Paying 10% more than a property is “worth” is back in high fashion, and this mentality was exemplified with the recent sale on Portland Street in the thriving King West area.

What a property is “worth” is anybody’s guess, but what if a comparable sale was staring you right in the face?

I consider a “buyer’s premium” to be anything paid above what the property should reasonably sell for.

If a property is under-priced by the seller and the seller’s agent and comes onto the market at $199,900 when it “should” sell for $225,000, then a $232,000 sale price would indicate a $7,000 “buyer’s premium.”

I also call this an emotional premium.

It’s hard to pin-point a value of any house or condo in the city, but we can sure come close!

So what do we make of a condo that is “worth” $340,000 selling for $385,000?

It’s pure insanity, in my opinion.

Before you judge, let me give you the backstory…

I detailed my experiences with this unit as part of another post last week, so forgive my redundancy.

Portland Street is located in “FreedVille” where Freed Developments has built half the area and has many more projects scheduled for construction in the not-too-distant future.

It is also in the heart of the thriving King West area between Spadina and Bathurst where all the chic restaurants and bars are located for the 24 – 30 year old crowds to pounce.

Brant House, West, Conviction, Brassai, Bier Market, The Spoke Club, Cheval, and even Blowfish if you feel like walking more than three minutes; are all at your doorstep.

I knew there would be action on this very dressed-up 1-bedroom unit in a 2-year-old building on Portland Street, but never did I think I’d see the complete insanity that plagued our market in 2007.

I mentioned last week how I stood outside the building with my clients one night waiting for another Realtor to come back with the key all while other groups of buyers showed up with their agents in tow.

We ended up seeing the unit with another group, and 2-3 more groups passed us by from the front door, to the elevator, to the lobby.

It was a complete mad-house, and the subsequent insanity should have come as no surprise.

But I’m naive, I suppose, and maybe a bit old fashioned.

I don’t get drawn in my the glitz and glamour of being able to pre-drink at my Portland Street condo before stumbling a block to Brant House with my buddies while my daddy’s Visa burns a hole in my pocket.

And when I see numbers and values staring me right in the face, I use them to make a rational, informed decision.

This unit on Portland Street was listed at $325,000 and immediately became the buzz of the industry.  All my colleagues had shown it; some of them to 2-3 different clients, and every young buyer in the city was sent this listing by their Realtors.

The unit was perhaps a touch over 600 square feet, but it was meticulously staged right down to the color and organization of the bowl of jelly-belly on the counter.

It was a fantastic unit, but my buyers didn’t like the fact that the second-storey balcony overlooked the alley-way below.  With the City of Toronto not picking up garbage and the hot summer heat, it was a pass for my clients.

We did our homework in advance, however, and found that the exact same model unit had sold for $345,000 only a month prior.  This unit was on a higher floor and was facing south, meaning it didn’t look at a garbage-alley from ten feet above.

We determined that since the two units were the same inside, but not the same outside, perhaps the unit currently listed for sale was worth a hair less than the $345,000 asking price.  I told my clients $338,000 but added that there may be a buyer willing to go right up to $345,000 just to ensure he or she gets the place.

My clients are both savvy people and said, “Why would we pay the same $345,000 price for this unit when the other one was substantially better?”

I told them “you wouldn’t, but somebody else might, and probably will.”

Emotion plays a huge part of the purchase process, but none of us were ready for the final selling price.

I ask YOU, the reader, to come up with an idea right now of the “insane” price you think I’m speaking of.

Do the math yourselves – the unit is “worth” slightly less than the exact same model that sold for $345,000 a month earlier because it happens to be on the second floor over looking an alley way behind a row of King Street restaurants.

The unit is “worth” $340,000, but somebody paid more, didn’t they?

Am I talking about $350,000?

How about $360,000?

Wouldn’t that be a gas?  Somebody paying $20,000 more than all rational thought would indicate they should?

Try again.

How about $370,000 then?

No.

