VREP #10 | Vancouver’s Five Best Investment Areas & A Secret Recipe for a Better Mortgage with Dustan Woodhouse

Top Mortgage Specialist Dustan Woodhouse joins Adam and Matt to discuss his secret recipe for securing a top-notch mortgage before offer presentation. Bonus: the rebel realtor, Eniz Aziz, sits down with the brothers to discuss the top five best areas to invest in Vancouver.

dustan woodhouse

Dustan Woodhouse


Intro:              Get ready for Vancouver’s premium real estate podcast. Your source for buying, selling and investing in Vancouver’s real estate market, with your hosts, two guys with faces for radio, Adam and Matt Scalena.

Adam:             And welcome back to Vancouver Real Estate Podcast. I’m your host Adam Scalena.

Matt:               And I’m your other host, Matt Scalena.

Adam:             And today we have an amazing show for you today.

Eniz:               Was that really your *** intro? What the hell was that?

Adam:             And we’ve got Eniz Aziz.

Matt:               From the Aziz Group joining us.

Adam:             That really is our intro.

Eniz:               What’s with the faces for radio?

Matt:               You don’t like that?

Eniz:               No.

Adam:             Tell us how you really feel.

Eniz:               Hey, you know I don’t pull any punches.

Adam:             Also we’ve got Eniz with us today and we’ve got a great show.

Matt:               Yeah. A fantastic show.

Eniz:               And speaking of faces for radio, you’ve got a great review.

Matt:               We did. We did.

Adam:             Kevin. Okay. So Kevin Farkless if that is your real name. You mentioned that you thought both of us were terrific, especially the cute one.

Eniz:               Why do you have to hit on Matt?

Adam:             My feelings are terribly hurt. Okay, so we’ve got a great show for you today.

Matt:               We’ve got Dustan Woodhouse, an amazing mortgage broker with Dominion Lending.

Adam:             But first we wanted to talk about this article that came out on moneysense.ca by Romana King and Mark Brown which was published just a couple of days ago March 9th, 2016.

Matt:               Yeah, and basically the thrust of the article is in the Lower Mainland the prices are out of control. A lot of people worried about prices declining, some sort of correction happening and they’re looking at certain neighborhoods that…

Adam:            …are good value. So in other words what they did is they took the top 200 neighborhoods that offer future appreciations in terms of capital appreciation. And all of the areas that they looked at were priced above $1,000,000. And they’re looking at kind of trying to figure out the top 5 areas that still offer good value and they were all on average about 14% cheaper than other surrounding community. So we wanted to kind of talk about some of the different areas and we have Eniz Aziz from the Aziz Group with us today.

Matt:               Resident expert.

Adam:             Resident expert as well.

Matt:               Wait, we’re the resident experts here.

Eniz:               Hold on a second, hey. No, I’m happy to help. This is going to be a good review. These top 5 neighborhoods are – I pretty much agree with all 5 of these neighborhoods.

Adam:            I do too. And what so funny is I had somebody send this article to me the other day and I was saying you know what? I’ve been saying this for years, these are undervalued areas. It’s clear.

Eniz:               Right, absolutely.

Adam:             So these are typically – so I want to clarify for the people at home, are we looking at condos? Are we looking at town homes?

Matt:               They’re single family homes. I mean every one of these top 5 areas they’re talking about, properties over $1,000,000.

Adam:             Well, if they’re talking about stuff over $1,000,000, I’m sure there’s condos that would fall into that and townhomes that would fall to that.

[cross-talk 03:12]

Eniz:               Yeah. Absolutely.

Adam:             And that actually makes sense because when we’re talking about some of these areas and I don’t want to spoil them but well, we are talking about largely single family detached areas.

Matt:               Exactly.

Eniz:               Exactly.

Adam:             Okay. So why don’t we start with the top so number 5? And it’s…

Matt:               Drum roll.

Adam:             Drum roll. So we are actually coming live from this area.

Matt:               Yeah, from this area and…

Adam:             Undisclosed location.

Matt:               Undisclosed location in Renfrew, Vancouver East.

Adam:             Great area. The thing about Renfrew is that it’s gone overlooked for I think many years. And it’s kind of because it’s the last area where – it’s the outer skirts of Vancouver Proper, right? It’s the last area before boundary.

