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Real estate downturn sparks buyers' remorse – The Globe and Mail



A sold sign sits in front of a house in Toronto on Sunday, April 9, 2017.Graeme Roy/The Canadian Press

The rapid downturn in Canada’s housing market is restoring a sense of calm to buyers who no longer need to fear being sucked into the whirling vortex of bidding wars. But now that prices are sliding, some buyers regret the outlandish bids they made during the early spring frenzy.

Claire Fan, economist at Royal Bank of Canada, says demand is cooling fast in cities across the country, pushing markets that once favoured sellers into a more balanced zone.

Ms. Fan notes that the slowdown in June was particularly acute in areas where markets were strongest – and prices were highest – during the pandemic.

In Toronto and Vancouver, consumers have proven more sensitive to the Bank of Canada’s early interest rates increases because average home prices are richer and mortgages are larger, she points out.

In June, new listings remained fairly robust while demand plunged, Ms. Fan says, and that pushed the sales-to-new-listings ratio lower for all regions.

East of Toronto, Durham Region has seen dizzying price jumps in the past couple of years. Detached houses in family-friendly communities were relatively affordable at the start of the pandemic. Now “days on market” are rising and price cuts are common. The swift turnabout is unnerving some sellers.

Shawn Lackie, agent with Coldwell Banker R.M.R. Real Estate, says buyers had 1,414 active listings to choose from last month compared with the unusually light inventory of 712 in June of 2021.

“The buyers are now sitting there saying, ‘hey we got the hammer back,’” Mr. Lackie says.

His advice to sellers coming to the market now is to be patient and work with any offers they get.

“Your first offer is typically your best offer,” he says “Even if it has conditions, work with them.”

Buyers these days are often making offers conditional on home inspections and financing. That gives them a few days to iron out wrinkles before the deal firms up – or back away entirely.

Mr. Lackie now routinely has a lawyer look over every deal.

“It’s just common sense. If something goes sideways, at least we’ve got counsel involved from the start.”

The Durham market reached a pinnacle in February, when the average price hit $1,228,990. In June the average price had fallen about 20 per cent to $972,354.

Some doleful buyers these days are asking for an abatement in price to reflect the current market, says Mr. Lackie, adding that the sellers must then decide if they will renegotiate.

Mr. Lackie says houses listed in February and March with asking prices of $799,000 in the Courtice area were routinely selling for between $1.15-million and $1.2-million as buyers lobbed bids $300,000 to $500,000 above the asking price.

Now buyers approaching the closing date for a property they bought in the spring can see average prices in the area have tumbled. If they estimate the price of the house they agreed to purchase has dropped by $260,000, for example, they might be tempted to forfeit the $60,000 deposit they gave and walk away, Mr. Lackie says.

In that scenario, the sellers will likely put the house back on the market. If they end up selling for less, they may pursue legal action against the original buyer.

In many cases, sellers are better off to agree to the compromise on price and move on, he advises.

Mr. Lackie points out that litigation will likely take two years or more and some sellers know they are still way ahead, even after they agree to reduce the price.

“Common sense has to get in there and push greed away,” he says. “Then the buyer can say ‘I didn’t get totally fleeced.’”

Another hurdle can arise if the value of a property has dipped since the offer date and the buyer needs a mortgage. If the lender requires an appraisal and the value comes in below the sale price, the buyer must close the gap.

“You’ve got to come up with another $300,000 because the bank’s sure not going to front you,” Mr. Lackie says. “That’s when the scramble starts.”

In many cases, young buyers make another visit to the “bank of mom and dad” he says.

Mr. Lackie expects the market to remain fairly quiet over the summer, with another bump in listings in September. He predicts a portion of those will come from people who moved to the suburbs during the pandemic but no longer want to commute. Another fraction will be homeowners who are financially stressed with the rise in interest rates.

Looking ahead, Ms. Fan at RBC cautions that further headwinds will come as the Bank of Canada presses on with rate hikes.

Ms. Fan says the central bank’s increases will likely cause housing affordability to continue to erode, put more buyers on the sidelines, and push prices lower.

Farrell Macdonald, broker at Atelier Realty, concentrates his business in Toronto and Ottawa, where he is doing a lot more upfront work than usual as buyers and sellers try to make sense of the current market.

For buyers, fear of missing out has given way to fear of buying in a falling market.

Mr. Macdonald, a former accountant, says consumers are wary of rising inflation for everyday items and the concomitant bump in interest rates.

“Unless you don’t eat or drive, it’s impossible not to notice,” he says.

To Mr. Macdonald the dramatic rise in house prices during the pandemic was mind-boggling.

“We saw this race to buy more house and more yard and maybe even a pool.”

People moved to the suburbs where they could find that large backyard, and now areas such as York Region in the 905 area code have cooled off dramatically.

In King Township, for example, the average price dropped to $2.083-million in June from $3.218-million in February as months of inventory swelled to 2.3 from 2.0 over that time. Only 21 properties changed hands in King in June compared with 86 new listings.

