Archive for March, 2014

“The Whitney/Dumont Condo Story”

Thursday, March 20th, 2014
  • P1210053We are Condoworld, one of London’s largest condo websites. We would like to keep our readers informed as to what is happening with London’s condo marketplace. On our website’s first page we say condos starting at $54,900. This is not correct and it should really say condos starting in the $30’s. How could this be? Well let us now tell you about the Whitney/Dumont story. Recently we updated our East End section of the London website and we added these two complexes to it. Our comments said, ” Back in 2006 these two rental buildings were turned into condos and most of the units were acquired as rental investment properties by out of town investors. Now let’s fast forward this scenario. One and two bedroom units are now coming to the market and pricing’s going forward are still to be figured out.” We also noted ” average price, no MLS sales ever going into the year 2013″. Other details we omitted are 1) many of the units were sold to people from the GTA area ( that’s where the ads for these units were placed and that’s where the presentations were made and many of the new buyers bought in without even seeing them. 2) these units were put into a rental pool and managed by property managers on this end. 3) many people purchased more than one unit, many families bought multiple units. 4) prices paid for units in these older walk-up buildings at the time in 2006 and 2007 typically ranged from $73,000-$75,000 for a one bedroom unit and $84,900-$89,900 for a two bedroom unit. After the 2006-2007 buy in period the condition that these buildings were kept in went downhill and vacancy rates started to go up. London agents observed this trend happening. A handful of new owners took displeasure in what they saw happening and started listing their units for sale on the MLS system at or near their original selling prices. As mentioned, nothing happened in the way of sales. P1210165Last year, the property manager Larlyn took over the responsibility of managing these buildings and improvements began to get made. The hallways got painted and carpeted, the security system was upgraded, new lighting in the hallways went in and new coin operated washers and dryers were installed. In spite of these improvements, none of the listed MLS units in 2013 sold. Then in February of this year an agent listed and sold quickly a one bedroom unit in the Dumont building at a price in the $30’s. Privacy laws prevent us from disclosing the exact sale price. Let’s remember that we are talking about two buildings with a total number of 84 units. If this becomes a benchmark price going forward then the collective lost in equity to the current owners if they were to liquidate their holdings would be a staggering figure of almost three million dollars! Was the pricing on this unit that sold this year MLS a mistake? Not really. In 2013/2014 the same thing happened with three unit sales in the condo complex at 1170-1176 Hamilton Road just east of Gore Road on the north side of the road. These are low-rise walk up rental buildings and are of the same style and age as the Whitney Street condos. They were converted to condos at about the same time by the same people who did the Whitney project. At that time, new out-of-town  investors were paying were over $70,000 per unit to buy into this new offering. These three MLS unit sales were the first ever to come to the market and sold out in the high $30’s and low $40’s. Needless to say investors in these buildings are very discouraged by what is happening. What’s going to happen when it comes time to refinance their mortgages and the lenders ask for updated appraisals? What’s going to happen if special assessments become part of this equation? How did I end up learning about  of all of this? Well once again, we are one of London’s largest condo websites and an investor contacted us from the website to list and my involvement then started . An offer was obtained on a MLS listing I took on a two bedroom unit in the mid $60,000’s which then fell apart. Yes the buyer was preapproved  for a mortgage and two bank appraisers were asked to do inspections, both of whom wrote negative reports saying that the values were not there to support the selling price. One appraiser, a person with 28 years of experience mentioned to me that there were buildings on Huron Street and Mornington Avenue where prices have also decreased. While I was not privy to the dollar value written in the report  the other units referenced were in the mid $40’s. All this was not pleasant news to hear. On a differing note, other investor’s have commented to me that over the last few years their property taxes have not gone down to reflect was has happened. Should IMPAC be looking into this? Last week I met on site with a family from out-of-town,  a young woman, her boyfriend and her parents. All three of these people bought a unit at $89,900 and we viewed two of the units together to see what kind of condition they were in. One unit needed $15,000 or so put into it to bring it back up to a reasonable condition. The kitchen, bathroom and floor coverings  were in poor condition. The young woman that I mentioned still owed a very large amount of money on her unit. How will she ever be able to absorb this meltdown in prices? What an upsetting experience for a first time buyer to have to be put through. Did the banks and their appraisers understand the risks involved when they first financed these properties? It should also be mentioned that the company responsible for this underwriting is still in business and still busy doing very much the same thing. I just checked their website,(today is March 20,2014) and here are two quotes I am noting from their site. “Our philosophy is to search out and find the best real estate opportunities available. If a real estate investment passes our rigorous analysis and investment criteria you can be assured it is an exceptional opportunity”. The second quote states “presents unique investment opportunities for astute investors to increase their net worth and build a retirement nest egg through income producing real estate”. This firm has not targeted London per say, as they are doing business like this right across Canada. Is this an issue more about market timing , meaning should we look at this a role of the dice? Are these people selling these kind of investment opportunities on the up and up? That is the three million dollar question. Was there a reasonable chance for this to be a fair investment or were the odds of winning stacked against these largely unseasoned investors. Where there regulators out there reading their investment ads or attending their investment presentations. Where the investors made aware of the risks involved? On a more  personal level I feel sorry for all of these investors. Why hasn’t this story surfaced so much sooner? I have being selling real estate in town for a long time and rarely ever come across situations like this. Let’s hope our London Free Press picks up on this story and asks furthering questions about how this could happen.
  • Written by Peter Daoust. Remax Advantage Realty
  • A summer of 2017 quick update. Toronto real estate agents are now listing these listings on the Toronto board system trying sell them at higher prices than our recent sales.