Navigating a Changing Market

Riding the high of an over-heated market is exciting but the cool-off period can leave some home-owners stuck with an over-priced property. In a seller’s market, a buyer is less discerning and will sacrifice a lot of their “must-haves” just to get the keys – but a looming correction could tip the scales leaving you with a home that won’t sell. Over the past few weeks I’ve watched a lot of real estate in Toronto move- and I’ve watched a good amount sit still and stagnate. Here are a few key features your home should have to help protect its resale value in times of market volatility:

 Make sure your home has GUTS: The unseen features of a home are often less familiar to a buyer and many can be easily scared off by the unknown. If you're expecting top dollar for your home, a buyer has to trust that those unknowns are handled. Today’s buyers expect a minimum standard when it comes to mechanical upgrades.

 Consider addressing the following:

1. upgrade knob and tube or aluminum wire to copper.
2. Check the age and integrity of the existing roof.
3. Examine the foundation and address any potential moisture entry-points.
4. Ensure HVAC is as efficient and practical as possible for the subject property.
5. Upgrade your water supply lines – increase size and switch from lead to copper to increase water quality and pressure.
6. Upgrade a cast iron waste plumbing stack to ABS plastic to avoid deterioration and leaks.

In times of recession, homes with these big ticket items left unaddressed will quickly drop to the bottom of the pile in terms of perceived value. Other detractors that should be addressed are roof integrity and windows. A buyer will be more inclined to stretch their budget if they feel safe in the home. Meeting that basic need is a step in the right direction.

Every inch counts: If you’re planning on finishing a basement to increase your re-sale value consider the height and size of the space. Finishing a basement that can’t accommodate anyone over 5’10” will set you back – you’re better off underpinning and digging down to add more height to an unfinished area than you are finishing something that no one can enjoy. If you are finishing the basement – find a way to include a bathroom, with a shower.

Know your audience: If you’re expecting your real estate investment to hold its value through a cool-down period you have to remember that buyers have alternatives to ownership. There’s a lot of rental inventory out there and as housing inventory starts to sit on the market longer, thoughtful attention to detail is what will set you apart and get the home sold. All bedrooms should have a closet, especially in older homes with smaller room sizes – I’ve seen a LOT of recent renovation projects that fell short because they forgot about the needs of the end-user. Also, consider adding additional bathrooms – ideally at least two full bathrooms and one powder room in a single family home. Don’t finish a space quickly, or cheaply – it’s obvious and it’s not enticing. Most buyers have seen everything that’s available, if you blend into the crowd, you’ll end up losing money.

Perfect the product: If you’re trying to sell your home, think of it as a product, and do what you can to eliminate, or at least minimize its flaws. If you’re installing a shower, make sure the shower head is installed in such a way that it’s high enough for comfort and proper use. If you can include a tub, add it in. Avoid using sheet laminate – spend the money and go for individual planks, sheet flooring looks and feels as cheap as it is. Pay attention to layout and usability of space. A renovation is useless if the finished product doesn’t work.

Time to buy: When the market shifts it also presents an opportunity to those who have been patiently waiting for a more affordable environment in which to invest. For many, a cool-down is an exciting time when great deals can be made – if you can, pick up properties with the following features:

• Semi-detached or detached.
• 2 or 2.5 storey.
• Parking
• Potential for income generation (duplex/triplex)

Those should be the only non-negotiables for investment hunting in a changing market. You’ll capitalize if you can find a home that has the aforementioned mechanical updates but needs the cosmetic changes most buyers either can’t afford or can’t envision. Also, start looking at neighbourhoods that some might not believe in. I have my chosen few that I’ve been watching and they’ve all started to gentrify. Depending on your plan for the property, buying a dated but structurally and mechanically sound duplex in a neighbourhood slated for growth during a down market will provide great long term returns.

 If you’re still looking at condos – stay away from the cookie cutter buildings popping up around the city. Avoid long-narrow floor-plans. Seek out enclosed dens or two-bedroom units exclusively. Don’t buy without parking and watch for resort style amenities that will inflate your monthly condo fees. High fees and a glut of inventory will quickly widdle your margins down rendering your tiny postage stamp in the sky a bad investment.

 Changing markets are unavoidable. Adapting and investing smart will help you successfully navigate the changes. Always think like a buyer and you’ll inevitably succeed as a seller. A smart investment in a down market yields incredible returns when it bounces back - and it always does.