Matt:               Yeah, I think a couple years ago everyone was looking around Commercial Drive. Grand View was really seen as the up and coming neighborhood and Renfrew was still little further East. And now it is…

Adam:             Little further East than some people wanted to go.

Matt:               Yeah. I mean to give you an idea we had a listing. Adam and I had a listing last week in Renfrew and there was 17 offers. The open houses – it was like a zoo. It was like a zoo.

Adam:             And it sold well, well over asking.

Matt:               Well, well over asking, yeah.

Eniz:               17 offer seems like a lot to handle.

Matt:               It was actually. I made a joke to another…

Adam:             Absolutely. 500,000 over asking. Yeah, over 500,000 over asking.

Matt:               It was an incredible experience the – I was looking at the offers as I came in and I said to another agent I think I lost 5 years of my life. It was a stressful day or two. But the one thing that I will say is the seller was exceedingly happy, that’s for sure.

Eniz:               That’s super good.

Adam:             And so the other thing I’ll say just quickly about Renfrew is that Hastings East which is on the north side of Hastings, has always been a little bit more expensive and a bit more enticing for buyers so being on that North side between say where I’m on Renfrew, whereas if you’re on the South side, it was always kind of considered a little bit lower value. So that actually kind of makes sense because when you think about the north side of Hastings we’re now sitting where its benchmark price is likely around the 1.5 range. Where in Renfrew you can still get a decent house for 1.2, 1.3.

Matt:               Yeah. The average home price here which strikes me as slightly low but till the market is moving quick is 1.1 – 1.4 – 1.5 in Renfrew.

Eniz:               That seems low. And it seem like there’s still pockets in Vancouver that you could still get good value in without getting to that crazy $2,000,000 like if you’d be going on Main or even Fraser now. So for the extra 5 minute drive.

Adam:             Yeah, exactly.

Matt:               And the potential I think is…

Adam:             The potential for sure in Hastings at Hastings corridor is starting to feel more like Main Street every month.

Eniz:               Absolutely. Yeah.

Matt:               The realtor grade here in money sense – not our realtor grade but the realtor grade 3.5 out of 5.

Adam:             I think that’s a little low.

Matt:               I would have given it at least a 4.

Eniz:               Yeah, about 40.

Adam:             It seems like an arbitrary scale but number 4 comes from even though we are a Vancouver Real Estate podcast, we’re coming just East, from Burnaby.

Matt:               And they’re very, very similar though, Vancouver Heights and Burnaby. We’re very similar to Renfrew.

Adam:             Very, very similar and basically I think that’s further to my point about Hastings East being kind of the real hot area for the last few years. They’re talking about the #5 and #4 basically border Hastings East. What are you guys’ thoughts on Vancouver Heights? So obviously it’s elevated land, you get amazing views to the west.

Matt:               One thing to point out is the average home price 755,100.

Eniz:               A lot of people overlook it. Just because it is on the other side of boundary. And it has a Burnaby address.

Matt:               Exactly. I was going to say the Vancouver postal code is something that a lot of people are surprised by.

Eniz:               Exactly. Exactly. And you’re right there, like it might as well be Vancouver. But it is a Burnaby address and because of that I think it gets dismissed.

Adam:             The other thing that people don’t look at is the area of the Heights because there’s a lot of great restaurants over there. It’s a good strip of Hastings.

Eniz:               There are a local-like restaurants and stores and like specialty stores.

Adam:             Okay. So area #3, Hastings. So we’re talking about Strathcona here.

Eniz:               Like this area has been coming up for a while but you still get good value there. What’s the average home price there?

Matt:               The average is home price is just over a million, 1.36.

Eniz:               Like I would buy in Hastings so quickly in compared to some of these neighborhoods like the upswing is so great and there’s tons of developments going in.

Matt:               Yeah, the potential of the developments going in, I mean it’s…

Adam:             What they were saying in the article which makes a lot of sense is when you have a lot – you have strips that haven’t been re-developed that are still…

Eniz:               At all.

Adam:             At all, right? So you still have the old vacuum cleaner store…

Eniz:               Yeah. Yeah. Exactly.

Adam:             And a very expensive real estate which kind of gives the area its charm but also suggests that there’s a lot of potential for redevelopment. And how close is it to downtown?

