Making Sense of the Nonsensical - or How to value a property in today’s real estate market

The rules of assessment have changed and today more than any other time in our market, predicting the value of particular property can feel like taking aim at a flying bat.  The reason for this can be attributed to one fact:  the buyer.  We understand value is in the eye of the beholder, in the past, we could count on certain characteristics of the buyer and the significance of how certain features affected their perceived value of a home. 

However, since the foreign buyer, now the most prolific of all purchasers, has been the dominant driver over the past 2.5 years, naturally a different set of values has overtaken our previous system.  As with any shift, the result is a new direction.   Complicating matters further is we now have 2 or even 3 distinct set of buyers and a moving market. 

The result? A bit of mayhem.  How does one value a property that has differing values to differing segments of the market. At the risk of offending some, but in the spirit of what this newsletter is all about (honest and reliable market information), we can categorize the buyers into 4 types in no particular order:

 

  1. Typical Canadian buyer
  2. Foreign Asian
  3. Foreign Persian
  4. The builder – who is then sub-catagorized into
    1. Building for himself
    2. Canadian Spec
    3. Persian Spec
    4. Asian Spec

Valuing the property

Let’s review some of the key features which drive buyers:

Way out in first place is THE VIEW – this is usually considered by all, but ability to pay for this feature may have been won out by the Asian buyer.  10 years ago a view might be worth 50,000 to 100,000, but today, that same view can likely be worth$ 200,000 to $1,000,000 or dare we say more?

  1. The view has become so important to the buyer that in many cases, lovely homes, just won’t and don’t sell without one. Selling a non-view property in this market takes a lot more time and those sellers may have to be prepared to take less than what seems fair.  The dump down the street with a good view will sell before their higher priced immaculate home.  When it comes to views there are categories which we have tried to rank by popularity (being popular is money in the bank)
    1. Huge panoramic views – Mount Baker to Vancouver Island
    2. South facing views which include downtown (the bridge in particular)
    3. Close in water views (south)
    4. Westerly views
    5. Partial views (some obstruction)
    6. Peekaboo views – these hardly count for anything at all these days, infact maybe considered as no view and a disappointed buyer
    7. River views – rivers tend, in general, to turn more people off than on
    8. Mountain views – nice but no more money for this feature

  1. Location:  We all know location is critical, but area out of favour with the Foreign buyer have been left behind in this market.  Ambleside, British Properties then Dundarave (though several Persian builders recently jumped into multiple offers on 2285 Ottawa – listed at 1.99 and sold for 2.311 with 11 offers for an 8,890 sq. ft lot with a view of course.  Of late there has been movement to the west with many of the view properties in Bayridge proving to be desirable and also a progress as far out as Gleneagles with pockets of that area such as Summit Drive being bought up and replaced with very large new homes.  It’s fair to say this area is still more preferred by the typical Canadian buyer though.
  2. Size of land– Obviously the bigger the better, the bigger land the bigger the house, the bigger the house, the more money.   Asian buyers typically like larger lots.
  3. Schools/Neighborhoods – Great schools have buoyed up the price of real estate for years, but good schools are extremely important to the Asian population.  Many of those buying real estate are coming here for the excellent schools and a western experience for their children.  In West Van, High rankings of Ridgeview, West Bay, Sentinel & West Van High.  North Van’s Edgemont village has always enjoyed the highest prices of homes due to Handsworth High School and Canyon Heights, Highland & Montroyal all have excellent ratings as does  French Immersion at Cleveland.  Getting into the catchment of these areas is paramount for buyers from all categories
  4. Specific streets in specific neighborhoods – Occasionally we see a run on a certain street – for examples the 1100 block of Haywood in Ambleside in 2011 or Millstream in the British Properties. This has spurred homeowners to put their homes on the market to gain additional $250,000 or more dollars that just wasn’t there the year before.  We have seen this sort of madness hit a street with the buyers buying them up for their friends, driving prices to the point of ridiculousness. 
  5. Side of the street - North Side of the street is preferred by Asian buyers, completely debunking the southside which ruled for years.  This is a Feng Shui thing..  Feng shui has affected many other aspects of the property that if favorable will increase value, but if unfavorable the opposite will be true.  Just look at any home or property that happens be located at the end of a T intersection.  It’s like the kiss of death in this market.  Things like the number of the house, the location of trees, water etc, can play a large part in who much a home may or may not get.
  6. Situation &  floor plans– Door on the north side, view to the southside is best.  Facing any other way means a discount on price.  Front doors opening to the view is a big no no – as belief is your wealth goes right out the window.  Some of these flaws can be corrected by erecting walls or mirrors and such.  Still most prefer 3 to 4 bedrooms up with en-suited master, office on the main, large family room off kitchen, potential to suite down for nanny and a great guest and office area would satisfy most – oops forgot the media room, wine room and 3 car garage…
  7. New homes – Though everyone likes something shiny and new, Canadians and Persians can appreciate a good renovation.  Chinese however make a point of the age of the home as being an issue.  Even 7 to 10 years is considered old.

