1. Don’t try to time the real estate market.
Buy and sell in the same economy. Trying to create or carve out an arbitrage in a volatile market is where people get burned. Unless you're an economist, an actuary, or write financial instruments for a living, arbitrage is fickle. One of the important ignored nuances around this concept is that if you’re selling, and your sale is challenging, then that will proportionately affect your sentiment towards the buy side. Being simultaneously in touch with both supply and demand factors of the real estate market will give you a true and complete perspective.
If you're not selling, if you're leveraging and using existing equity to purchase, this advice is especially important, you just have to apply the demand-side to the other source of capital. In this case, think like a lender, rather than a buyer - the easiest way to do this? Pay attention to your actual lender. This leads me to my next protection mechanism:
2. Work with your lender’s criteria
Be mindful that your lender has a team of hundreds, if not thousands of people constantly trying to figure out what the market is doing. If you're paying attention to the TSX looking for buy/sell signals, you might as well just liaise directly with the institutions that are initiating those signals. Trust me, your lender doesn't want your property to go down in value, either.
- if your lender needs more time - you should probably take more time.
- if your lender wants to appraise - you should probably let them appraise.
3. Include clause provisions for a shutdown
There is no way to truly know whether Canada is going to end up like Singapore or Italy as a result of the Coronavirus. Given where we're at on the curve, you can probably draw your own conclusions.
Economics aside, a shutdown will cause meaningful changes to the way we transact real estate, and the best thing you can do is exercise caution and consider that when you're approaching a deal:
- you don't know how long due diligence is going to take you
- you don't know whether or not your lawyer will be open on title/closing day
- you don't know whether the land registry office will be open
- you don't know how your lender will be operating
Stay safe out there friends - financially, too.
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