Who sets real estate prices?
TONY: Last month, I covered the recent bylaws changes made by the Town of Gibsons. The plan is to first limit then eliminate short-term rentals in Gibsons. That provoked a lot of conversation with some commenters blaming real estate agents for the run up in housing prices in recent years. My first question to you is a bit of a hardball, Nicole.NICOLE: Lay it on me.
TONY: As a Realtor, why are you personally forcing real estate prices to increase?
NICOLE: I know. It's a terrible thing, isn't it? I appreciate that people give us that kind of credit, however, the prices are set by the market. Buyers set the price that they want to pay, and sellers set that price that they want to sell at. And if we can meet in the middle, that's fantastic.
TONY: When Realtors hold offers, from a buyer's perspective, you go into an environment where you can’t write an offer for a property until a certain time. Isn't that Realtors stacking the deck to try to create bidding wars? And in that way, are they influencing house prices?
NICOLE: Well, you could say that, but it really depends on the amount of buyers that come to the table. And if you are setting a date and time, but you've set your price so high that no one's interested, it doesn't really matter. The reason we set those dates is because there are so many people, it's so hard to decide on what that price of the house is. You say, "Hey, everybody decide if you want this house or not, this day and time, tell us your price." That's how that works.
TONY: Yeah, I agree. The risk as a Realtor that I don't think everyone appreciates is, is that it's not an exact science. When you're setting a house price, you don't know one hundred per cent if that's the right price. That’s why Realtors need to make sure that the listing gets enough exposure to the market. Especially being in a rural community like this, it's mainly to make sure anyone that's potentially looking for that kind of house gets the chance to see it.
NICOLE: Absolutely. We have a lot of people travelling from off-coast coming over here too, so like you said, you need to give them that chance to actually see it, and that's just doing the best thing for your client.
TONY: Yeah, I agree. That's really our job. Whether you're representing a buyer or a seller, you're trying to do the best job for that party in the transaction.
Realtors need local knowledge
TONY: Over the last couple of months, we've experienced that real estate prices can move quite quickly up or down. How important is it, in your opinion, for Realtors to pay close attention to their local markets?NICOLE: It's the most critical thing. We are basically like the weather forecasters for the market at any given time, so we are just translating those conditions. We're saying, "Okay, here's the benchmark for a price for this house right now in this moment. Here's how many people are looking. Here's how inventory's going." And if we're not paying attention to that, we can't advise our clients to the best of our ability, and give them the best price.
TONY: Have you seen some buyers looking on the Sunshine Coast with Realtors that are from off-coast?
NICOLE: That's starting to drop off a little. I think when everything was so busy in the summer and so hectic, Realtors were just throwing their clients at places. Now they have a little more time, and people off-coast are realizing that they do need somebody who's an expert. The Sunshine Coast is a very unique market. We all know that. It's an unusual place to buy a home, and you need that local insight. I'm seeing out-of-market Realtors less and less, although there are some off-coast agents who are a little more comfortable with it. Personally, if I'm outside of the Sunshine Coast, I'm sending my clients to a local agent.
TONY: How has working with buyers recently changed? Have you noticed the market slowing down?
NICOLE: Well, personally it hasn't slowed down, but the activity is different. It's a different set of buyers who are in the market now. And they're enjoying the fact that they do have some time to say, put subjects on their offer. That they're taking a little bit longer. They might even get to see a home twice before they make an offer on the house, but they're a little too optimistic about the price that they might get that house at. The challenge right now is exactly the reverse of what we had the last two years where everybody knew you had to pay the highest price with no subjects. Now people think it's a fire sale, but it's actually not. We're a very small market, we have a small inventory, people still aren't going to sell for any number. It's educating buyers that yes, there may be a little bit of negotiation involved, but you're not going to get a home for hundreds of thousands dollars off.
TONY: It's not going to completely swing the other way.
NICOLE: It's not a giveaway.
Differing motivations of buyers and sellers
TONY: I’d like to know how you think the motivations of buyers and sellers differ?NICOLE: Well, they're on two opposite ends of the exact same equation. Sellers are always wanting to get the most for their property, of course. Buyers are trying to get a good value at least, and they are looking for a home that suits their specific needs, whereas the seller probably no longer needs that home. We've got a split in terms of these priorities, and it's just that meeting in the middle as well. Right now buyers are looking at the value a little bit more because they realize that they have that chance to do so. And it's been a long time for them since they've gotten that opportunity.