Eniz:               It’s like a 5 or 7 minute drive.

Matt:               If you’re thinking kind of 10-15 years out, I mean…

Eniz:               This is where you want to be. Absolutely.

Adam:             This is Vitex?

Eniz:               Yeah. And I’ll tell you now like right now it is not the most pleasant neighborhood to be in. But…

Matt:               This is the thing, yeah…

Eniz:               But given the way Vancouver is going…

Adam:             Well, it’s not as polished as some areas, it’s…

Eniz:               Yes, it’s not.

Adam:             But what we take the – I live in Renfrew. We take the bike road down Adanac through Strathcona and there’s so many great little coffee shops and kind of built into the neighborhood. I love it. I love it over there. It makes sense.

Eniz:               It’s also one of the parts of Vancouver that still allows late-industrial.

Matt:               Right.

Eniz:               Right? And that’s a unique thing about it. Like it will eventually cater to all of Vancouver what it can hold and what can be developed out there. It’s a good spot to buy some land and hold on to.

Adam & Matt:           For sure.

Adam:             Didn’t Chip Wilson just buy…

Eniz:               Yeah, he did.

Matt:               Yeah, it was Chip Wilson and the [Tawny? 09:33] Groups in there…

Eniz:               Yeah, they bought out there.

Adam:             Obviously well financial where Strathcona village is going up.

Eniz:               Yeah and they sold out quickly.

Adam:             Okay. So the #2 area, Brentwood Park, Burnaby. So that actually to me makes a lot of sense, especially if we’re talking about the detached market. But the thing about Brentwood and I think we’ve talked about this in another episode; one, Burnaby has some excellent city planners and first of all they’re doing the redevelopment of Brentwood town center which is going to be phenomenal. 250 new retail and restaurants in…

Matt:               Yeah, the amazing Brentwood is going to come out of that.

Adam:             Beautiful atriums, everything else.

Matt:               Concord Pacific has I think – how many towers going up over there?

Adam:             Yeah, there’s a lot.

Eniz:               A few, yeah.

Adam:             There’s a lot. Okay. So there’s that. But then there’s also – I was speaking to somebody down at the city a few months back. They’re also redeveloping – they’re doing like an urban trail along Willington. So they’re buying parcels of land along Willington and they’re going to connect Confederation Park all the way down to Brentwood town center with this really nice walk like green walking path where there’s going to be little rest areas and parks. And I think that Burnaby is a really progressive, forward-thinking community.

Matt:               And that’s the type of planning where 25-30 years from now people are going to be looking back and celebrating these planners.

Adam:             Yeah. For sure.

Eniz:               And Brentwood Park for many years has always been like a location for families that kind of grow and be and raise children.

Matt:               Exactly. Makes sense.

Eniz:               And it’s in a location where it’s close to the highways, it’s close to Vancouver. It’s close to a lot of things, right?

Matt:               There’s a reason why the realtors gave it a 4.5 out of 5.

Adam:             Really?

Eniz:               Yeah. There’s got to be.

Matt:               And sort of the average home price 1.25.

Adam:             1.25.

Eniz:               That sounds about, right?

Adam:             Another note on Brentwood park just because I’ve got a lot of people that are living downtown in one bedrooms that need a second bedroom and they can’t maybe make it work in Vancouver. Where do they go? They go to Brentwood Park.

Matt:               Prices are more tracked at Brentwood Park. Yeah, the condos in Brentwood are very attractive to a lot of people.

Eniz:               Totally.

Adam:             They want to be right on the SkyTrain line and they also want this space, right?

Eniz:               Yeah, exactly, exactly. And you don’t have to go as far as Surrey or Coquitlam out there.

Adam:             No bridges.

Eniz:               Yeah, no bridges. You’re right. It’s not that far.

Adam:             Okay so the #1 area, Ambleside.

Eniz:               I don’t know if everybody agrees to this but I think this is definitely #1.

Adam:             Really?

Matt:               In the article the average house price in this neighborhood is approximately $420,000 cheaper than in the surrounding areas.

Adam:             In West-Vancouver.

Eniz:               In west, in west.

Matt:               The realtor rating is 4.5 out of 5. It doesn’t look like they gave anyone 5. 4.5.