As prices fall, Mr. Macdonald has seen some collateral damage during the transition. One couple, for example, planned to sell their house in the Toronto area and move to Ottawa.

Their agent advised them to sell first and then look for the new property, but they did the reverse.

After buying in the Ottawa area at the height of the market in February and selling in the sagging GTA two-and-a-half months later, they have delayed their plans to retire, he says.

When it comes to sellers, Mr. Macdonald is delving into their motivation in trading properties.

“The cost and grief of going through a move is particularly relevant,” he says.

Sellers leaving Toronto for a smaller centre are able to go through with their plans if they’ve owned the house for several years, he says. Even if they sell for less than the property would have fetched earlier this year, they’ve usually locked in some gains, he says.

“Nobody I’m speaking to is expecting a February price.”

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This full service Vancouver realtor enables clients to make strategic real estate decisions – Vancouver Is Awesome



A child’s crayon drawing, showing three happy people in front of their new home, graces the office of Andrew Lasko of Lasko and Associates. It was a gift from the eight-year-old daughter of a couple from the Philippines – a thank-you gesture for helping the immigrant family purchase a house in Canada by matching their budget with a motivated private seller. 

While there have been many such satisfactory outcomes throughout his 10-plus years as a realtor, providing “full service and the right kind of experience for every client” takes effort, especially in a fast-paced and constantly evolving real estate market, says Lasko. “I keep this picture around and on tough days, I look at it and remind myself of why I’m doing what I do.” 

The idea of “full service” means different things to different people, and Lasko strives to gauge the exact level for ensuring his clients are comfortable. “That’s why it’s important to start with a conversation to understand their expectations,” he says. “It’s not just about whether they are looking for two or five bedrooms or what kind of amenities they want nearby. I am interested in learning what process works best for them; for example, do they like to be hands-on? Or do they prefer to outsource as many tasks as possible?”

His background in financial planning and analysis in the real estate, urban planning, banking and auditing industries – combined with a passion for community-building – give Lasko an advantage when it comes to enabling clients to make strategic real estate decisions. 

He values “a methodical approach and due diligence” for collaboratively navigating an industry, where structures are useful but market trends sometimes require a quick response. That’s where experience is a big asset, he believes. 

“Over time, you get to know buying patterns; you see where things are offered and where people are looking,” says Lasko. “I can help you explore real estate as a step towards achieving your overall financial and lifestyle goals. I can also speak intelligently about a range of financial products.”

With many of his clients being busy professionals, including accountants, engineers, doctors and lawyers, Lasko aims to minimize the stress that can come with selling or buying a home. “I have pretty big shoulders, so you can trust me to carry much of the load,” he says. “And I’m constantly challenging myself to go the extra mile, to uphold the ethics – and improve the reputation – of the profession.” 

Lasko grew up in Toronto and lived in Sydney, Australia, and Copenhagen, Denmark, before settling in Vancouver in 2007. Moving frequently inspired an appreciation of the “emotional strain that can come with the process, even if you’re super-organized.

“The last time I moved, I had a spreadsheet. I hired a packer and a mover,” he recalls. “I was going to wake up in one place and go to sleep in another.” 

Needless to say, it wasn’t quite as stress-free as anticipated, he admits, and experiences like this have reinforced his commitment to offering his clients “the right experience. 

“I really focus my attention on what they need,” says Lasko, who loves to discover commonalities, for example, in demographic or socio-economic backgrounds. With his ties to the financial, Jewish and LGBTQI+ communities and his active lifestyle, there is always overlap, “like a Venn diagram,” he notes. 

Lasko also hopes to help enhance his clients’ financial flexibility, perhaps by discovering unrealized value. “I love the fact that I can help people enter the market with a condo,” he says, “and move their way up to million-dollar estates.” 

His efforts and results have not gone unnoticed, and Lasko has repeatedly earned professional recognition. Yet what matters most is when clients tell him he’s “the best realtor,” says Lasko. “This gives me the shivers, in a good way.”

Andrew Lasko is featured in the 2022 Excellence in Real Estate Magazine.

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The Pro and Cons of Real Estate Investing: What You Need To Know – ReadWrite



The outlook for the stock market and much of the economy remains uncertain. That being the case, many investors are looking for alternative spots to grow their portfolios. One of the best choices for a number of reasons is real estate. This exciting field offers benefits both obvious and less well-known that make it an excellent option for your money. But it’s not suitable for everyone. Read on for an explanation of the advantages and disadvantages of real estate investing.

Pros of Investing in Real Estate

Many folks are familiar with some of the advantages of investing in real estate. But unless you’ve taken a closer look, you may miss out on some less well-known but equally valuable benefits.

Multiple Ways to Make Money

Real estate investments offer numerous ways to make money, regardless of your strategy.

For example, owning a rental property doesn’t just make you money from the cash flow you receive each month after the property’s mortgage and bills are paid. It also quietly earns money from appreciation as the property grows in value over time. At the same time, you bank additional money each month when you make the mortgage payment. This allows tenants to pay down the loan’s principal.