TONY: And as a Realtor that does a lot of transactions on an annual basis, how important do you find your relationship with other Realtors in making those transactions go smoothly?
NICOLE: Again, that's huge because if you know that you have somebody on the other end of the deal that is efficient, that is getting those questions to you quickly, that is providing the information that you need with your client, that's fantastic. You enjoy working with those people. When you know that maybe someone isn't going to get back to you right away, that you're not going to get all the info on the first try, that can be challenging. So, it's really important for us as agents to be working cooperatively with each other while still maintaining that client privilege, and working for the best of our abilities for our people.
Mindset of fall buyers
TONY: You work with a lot of buyers. I’m curious as to what you think their mindsets are as we move deeper into a fall market.NICOLE: I think the buyers are of two minds right now. Obviously, they're mindful of those price increases in terms of interest rate, and what that final dollar amount looks like for them for their payments. They're also looking for better value, as we already said. They are conscious of course, that as we move into the fall and into the winter, inventory tends to slow down. There's a bit of urgency there, wondering if there will be anything before spring for them to buy. It's a bit of a hurry-up-and-wait scenario. Buyers want to be cautious about their purchase, but they're not sure if they're going to see any houses that they're really interested in. We're trying to shore up the expectations in terms of buyers needing knowledge about what they’re looking for. How obvious is it that they’ll find something that they want in the next few months? And can they afford it, if they do find it? We're just running the odds in terms of “Can you afford what you like now?” Or do buyers want to wait and see? It's a bit of a tricky one.
TONY: There was just a BMO article came out that said there are a lot of pre-approvals out there that people want to buy with before they expire. A lot of pre-approvals have a three-month or a four-month limit before the rate expires. Do you find that some of your buyers are motivated by that urgency? That they know they're only approved for a certain amount of time to spend at a favourable rate, otherwise, they're going to factor in an increased interest rate cost like you just alluded to?
NICOLE: Yes, absolutely. And in fact, some current deals are very much hinged on specific dates, when they would lose their rates. So, it's really critical for people right now to be able to hit those target rates because with prices still holding fairly steady on the Sunshine Coast, if those interest rates do go up a little bit more, people are concerned that then the house that they do love is not going to be as affordable. Those rates are really important and that timeline is really crucial for some people.
TONY: Do you find that the houses with legal secondary suites help bridge that gap a little bit as interest rates are going up?
NICOLE: They definitely can. People are always looking at a way to get some revenue out of their property if they can. Not everyone's interested in being a landlord, but a lot of people find addition income very appealing, especially those first-time buyers.
Fallout from COVID
TONY: Changing tack a little bit, when COVID hit, did you notice a change in the general buyer demographic you were working with? Who was your typical client pre-COVID and then post-COVID?NICOLE: You could see a change basically by May 2020. And it was a lot of young professional couples, at least on my roster, who were coming in. They didn't necessarily have a tie to the Sunshine Coast, BC. They didn't have children that were going to school all of a sudden and needed a lot of space. They realized that they could work from anywhere, and that they had seen a lot of people really enjoying themselves over here, and they came in droves. And that really pushed that market because we all of a sudden had a new buyer pool that we didn't have previously, which was people who were working remotely who'd never even thought that they would leave the city, but could now suddenly go anywhere. And of course, BC’s Sunshine Coast is a no brainer if you are in the Greater Vancouver Area. And exponentially, we had this extra group of people looking, and certainly not enough inventory to keep up, and that's why those prices shot up the way they did. And most of those buyers have not left.
TONY: Yeah, I saw the same thing. The Sunshine Coast was BC’s best kept secret being only 40 minutes away from Vancouver. And now, even though we're not continuing to see as many buyers that are in that younger demographic, the collective consciousness is aware, and buyers that do have the means are still migrating here in droves. You see the traditional retirees having to compete with them a little bit.
NICOLE: Yeah, it's an interesting dynamic.
sellers in the shifting market
TONY: What changes have you seen from sellers with the market shifting and moving into fall? And we touched on this a little bit before, but what's the biggest changes you're seeing with sellers?NICOLE: I think sellers are grappling with the fact that there might not be a lineup of buyers standing at their door as soon as they put that for sale sign out. Some sellers were so overwhelmed with the response that even a multiple-offer situation was scary for them, because there were too many offers to read. What a wonderful problem for sellers to have! But now sellers are realizing, “OK, that has calmed down.” Buyers are looking for value, they're taking longer. There is a set of buyers who've moved on because they can get back to “real life” in the city, and they enjoy those creature comforts that maybe a rural lifestyle doesn't provide.
