No end to good news for Saskatoon economy

It’s everywhere! You can hardly open a newspaper without encountering good news about Saskatoon’s growing economy. Some are even starting to use the boom word. Perhaps what’s most striking is that I’m hearing this news on a daily basis from people who reside outside of the province, would be investors who are obviously catching wind of all of the good things happening in Saskatchewan, and here in Saskatoon.

The latest bit of good news for Saskatoon is the recently released Statistics Canada Labour Force Survey which tells us that there were 9,800 more people working in Saskatoon at the end of 2006, as compared to the same time in 2005. Across the province of Saskatchewan, we see an increase in the workforce of 22,800 people.

So, where are the people coming from to fill these positions? Perhaps we’re finally getting our lazy people off of the couch and into the workforce, but probably not. These people are coming to Saskatoon from all regions of Canada. Saskatoon is on the grow and an abundance of jobs in construction, agriculture, science, trade and services, and the mining, oil and gas industries is bringing people back home to this province. Talk to any REALTOR® and they’ll tell you what I’m telling you; they have never been dealing with more out of province prospects than they are right now.

Managing this opportunity for growth will be just one of the bigger challenges that we face in Saskatchewan over the coming years. How do we continue to create opportunities which encourage interest in our province?Dwight Percy writes an excellent column titled, “It’s a Make or Break Year for Saskatchewan” which is certainly worth a read.

What about housing? Today, the MLS® system is showing only 258 active listings of houses and condos across all areas of Saskatoon and all price ranges. Based solely on my recent effort to arrange showings of “active listings” I’m going to guess that 30-40% of these properties are under contract, and technically, no longer available.

Part of the challenge that we face in capitalizing on this interest is having adequate housing to accommodate people. The city of Saskatoon needs to take a serious look at its land development policy and find a way to make more building lots available, and they need to do it fast.

Last week, I received a call from Alan Thomarat, executive director of the Saskatoon and Region Home Builders Association. Alan asked me to join him and Harry Janzen, executive director of the Saskatoon Region Association of REALTORS® at City Council this Monday evening to speak to council about the potential problems which could arise from our current situation. I’ve agreed to do so.

I don’t know much about land development and I’m not an expert in municipal growth management but I do have a pretty good handle on basic mathematics, the Saskatoon real estate market and the principle of supply and demand. It’s quite simple really; if we have more families moving to Saskatoon we need more homes to put them in. If we don’t meet that growing need, we can count on house prices to rise faster than incomes leaving many of our younger families and less affluent citizens out in the cold and that doesn’t sound like good news to me.

Norm Fisher
Royal LePage Vidorra

Special considerations for Saskatoon condo buyers, part 2

This is part two of Special Considerations for Saskatoon Condo Buyers. Part one is here.

In part one of this post, I discuss the various documents that are normally available for your review when purchasing a condominium. These documents are traditionally requested by the buyer as part of their offer and are provided following acceptance of your offer. If you have made your offer through a REALTOR® in Saskatchewan it will include terms that provide a “right to rescind” the offer should you discover facts about the condominium corporation which cause you to want out of the deal. The mandatory Schedule “C” used by real estate registrants in our province provides ten days for the seller to deliver the documents and five days for the buyer to review them. Part two is an overview of what those documents are.

The current Bylaws of the Condominium Corporation

The Bylaws define how the condominium corporation is structured and managed, including details on how the board of directors is formed and what authority the board has to act on behalf of the condo corporation. It should explain your rights as a voting partner in the corporation. It also details the rules and regulations of the corporation which all unit owners must agree to as well as what remedies exist when someone breaks those rules.

The latest financial statements of the Condominium Corporation and the last audited statements

This is an overview of the financial affairs of the condominium corporation including a statement of income and expense. You should be able to determine what assets are owned by the corporation, what liabilities exist and how the corporation has been utilizing the contributions made by its unit owners. Complex financial statements should probably be reviewed by your accountant who will have some expertise in identifying area of weakness or concern.

The current policy of insurance

The Condominium Property Act, 1993 requires that condo corporations carry insurance sufficient to cover the replacement cost of buildings and improvement in the event that a condo property is destroyed.

Any current management agreement regarding the Condominium Corporation

If the condo corporation has elected to use a property management service to perform certain functions on behalf of the corporation, details of that arrangement should be provided to you.

The current recent budget of the Condominium Corporation

An overview of estimated expenses of the condo corporation for the current year.

