March 23, 2016 | Advice for Buyers, bidding wars, buying a house
Let me start off on a positive note: We’re not Vancouver. Not that Vancouver is not a pretty place or a desirable city in which to live, but our Toronto real estate is more affordable. But let’s be honest. Prices of Toronto properties have gone up, and if you want to buy a house, they have gone up more than condos have. Even if you want to ditch your city life and head to the suburbs, prices have gone up there too. Bidding wars are more and more common beyond the city limits. Could these crazy price appreciations year after year for houses go on here forever? Probably not.
There are, however, some fundamental things to keep in mind. They don’t build very many houses in Toronto any longer. Density is the name of the game here for city planner and for developers. So, new low density houses are not encouraged here very often, and they are not as profitable as high density housing for developers. The city may cap the number of stories on new developments on major boulevards, but they are still very likely to be condos. Condo apartments will continue to be the construction style of choice. So, houses will continue to be in demand even more so in future Toronto.
Still, if you’re just one of those people who want to have your house and live in Toronto, then you may need a bit of a game plan to be buyer ready. Here are some tips to improve your odds of buying a house in our growing city:
- Research Sold Prices, Not List Prices. I see a lot of buyers going through realtor.ca and zolo but looking at the listing price to determine what they can afford. Sadly listing prices don’t mean very much in this day and age. You need to look at recent sold prices. Not sold prices from two years ago or even a year ago. The more recent the sale, the closer that sold price will be to actual market value. If you go too far back in time, you will have sold prices that have already appreciated. A month or two would be perfect.
- Be realistic. It’s best to know your limits right off the top. You have to be clear about what you can afford and how much you are willing to spend on renovations. Houses are not maintenance fee free. They have wildly varying maintenance costs year after year. Often there are more in the first few years of possession if you take over an older home. Know you may need some renovation money off the top. Also, if you are not paying all cash, talk to your mortgage broker to find out just how much you can afford. You may have to do a two step if you don’t have enough money to buy a house. In other words, buy a condo, build equity and possibly buy a house down the road.
- Be Clean As you Can Be. No, I don’t mean you need to shower more often or require a more coco-nutty soap. I am talking about being prepared for multiple offers. If there are ten offers on the table in Toronto, you won’t be able to buy a place if you have a financing condition and a home inspection condition. Think about it from the seller’s perspective. Why would they go for an offer that could fall apart? Now, I don’t think it is ever advisable to go into an offer situation with a clean offer with no conditions if you are not entirely 100% certain you can carry the amount you offer with your bank. You have to do your homework in advance. I would also suggest you do your own home inspection in advance of buying your house. Yes, you could lose out in a house in which you have paid money for an inspection, but you should know the health of your house and what sort of fix up expenses will be required before you remove any home inspection condition.
- Have A Strategy. This will vary depending on if you are interested in a house that is holding back offers or not. Both require different strategies on timing and on how to appeal to the seller beyond price. You need to know when to be tough and when to be kind. Know the Culture of the Neighbourhood and of the Selling Agent. Some neighbourhoods have a culture of listing a property below market value and holding back offers for a week while others price their properties closer to market value or slightly higher and take offers any time. I know it’s been my experience that some agents are notorious for underpricing their listings no matter what neighbourhood they list, sometimes well over 100K under market value. If you can learn a thing or two about the listing agent it may give you an advantage.
- If You Can’t Stand the Heat, Try a Different Kitchen. Some neighbourhoods and houses are incredibly competitive where a given house will bring in several bidders. If feel you can be competitive at this level, then go for it. Let’s take on the competition and smite them! If you feel it’s too much, then you need to put on your potential goggles and try another neighbourhood. It may be wiser to look for a less renovated house that you could make your own. It may be wiser to try out neighbourhoods that are on the upswing instead of the central and popular neighbourhoods that everyone adores. Yes, it may take longer to become a cool part of town, but you will be all the wiser for getting there earlier.
Buying a house in Toronto is not always easy. There is a upside of course! The pain you have obtaining your house will likely pay off down the road. We cannot determine where Toronto’s housing market will go, but we can say with certainty that in a growing city where new houses are rarely built, houses are smart long-term investments.