NICOLE: Sellers are realizing that they have to be a little more sensible about their price. They have to offer more value. It's not a no-questions-asked process anymore. Buyers will have inspections, and that's okay. It's basically a normal market again. And just the fact that we had such a significant change in terms of seller's market only for such a long time, some people are seeing a bit of a sky-is-falling issue. But really, we're just coming back to the normal process of buying a home, which is you make an offer, you do your inspections, you do your due diligence, you like what you see, and you can confidently move forward, which I think is best for everybody really.
TONY: A more civilized way to buy a home.
NICOLE: Indeed.
BC Assessments
TONY: Have you noticed that buyers are looking at BC Assessments and questioning you on the delta between asking prices and assessed prices? How do you handle those questions? For example, a home is listed for a million dollars, but it's tax assessed for $500,000. How do you look at those disparate numbers and explain them to a potential buyer?NICOLE: That's a great question, and it's one of the first questions a lot of them ask, because they look at the assessment, they see how low it might be, and you have to take a look at the assessment in a very rational way. This is a huge grain of salt situation. Those assessments aren't based on an in-person walkthrough by an inspector. There could be upgrades they don't know about. The house could be completely renovated in terms of expanded, and they don't know about it. That assessment is a very baseline value. And then you have to look how many more houses are there like this? What shape is this one in? Where is it located? Do you love it in the moment so much? There's so many different factors that go into that.
NICOLE: The assessment is a good base price, but it's not necessarily a true value. And we are seeing the flip side too, where some sellers are really interested in selling, and they're selling below assessment. And that is a massive selling point for people because if we're told, "Hey, assessment is not really the top dollar," and you're selling below that, that's a huge flag that someone's motivated, and this is a good deal for a buyer.
Handling lowball offers
TONY: I've seen some substantial price changes in the past few months, but some listings seem to have optimistic asking prices. When working with a buyer, how do you handle them wanting to make what could be perceived as an aggressively low offer?NICOLE: Well, you have to look at it a couple different ways. There's a human being on the other end of this offer who's going to read it, and feel a certain way about it. What you want to do is even though you want to get a good deal on a house, you have to avoid actually hurting someone's feelings. We do say yes, you're supposed to negotiate without emotions, but that's our job as agents. The other parties are very emotional about it. Going in really low, you have to either justify that with a lot of knowledge about the property and reasons why, or you're basically just saying, "I'm just trying to get a ton of money off your house. What do you think about this?"
NICOLE: Every once in a while, there's a seller who's in a tough spot, they've had no other action, and then fine, but that's not really the best way to go about it. You have to be a little more sensible about those low ball offers, or at least back them up. Otherwise, it's best to stick within a reasonable rate, getting a good amount of money off the house if you can, but not detrimentally damaging this deal. Because if they don't want to talk to you, then you've lost the house.
TONY: Okay, I got two questions from that. First of all, is how do you manage seller's expectations? When you're going to market, and they may have an increased idea of what the value of the house is, how do you mitigate that, and get them back into reality?
NICOLE: Well, first of all, you can judge if you're priced right by the activity on the house. If you've got a bunch of people knocking on your door, and asking for showings, and asking for more info, and even writing offers, that's a good sign that you've at least done something right. If it's complete crickets, there's a very good chance that you have just priced it too high. No other reason. Everyone's online, everyone can see the listing. The photos are probably great if you or I are listing it.
TONY: Of course!
NICOLE: There's a reason and it's the price, that it's keeping people away. You have to say, "Okay, maybe we are going at this price, but the activity is going to show us if we got it correct or not. We know you love this house, we know you think it's worth X, but the market's going to tell us one way or another."
TONY: Going back to what you were saying about not trying to polarize a seller, will you avoid or not necessarily encourage your buyers to make offers that are substantially low, if the property's massively overpriced? Or would you just not show them? Say for example, we've got house X and it's worth $1.2M. Your buyers have a budget of $1.2M, but it's listed at $1.45M. Will you assess properties, and then take your buyers out to look at them, even if they're overpriced? And then encourage them to write an appropriate offer? Or would you find that overpricing a property will dissuade some people even going to that property?
