Who Takes What Risks in the Canmore Real Estate Market?

Anyone participating in a free market takes risks – and this is true when it comes to Canmore real estate. Whether it’s investment products, securities or even buyers and sellers in typical consumer markets, different parties take different risks. Even walking out your door to participate in a market is a risk!

As a professional extremely interested in market dynamics, this is something I love to consider. If you ask any of my clients, you’ll find they are quick to describe me as someone who likes to look at a situation from all angles. Providing my clients with key information about a transaction gives them knowledge that helps them achieve the best outcome for their goals. Real estate deals can be a lot like chess; we need to ensure we’re always thinking a few steps ahead of our competition.

As always, this article is for informational purposes only, and should not be construed as specific real estate or investment advice. If you have questions about a certain property or want to know more about buying or selling in Canmore, please feel free to contact me directly. I’m always available via text, call or email!

Today, let’s look at:

• What kinds of risk are there in real estate?
• What risks do Buyers take in Canmore?
• Protecting yourself as a Buyer
• What risks to Sellers take in Canmore?
• Protecting yourself as a Seller
• Conditional Offers
• The truth about Market Risks

What Kinds of Risk are there in Real Estate?

Everyone will have a risk tolerance that is completely their own. For some people, they consider big picture risks when making a purchase. Could this property be affected by a landslide, or forest fire? What would happen to its value if areas around it were redeveloped? Obviously the scope of risk as it relates to real estate is a far bigger discussion than we could have in a short article.

When it comes to the property itself, risks that may affect the perceived value of a property include but are not limited to:

Macro Risks

These risks include things relating to world geopolitics and international migration, to national and provincial economics and climate change.

Local Risks

These risks include things like municipal government actions, zoning changes, community developments, and the local economy. They could also include specific things like neighbourhoods and regional weather patterns.

Property Specific Risks

These risks include the age and build quality of the building, materials, the intended use of the property, potential issues with tenants or differences in value perceptions.

Real Estate Transaction and Market Risks

This will be the main focus of our article today. Much of the risks noted above are beyond the control of a market participant, or are known at the time of making a decision to buy or sell in a market. In most cases, the factors noted above are often the reasons why people choose to engage in a transaction for real estate.

Often the factors that make a property desirable to Buy also make them desirable to Sell. Market price improvements entice sellers to list, while the presence of strong values incentivizes buyers to participate. The truth is, it can never be both a good time to buy and a good time to sell. In my opinion – most gains in real estate come from strong rents, upgrading uses, or from changing markets or market segments to crystallize your gain.

Having a great home that you love and enjoy is a priceless thing that should not be undervalued – though it may not necessarily make it a sound investment. Regardless of your opinion on markets or a home as an investment (at all), there are risks that Buyers and Sellers take in real estate transactions.

You have an unlimited number of “swings” before the perfect property comes up. It may not seem like it, but you really do.

What Risks do Buyers Take in the Canmore Real Estate Market?

Typically in a tight marketplace, Buyers can be at a disadvantage to Sellers. Well – it can feel that way, at least. The thing about being a buyer though, is that you are never tied to specific property. This means a lot of things:

• You have an unlimited number of “swings” before the perfect property comes up. It may not seem like it, but you really do.
• You have no hard risks tied to the marketplace as you don’t own a piece of it yet. If things fall apart tomorrow – that isn’t your problem! You can put your money into literally anything, anywhere.
• You have multiple property choices that could all lead to positive outcomes. Sellers don’t.
• With the right agent, you will always be able to make a conditional offer. This transfers risk to the Seller, which we will discuss below.

The main risk a buyer takes is in choosing not to act. If you don’t act on an opportunity, it could disappear forever. That doesn’t mean you lose out completely – as more opportunities will always come up on any timeline (and yours is unlimited). So not acting isn’t necessarily a bad thing. Other risks for buyers can include:

• Paying too much.
• Unfavourable terms.
• Buying the wrong property for your needs.

Protecting Yourself as a Buyer in Canmore

The best way to protect yourself as a Buyer in the Canmore real estate market is to work with your own real estate agent. Any agent representing a Seller has a fiduciary obligation to act only in their best interests. This means you would be treated as a customer to them; the Seller is their client.

Sellers look at the Buyer risks above, and see them as an advantage. Think about it: you’re in a buyer in a hot market, and the “perfect” property comes up. Supply is low, and this property looks exceptionally good. The cost may be high, and competition is steep, but if you miss this opportunity now, you may never ever see something like this again.

