RESALE
CONDOS PROVING BETTER “VALUE INVESTMENT” OVER PRESALE CONDOS
Charles Hanes
January 29, 2008
The Toronto condo market has proven so hot that “no-name“, and even worse,
“bad name” developers have been getting away with escalating prices through the
well known “sales tactic” known as “hysteria selling” (“creating
a buying environment through factual and frequently non-factual representations under
which it appears that everything is selling out to induce buyers to commit right there and
then . . . “)..
As the title “hysteria selling” pretty well gives away, the psychology of this
approach is to “create an environment of hysteria” and dribble out limited
selections of suites (“dog suites”) and then “count on the market to sell
off your quality suites at escalated prices. Haven’t you seen any of these tactics:
small foyer at sales center where you are required to sit and wait for an agent? By
appointment only but dozens of others at the presentation center at the same time? P.A.
system announcement announcing numerous suites “SOLD” even as the door has just
opened? Availability boards full of red dots (“SOLD”) even though the doors just
opened?
Have you “been forced to wait in line, out in the cold to even get in to look with
the constant feeding of notices that units are selling out so you must put down your
deposit and complete the paper work today”!
A simple reflection back onto 1
Bloor East, (for example - you can read my comments on this circus side show here) show precisely this strategy
(pretty well executed I must say). Don’t get me wrong I’m not saying that there
is anything actually wrong with this approach. I actually am guilty of being one of the
first guys in town to develop and use this “tactic” to set up my “strong
arm sales presentations”.
What I don’t like is the flagrant use of misrepresentation underscoring most presale
developments these days. Back in the day, when I worked the condo sales floor, I literally
could sell you a condo even if you did not want to buy it! That’s what a highly
trained sales professional is trained to do. Buyers don’t come out of people walking
through a show room, getting all of the information they want and going home and studying
it leading them to make up their minds on whether to buy or not.
If you think that this is the way it works, then you are one of those chosen few who
continually lead this market to the delusional state under which it operates! Consumers
walking into condo sales sites and/or registering with them online, are the absolute worst
thing for buyers that there is out there!
What I am opposed to is the Realtors working for these developers having availability
boards filled with red dots inferring that they are all sold when in fact they
aren’t. We used all of these tactics in the old days too, but we weren’t
Realtors.
Realtors accept certain professional Standards and a Code of Ethics that is not supposed
to allow us to misrepresent material fact and these availability representations or
misrepresentations, being made to pressure buyers into buying is just flat out wrong!
The tragedy is that through ignorance, the consumer ends up being his/her own worst enemy
in their efforts to buy condos competitively. That’s right! You are you own worst
enemy! Over the years I’ve written articles such as “Lemmings”, in which I
set out rather clearly how devastatingly counter productive it is for buyers to buy
without their own professional representation.
Developers have come up with an innovative twist on selling condos since my
“conversion” to protecting buyers. In my day of working for developers, we
simply did not work with Realtors at all. They call it “Co-operating” and what
it means is that the Realtor is co-operating with the Seller’s Realtor to sell the
condo units. This is a contradiction of terms to any Realtor working under a
“Buyer’s Agent Agreement”. |
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Today, developers
are marketing strongly to Realtors (22,000 on Toronto Real Estate Board) calling them
“Priority Realtors” which is great for their ego but more significantly it means
that if they “co-operate” with the seller’s agent they will be compensated
up to 4% of the purchase price of any unit that anyone introduced by that Realtor buys.
Unfortunately, the greatest majority of Realtors do not have specific condo experience.
There are a few and the one consistent characteristic is always that they’ve worked
on the sales floor at condo developer sites. The best ones have been doing it for years
and years. When I say the best I mean the ones who can offer you the most of the one
ingredient that is absolutely needed.
That is “hands-on” experience with a resulting knowledge of the various
developers in the city. If your Realtor doesn’t know the background of the developer
it is questionable how much they can really do for you. When you are buying a condo you
want specific expertise and experience on your team or anyone could successfully go out
and buy and/or invest in condos on their own!
Don’t get me wrong. Realtors in Ontario are well trained professionals that meet
rigorous ongoing educational requirements imposed by various government and industry
governing bodies. Any Realtor is certainly qualified to transact a straight forward
purchase and/or sale of property for you. The world of condos is a very different place.
When you are buying a presale condo you are buying into a developer and unfortunately the
odds are negatively stacked against you in Toronto with “other than good
developers” outweighing “quality developers” disproportionately!
With unproven developers selling buildings at $400/square foot and then being late in
building the building (as set out in my earlier article regarding The Met and London on the Esplanade) and then
preselling another development at $800 per square foot, someone has to point out that
presale selling in this town is spinning out of control.
With tons of upscale residential condos already under construction (100 Yorkville, 1 St. Thomas, Shangri La, Ritz Carlton, Trump International Hotel &
Residences, Four Seasons
Hotel & Residences, Regency
Yorkville, at the top of the market and literally tons of middle market presale condos
under way I am calling for a backlog in inventory of existing development properties that
my clients by buy at original prelaunch prices (“Assignments”).
We’ve done a few of these at The
Met (a quality development at Yonge & College) where suites that sold under $400
per square foot were assigned in today’s ($600 per square foot) market! Many original
purchasers just want or need to get out of their existing deals. With so many investor
clients, I can usually come up with assignments for my clients. I have properties right
now that have not been on the market and are brand new (occupancy within 2 months) that
are not offered for sale anywhere as developer agreements prohibit advertising them. If
you are interested in these please contact me.
I am NOT forecasting my investor clients continuing to support the presale market
especially under the rather questionable ethical issues I see in today’s market.
There are lots of very good opportunities in the resale market where prices certainly
don’t compete with these $1,500 and up per square foot future luxury condos.
To balance these assignments I see us being very busy buying into quality older buildings
and renovating these suites for our clients. Again, our uniquely intimate awareness of the
local condo market (almost 3 decades on hands-on experience) ads considerable benefit to
buyers looking in this area.
Whether you are looking to buy a condo to live in or if you are looking to invest in
condos, you are advised to not do another thing until you have communicated with us (Register here and we’ll get
things rolling for you immediately).
I look forward to working with you. |