 

Valuations that take these points into consideration are likely to be more accurate.  Depending on the property we take upwards of 2 hours to put together a full evaluation including several other important factors such as

  1. Tax assessed value – here we note what properties in the neighborhood are selling at in conjunction to their assessed values
  2. Comparable properties (listed, sold and what didn’t sell, along with days on market, and features)
  3. Yearly trends in the neighbourhoods and schools
  4. Historical statistics on market value and where we are today
  5. Just knowing what’s selling an what’s not.

So you can see it takes a great deal of knowledge to get an accurate price on a home and even then, another buyer will come along and throw all that common sense out the window;)

How Not to Sell Your Home

Deciding to sell your home is big a decision. However your next steps could save or cost you hundreds of thousands of dollars. Keep in mind these two facts when pricing your home:

  1. Sellers' perception of their home value is usually much higher than it actually is.
  2. There are Realtors who will suggest an over inflated listing price to "buy" your listing.

 

Though both these facts are common knowledge they create a dilemma for the seller. Given this, it's tempting to list at a too high price at the recommendation of a Realtor trying to "buy the listing" by suggesting the home is worth far more than market value. The ugly truth is the advantage goes to the listing Realtor and the disadvantage to your pocketbook. How can listing your house too high hurt you? If someone likes your house, they will make an offer- right? Wrong! There are several damages to be done: Consider timing - the worst time to overprice your home is in down turning market. (current trend)

To help illustrate the trend line vs. listing price here is a visual on the chalk board:

When you see the list price plotted in this manner, results from overpricing are clear. If we were in an upward moving market, the home would be on the market for a longer time, but eventually the market will catch up to the price. However in a down turning market the risk is leaving tens of thousands, perhaps even 100's of thousands of dollars on the table because the home was overpriced. In fact even in an upturning market, pricing high is still ill-advised. There is still a very good chance you will miss good buyers willing to pay top dollar for your home. With more homes overpriced than priced correctly, your accurately priced home is a beacon to buyers. You now stand a chance of getting your price, or more than your price, IE. multiple offers - over bidding the property! Not to mention the whole process is a lot less energy on your part (fewer showings and opens = less cleaning and having to leave your home) and there is the risk of becoming a "stale listing" coupled with the emotional turmoil of all the negative feedback.

Be aware, setting a high price in a down turning market is by far the bigger mistake. These sellers are missing opportunities from buyers who will not even enter a home priced hundreds of thousands over their budget. Buyers become few and far between in this market and the overpriced house misses the opportunity all together, in fact it stands a good chance of not selling at all. Although sellers understand this, it's so tempting when a Realtor gives them an over inflated price. Some are even flattered by this.

Previously reported in the Market Brief, Vancouver's sales peaked May 12th (as per the bi-weekly spread sheet) though the signs were there at the end of April. Some properties overpriced at that time still have not sold and now perhaps won't sell unless they are drastically reduced to a price level well below what it should have originally been listed at.

Moral - Abandon your personal point of view. Buyers don't care how much you paid for your home, how many memorable moments you and your family shared in the home, or how much you need for your next purchase. Make sure you get the facts and make a decision that makes sense. It will save you 100's of thousands of hard earned dollars.

Here are some examples:

Buyers and Sellers not Seeing Eye to Eye

 

 

 

 

 

 

 

 

 

 

 

This cartoon resonates with me - don't laugh... This is more the norm out there than you might think. Buyers continue to disagree with sellers on the topic of price, this has resulted in historically few sales.