Adam:             No perfect area.

Eniz:               Is our pocket that you guys think that aren’t on the list?

Adam:             I think they actually hit – I’ve seen a lot of these lists before that I don’t think do an excellent job of kind of highlighting areas. They go to the areas that seem to be kind of… 

Matt:               They’ve already arrived.

 Adam:             They’ve already arrived. Yeah, we should probably just get back to our interview with Dustan Woodhouse, member of the Real Estate Action Group, REIN Network and also he’s an author. I think he’s working on his second book. Doing this all the time while still being #16 broker in CMP Magazine.

Matt:               Crazy.

Adam:             An all-around good guy. So I’m really excited without further ado. Here’s our interview…

Matt:               With Dustan Woodhouse.

Adam:             Enjoy.

Adam:             So we’re here with Dustan Woodhouse from Dominion Lending Centers. How you’re doing, Dustan? 

Dustan:           Not too bad guys, good morning. How are you?

Adam & Matt: Good morning. 

Adam:             So first of all why don’t you tell us who you are and what it is you do?

Dustan:           Well, I’m an independent mortgage broker. Have been for 8 years, going on 9 but there have been a little bit like dog years in the amount of volume that I’ve worked through over those years. But the biggest I guess difference between myself and somebody else the client might be talking to about the mortgage is that as an independent agent I’ve got access to multiple lenders. A lot of people walk through the door and talk to the bank and that’s fine but the person they’re talking to really only has access to one set of solutions. The solutions of that one institution, not multiple institutions.

Adam:             Right.

Matt:               Yeah, I’ve been explaining it clients lately you’re sort of the Expedia – if you’re looking for a flight, it’s like you can walk up to the Air Canada counter and buy a flight or you can go online and type in into an aggregator and usually get a better product and a better price.

Dustan:           Well, and that’s actually a good analogy because of course when you’re booking a flight just like when you kind of get a mortgage arranged, at first price or rates is top of mind but very quickly you realize oh, hang on, yeah, that’s a great deal but it’s got 4 stopovers and it’s going to take me an extra 10 hours to get there. So yeah, that’s a very good analogy actually for what we do. I would say to client’s rate is #1 on the list but it’s also #10 on the list. There’s 8 other things that we should talk about and usually by the time along the second or third one they’re saying to me “Nobody has ever told this before.” That’s how we like to straighten out the value.

Matt:               So what are those – can you give us an example of one of those things in between?

Dustan:           Yeah, absolutely. Here’s an interesting one. I use this somewhat specifically worded sentence with every single client that I work with, at least once or twice in the initial conversations and usually again before the transaction is over because it acts like a little bit of a combination lock to unlock the memory of the conversation 38 months later. And so that one little thing that a lot of people aren’t expecting is this. 6 out of 10 Canadians will break their mortgages. They’ll break those mortgages in an average of 38 months and they’ll trigger a prepayment penalty they had no idea was coming. That term for that prepayment penalty is interest rate differential. And I won’t bore you with a detailed explanation or the Byzantine calculation of how an interest rate differential penalty is calculated. And in fact, most representatives of the institutions, the major banks and most credit unions that charge an interest rate differential penalty would not be able to actually articulate the equation. And they certainly couldn’t articulate the reasoning for it.

Suffice it to say that we see currently that penalty equaling 4.5% to 6% Recently, we got a couple at 6% of the mortgage balance. The average mortgage balance in British Columbia contrary to a lot of misconceptions is actually only $300,000. But if you apply that basic math of 4.5% to a $300,000 mortgage, we’re talking about a $14,000 penalty. And there’s a number of other mortgage products and other lenders who will put – who will offer a product that has only a 3 month interest penalty ever. And a 3 month interest penalty mathematically is about a half a percent of the mortgage balance, so about $150 on that $300,000 mortgage. The biggest culprit is 5 year 6, some are major chartered bank.

So although 2 out of 3 of my clients wind up with a major chartered bank, the majority of my clients wind up either in a variable rate mortgage or currently a 2 year 6. I mean the 2 years 6 is a phenomenal product well-worth looking at right now. And it does not contain that monster penalty inside it. And as they say, my clients – most of them are thinking “Well, I’m not going to break my mortgage.” I say “Hey, my office is based in the head office of a lawyer’s office, real estate [inaudible 18:11] office. And if you stop the next 10 people at the door who just signed their paperwork today and said “Any chance you’re going to break a mortgage in the next 5 years?” 10 out of 10 will say “No way, not me” and 6 of them will be wrong.

