Posted June 2017 | Written By David Seigel
For the last two years, along with discovering why Sea Pines has the best real estate we’ve all seen the extensive media coverage about the GTA real estate market and turn key real estate services. We’ve seen 25-50% increases in property value over that time, bidding wars for resale properties, massive lineups and mailing lists for new homes – it seemed like every property available was like a boxing day or black Friday blowout – difference being people were clamouring to pay more rather than less.
Then the end of April came around, and things changed. Some have believed the cooling is due to Premier Kathleen Wynne’s foreign buyer tax (and other aspects of her 16-item plan). All that was supposed to do was remove a small percentage of purchasers from the equation, allowing Ontario residents to avoid bidding wars and be able to have a reasonable shot at obtaining the home of their dreams. But instead, the market seemingly halted. All the media can write about now is the real estate Armageddon that is surely coming.
Everyone take a deep breath. Now let it out.
The Toronto real estate scene is not likely to crash any time soon. It is simply going to level out so that supply and demand balance out, and as outlined above – purchasers will have a better shot at obtaining homes. What it comes down to is understanding how to properly evaluate comparables and the market, and taking your time as opposed to rushing.
Case in point – I personally sold a condo property recently (read here about how to buy a condo). Two other sellers in my building listed before I did in the month of May, after the “cooldown” had begun. They each had units that had 2 bedrooms and 2 bathrooms. Both had agents who didn’t understand the market, nor did they understand how to evaluate comparables. Their agents compared their units ONLY to the units sold in the building previously up to 6 months earlier when the value was far lower. They failed to compare to the 12 other condos within walking distance, where units had more recently sold for much more.
Also read: 2018 Trends In Real Estate.
These agents also failed to evaluate the market. With the cooldown, bidding wars had disappeared. Selling for thousands over asking price was a thing of the past. Listing your unit at a far lower price to get more people in the door was now an outdated tactic. Both of these agents listed their units far too low, and both accepted bully offers (an offer for a certain amount that is only good for a few hours) for between $50,000 and $100,000 less than they should have based on the comparables. These agents got scared by the reduced interest, absence of offers and were too inexperienced to wait it out for the right buyer. Plus, they probably didn’t want to waste time on condos with smaller commissions when bigger houses are out there.
My first reaction was a worried one – had these two destroyed my chance to sell for what I wanted? My agent and I discussed, compared to other recent sales in the area and determined that we needed to list at a higher price that was more in line with the unit’s value. I listed my 2 bedroom, 1 bathroom unit at the beginning of June for $15,000 more than the higher of the two sellers. Within a week, an agent called my agent. They were interested, but asked about the higher price than those two sales. My agent coolly replied “Listen, if you want to build a time machine and go back to two weeks ago and buy one of those units, go ahead – but if you’re looking to purchase now, we’re not letting two desperate sellers diminish the value of this asset that clearly compares to other recent sales in the neighbourhood.” After an honest and reasonable discussion, my agent called and told me they were making an offer a little below our asking price, but above what the other two agents sold their superior units for. I accepted, and my inferior unit set the record for the highest selling price in building history. Other agents and potential sellers in the building thanked us for bringing the proverbial bar back up to where it was meant to be instead of continuing what could have been an ugly downward trend for our building.
My sharing this story is not about my business savvy or me making money. It’s about restoring confidence in a market that people have been questioning for the first time in 5 years due to declining numbers of sales.
My two pieces of advice if you’re looking to buy or sell:
If the market were truly doomed, my story would never have happened. I believe it will continue to be slower over the summer, but will heat up again in September when everyone stops thinking about summer vacation and starts thinking about some great purchase opportunities. It’s simply about working with the right people, doing the research and taking the proper time instead of rushing and making decisions in fear.
Of course, a nice coat of paint doesn’t hurt either.
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