Hunger Games: The Real Estate Menu in a Hot Market

By Randy Dyck

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 RV, and checking the oil and tire pressures in preparation for a 982 kilometer road trip that would take most travelers 12-14 hours to cover; my fiancée, Jolene, and I were planning to make that same trip in less than 10 hours. The Class B RV was new at the time and to save you a paragraph you can read about it on campingfunzone.com. While it definitely wasn’t the fastest van, it had very low fuel consumption so we wouldn’t need to refuel as much, saving us crucial time. 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 in the early 1900s who dropped a pair of pinchers into the creek. This little town was home to my parents ‘ 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 and jumped into my yellow RV, 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 hometown 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 traveled this route. In fact, one year I had traveled 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 five 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 is known for orchards, the 104 kilometers long Kootenay Lake, and of course, Kokanee beer and the famous Sasquatch that is in all of their 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 handpick 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 four-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 five 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 tummy 20 minutes ago, now wanted to get out. A few more kilometers 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 onto 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 about 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 sellers’ market that is playing out in the 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, 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 enout 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 sellers’ 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 as they require intense renovations that can’t be done DIY and need professional electrical or City Plumbing and Rooter companies to get it into a profitable state. Or the property is simply not desirable for anything except homeownership, due to locational factors.

An electrically charged sellers’ market plus an 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 buyers’ 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 seller’s 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 three-hour push to Pincher Creek and arrived in a mental fog at 4:00 AM; nine 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 empty tummy once more.

Randy Dyck has been a top producing realtor in the Fraser Valley since 1992. He and the Eximus Real Estate Team have sold over 3000 properties in the past twenty years. Together, Randy and the Eximus Team are passionate about helping investors find the right properties for their investment portfolios. (randy@eximus.com)

{{cta(‘a2f69965-cbaf-4089-8592-d93ceeef8740′,’justifycenter’)}}