Adam:             Right. So when should a potential buyer actually contact you then? Like in what stage of the process?

Dustan:           … thinking about buying something.

Adam:             Okay.

Dustan:           And I usually suggest to clients – pardon me, I shouldn’t say suggest but then I’m finding more and more clients who are calling me before they’ve actually even spoken with a realtor, certainly the majority of realtors want their client to get pre-approved before they start taking the low-insurement properties because then ultimately you really want to know how much mortgage money you qualify for, what those payments look like. And really, a pre-approval is something like – there’s different degrees of pre-approval. With our clients we always like to pull out a current credit report. It does not have that big of an impact on somebody’s credit score as they might think. It’s a very, very worthwhile step. Nothing like going and looking at 40 or 50 homes, finding the right one, dealing in the environmental end with multiple offers, winning the bid, you’ve got to place and then your credit gets pulled up.

And true story a phenomenal client 11 on paid parking tickets. And how could this be? I mean this is a very successful businessman, just a wonderful applicant in every way. How did he have 11 on paying parking tickets? Well, he had them because his son was doing a wonderful job of getting up first in every morning and running down to the mailbox and getting the mail every morning for them and plucking out all the parking tickets that he had gotten in dad’s car.

Matt:               Oh, no.

Dustan:           Yeah. Now we fixed that. We actually solved that problem, primarily because there is a long completion date. You had about 90 days to complete the purchase so that gave us time to fix the credit report and deal with the parking tickets. But like I said, it’s those little things that you’re not expecting, you really want to get that ahead and have a detailed approval. So same thing with getting a complete documents package and reviewing all those documents and in advance and writing an offer for a client just to make sure the little things are addressed.

Adam:             Sorry to interrupt. I was just going to say so getting a pre-approval means that you’re basically getting the paperwork together?

Dustan:           A true pre-approval would involve – you submitting pay stubs, recent notice on assessment that can [inaudible 21:07] low taxes on-going, absolutely.

Adam:             Okay. And what about rate holds?

Dustan:           Well, that’s kind of the key word that people confuse of pre-approval. Oh, I’ve been in my branch and I’m pre-approved. Well, did they pull up a credit report? No. Did they ask for any documents? No. So they took your word for everything. Punched it in, told you how much money you qualified for and have put a [inaudible 21:35] in. Did you explain to them what area in town you were looking for properties? Well, not exactly. Did you put in – like do you know how much they put in for property tax and strata fee? No, I’m not sure.

And a lot of times, representatives will do a pre-approval and forget to put property tax or strata fees and that’s very important. I mean in Pitt Meadows property taxes are extremely high. And the property taxes can actually cut your mortgage approval back by $15,000 and same thing when you get into certain stratas. You know, in the good old days strata fees were typically a $150. There’s lots of buildings out there now with 300, 400, 500 dollar amount strata fees. And the simple math, every $100 a month worth of strata fee cancels out $25,000 worth of mortgage money. Detail, detail, detail, you really want to get right into all of those things.

Matt:               So if in this market obviously we’ve spoken quite a bit about this. A lot of people are going in subject-free. It’s just the niche or the market right now it’s so competitive. If you’re pre-approved, does that mean you have carte blanche to go in subject-free?

Dustan:           Not at all. And in our office on average we’re dealing with 1 or 2 clients a month, more some months who have gone to the branch, have been told they’re pre-approved for X dollar amount, gone out written an offer on a property subject-free, then gone back into that lender and have been told “No, sorry. You don’t qualify.” And it’s either property taxes, strata fees that have kicked in and created a variation. It’s a wrinkle in their credit report. It’s a variation in their income that they didn’t disclose like I won’t get into detail there but there are variations that matter there. Or it’s something to do with the property. And it’s probably the biggest thing that we see is clients don’t understand that they can be platinum plated. The lender wants to give them the money but the property matters as well.