This unit sold for a whopping $385,000.

If you’re the guy that just paid $345,000 for the same model one month ago, congratulations – your condo just went up in value to the tune of forty-large.

But if you’re the moron that just paid a $45,000 emotional premium for this condo, please tell me WHY!

This is one circumstance where the old adage, “It’s worth what somebody is willing to pay for it” is completely false.

It’s not worth $385,000, now way, no how.

It simply can’t be worth $385,000 when the same unit just sold for $345,000!

If you are this buyer’s agent – you should be ashamed!  But you won’t be, because you’re an a**hole who sold out his clients for a $9,625 commission…

This buyer got carried away, and simply said, “Screw it,” while throwing all caution to the wind.  Perhaps the buyer had been looking for six months and finally found the “perfect” place to call home, but the price he paid should haunt him for quite some time.

One of the first things I tell my new clients is, “If you have a mental stumbling block about being in competition, you need to get over it right now.”  Because for ever Dick or Jane looking at 1 Shaw Street, 1029 King Street, or 66 Portland Street, there is a Tom, Dick, or Harry looking at the same property with the same gleam in their eyes.

But when absolute INSANITY kicks in, I tell my buyers to walk away.

The price paid for this unit on Portland Street makes me sick to my stomach, and it has nothing to do with those awful ribs left over from Sunday night that I just microwaved and downed with a large glass of milk…

It has to do with the ridiculous price that somebody paid while tearing up the comparable sales and saying, “I’ll pay anything to get this place.”

That’s when you know the market is out of control.

I can’t predict the market – I can only comment on the current conditions.

But if this sort of thing starts to happen with increasing frequency, I’ll be very, very worried as we move ahead…

http://torontorealtyblog.com/2009/07/17/pure-insanity/

reviewed by Moishe Alexander,   CFC  Canadian Funding Corp CEO

• Determined how much each component can be expected to vary in size and position.
• Looked at each step in the order of construction.
• Proposed a change to the standard, but aesthetically unacceptable, tolerances for brickwork.

It remains to revise the detail so that adjustments are available to compensate for extremes at each stage. This will make completion of the detail possible without reducing tolerances for subsequent stages. One possible revision is to adopt the slab edge detail shown in Figure 6. The slab position tolerance is the same as before. The brick position tolerance is plus or minus 5 mm. The shelf angle tolerance is 5 mm in any direction. The steel stud position tolerance is a more reasonable plus or minus 10 mm.
The shelf angle is shown supported on HSS brackets, with coarse adjustment of position provided by selecting an appropriate bracket size from a range of sizes, and positioning each bracket on the slab in relation to the datum floor level, not the local floor level. This brings the shelf angle close enough to make minor adjustments with shims and slotted bolt holes. While this appears more complicated than the typical detail in Figure 3, it is not necessarily more expensive. An angle cast in the slab would have to be heavier, because of the increased moment arm supporting the brick. It would also have to be cut when it projects beyond the brick, and extended when it does not provide enough bearing, and touched up afterward to prevent corrosion. Additional modifications would be needed in the vertical direction, concealed behind a larger flashing. A larger angle, with shims and grout between it and the floor slab is a possible solution. The resulting significant thermal bridge may be seen as an advantage, or disadvantage, depending on climate, location, and design objectives. The cavity would be larger than necessary so that at the bottom where the shelf obstructs it, there would be a minimum of 25 mm to ensure drainage.
When the shelf angle is too far inward by 5 mm, and the brick is too far out by the same amount, there will still be 65 mm of bearing. At the other extreme, the toe of the angle will be 5 mm back from face of brick (on average, it should be 15 mm back). From the preceding discussion, we know that the bed joint indicated should be 13 mm, and that the gap under the shelf angle, if 5 mm of movement is anticipated, should be indicated as at least 15 mm. A larger gap is needed if sealant will be used.
The problem of minimum fastener distance to slab edge is resolved by allowing fasteners to be off the centre of the stud track. The stud tracks should be positioned relative to the same datum used to position the shelf angle. Cumulative errors would result if they were measured from the edge of the slab, or the toe of the shelf angle.
If the studs are at their outward limit where the slab is at the inward limit, the track might hang out beyond the edge of the slab by up to 22 mm. If the fasteners have a 50 mm minimum edge distance they might have to be 75 mm from the outside face of stud, leaving 27 mm clear from the centerline of the fastener to the inside leg of the track. Before deciding that this is acceptable, confirmation is needed that performance will not be impaired by having fasteners consistently off the centre of the track, and that 27 mm is adequate tool clearance for installing the fastener. When they are installed, the fasteners have to be positioned from the slab edge, not the stud track.
The cavity, nominally about 52 mm allowing for bumps in the air barrier, could actually be anywhere from 37 mm (with the studs all the way out and the brick all the way in) to 67 mm. The distance from face of insulation to the middle of the wythe of brick, normally 97 mm, will vary from 82 to 112 mm, a range of 30 mm. Ties fitting this range may not be a standard size. More to the point, because the other halves of the ties won’t be fastened to the studs with perfect accuracy, two sizes of wire insert will have to be available to the mason at the jobsite, so that he can keep the ties bedded in the middle 30 mm of the brick wythe.
The vertical direction for the brick tolerances has already been considered. What about the stud length? If all the studs are precut, allowance is needed for errors in cutting. Consider also the expected structural deflection, plus 20 mm for variation in slab position. If the studs are cut 30 mm shorter than the average floor to ceiling dimension, then a connection is needed (such as clips) that still engages the studs and maintains the required stiffness when the gap from end of stud to underside of slab is 50 mm. The nested track connection shown will require studs to be cutto- fit or selected from an assortment of lengths. Reviewed by Moishe Alexander.

