The market supply for available apartment buildings is at an all-time low. Or, should I say, sellable apartment buildings are.
We all know that the value of apartment buildings has dramatically changed since the rates have risen from the low two per cent range to the high four per cent range.
However, many potential sellers are still clinging to the idea that they can sell at 2021 prices, which is no longer realistic.
As a result, there has been a dramatic increase in the number of expired listings, which is damaging to both sellers and brokers.
Sellers must face new economic reality
For the seller, unrealistic price expectations deter serious buyers from putting forward reasonable offers. For the broker, an expired listing means no pay and reputation challenges.
Taking a listing at “any price” is not beneficial to either party. And apartment buildings – the safest real estate investment – should never remain unsold or expire at this rate!
As the market begins to respond to more stable interest rates, serious sellers are still present and there are many serious buyers looking to invest their cash.
However, the down payment in proportion to the loan has to make sense for both parties.
If you are a seller who has accepted the fact that your 2021 valuation is no longer accurate, there are buyers out there.
Buyers: Offer your “best price”
Similarly, if you are a buyer who is willing to buy at reasonable numbers, your seriousness toward the purchase price you put forward is more important than ever.
Private sellers take time to adjust to the fact that their building is worth less today than it was two years ago. Therefore, it is crucial not to put a deal under contract and start renegotiating.
Today’s sellers are less patient than before (since they feel they are taking a “discount” to begin with), and buyers should come in with their best price and close the deal without delay.
Remember, a seller who has come to terms with the current valuation of their building will not have patience for buyers “nibbling” at the purchase price for minor defects, like they may have in the past when the margins were much higher.
If you are a serious buyer in today’s market, we recommend taking a more proactive approach with brokers who are currently transacting, i.e. put yourself forward as willing and able to drop an offer quickly.
Even months or years after having a building expire, a seller may be weary of doing a proper listing process again, as that experience caused the seller time and effort and has surely incurred them emotional dissatisfaction.
Such sellers, either based on their personal experience, or by just observing the market, are much more likely to entertain a one-off deal from a buyer that has the proper reputation (or for whom the broker can, more-or-less, vouch based on previous transactional experience).
In general, if you are a serious buyer, do not underestimate the psychological impact the doubling of interest rates has had on the majority of owners/sellers of apartment buildings and tailor your approach accordingly.
Baron Realty specializes in matching buyers and sellers of apartment buildings. The author,
Ramona Ursu works in partnership with Mikael Kurkdjian and a team of real estate professionals to bring the best boutique-brokerage services to the apartment transactional space in Ontario and Quebec. firstname.lastname@example.org