averaging $586,654 (101.1% of asking). Only five of them, however, sold above asking price (106.8% on average) - the remaining eight sold below asking, at 97.5%. The average time on the market was 19 days, and the homes that sold below asking averaged 19 days - only a few days longer.

February 2006 saw 26 sales in Bloor West Village, with the average selling price of $665,132 (101.5% of asking).

In central Toronto's Davisville neighbourhood 19 sales of freehold properties were reported, with an average sale price of $737,885 (103.84% of asking). The average time on the market was only 11 days, and it would even be less without the pre-set date for the offers. Twelve of the sales were above asking price, and the remaining seven still averaged 97.6% of asking and 16 days of market exposure.

In February 2006 14 homes were sold, averaging $618,337 (102.9% of asking), after only 8 days of market exposure.

22 residences were sold in prime Riverdale, averaging $582,121 (107% of asking) and 11 days market exposure. After discounting the only three that sold below asking, the average percent of asking price rises to 109%. It does seem to me that the listing prices might be deliberately low in this neighbourhood, to encourage multiple bids. The highest 'over asking' selling (117%) was my favourite listing on Bain. It wasn't a large house, but it was really trendy and had a great ambiance. The property that took the most time to sell was sold only after 52 days. That property was listed just before Christmas, on December 22, which, I am sure, did not help.

In February 2006 the same number of homes was sold (22), with the average price of $503,050, 102.6% of asking, and 13 days, on average, of market exposure.

In North Toronto only six sales took place, averaging $881,667 (107.7% of asking) and 11 days of market exposure. Only one sold below asking (99%). 10 residences were sold in February 2006, averaging $832,975 (107.6%). Four of these were sold below asking.

Bank of Canada Maintains Key Interest Rate

The Bank of Canada's strategy of keeping short-term interest rates steady continued with its announcement today that it would leave its key policy rate unchanged. This is the Bank's sixth consecutive decision since May 2006 to leave this rate constant.

In its announcement the Bank commented that it deems the risks to its previous inflation projections to be roughly balanced, with the main downside risk continuing to be "that growth in the U.S. economy could be lower than expected," and the main upside risk continuing to be "that household spending in Canada could be stronger than expected, largely because of borrowing against increased home equity."

This decision means that the prime lending rate offered by most lending institutions in Canada will stay put, as will rates on variable mortgages. The Bank’s decision today does not affect the rates for new fixed mortgages, the pricing of which is determined by trading in the Canadian bond markets.

If you would like to discuss how current trends in mortgage rates impact the best mortgage strategy for you, contact an Invis Mortgage Consultant. He or she can obtain a mortgage pre-approval if you're wanting to buy a home – with a "rate hold" of up to 120 days, you will know how much you can afford. Another starting point is the www.invis.ca website, where you will find a number of calculators that allow mortgage holders and prospective home buyers to examine different financing scenarios in more detail.

Courtesy of Jim Rawson of Invis, 416-972-6336 ex. 30

End of February in Toronto neighbourhoods

It is the last day of February, and, stock market crash and RRSP season aside, it is interesting to see how are homes selling in various Toronto neighbourhoods. I compared sales in January and February.

Starting from the west end:

• The Kingsway had 5 sales in January, with average price $1,196,800 (98.2% of asking), and 8 sales in February, averaging $929,500 (101.6% of asking).
• Bloor West Village: 17 sales in January, $528,607 average (106.8% asking), and 12 sales in February, $590,375 average (101% asking).
• High Park: 12 sales in January at $592,342 average (105.3 of asking), 17 sales in February at $594,441 average (98.4% asking).
• Roncesvalles Village: 5 sales in January at $511,400 (103.6% asking), 6 sales in February at $475,542 average (102.3% asking).
• Riverdale had 16 sales in January at $521,269 average (102.1% asking), 21 sales in February at $579,841 average (106.7 asking).
• Prime Beaches had 11 sales in January at $624,064 average (102.2 asking), and 18 sales in February at $601,983 average (103.9% asking).
• In Scarborough, Guildwood Village had 3 sales in January at $367,850 (98.7 asking), and 7 sales in February at $422,286 (96.7 asking).
• Looking north, North Toronto had 4 sales in January, averaging $765,625 (97.2% asking), and 6 sales in February at $881,667 average (107.7% asking).

It is still a common practice in busy Toronto neighbourhoods to list properties low (often substantially below market value) to generate bidding wars and quick, firm sale.