Written confirmation of parking/storage facilities and exclusive use areas included in the purchase price, any related costs or charges and any special rules regarding those areas

This one is pretty obvious but do be certain that you receive written confirmation of any areas which are designated for your exclusive use. In most cases, the title to your unit only includes your actual unit. Parking stalls are most often part of the common area, portions of which are designated for exclusive use of specific residents. You must have written confirmation of your right to use a specific parking stall.

A current Estoppel Certificate issued by the Condominium Corporation pursuant to the regulations of The Condominium Property Act, 1993.

The Estoppel Certificate will normally include details on the following items: 

· the amount of the monthly contribution (condo fees) levied against the unit you are purchasing;

· the extent to which that contribution has been paid;

· the manner in which the contribution must be paid;

· the portion of the contribution which is deposited to the reserve fund;

· the current balance of the reserve fund;

· proposed amendments to the Bylaws of the Condominium Corporation;

· amounts of any special levies which may be proposed which would affect the unit you are purchasing and;

· in most cases, exclusive use provisions for parking and storage are detailed here.

Reserve Fund Study

Perhaps the most difficult item to assess of all of those detailed above is the reserve fund. If a condo corporation encounters a significant expenditure which cannot be adequately covered by reserve funds, the corporation will issue a cash call and unit owners will be required to make up the difference. One cannot simply look at the balance of the fund and say, “Oh, that’s a lot of money,” or “That’s not very much money.” One must consider the overall condition of building and improvements and any possible costs which the corporation may encounter in the future to determine if the reserves are sufficient, and even then, it’s often a best guess for most people. This is a particular challenge with larger projects like high rise condominiums. I recently assisted a purchaser who bought a condo in downtown Saskatoon high rise. One of the budget items for this condominium was new caulking for the windows. The estimated cost was in the range of $70,000. This is something neither he nor I could have possibly considered or understood had that item not been disclosed to us. Apparently, neither could the condo corporation and consequently this item was dealt with through a cash call.

Recent changes to the Condominium Corporation Act requires all condo corporations with 12 units or more conduct a reserve fund study by January 31, 2008. The study must be updated every ten years thereafter. The study will be completed by an engineer who will assess the remaining life expectancy of the major components of the buildings and improvements, estimate the future cost to maintain, repair or replace those components and determine if the current reserves and the monthly contributions are sufficient to cover those costs. Many corporations have already completed their surveys. When shopping for a condo, you may prefer to consider those condos where the reserve study has already been completed, particularly if you’re purchasing part of a large project like a high rise.

Other Actions You Might Take

  • Have the property inspected by a professional inspector who is qualified to assess the condition of major components of the buildings.
  • Speak with directors of the condo corporation and ask questions about improvements they’ve been discussing. Ask specifically if there are pending decisions on major financial items.
  • Speak with some of the current owners.
  • Start reading the Condominium Corporation Act when you’ve decided to purchase a condo.
  • Ask if a reserve fund study has been completed and if so, make your offer conditional upon receiving, reviewing and approving it.
  • Work with an agent who is experienced in condo purchases and can guide you through this complex process.

Norm Fisher
Royal LePage Vidorra

Special considerations for Saskatoon condo buyers

When you purchase a condominium you’re buying more than just a home. You’re also purchasing shares in a corporation which is responsible for managing the affairs of the property. Your “share” of the corporation is normally based on the size of your condo unit, as a percentage of the whole. These shares are often referred to as a “unit factor.”

Of course, you enjoy exclusive use of your condo unit and pretty much everything that goes on inside of it, including improvements you wish to make are your responsibility and are done at your discretion provided these things do not contravene the Bylaws of the Condominium Corporation.

In addition to implementing and enforcing Bylaws for the condominium, the corporation is responsible for setting budgets, record keeping, maintaining adequate insurance on the building and other improvements and maintaining the property. Each unit owner makes a monthly contribution, based on their unit factor, to cover expenses incurred by the corporation. In most cases, some money is also collected and set aside for “reserves,” which will generally be used for unexpected expenses and expenditures which are not included in the general operating budget. Like any other property, major expenses are incurred when a roof needs to be replaced or a boiler system fails. Generally, these items are paid from reserves. If the reserve fund cannot cover the expenditure unit holders are called upon to make up the difference through what’s known as a “cash call.”

Just like companies which operate in the market place, some condo corporations manage the affairs of their property better than others. As a prospective buyer, you owe it to yourself to make certain that you have a reasonably good idea of what you’re getting yourself into. The doctrine of caveat emptor or buyer beware applies as much to condos as any other type of home and prudent buyers take appropriate actions to protect their interests.