And so there’s any number of things that can arise in a property disclosure statement. You know detached houses, one of the more common ones we see is vermiculite insulation, aluminum wiring. You know, asbestos in the property. Like any of those things will basically cause the lender to reject the application. It’s not about whether you’re going to fix it once you buy it. It’s not about what will be, it’s all about what is. So if that property contains those things right now, the lender will not lend on it. Period, the end.

And if you’re on a subject-free contract, the seller’s not going to bother to stem the money to fix things. The seller may not even give you access to the property to fix those things. You may not have budgeted to remedy those things because some of those things are potentially tens of thousands of dollars to remedy. So they say the property really matters.

And of course in the case of strata properties, it’s all about that form B. Is there pending litigation? Is the property undergoing a major renovation? And of course any time the word membrane, water or leak appears in the property disclosure statement of the strata property, you’ve got problems.

Adam:             Yeah, you know what? There was a story not long ago about a client who removed subjects on a downtown condo that had been rain screened and the scaffolding was all but down except for they didn’t have the certificate of completion yet. And that was a major issue when they went – when actually the lender that they thought they were good with rejected them and they had to scramble which is obviously a very stressful situation to be in.

Dustan:           Yeah, I mean I know, I’m down basically to one lender that I can send the strata property to that does not have a certificate of completion for work that is underway. One lender.

Adam:             Wow.

Dustan:           Out of you know, thirty plus. The rest of them no chance to finance that property.

Matt:               So we’re in a situation here where buyers in some cases almost have to go subject-free to be competitive. So what are the steps basically to write a subject-free offer? Something that’s not conditional based on financing?

Dustan:           Well, it’s a secret recipe. And any client that takes this recipe and calls the broker or their banker may get told no, that can’t be done. It can be done but only a certain number of times before it can’t be done. And so typically what you’re seeing is the property hits the MLS, Wednesday, Thursday, Friday, they’ve got showings Saturday, Sunday, they allow for inspections on Monday and they’re accepting offers Tuesday night.

That’s what seems to be the rhythm that we’ve gotten into and that’s a great rhythm from a broker’s perspective. Because that gives me a heads-up on Thursday, Friday that they’re interested in the property. So I’ll pull the MLS up, the actual property tax, the actual strata fees that’s applicable and I can say yeah, we’re in the zone, the numbers work, now ask for the property disclosure statement. Get that for us. And again a lot of listing agents are really on the ball now and so we’ve got property disclosure statements, strata form B’s, AGM minutes, like all of those documents are available and ready to go. And frankly they need to be. Like you don’t go subject-free on a property that you don’t have AGM minutes and a form B for because anything could be lurking in those documents.

And if they review it on the weekend and it looks like yeah, we’re going to go on this property then I will take their maximum price, build the whole file up, I’ve got all their documents, job letter, pay stub, notice assessment, I’ve got the property disclosure statement, I’ve got every document except an accepted offer.

And I can submit that entire package to a lender for review on approval Monday morning and get an approval back on Monday afternoon. So technically they’re done.

Adam:             So their financing is sort of before they write the offer essentially.

Dustan:           Exactly.

Matt:               How do we deal with the other thing that I’m seeing a lot which is the appraisal that comes in after the accepted offer or after the purchase if somebody goes in subject-free?

Dustan:           Well, normally I’m advising to make sure we’ve got a condition on appraisal but a provision allowing access for an appraiser.

Matt:               Right.

Dustan:           Because the appraisal matters. Now a lot of times if it’s an owner-occupied purchase under 750,000 an appraisal won’t be triggered. If it’s over 750, an appraisal will be triggered 100% of the time in my experience. And if it’s in a strata older than 8 years typically an appraisal gets triggered.

And those are instances where 20% down or greater is in play and high ratio financing in which we’re putting less than 20% down, which of course you can only go to a maximum purchase price of one penny less than one million dollars with less than 20% down. You may not [inaudible 30:00] the appraisal in those instances although the insurers are ordering their own appraisals. And so it’s not a guarantee that just because they’re putting less than 20% down an appraisal won’t be required. It very well could be required and the insurers are slow-moving. So it could be 3 or 4 days later when you’re suddenly being triggered to look at conditions for an appraisal.

So it’s very important when you’re going in subject-free that you still have a clause in there allowing access for an appraiser. Technically the seller doesn’t have to give you access after you’ve got your contract in place, right?

