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What is an SPP?


In real estate speak this refers to a “condition” in an offer that makes the offer conditional on the Sale of the Purchaser’s Property (SPP) or Sale of Buyer's Property (SBP) which is the same thing. 


In a balanced or Buyers’ market this is a completely normal condition to include if you already own a home that you will need to sell before closing on a new property. Normal but not necessarily easy…

 

In a Sellers’ market, this kind of condition – or really including any kind of condition, can mean the kiss of death for your offer if you’re competing against an offer that doesn’t include that or other conditions…

 

When you’re including conditions in your offer, you’re writing them to YOUR benefit. The Seller is looking for an offer that benefits THEM. And that’s what  negotiations are for, to find terms that everyone can agree to…

 

So let’s break it down!

 

Advantages to including an SPP condition in your offer:

 

  • Takes the risk out of the equation for a Buyer who needs to sell their existing home in order to close on a new home
    • Depending on the language of the condition, gives the Buyer an out if they don’t sell their home for the amount of money they need in order to purchase the home they’re offering on
    • The Buyers’ deposit is returned if the condition is not fulfilled or waived

 

Disadvantages to including an SPP condition in your offer:

 

  • Can limit your negotiating power
    • When you need the Seller to agree to something that’s not necessarily in their best interest, you can’t be quite as cut-throat in negotiations as you may want to be
    • The seller will want to be compensated for the perceived risk & aggravation of accepting this condition & that translates into $$$
  • The home you have an accepted offer on continues to be marketed & shown to other buyers with the hope that another offer will come in
  • Your accepted offer could get “bumped” by another offer & you will have a pre-determined amount of time to either “fulfill” the condition, “waive” it, or walk away with your deposit
    • Typically an “escape clause” goes hand in hand with an SPP condition & will stipulate how much time you have to respond after receiving notice that another offer has come in. And by respond, I mean, Fulfill, Waive or Walk. Anywhere from 24 to 36hrs is the norm.
  • You will need to be prepared to shift into high gear if your existing home is not already on the market & your offer is accepted
    • Depending on the language in the offer you will need to have your home listed on the MLS by a certain date & you will have a specific amount of time to sell it

 

That last point is an important one & there are a number of aspects to this part of it!

 

A savvy Buyers’ Agent is going to first “sell” your home to the Listing Agent & the Sellers, in order to get the SPP condition accepted. Your house is the best thing since sliced bread & it’s going to sell in a hot minute! And here’s why….

  • Detailing a competitive pricing strategy
  • Detailing a solid marketing plan
  • Detailing an attractive timeline

 

A savvy Listing Agent is going to carefully assess the property themselves to determine how confident they are that the property will be sold within the agreed timeline. If the Buyers’ Agent hasn’t provided all the details, they should be asking for them – if they don’t agree with the details provided, then they would be advising the Sellers that the risk/reward just isn’t there for them to accept the condition.

 

So what this means is that a Buyer needs to have all their ducks in a row prior to making an offer if they know that they will want to make it conditional on selling their existing home. This is not the time to start prepping the house for sale or “trying out” a higher list price than what their Agent has suggested…those things need to have already been done & a specific agreed-upon plan in place that’s just waiting to get executed!

 

At the best of times real estate is a high stakes, sophisticated business & adding an SPP condition into the mix takes it up yet another notch…but if everyone is on the same page, well prepared & working with a high degree of professionalism, this is a scenario that can be navigated successfully for everyone involved! We'll just gloss over the nail biting, teeth gnashing & possible day drinking that the agents behind the scenes are doing trying to make it all come together seamlessly, lol! ;)

 

All that being said, if you don’t like the idea of the Seller having you by the “short & curlies” in a balanced market, then the answer to that is to sell your home first! You will know how much money you have to work with, you will already have a closing date to work towards (or arrange bridge financing for) & you will be on your own timeline & terms! The only fly in this ointment is that it’s a bit of a leap of faith that the right house will be available, at the right time, so that you don’t end up homeless or settling for a house that’s not “the one”. And this is what makes this scenario not right for everyone…

 

There are only 2 choices & you have to decide which one you feel most comfortable with…pick your poison!

 

Until next time,


Insurance Issues You Should Care About!

 Is your HOME under-insured?


The price per square foot of a new build has increased dramatically over the past couple of years & often our insurance policies are not keeping up!


Regardless of where you are in the real estate space, this is an important topic to understand & take action on if needed.


First-Time Home Buyers – as you are arranging insurance coverage for your new purchase, ensure that you understand & ask how “replacement cost” is determined, “adequate limits” & “co-insurance penalties”


Homeowners Who Have Renovated – if you have “forced” appreciation on your home due to renovations then your replacement costs may have changed, depending on how your policy is written


Homeowners Who Have Re-financed to Pull Equity Out – make sure you don’t owe more than you are insured for


Homeowners/Investors Who Have Owned Their Home for a Long Time – has your “replacement cost” kept in step with market appreciation of your home


Your insurance broker/agent should be reviewing the replacement cost on your dwelling with you at every renewal. It can be a bit of a lengthy process but SO worth it! And yes it will most likely mean your premiums will go up. BUT if you have a loss & the insurance company deems you under-insured then you will have to come up with part of the rebuild funds.


An example I’ve recently heard is that if rebuild costs $400k and you’re insured for $300k & you have a fire with repair costs of $100k, the insurance company will say you are 25% under-insured and you need to contribute 25% of the repairs…so insurance would only pay $75k of the $100k in repairs.