It is not difficult to find:

• brickwork with too little bearing, because the structure was built too far back from the face of the wall;
• modified shelf angles, either burned off at the outer edge, or with structurally inadequate extensions;
• brick cut to make thinner veneer, and insulation omitted altogether, in order to keep a finished wall flat where the structure behind it was too close to the face of the wall;
• precast panels with joints varying in width from zero to more that twice the detailed joint size;
• fasteners for steel stud track that can be removed without tools, because they were placed too close to edge of slab, spalling the concrete.

When gaps are designed into assemblies to provide for structural live and dead load deflections, creep, and differential movement caused by thermal expansion and contraction or moisture, oversized or mispositioned parts may reduce the required gaps. Such problems are not confined to the brick veneer steel stud example. Tolerances need to be considered in the design of all building assemblies.
Builder and designer often share responsibility for these problems. Construction variations commonly exceed established norms. However, applicable codes and standards often explicitly allow variations that details do not accommodate. When there is no formal codification of allowed variation, the common practices of trades involved establish de facto standards. Designers who do not state an alternative implicitly adopt these standards, even if they are unaware of having done so.
The wall cavities measured during a study by CMHC a few years ago, were as much as 17 mm smaller, and as much as 20 mm larger than the dimension indicated in the details. The range from smallest to largest on the same building averaged 19 mm. The difference between the largest and smallest cavities on a building was never less than 10 mm, and in the worst case it was 37 mm. For most construction types, there is not much information available about what levels of accuracy are being achieved. Similar levels of variation do occur in other kinds of construction.
Designers should explicitly determine if the tolerances implied by the relationships between parts and provisions for adjustment in a detail are realistic. If a detail cannot accommodate variation that is acceptable under the applicable standards, by established trade practice, or by tolerances stated in the specifications, what will happen on site? The detail would have to be revised, perhaps at additional cost. Or, the builder may leave some insulation off to make room for the structure to avoid an ugly bulge in the wall. Some brickwork may be left insecure because of inadequate bearing. If the designer allows for adequate tolerances, and the builder meets them, there will be a great reduction of such problems. Reviewed by Martin Lapedus.