Adam:             Well, here’s a scenario. So what if somebody writes say the property is listed at 599, there’s 7 or 8 offers and somebody offers 700,000, the appraisal comes in at 675. What kind of situation are we dealing with there?

Dustan:           Luckily that’s a somewhat rare situation. [inaudible 31:00] seem to be staying on top of market values. There’s enough activity, there were 3 or 4 other units within a block or two that also sold at a similar price within the last few weeks. But the appraiser has comparables. You’ve always got to be concerned that you’re setting a new high water mark. You are breaking new ground and you are paying a new elevated premium for the property. And in the example you just gave the appraisal comes in at 675, the contract says 700, what’s happening there? Well, that client is going to have to come up with $25,000 cash into their down payment.

So again subject-free offers have limited resources i. e. 5% down you’ve got to be very, very cautious. You want to know they’ve got backup resources because they don’t have an extra $25,000 to put down potentially. And clients just hitting 20%, you’ve got to have that conversation with them, too because if they’re coming up $25,000 short not hitting 20%, now they’re triggering a CMAC mortgage premium, their amortization is no longer 30, it’s 25 years. And the qualification criteria [inaudible 32:22] completely.

And so it is a valid concern – as I say, fortunately it’s something that we don’t really come across very often. Out of over 200 files last year – pardon me, about 140 purchases that were done last year the appraisal came in below purchase price I believe 2 out of 140.

Adam:             Wow.

Dustan:           And that is a small margin, it’s like 6 or 7 thousand dollars. The other one was more serious. It was a 6 figure gap that had to be bridged. Luckily it was a client with the abilities to bridge that gap and the desire to bridge that gap.

Matt:               Right. Okay.

Adam:             Okay, so we will switch gears a little bit here. In your blog posts you talk about how the mortgage market is always changing and you outline a couple of different ways that it’s changing. One is government policy that seems to get the most media attention. And I was curious to hear your thoughts on the new liberal governments attempt to call the real estate market here in Vancouver and also in Toronto by changing the requirements between financing from $500,000 to a million. And then just to – you know, Adam and I definitely have opinion how that’s impacted the market here but considering February 15th is the day the change takes place, I was wondering how you think that’s going to impact the market?

Dustan:           Well, you know what? Before I answer that question, let me touch on one other thing as far as guidelines and policy changes that sort of tie into an earlier answer I gave you and that’s that lenders often create their internal guidelines and policies. And a number of lenders now will not review a [inaudible 34:24] without a complete and accepted contract in their hands.

So that little recipe I gave you for going subject-free it works with fewer and fewer lenders because they’re trying their own efficiencies, they don’t want to be underwriting a file for 11 different people who are all bidding on the same property. They don’t have the time for that either.

Everybody in this business is pressed for time just because of the non-stop increase in volumes, month over month in every month we hear new higher water mark over and above that’s above average consistently. So there are lots of little policies that aren’t announced.

As far as the bigger ones that are, the liberal government is certainly under some pressure. I mean I think all levels of government, I mean municipal, provincial and federal are under some pressure to try and take steps to cool the market. And I think they’re trying to do things that optically look like prudent steps but aren’t actually going to have significant material impacts on the market because the majority of Canadians are home owners and the majority of home owners are [inaudible 35:44]. And the majority of home owners really don’t want to see 20%, 30%, 40%, 50% of the value wiped out of their home through some new government regulation.

And when I’m asked what the biggest danger to the real estate market is, I always say government over-regulation.

You know, the market itself, that’s probably the single biggest danger for existing home owners as far as their value goes is some kind of government regulation that negatively impacts that. And so to that end the increase in down payment between $500,000 and a million dollars that plays really well across the country. The broad voter base will support that because really who is that really impacting? It’s impacting Toronto and Vancouver and to a lesser extent Calgary.

So it’s impacting three cities in the entire country. So the national voter base can say yeah, I mean who needs to live in a house between 500 and a million and you should be putting more than 5% down when you’re buying that home? That’s easy for them to say outside of the market.