Policies that are “100%” replacement value are usually UP TO a certain amount of money so it’s important to ensure that that amount of money will rebuild your home or address your loss to the same condition it was in when you suffered the loss – for example if you renovated your kitchen you want it rebuilt to the same quality & finishes – not builder grade basic.


Insurance companies often use automated software to determine replacement costs/premiums, if you find that the numbers they are giving you are not adequate, then escalate things until you do get something that makes sense – advocate for yourself because no one else is looking out for you!


Remember…   “replacement cost”, “adequate limits” & “co-insurance penalties”


Until next time,







Check out other posts I've written related to insurance matters:


Are Insurance Conditions Making A Come-Back?


The True Costs Of Home Ownership Series - Insurance


Property Values are Hyper-Local

 

-Local Matters-

I love getting questions & comments! And in the past month I've gotten a number of questions that follow the same theme...and that is, how does the selling price for a home in one area impact the value of a home in another area? Some of the homes in question are more than a hundred kilometers away from each other!

And the answer is that most likely it doesn't! It's not a relevant comparison because each area has it's own little eco-system when it comes to things like supply & demand, property values & more!

I'm sharing 1 comment & 1 question in today's post, one is more from the seller perspective & the other from the buyer's - & it's cut & paste directly from my email for the win!

The first one, a comment, came after updating someone on the selling price for a home in Wilmot Creek in Newcastle. I had noted how long it had taken to sell & the fact that the selling price was 86% of what they were hoping to get (given their original asking price). The response to this was:

Wow! I guess that will be impacting our sale too!


And my answer was as follows: 


As for the impacts of the Birch Tree Lane sale, very important to remember that real estate is hyper-local & you have to look at it on an individualized basis. What’s happening in Wilmot Creek will be completely different from where you currently live because 1. The location is different &  2. Unless you’re currently living in a land lease community (like Wilmot Creek), your home’s value will be completely different because it’s a different segment of the market.


So how DO you figure out what impacts you & what doesn't? What's relevant to your current situation & what isn't? Besides asking me, of course, lol...I went on to write the following:

What could be helpful for you is to log onto my site & set up a new search for SOLD properties that are like yours, in your area. That will give you a sense of what your current home would sell for in the current market. You can set that up to get a daily or weekly email with all the sold properties in your area that are like your current home so that you can compare. Go to any of my emails with listings in them & click the log in button to get started! If you have any trouble getting that set up, just send me the info & I’d be happy to do it for you!

In example #2 I was once again updating someone on a selling price - this time for a townhouse in the new waterfront development in Bowmanville. As in the first example, I had noted how long it had taken to sell & the fact that the selling price was 90% of what they were hoping to get - $799k to $720k. The response to this was:

I wonder if other towns would sell for 720 if they were originally listed at 799

 

I responded with a list of selling prices since the beginning of the year for a 3bed/3bath townhouse in that development showing the downward trajectory from $915k in January (height of the market) to $720k in October & concluded by saying:


Each sale sets a new price standard, so other 3bed/3bath townhouses in the development that are comparable (same finishes, same view etc) are going to be impacted.


The follow up question asked was:


Would it be the same in Brooklin?


And I responded with:


You can’t really compare Bowmanville to Brooklin. Historically Whitby & Brooklin real estate has commanded a “premium” & homes cost more in those areas.

Also, the sales I listed in my last email were related to 1 particular development in Bowmanville, so we’re looking at the ACTUAL selling prices for 5 sales since the beginning of the year.

There are many developments in Brooklin, so we would be looking at the MEDIAN selling price of the 22 sales that have occurred since the beginning of the year…

Here’s an example using the median selling price of a 3bed/3bath/single car garage townhouse in Brooklin so far this year:

January - $1.030M (1 sale – actual price)

February - $1.010M (4 sales - median price)

March - $999,999 (5 sales - median price)

April - $920,000 (1 sale – actual price)

May - $851,450 (6 sales – median price)

June – No Sales

July - $850,000 (3 sales – median price)

August – No Sales

September – No Sales

October - $822,500 (2 sales – median price)

November (to-date) – No Sales

So the median price from January compared to October in Brooklin is down 20.15% & in that specific development in Bowmanville it’s down 21.31% - which is a very similar decrease in value…BUT a 3bed/3bath townhouse in Brooklin was still $100k more expensive than in that specific Bowmanville development in the month of October.

Interesting to note, when looking at 3bed/3bath townhomes with a single car garage in ALL of Bowmanville, the median price in January was $986k & in October it was $760k - which outperformed the waterfront development values - but it also shows a greater drop in the MEDIAN value - down 22.92% vs 21.31% & vs 20.15% in Brooklin. Still outperforming I guess, lol...

The bottom line is you need to compare "like" with "like" because different locations command different prices & different types of homes also command different prices. Digging further for context to go along with the raw numbers, is what gives a more complete picture, & hopefully a better understanding of f what the market is doing specific responded 


If you're ready for more context, there are several resources you can take advantage of:

StreetMatch - keep up with real estate directly in your neighbourhood - or any neighbourhood

Sold Listings - set up the criteria for what type of sold listings you're interested in & how often you'd like to receive them

Monthly Housing Report -  this is a personalized report created to your specifications that compares your real estate wish list across different cities/towns/communities in Durham & the surrounding areas - super helpful to see where you'll get the biggest bang for your buck! Example is linked.  Get that set up HERE

Book a Discovery Call with Kelly - Sometimes a call is just easier...


Until next time...keep those questions & comments coming!