Hunger Games – Ravished, Famished, and Starving in Real Estate

It had been a long day and it was only 5:55 PM. I was up early that day packing my weekend bag, fueling up the car, and checking the oil and tire pressure in preparation for a road trip that would take most travelers 12-14 hours to cover 982 kilometres; my fiancée, Jolene, and I were planning to make that same trip in less than 10 hours. The journey—or road rally as we knew it—would take us from Abbotsford to the tiny cowboy town of Pincher Creek, Alberta, which was appropriately named after a bridge builder from the early 1900s who dropped a pair of pinchers into the creek. This little town was home to my parent’s farm where I was born and raised. The purpose of this trip was to introduce Jolene to a few more of my relatives and friends from back home that had not yet met her.

Finally, 6:00 PM arrived! I bolted out the back door of the sports store I was working at in the fall of ‘87 and jumped into my yellow VW Rabbit, hardly a rally car. A quick two block drive to pick up Jolene and we were off with a plan to be in Pincher Creek by 4:00 AM Mountain Standard Time. The twisty, curvy, and mountainous terrain of the Crowsnest Highway was spectacular. We zoomed through the Southern Okanagan Valley, Kootenays, and finally over the Rocky Mountains toward our destination. On our way we would see the magical colors of fall, an early dusting of snow on the high mountain peaks, and wildlife preparing for the winter ahead.

Maybe you are asking yourself why I would turn the road trip to my home town into a personal rally race. Well, that is just what I do. How can I continually improve and become better, or in this case, beat my best time? This was not the first time I had travelled this route. In fact, one year I had travelled to Pincher Creek and back on thirteen separate occasions—clearly I knew the road and its small towns very well. Over the course of those many trips, I learned that it was the pit stops that were the real time wasters. Stopping for fuel was a necessity, but bathroom breaks, food, and stretching were not. The fuel gauge on the little Rabbit would scream for more fuel after 5 hours of intense driving, which was around 11:00 PM. Creston was the town that would be our one and only stop. A quiet little Kootenay town known for orchards, the 104 kilometer long Kootenay Lake, and of course, Kokanee beer and the famous Sasquatch that is in all of their beer commercials.

The Creston stop was at a 7-11, the only gas station that was open 24 hours. This was a well-planned stop, much like a pit stop in a real rally race. While I fueled up the rally car, Jolene would visit the washroom, stretch, and hand pick the freshest of the stale and dated gas station subs—by now we were famished and would have eaten just about anything. It was our version of the hunger games, traveling for 5 hours and not eating much since lunch. Anyway, with the car fueled and a quick bathroom break for me, we pulled out into the dark of midnight for the final 4 hour push to the little town on the edge of the Rockies in Southern Alberta. We logged this as an awesome pit stop at under 5 minutes!

The fresh air, stretch, and empty bladder seemed to make me even hungrier and I could not wait to tear open the cellophane packaging and sink my teeth into the 7-11 special sub. With the Rabbit back up to cruising speed once more, I quickly filled my empty and ravenous tummy with the sub-par sub. Talk about distracted driving: pitch black, wildlife on the road, speeding, poor headlights, and unwrapping and eating a stale, microwaved sub.

Ah, hunger pains gone and satisfied! Or were they? What so quickly filled my ravenous, starving, and famished tummy 20 minutes ago, now wanted to get out. A few more kilometres and I could not take it anymore as the sub began doing gymnastics in my stomach. So much for a new record time… A hard brake on to the shoulder of the road, and into the ditch I ran as I rid myself of the 7-11 special. Standing hunched over and tasting the sandwich for the second time I asked myself, “Why did I not put a better plan together?” Poor planning often results in consequences that are not favorable, much like making a bad decision on eating a horrible sandwich. Instead, I should have packed a cooler of fresh food and eaten before I was ravished, famished, and starving.

This road trip from the past reminded me of the current white hot seller’s market that is playing out in the Greater Vancouver and Fraser Valley real estate market. Today, the buyer is in a frantic race to find the house of their dreams, or in the investor’s case, the best investment property for cash flow and appreciation.

The buyers are acting like they are famished, ravished, and starving, trying to find any property that they can. They spend hours online waiting for the next potential listing that matches their ever-changing wants and needs list as they lower their standards, or keep increasing their maximum purchase price.  And then they email or call the listing realtor hoping for immediate access to see it before the throngs of other qualified or not-so qualified buyers tour the property.

Their Saturdays and Sundays are scheduled to race from open house to open house, much like it is a treasure hunt, only to find that hundreds of others have already found the treasure before them. Finally, the buyer/investor finds the not-so-perfect property that they are convinced they need to buy. This is where the real hunger games begin as they try to outbid multiple buyers, only to be beat out in a multiple offer bidding war. A buyer may throw all caution to the wind and ignore the important due diligence process by writing a non- subject offer, one that may well be 10% or more above the list price, and leaving the completion dates open which allows the seller to choose their perfect completion and possession dates. This has become the norm: buyers are willing to do anything to win the seller’s approval of their offer.

This emotionally charged seller’s market is causing buyers to make poor purchase decisions. Buyers end up buying properties that, in a balanced or buyer’s market, would be seen as poor and challenging properties to sell. An electrically charged sellers’ market plus electrically charged buyer, equals multiple offers, and the net result is often a poor purchase. When helping buyers in a sellers’ market, I will ask the buyer this question before I prepare the offer: “Would you consider buying this property if we were currently in a buyer’s or balanced market?” This question helps the buyer/investor to qualify the property for what it is really worth. If the answer is yes, then it is certainly worth pursuing and negotiating the deal, even if that is above the list price and non-subject in a sellers’ market. If the answer is a no, then let’s move on and let somebody else make the poor purchase.

As the market returns to normalcy—which it always does—the electrically charged buyer that bought a poor property in a sellers’ market will experience what I experienced with the 7-11 special sub: an upset tummy, an awful taste in their mouth, and asking themselves, “Why I did I not do my due diligence and put a better plan in place?”

Poor investment properties that were bought in the heat of the market will struggle to keep quality tenants, and heavy rent discounts will be required to secure shorter term leases. As well, appraisals and future values will be considerably lower than other quality properties bought in the same market, limiting your options to continue to invest. As an investor in a white hot market, ask your realtor why you should not buy a particular property. If he or she is convinced you should buy every property you view, it may be time to find another agent that is concerned about your investment when the market returns to normalcy. Buy with your head, not your heart.

In the end, Jolene and I collected ourselves and made the final 3 hour push to Pincher Creek and arrived in a mental fog at 4:00 AM; 9 hours from point A to B. A second quick bathroom break when we arrived and we were off to bed, only to be awakened by the amazing smell of bacon and eggs being fried for breakfast. It was time to get up and fill the ravished, famished, and starving tummy once more.

The hot single family market is cooling ever so slightly, while the townhome and condo markets are heating up. It is the echo effect. The single family home has become out of reach for many buyers and the buyers are turning to more affordable townhomes and condos. Almost all STR numbers for strata properties are up significantly in the Fraser Valley and Vancouver, especially in the most expensive areas. For instance, Whiterock which is the most expensive single family area in the Fraser Valley had the highest STR number for townhomes, a massive 62%. Also condos in Whiterock had an STR of 40%. The highest recorded condo STR was 45% in Langley.

Inventory levels for all types of property continues to be low, while record sales continue to be put up. It will be interesting to see if the summer months of June, July, and August will follow the hot seasonal temperatures.

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Article Written by Randy Dyck as published in the Real Estate Investment Network (REIN) Volume May/June 2016.

Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com

STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales  ​