If you offer on a condo unit through a REALTOR® some actions have already been taken to help protect you. All real estate registrants are required to use mandatory forms as directed by theBylaws of the Saskatchewan Real Estate Commission. One of those forms is called a Schedule “C” Special Terms for Contract of Purchase and Sale of a Condominium Unit. This form, when completed by a buyer and accepted by the seller, binds the seller to provide you with various documents within 10 days of acceptance. You may review these documents and if you are concerned about anything you discover to the extent that you wish to cancel the agreement, you may do so by serving written notice to the seller of your intention to rescind your offer. That written notice must be delivered to the seller within 5 days of receipt of the documents.

The Schedule “C” requires the seller to provide the buyer with the following documents:

  • the current Bylaws of the Condominium Corporation;
  • the latest financial statements of the Condominium Corporation and the last audited statements;
  • the current policy of insurance;
  • any current management agreement regarding the Condominium Corporation;
  • the current recent budget of the Condominium Corporation;
  • written confirmation of parking/storage facilities and exclusive use areas included in the purchase price, any related costs or charges and any special rules regarding those areas; and
  • a current Estoppel Certificate issued by the Condominium Corporation pursuant to the regulations of The Condominium Property Act, 1993.

 In my next post, I’ll go a little deeper on these documents, explaining what the purpose of each is and what steps you may take to protect yourself.

Norm Fisher
Royal LePage Vidorra

Premium Saskatoon houses sell while market is still at work

I did a routine search of today’s MLS® listings at about 4:00 pm. There are two new listings showing up in all of Area 1, which for Saskatoon real estate agents includes all neighbourhoods which are East of Circle Drive East. Both of these new listings are in Briarwood. One is priced at only $248,000; the other at $419,900. This small number of listings comes as no surprise. It seems to be the way it has been lately.

Meantime, the number of potential buyers continues to mount. There are plenty of motivated buyers waiting in the wings for these types of premium homes. One of those buyers is certainly prepared to pay more than anyone else for one of these two homes. At least, that’s pretty much how it works in most cases. The only problem is, both homes are currently sold, pending unknown conditions. At the time I write this blog, neither listing has yet found its way to MLS® Online. The listings will appear there tomorrow, a day late and a dollar short.

Of course, the question running through my mind is, how much money did these sellers miss out on by accepting an offer before most of the market could even get away from work? This, we’ll never know. Perhaps they somehow managed to connect with that buyer who was willing to pay the most, but I doubt it. Why would anyone accept an offer before the market knows their house is for sale? To me, it’s simply mind-boggling. Any thoughts?

Norm Fisher
Royal LePage Vidorra

Understanding the Saskatoon house price puzzle

If you read the story in today’s Star Phoenix titled, “City housing price surges: Average sale price of Saskatoon house tops $160,000,” you might be a little confused, especially if you’ve been reading my blog or reviewing my statistics. I’d like to make a small contribution to this discussion and add just a couple of the missing pieces.

The “year-end average figure of $160,577” which is related to “houses” in this story, actually represents the average sale price of Saskatoon homes across all of 2006.

Included in that average are condominiums and mobile homes. The average selling price of a Saskatoon house actually came in at approximately $171,000 for all of 2006.

Of course, the other potential problem with one-year averages is that they are often skewed by some old data, particularly in markets where prices are changing rapidly. Those houses which sold at a lower price at the start of 2006 tend to skew the average down and give a slightly distorted picture of what one might expect to pay for an average house in today’s market. This was one of the primary reasons that I added six-month averages to myAverage Sale Price of Saskatoon Houses page and my Saskatoon Neighbourhood – Profiles and Price Trends page. In a market which is changing rapidly, the six-month average represents a more realistic reflection of current market prices.

Having said all of that, I’ll note that the average selling price of a house in Saskatoon over the last six months is $176,153, substantially higher than you might have guessed from reading this story. Given the fact that current listing inventories are extremely low, it’s reasonable to assume that the average is closer to $180,000 at this time.

Unfortunately, I cannot provide you with a link to this story as it didn’t make the Star Phoenix website today. Instead, they feature the article, “Edward Jones at home in Sask,” which discusses the investment brokerages plan to open offices “in our community” so that new sales people can go “door knocking in neighbourhoods.” I’d like to thank the Star Phoenix for the warning.

Norm Fisher
Royal LePage Vidorra