Don’t Believe Everything You Read…

Condos

4 minute read

March 22, 2010

Once upon a time, TMZ was considered complete trash along with the likes of The National Enquirer.  Then the Tiger Woods scandal hit, and people were flocking to TMZ.com for breaking news bulletins.

But just because something is written or reported doesn’t make it accurate.

Take this latest example that occurred during my weekend trip to Mont Tremblant

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There was very little snow, and we did very little skiing.

But my extended weekend trip to Mont Tremblant was worth the price of admission!

What was not worth admitting, however, was that I had worked seventy-seven straight days before Thursday night’s trek up to Quebec.  I took some good-hearted ribbing over the weekend from the guys and gals about that one.  Maybe I do need more time off.

I’d love to tell the story of the dance contest between the guys and the gals – the “same-sex” dance contest, to be exact, whereby my buddy and I performed an artistic free-dance adaptation of Avatar to Phil Collins’ “In The Air Tonight,” but I think I should keep this column about real estate…

During dinner on Friday night, one of the girls began to talk about her condo and how much she loves it.  We were all smiles.

But then she threw out, “Yeah, and it’s gone up like $70,000 since I bought it.”  I did some quick math in my head and determined that while Einstein thought that time-travel was possible, so technically anything is, I would find it very hard to believe it at all possible that her condo had increased by $70,000 since she purchased it.

Thankfully, before I could ask, “Where did you hear that?” even though I wasn’t going to, another patron of the dinner table did.

She answered, “Oh, you know those ad-things that come around?  The flyer-newsletter things.  I read it in there.”

Okay.

So it simply must be true.

Wait, before I go on with this story, let’s backtrack a bit to another story; a better story; a story that I told at the dinner table that night right before this girl announced that her condo had increased in value by about 44% annually…

Last April, I was showing condos in the concrete jungle down on Yonge Street to a couple of young clients.

They were looking to rent a bigger space, and we were touring about six or seven units on a Friday night.  Yes, on a Friday night…

I knocked on the door to the third or fourth condo on our list, and the resident happened to be home.

It was the same girl from the dinner table this past weekend, only I didn’t know her then.

Well, I sort of knew her, as I explained in this story on Friday night to a bunch of eager ears…

I recognized her as a friend-of-a-friend, even though she and I had never met.  It’s not weird – just listen.

I asked her, “Hey, do you know Stacey Black?”  She smiled and said, “Yeah, yeah I do.”

I paused, as her smile turned to a more questioning look; one that subtly asked, “Since I don’t know you, how do you know me?”

I then realized something was amiss, and tried to save it with – “Yeah I think I’ve seen you on Facebook a few times.”

Then without a thought, I turned and walked away, not realizing how incredibly creepy, weird, eerie, and stalker-ish that sounded.

About a minute later, it dawned on me: “David – most people don’t freely admit to creeping Facebook and you just told this girl that you’ve seen photos of her – so many photos that you actually recognized her in person!”

I immediately went back into the living room and as if the conversation never ended, said, “….on Facebook….in the photos….from Stacey and Paul’s wedding!  Paul was showing me the other day…..great photos!   Seriously, everybody looked so great!”

Phew!  What a save…

But that’s actually what happened, and how it happened.  Only I left the window open for this girl to think I was the best stalker since Alec Baldwin in The Juror.

So here we are just less than a year later, and I’m at a cottage in Mont Tremblant with the very same girl during our first official introduction.  I actually told that story to everybody at the table; just to break the ice…

Anyhoo, Jane surmised that her condo has appreciated about $70,000 since she purchased it last year.  Her lease was expiring in the spring and I happened to be showing her unit to clients when we bumped into eachother.

Folks, let’s be honest here: you can’t believe everything you read.

And surely you must have some common sense.

Jane’s condo was about $240,000, and a $70,000 increase would amount to a whopping 29%.

But factor in that she only purchased it eight months ago, and you’re looking at an annualized return of just under 44%.

Do you know how big a return 44% is?

It’s massive.

We should all know that.

So when you get a flyer, newsletter, or piece of junkmail that contains “up to date real estate values,” tread with caution and use common sense.

A lot of real estate newsletters make very vague references to recent sales (since we can’t hand out sold data until the deals have closed), and thus people make assumptions about the value of their condos based on these incredibly fuzzy descriptions.

Jane picked up a flyer, saw a value, and immediately attributed that value to her unit without really knowing how the two units compare.

How do we know anything about the unit that sold?

I mean, I guess if your unit is also a 1-bedroom, and your unit is also a 1-bathroom, and your unit is also the “Merlin” floor plan model, and your unit also has track lighting, and your unit also has a cracked window, and your unit also has a large pizza stain on the carpet from when your friend Sandy got careless last New Years but promised, “I’ll clean it up, I really will,” and never did, then YES, I suppose you can just take the value from the vague real estate newsletter and apply it to your investment.

But failing that, don’t just believe something because you read it (unless it happens to be this blog…)

Real estate has always been hard to price because it has no fixed value.  The only time we really know what a property is worth is the very day that it is sold.

Do a little bit more homework, and avoid generalizing based on flyers, internet stats, or even media reports about the market in general.

Because when you find out that 44% is actually more like 9%, it’s gonna hurt more than falling off your buddy’s back as you shoot an imaginary bow-and-arrow while he parades you around the room during your free-dancing scene from Avatar…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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2 Comments

  1. Geoff

    at 9:17 am

    It’s interesting how often people confuse paper gains/losses with real gains/losses. Your friend’s condo hasn’t gone up in value at all unless she sells it and pockets the cold hard cash.

    Also a 9% return is hardly anything to sneeze at (again, see point #1 above).

  2. George

    at 9:19 pm

    You can also add a subtitle to this post: “Don’t Believe Everything You Hear.” Whenever someone tells me about their financial successes, I knock off a few thousand or percent as I just assume now that everyone exaggerates their “accomplishments” to justify the actions that they took.

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