A seller's market can be quite overwhelming for a buyer. With a positive mindset and some strategic planning, a buyer can do very well in a seller's market, especially right now. If I was considering purchasing a home in this market these are a few things I would consider. I would think like an investor, a mindset of profit over the short and long term.
The cost to build a house right now is extremely unpredictable and volatile. Companies are unable to give contractors 30-day price guarantees because the product pricing is increasing exponentially. Lumber, plumbing, electrical wire, concrete are only a few of the bits and pieces required to build a house from the ground up. When contractors to be unable to hedge against price increases to manage costs, it is an extremely challenging situation. At the moment this is pushing up the price of new houses.
Move-in ready houses are a delight to purchase. In a seller's market nicely finished homes tend to go at a premium because it makes life easy for the buyer. One simply packs, move into the new house, and unpacks, life barely skips a beat. This is sometimes the only option depending on people's current life commitments. If I was selling a home, I would definitely want to try and make the house as move-in ready as possible.
Well worn homes have some opportunities as well, especially if there is the ability to add some sweat equity and do some easier renovations where costs can be managed. Adding a suite, new flooring, appliances or paint. Even upgrading wiring and plumbing can add a ton of value. If I was looking to purchase a home, and I wanted to make (or save) some money, a house that needed to be fixed up would be on my list.
Recently a house in Courtenay was listed for $555,000. It is on a busier street but has a suite downstairs which rents for $1200/month. The upstairs needs some renovation. With a minimum down payment of $30,500, the mortgage would be close to $545,000 with the government-mandated default insurance added on. This makes a mortgage payment of close to $2300/month. With the rental of $1200/month, you are looking at a monthly cost of $1100/month plus property taxes and utilities. The British Columbia Real Estate Board housing forecast predicts properties in the Comox Valley to appreciate 7.7% in 2021. Spend a year slowly improving the upstairs and with the expected property appreciation you could end up in a very positive position. Or move into the suite and rent the upstairs out for $1650, making your monthly mortgage cost even less. A house with a suite or suite potential is a sound purchase decision in a seller's market.
Another house was listed for $639,000. It is on a quiet street in Cumberland. The layout is perfect to add a suite as the downstairs was a full walkout basement. Zoning allows for a suite and it already had a bathroom in the basement. With a mortgage product called purchase plus improvements, you can add the funds to build the suite in the basement onto your mortgage. Let’s say you bought the house for $639,000 and added $25,000 to put a suite in the house for a total purchase price of $664,000. The minimum down payment would be $41,400 making the mortgage amount close to $645,000 including government-mandated default insurance. This makes a mortgage payment of $2723. If you could get $1400/month for the new basement suite, this would make your monthly portion $1323/month plus property taxes and utilities. Plus you immediately increased the value of the property by adding a suite.
In both the above scenarios, if you ended up paying $25,000 over the asking price in a multiple offer situation, this would increase your monthly payment by $105/month. Is it worth it? YES!
* Per British Columbia Real Estate Board Housing Forecast