Of course we’re on the front lines inside this market and we see that applicants actually have very strong incomes. They have excellent credits. And frankly saving up $50,000 plus other expenses, arguably saving up 60, $65,000 to put 5% down on a million dollar purchase takes some discipline. I mean that takes generally discipline for an individual to do that. But the government has taken these steps to increase the down payment but again it’s a sliding scale increase so it’s a very graduated increase. And presumably for purchases at the higher end of the market will be able to access the additional money. I believe the metrics I’ve seen it will impact somewhere between 2% and 4% of clients overall.

Matt:               Right, right. So your general impression is the market, you know, February 15th there’s not going to be a big change, a cooling.

Dustan:           Yeah, that’s not for people to – there’s a level and I’m not one of them. But that bit of legislation is certainly not going to be the pin prick that bursts the perceived bubble.

Matt:               Yeah I mean Adam and I work with a lot of people, too that are looking in that large bracket between $500,000 and a million and there’s very few of them that at least that we come across I think or at least that I come across that aren’t putting down 10%.

Adam:             Yeah, 10% at least and a lot of people obviously are putting down 20% to avoid the CMHC, right?

Dustan:           Yeah I mean people have to keep in mind we’re in the cusp of the greatest [inaudible 39:00] transfer in history. You know, the current grandparents and parents or great grandparents, grandparents and parents for the most part they are of this generation, the wealthiest mass populous ever in history. And there’s an awful lot of people, especially in Vancouver, I mean my own grandmother, she moved out of her home, I mean it has risen well over a million dollars in value. And she was 101 so it wasn’t an amazing sharp increase per se but she is still living in a home quiet comfortably now thanks to that increase in wealth.

Adam:             Wow.

Dustan:           And so for her to say hey, grandkids, great grandkids, let me help you with the down payments, she would be in a position to do that, right?

Matt:               Exactly.

Adam:             A quick question: how old is she now?

Dustan:           She is 102 now.

Adam:             Oh good. I thought we were talking a decade ago maybe.

Dustan:           No, actually there is another little myth that we can bust while we’re thinking here. So the myth of downsizing. All due respect to David Foot and his book Boom Bust & Echo that talked about the suburban ghettoes and Mcmansions that would [inaudible 40:27] all pennies on the dollar – people don’t want to leave their homes. My parents are in their seventies, they’ve been looking at moving for 15 years. Haven’t pulled the trigger yet. But probably will live for another 15 and then maybe they’ll do something. But yeah my one grandmother downsized at 101, my other grandmother she downsized as well at the age of 84.

So sure, I guess people will downsize but not until they really, really are forced to.

Adam:             Exactly. Well, you’ve got good genetics anyways.

Dustan:           Yeah well, certainly the ladies in our family do that’s for sure.

Adam:             So Dustan, how can people reach you?

Dustan:           To be honest with you as far as clients go I work by referral only.

Adam:             Okay.

Dustan:           So they can reach me through you guys.

Adam:             Excellent.

Dustan:           But no, I mean certainly I have a website and it’s you type Dustan Woodhouse into Google. There’s 15 different ways to contact me whether it’s LinkedIn, the website, etc.

Adam:             Perfect.

Dustan:           And my email address and phone number are on my website. I’m not a hard guy to track down but as I said I pretty well strictly work with clients who’ve been referred to me.

Adam:             Excellent. Well, thanks a lot for your time and yeah, it was excellent.

Matt:               Yeah, thanks Dustan. Appreciate the time.

Dustan:           Absolutely. I appreciate the opportunity guys, thank you.

Adam:             Okay, take care.

Matt:               So there you have it.

Adam:             Yeah, that was very informative.

Matt:               I learned a lot. And hopefully some of the listeners did as well.

Adam:             Anyways, if you have any questions or concerns for us, please do contact – where can people reach you Matt?

Matt:               You can give me a shout at 778-847-2854 or at matt@scalenarealestate.com

Adam:            Or you can reach me at 778-866-4574 or at adam@scalenarealestate.com. If you enjoyed today’s show, please do us a favor and go to iTunes and rate us and also subscribe. We’re going to have a lot of interesting episodes coming up focused on the city of Vancouver and real estate in Vancouver in general. And hopefully a lot to look forward to.

Matt:               Yeah.

Adam:            So tune in next time and thanks for listening.

Outro:             This has been the Vancouver real estate podcast with Adam and Matt Scalena. Contact us anytime at 778-866-4574 or 778-847-2854 or online at www.scalenarealestate.com

Subscribe today!