Unsanitary properties | Are these slums worth their price?

Here, a building in an advanced state of disrepair. There, a house invaded by mould. Or even a squat-like triplex… Several properties displaying photos worthy of a horror movie have been circulating a lot on social networks lately. What especially tickles the public: their price sometimes close to a million. Are we taken for hams? We probed the question with real estate professionals.

Sylvain Sarrazin
The Press

“That doesn’t make sense! », « Who would buy that? » and others « Big foolishness! » are as many reactions of the public to the sheets of sale of unsanitary properties posted lately. The contrast with the neighboring luxury condos is indeed violent: filthy kitchen, smashed walls, worm-eaten woodwork, floors covered in mold, shambles… in short, it’s old, it’s dirty, it’s not worth much. To the grimace of disgust joins the heart attack, when the prices of these dwellings are displayed, ranging from $300,000 to $799,000. Scam? Market going haywire?

We asked an appraiser the question after submitting three cases of dilapidated properties, in Montreal and Gatineau, in the Hull sector, that had recently been advertised. “Regarding the asking prices, in these cases, I see nothing abnormal,” replies Simon Beauchemin, chartered appraiser at PCG Carmont. “Often, it strikes the imagination when we show properties that are at the very end of their useful life with high selling prices. But Mr. and Mrs. Everybody or a small family is not going to buy this kind of project, because these are products for which we are looking at the development potential. It’s a different market: it’s aimed here at entrepreneurs and informed investors, who have a different eye than the general public,” he explains. In other words, they are not intended for individuals looking for a “turnkey” home, but rather for professionals looking for “turnkey” projects.

Thus, an investor, rather than fixing his attention on the rotten joints of a bathtub, will rather consider the zoning and its leeway. Will he be able to add a floor? Build or renovate more units? Building on 100% of the land? “You may think that the price is high, but if you maximize the densification on the same site, you get better profitability,” says Mr. Beauchemin, who insists on the value of the land linked to its location.

This is the kind of scenario that occurred in the sale of a triplex in Ville-Marie, whose last occupant seems to have been a furious Godzilla. Put up for sale last fall for $676,500, it was acquired by a contractor a few weeks ago for $580,000. “It was mainly for the potential that he was sold. There is work for $350,000, but once renovated, it should be worth at least 1.2 million,” said broker Thanh Quach Thi, who led the sale. No need for a calculator to imagine the profit. But why the hell leave the place in such a state on the sales sheet? “It’s a sale by the public curator, we couldn’t do anything inside,” she explains.

A moldy price?

This was also the case of a house in Gatineau, invaded by mould, which made the headlines. Uncontrolled water damage has transformed it into a veritable cave of Gollum. Seasoned broker Jimmy Arseneault wanted to list it at $200,000. Since this is a repossession, the bank has set the price at $300,000. “I had comments that I should burn in hell,” laments the broker.

However, he insists on his concern for transparency, presenting the most edifying photos and describing, in an assumed way and with a touch of humor, the target clientele (budding renovators and hammer pros) and the assets of the location, popular. “If I had just put a picture of the facade, as many do, I would have attracted lots of young families. Might as well give the right time. Surely you’ll find it too expensive for you at $300,000, but maybe because it’s not for you. You might have had it for $150,000 in this condition two years ago, but that’s the deal. People did not see him go up, ”he says.

After receiving nine purchase offers, all from contractors, the “moldy house” quickly sold. “They’re going to freak it out and put it back at $600,000 or $650,000,” the broker predicts.

On familiar ground

“Location, location, location”, to use this real estate saying in French. In all the above cases, it is more the value of the land and its location, rather than the decrepit walls, that are worth their weight in gold.

The CMHC has indeed conducted a study on the significant increase in real estate values ​​since the 1990s. Highlight: two-thirds of the increase in the values ​​of single-family homes in the Plateau Mont-Royal stem from that of land, the remaining third being related to the building. He insists, like Mr. Beauchemin, on the search for the maximization of said land, thanks to zoning.

A resounding illustration of this remains this building in poor condition for sale for $799,000 in Mile End, a popular Montreal district. “The land very well located and the possibilities of demolition and renovation, which remain to be confirmed with the municipality, explain its price. There’s a lot of action on it. But you have to know that, and the values ​​on this market, ”says broker Francine Simard.

According to chartered appraiser Simon Beauchemin, this asking price is not outrageous. Her team having carried out a quick analysis, she identified several advantages related to zoning: “Subject to municipal approval, we could establish a commercial ground floor, add an upper floor, and the land is 100% constructible. In Montreal, it becomes a plus for an entrepreneur. »

The appraiser frequently sees this kind of dilapidated property, recounting having once seen a building that he considered too expensive. “The contractor showed me that he was going to quickly renovate vacant units, add a floor and obtain six units with rents at market prices. He thus left quickly to seek a return on his investment. »

Of course, the overheating caused by two years of pandemic and the imbalance between supply and demand came to play a major role in these ever higher prices. The CMHC had warned, last September, of the overheating of the Montreal market and its state of vulnerability. Francis Cortellino, from the CMHC, notes still significant price increases, still-present demand, but a relative decrease in the pace of transactions. “As there is still demand on the market, this may encourage buyers to acquire such properties. He warns against speculative attitudes: “It is a danger to have irrational expectations, thinking that prices can only increase,” he warns.

Chartered appraiser Guillaume Caron didn’t comment on the examples above, but notes that simply selling these properties validates their value: “If it sold, it’s probably worth it. Market value is when the price offered meets the buyer’s perception of value. It’s a good demonstration that probably the market is there,” he said.