September 14, 2016 | Advice for Buyers
Guess what’s lighting up like a pinball machine with fireworks? You got it. The Toronto real estate market. Up, up we go again this Fall like the Spring market of this year and the Spring and Fall markets of several years before. Perhaps you’ve heard? There is low inventory, bidding wars, bully offers, and incredible price appreciation. Enough to make buyers hang their weary heads in their hands and weep, especially if they want a house or a unique condo unit in a high demand neighbourhood. Well, chin up! It’s not easy, but there are ways to buy a competitive property in a tough Toronto market.
It can be quite discouraging if you are on the buyer side of things. Not too long ago, it was just houses that were having bidding wars and eye-popping price appreciates, but it seems that the competitive spirit has spread to many condos of all shapes and sizes in or near Toronto’s downtown. Not only that, but the number of competitive neighbourhoods are greater than ever.
So, let’s look at important tips buyers can keep in mind to make them better buyers.
1. Don’t Fall for the List Price. This is a big one. All buyers will have a certain limit that they would like to spend on a property based their lending institution’s assessment of what he/she/they could afford or based on how much buyer(s) are comfortable spending. The problem is that many buyers will begin their research by logging into realtor.ca, and make a common mistake. If, for example, a buyer has a limit like $800,000, she will search for properties that are listed for $800,000 or less. This would seem to be a logical approach. You have a maximum price you would like to pay, and you type that price into the maximum list price so you don’t search for properties that are not over $800,000.
This is the classic buyer mistake. The buyer has assumed that the list price will be the sold price. Very often in this current Toronto market, it is not. Some recent listings I have come across in the past few weeks were listed at $699,900 and $799,000 respectively. The first one sold for $921,000. The second for over a million.
The list to sold price difference is not always so large, but it happens more often than you think. So, what do you do? See #2
2. Review the Sold Prices in the Area. Different neighbourhoods have different cultures of selling properties. Some will hold back offers and expect higher than the list price. Others will price high and take a slightly lower price, though this is unusual in the current market. Whatever price a property is listed, it is rare that a house will sell exactly at list price. So, base your searches on the sold prices, not the list prices. And make sure your real estate salesperson looks for comparable properties. It should be a similar size, number of bedrooms, state of renovation, and a very recent sold. And with that said…
3. Sold Prices That Are Not Recent Are of No Value. If your bestie bought in a building or a given neighbourhood last year, don’t expect the pay the same price for a similar property. Time has a way of changing prices fast, particularly with the appreciations we’ve seen in Toronto in the last year. Even going back two months may require that you consider how prices have changed in that period.
4. Be Prepared for Clean Offers. If you feel that you are going to be in competition with other buyers, the seller will likely have expectations of a clean offer. A clean offer is an offer on the property with no conditions. This is not something to be handled lightly! If you want to present a clean offer you have to make sure you have your ducks lined up. Make sure your financial institution will cover your mortgage (or more) at the offer price before you go in. If you’re buying a house, you should do or review a home inspection from a reputable home inspector. For condos though, never do a clean offer. Your offer should always include a condition for your lawyer to review the status certificate to a make sure the finances of your condo corporation are something you can feel good about.
5. Use a Good Real Estate Salesperson. Sure, this sounds like a big lead-up to pick me as your real estate salesperson, but even if choose someone else, it is wise to make sure your real estate agent has some experience buying properties in a competitive market. You have to have some experience winning bidding wars and getting those coveted properties. You need someone who will tell you that this home is not worth it. You need a professional’s experience to work out good strategies or else you will keep on stepping up to the plate and striking out.
Not all properties will be competitive. If you are a buyer who can put on your potential goggles, then you are better off than 90% of most buyers. There are some hidden gems out there, but you may need a renovation budget and a little vision. Still, if those hidden gems are in a high demand neighbourhood, there’s a good chance you’ll still run into competition.
If you’re planning on buying this Fall, armor up and have a strategy for war! Maybe you won’t win every bidding war you enter, but by following the above tips, you’ll have a much better chance of landing something you really like sooner.
If you have any battle stories of your own or tips from a buyer’s perspective, please feel free to share!