All of these things could be true – but you shouldn’t let them make you take risks in terms of price, terms or suitability. A good agent who is working for you (and only you), will never encourage you to sacrifice these key elements of a deal in exchange for an expedient outcome. Unless – and this is important – you’re confident in doing so and you make that clear.

To the average person in Canada in the past decade or so, the main risk in real estate seems to be not owning any.

What Risks do Sellers Take in the Canmore Real Estate Market?

To the average person in Canada in the past decade or so, the main risk in real estate seems to be not owning any. There is a perception that Sellers have only seen massive and sometimes unjustified gains, with some markets seeming to defy gravity. All one needs to do is simply put a sign on the lawn, and watch the Buyers line up to pay your price. Right?!

The truth is, while it can sometimes work out this way, selling can be a difficult process that can leave a bad taste in your mouth if done poorly. Some of the risks sellers have are:

• Skin in the game. You own a piece of the market – so if it goes down, you go down. Prices can go down as well as go up.
• You are tied to one property, and only desire one outcome – for that single property to sell. Options are limited.
• Time isn’t on your side. You may have goals that can’t wait, and the longer you are on the market with a property you don’t want – the more likely you could be stuck with it.
• You don’t know what Buyers are out there or what their intentions are. Same goes with other Sellers.
• Conditional offers are a bitter pill – they hamstring you to one buyer, but are a necessary evil if you want to sell.

Assuming a property is priced well, the main risk a Seller takes is also choosing not to act. Should you take a lower offer now, or wait for a higher offer that may never come? You could be:

• Selling too soon. What if values are about to go up?
• Selling too low. Are you giving it away?
• Selling too high. Are you wasting your time?
• Going under contract to the wrong buyer.

Protecting Yourself as a Seller in Canmore

When I represent a Seller, my focus is on achieving the highest sale price possible along with the most favourable terms for the Seller. Period. Working personally with a Seller to handle every aspect of their listing ensures a lot of the risk is stripped out. Buyers won’t know anything about you; all we can do is push the risks on to their plate by ensuring the Sellers property is as enticing and competitive as possible, coaxing buyers to take the risk to buy it – ideally on very favourable terms.

More often than not, a bird in the hand is better than two in the bush. The best offer is usually the first one – but that doesn’t mean you need to accept it outright. A good agent will help you to shape even a good offer into a great one, by negotiating everywhere you can – be it on price or otherwise. Its always important to work with the offer you have in front of you, though.

Conditional Offers – Buyers and Sellers

When a Buyer makes a conditional offer, they provide the Seller a price that may be acceptable – but with strings attached. Proceeding with the contract is contingent on the Buyer fulfilling specific conditions. Conditions always provide an escape route for a Buyer, because they can be subjective to the Buyer and provide them with a chance to leave unscathed. It costs a Buyer nothing to make a conditional offer in most cases, deposits are refundable, and they could make offers on multiple properties at the same time.

When a Seller accepts a conditional offer, they take on more of the risk in the transaction. They promise their contracted Buyer first choice to their property, for a specified amount of time, with little or no strings attached. The longer the condition period, the more time the Seller risks as they turn other potential buyers away from their property. The more time that passes, the higher the risk for the Seller in the marketplace. Ultimately the Seller can’t know the mindset of the Buyer, or their willingness to proceed, until the time is up.

In any reasonable market, for a large purchase such as a property – most offers will have conditions. Financing takes time, inspections protect both Buyer and Seller, and due diligence is always the best strategy. Even if you Sell into a frenzied market – you don’t want to turn around and Buy right back into the same mayhem.

The Truth About Market Risks

The real truth about market risks is that the are always unknown. This is true for Canmore real estate market risks as well as risks in other markets, too. Sure – you could get a great price on your property. But something unforeseen could cause the value to double overnight… right after you sold. The same thing could be true in the other direction – no matter how hard you research, battle and push to buy the perfect property – a nasty neighbour could move in, or the global economy could sour.

Ultimately a property will only be worth what a Buyer will pay, and what a Seller would accept. Buyers and Sellers must both give and take to reach an agreement that ideally offers a win-win situation where everyone gets most of what they want.

Taking a hard look at the risks you’re truly taking in the marketplace is important to making critical decisions. Working with a great Canmore real estate agent can help to make sense of where you stand. Again, I’m always here to help with any questions you may have. And when it comes to my own risk tolerance: Well, I don’t even like to drive at night, personally.

Cheers!