Hot market mayhem -secret

Photo: AJ Hazzi

Hot market mayhem - and how to escape the insanity

All we hear about these days is that the Kelowna real estate market is on fire, houses are selling in multiple offer and for over list price.

This is not untrue, but it doesn’t tell the full story. Adding to the mayhem is a massive influx of Vancouver investors pouring into Kelowna right now, driving up the price of our cash flow properties, be it suited homes, downtown RU6 property or duplexes.

Inventory is low, but did you know it is now down to near 2007 levels? 

It is most certainly a seller’s market in that we have far more buyers than we do sellers right now. The average days on market are plummeting, and it seems all we hear about are the bidding wars, especially with investment properties. 

Proportionally we have almost 50% more properties selling to investors this year versus last. This translates to hundreds of investors set up on auto searches, waiting for that next hot listing.  

While everyone is waiting for the ping of an alert from their new property search, there is a secret pocket of inventory equating to roughly 25% of the total inventory on the market for over 100 days. 

One thing I can tell you for sure, those particular sellers have heard just about enough of realtors, the media, and the general public talking about how great the market is, while their home sits on the market desperately hoping for showings.  

People forget about these listings that came on the market too high, got overlooked, and are now aging away being ignored as though they were last to be picked for dodge ball. 

 

I get it, new is sexy, who wants what everyone else has overlooked? But that’s a follow the masses mentality.

It is the same reason why the vast majority of these “investors” were sitting on the sidelines when things were really depressed three years ago. Sellers were willing to throw in a kidney to get you to take their property, but it just wasn’t popular then.  

In previous articles I have written about ways to let the numbers and cash flow potential guide your decisions around price. Based on that, every property is a good deal at the right number. 

Consider this: A hot foreclosure listing just came on the market downtown on Walrod Street. It came on for 425k, the sweet spot for investors. Now all these people competing for this hot new listing will likely bid it up 30-40k over list. 

So let’s assume it sells for 455k, to be conservative - although I expect it go for more. Is that a good deal? Sure, the winning bidder is happy as a clam, and the runners up go back, discouraged, to wait by their computer for the next one, telling themselves they will have to be more aggressive on their next bid. Euphoria ensues Euphoria ensues in a market like this, but. . . .

This is not the way, people. I can’t make it 2011 for you, but what I can say is, there are precisely 308 sellers of single family homes who have sat on the market for at least 100 days (I just checked). They are as close as you are going to get to a 2011 seller. 

Some of them might be unrealistic and won’t listen to reason, but others have a real need to move on. They made a tactical error in the beginning by listing in what I call “no man’s land”, and now they are paying the price. These sellers would love to see an offer from you. They might even be willing to let you negotiate. Imagine that.

So, thinking back to the 425k foreclosure house on Walrod that will sell for at least 455k.  Would it not be just as good, or potentially better, to approach a seller optimistically listed at $469,900 for 100+ days and offer them 450,000 or less? 

In addition to the better price, you can actually get favourable terms and the dates that work for you. Go figure.

Now, armed with this info, it is your job to evaluate at what price and on what terms this property goes from being an overpriced stale listing to a home run investment that everyone else missed because they were all too focused on the new sexy.

For a specific list of properties in your price range that have spent no less than 100 days on the market, with sellers who would be thrilled to let you negotiate with them, just email me and I’ll send it right over.  

Also, for those of you looking for a crash course on how investment properties are analyzed on the fly in the real world: On April 30th we are bringing back our famous Ugly House Tour. We have room for 20 on the limo bus on a first come first serve, click here for more info.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.