NICOLE: That's a good point. I think it depends on what I would assess that property at before I bring my people. I really don't like to bring people to something that's well out of their budget, regardless of whether I think it's worth X or Y. Just because you're setting an expectation that everything is sort of on a huge sale, and they might see properties that are out of their reach that then disappoint them for what is in their price range. We want to keep everybody as realistic as possible, but if a property really does just have a huge price tag on it, that it doesn't really warrant, I might take them to it and say, "Hey, we've got the backup that the list price isn’t actually what it's worth. Let's go see it. Maybe we can actually present a case. And I think it's worth X or Y. Here are all the comparables. Here are the reasons."
NICOLE: We find that a lot of people want to try a price. Let's see what happens. If you bring an offer in the first couple of days that’s just come to the market but is way over price, and you bring a sensible price, chances are the sellers aren’t really going to talk to you. But if you can back it up with numbers, with facts, with comparables and a clean offer with relatively few subjects, and say, "Hey, this is what we believe it's worth, this is why, and this is how simple we're going to make that process." A lot of times people do appreciate that and they say, "Okay, this makes sense." Again, it really depends on the seller's motivation. And some of them will sit for six months and say, "No, I believe it's going to happen," and those ones we can't do anything about. But I like to back up my offers like that, give it a shot, if it does make sense, but not just throwing spaghetti at the wall and seeing if it sticks.
Scariest Halloween costumes
TONY: Halloween's coming up, and I think everyone would like to know what you're going as this year.NICOLE: Well, what AM I going to go as? I don't know yet. Let's see, a remediation report? A house full of asbestos? I don't know. What are you going as?
TONY: I haven't fully decided yet, but I was thinking maybe the lead singer of the Red Hot Chili Peppers.
NICOLE: Obviously.
TONY: Yeah, that's what I'm going to be.
NICOLE: (laughing) Get that sock ready, buddy!
TONY: (laughing) Ooh, that could be a challenge. I forgot he wore that. I mean the newer version, not the Blood Sugar Sex Magik one.
NICOLE: The former heroin addict version?
TONY: No, they did that for that album. Now, their new album, it's a different little bit of vibe. More clothes for the lead singer anyway. I think Flea's probably still naked...
Listings for October 2022
TONY: I've got a few listings coming up this month, which are people that have phoned me after the last podcast, and said, "I've got this Airbnb and the zoning's changing, and is it the best time to sell now? Or wait?" And my advice has typically been sooner is better than later kind of thing, if we're going to see a few of them coming on the market.TONY: I've got one on Skana Crescent, which is out in Sandy Hook. That's a really nice log home that's been used as a vacation home for the seller, and he has been doing a bit of Airbnb there. But, it's got beautiful views. It's in a really nice location, and it's just a great little getaway spot. Do you have any that you've got coming up, that you wanted to give a plug to?
NICOLE: I do, yeah. I actually have a wonderful little one-bedroom town home overlooking Brothers Park in Gibsons. It's in the Maplewood complex, really great spot. 956 sqft. Upper floor. Beautiful vaulted ceilings. New kitchens, bunch of balconies. And that's at $604,000 which is great. You basically get a brand new home, and save the GST.
NICOLE: I have a really cute little rancher coming on in Upper Gibsons. Three bedrooms, one bathroom, nice little yard. It needs a little bit of a cleanup, and you have an absolutely adorable little home. And then, something coming on in Marine later on this month. Close to the ferries, great commuter home, and has a suite.
Contact Realtor Nicole Arnett
TONY: Nicole, thanks for being my guest this month and providing some really important insight for buyers shopping on the Sunshine Coast. If someone wants to work with you, how would they go about contacting you?NICOLE: They could contact me through nicolearnett.ca. Give me a call or text, (604) 765-0017. Or of course, Instagram @nicocoastalhomes.
TONY: Awesome. And I can attest as someone that's been on the other side of many deals with Nico, it's an absolute pleasure to work with her. And if I wasn't a real estate agent, or I was shopping on the Sunshine Coast, I'd definitely give her a call. Thanks so much for coming today.
NICOLE: Aw, thanks for having me, Tony.
TONY: My pleasure.
CALL TONY TODAY
If you’re not already working with an agent, call me when you’re ready to buy or sell and I’ll guide you through the busy and competitive real estate market on BC’s BEAUTIFUL Sunshine Coast.
Tony Browton - TrueBlueRealty.ca
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Mobile: 604-418-2695
Email: Click here to email Tony
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Mobile: 604-418-2695
Email: Click here to email Tony
⚠️ DISCLAIMER: This blogpost is not intended to cause or induce breach of any existing agency agreement.