Many sellers are either refusing to drop their price or simply take their home off the market .Buyers, now far more selective, are not paying much over the assessed value, even though EVERYONE KNOWS, the assessed value is only a guide and often an inaccurate one at that.

According to the Real Estate Board, overall Sales are down 18% when looking at the last 10 year average. Listings on the contrary are 18% higher for the last 10 year average. We put the numbers together in our specific markets and it's grimmer than that.(see table below)

Sales to Active listings just moved from 10% (where it had been since June of last year) to 12% . Though this is small move in the right direction for sellers, we are still clearly in a "buyer favored" market. (that is the number of sales in comparison to the number of active listings)

Analysts say that downward pressure on prices occurs when the Sales to Active listings ratio dips below 12%. Upward pressure results when this ratio is above the 22% range.

 

Throughout Vancouver, prices have declined an average of 5%, with the bulk of the homes taking the hit being detached homes. We know the saying the "Bigger they are, the Harder they fall", accordingly, those markets which saw the largest gains are suffering most. West Vancouver wins the biggest loser prize, with the fewest sales of all.

 

Blue Eyed Mary’s

Blue Eyed Mary’s http://www.blueeyedmarys.com was transplanted from its original home on Bowen Island in 1999.  Run by husband and wife team (Carol Wallace is the wife and chef).  As their children grew they needed to spend more time on mainland and voila, they moved to 1735 Marine Drive. My husband Ian and I enjoyed a fabulous meal there last week and here is my review:

There is little to choose in the way of good restaurants in West Vancouver. The masses opt for another chain restaurant at the mall, but Blue Eyed Mary's offers a creative menu, cozy charming eclectic interior and friendly good service. My husband and I came here for a Friday night dinner arriving late for our reservation. The host and owner was friendly and allowed us to pick our seat. The front of the restaurant is bright and looks out over Marine, the back is darker and more intimate. White table cloths and candles, fine glass wares provide an upper scale feel though the mood is more casual than stuffy. There is a good wine list with some interesting options we have not seen at other restaurants, like some Okanagan Crush Pad wines. An effort has been made to provide a variety to the diner. Being we are both vegetarians, we really note and appreciate when a restaurant makes an effort to provide something unique for us veggies as so many don't. We have been to this restaurant several months before and enjoyed a delicious baked acorn squash, this time the choice Curried Root Vegetables, Sweet Potato Cakes, Plantain Chips, Jerk Spice Drizzle and Raisin Goat Yoghurt - fabulous and delicious. I started with the White Bean Soup and my husband had Caramelized Onion Tart, Sauerkraut, Baked Apple, Crispy Prosciutto, Sherry Cider Reduction which was scrumptious. Each diner is treated to a plate of melt in your mouth fresh bread at the start and we finished off by sharing their Honeyed Pear and Blue Cheese and Hazelnut Treacle - I had to hold myself back from licking the plate! So good! Our entire meal with a bottle of wine came to $117 - and the service was right on. Thank goodness there is a good locally run business to choose from and support. Check out Blue Eyed Mary's if you haven't yet, you won't be disappointed.

 

We would also like to point out and congratulate La Regalade for winning “Best North Shore” this year from Vancouver Magazine Awards.  The other contenders were, Fraiche, Gusto di Quattro, and Blue Eyed Mary’s. 

Zen Japenese

We had the pleasure of dining at Zen Japanese Restaurant the other evening.

I must say Zen continues to provide a creative and tasty dining experience for the most part.  A bit pricier than other sushi restaurants on the north shore, but the superlative quality, presentation, and creativeness is well worth it.

Stick to some of their more unusual, or specialty items. We found the "standards" to be nothing special, certainly good but not outstanding.

We had, among other items, Ebi Dumplings, Jalepeno Hamachi, Warm Mushroom Salad,"Fish Tacos", Kabocha Roll,Sakura Roll, all exellent. Dessert is offered, one of the few Japanese restaurants that do, pretty basic, not their forte.To fully enjoy Zen, ask your server for suggestions, or take the menu on an adventure!

Dinner for 4, without beverages, tax or tip, $184.