Tax Advantages

Not only will you be able to deduct actual expenses required to operate and maintain the property, but you can also take a write-off for depreciation.

This on-paper expense costs you nothing out of pocket but can reduce your tax bill. When you sell the property in the future, you may also be able to take advantage of lower tax rates on capital gains. Alternatively, you might defer taxes entirely by buying a similar property in what’s known as a 1031 exchange.

Protects Against Inflation

Inflation has been a major topic of discussion over the past months as prices continue to grow across the economy. These conditions are ideal for holding a tangible asset like an investment property.

As prices go up, the value of your property tends to increase as well, helping you avoid much of the pain of inflation. At the same time, you’ll be paying back your loan in “cheaper” dollars, generally at a long-term fixed rate. As rents and other income grow over time, your mortgage payments will typically remain the same, improving your returns.

Diversifies Your Portfolio

All too often, people have their whole nest egg invested in the stock market, bonds, or similar financial instruments. This means that they’ve tied their long-term wealth entirely to these financial markets.

Real estate investments offer critical diversification, a key to any balanced portfolio. Few people can truly avoid economic downturns, but having diversified investments means you can lessen the blow and come out the other side as strong as ever.

You Don’t Need a Lot of Money to Get Started

Many people may ignore real estate, thinking they don’t have the cash to find a deal.

This isn’t necessarily the case. Aside from common strategies like rental property investing or house flipping, real estate investors can also get started in low- or no-money-down systems like wholesale real estate.

Those who sell wholesale real estate do the legwork of finding great deals. They usually do this by aggressive and creative marketing to owners who may not even initially consider selling their home. Once they’ve found a willing seller, they connect them with a previously identified buyer who has the cash for an investment property but not the time to search for great deals.

For their work, the wholesaler typically receives a fee. They profit by selling the contract on the property to the end investor at a slightly higher price.

As you can see, this requires little initial investment from those interested in wholesale real estate, other than marketing costs and time spent networking with potential buyers and sellers. It can be an ideal way for would-be real estate investors to generate some capital. They can do so while growing their connections in the local market.

Real estate investors who are just getting started can also use more passive means like REITs, which are essentially mutual funds that hold real estate investments. These are basically hands-off investments but usually generate the lowest returns with the fewest incidental advantages.

Cons of Investing in Real Estate

Like any investment, real estate isn’t perfect and isn’t right for everyone. Before rushing into the real estate investment world, consider the following to avoid a potentially unpleasant surprise down the road.

Many Strategies Require Lots of Cash

We mentioned wholesale real estate above as an example of a low- or no-money-down strategy. However, wholesale isn’t for everyone and every situation, and many other strategies do require a significant amount of money.

Depending on the property type and location, this could be anywhere from the low five figures to six figures or more. For some, this isn’t an unreasonable amount of money. But for others just getting started, it might prevent them from taking advantage of good deals when they arise.

Investments Usually Aren’t Easily ‘Liquidable’

Most real estate investments are long term. If you put down ten or twenty grand on a mortgage, you’re generally unable to access that money without selling the property, ending the investment.

In some cases, you may be able to take out loans or lines of credit to access the equity in properties without selling. However, these come with various fees and restrictions and take time to process. Therefore, real estate investments aren’t the best choice for those who may need to access their money quickly and easily down the road.

Time (or Extra Money) Required

While many investments may be able to grow on their own with little management or involvement, real estate is not among them. You’ll need to deal with finding tenants, conducting maintenance, and other day-to-day requirements of owning a property. Some may find their enthusiasm for real estate investing flagging after the third call in a week for a clogged toilet or locked-out tenant.

Of course, property management companies exist for precisely this reason, allowing professionals to take care of these things so you don’t have to. But you’ll need to give up some of your returns to pay any property managers, who usually take a cut of the rent they collect for you each month.

A Great Deal Lies Outside Your Control

You may do everything right when it comes to finding the right property, picking the right tenant, and managing correctly. Still, real estate investors face lots of factors outside their control.

The city your property is located in may change rental rules or zoning. Similarly, a huge new housing development could open up nearby. Your property’s ideal neighbors may sell their home. They might be replaced by party animals who leave their lawn covered in trash. These are just a few downsides you’re exposed to that you’ll often have little notice of or way to avoid.

Real Estate Investing: A Top Way to Grow Your Money…But Not For Everyone

Those looking to grow their portfolio will find few better ways than real estate investing. From long-term buy-and-holds to wholesale real estate, there are so many strategies for investors to tailor to their financial needs and resources.

Still, it’s crucial to remember that real estate may not be right for all investors. You should assess your situation and any potential deals carefully before jumping in. Who knows? You may be on the verge of an investment that changes your financial situation forever!

Image Credit: RODNAE Productions; Pexels; Thanks!

Deanna Ritchie

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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Canadian Real Estate Affordability Hits Worst Level Since The 90s: Bank of Canada – Better Dwelling



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Canadian Real Estate Affordability Hits Worst Level Since The 90s: Bank of Canada  Better Dwelling

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