My Best Advice For Buyers Right Now
March 26, 2021
If you’re a buyer in today’s market, the most important advice I can give you is to stay positive and have patience. Many buyers compete in a number of “bidding wars” before they finally make a purchase. And just when you think you’ve fallen in love with a property, if you don’t get it, the fall can be pretty tough BUT know that there will always be another one that comes along. You just have to be patient.
Right now, some properties are selling within hours of being listed.
The stagnant condo market from the fall is gangbusters right now. Six months ago, if I told you I had buyers who couldn’t find a one bedroom plus den condo with a budget of $700K, you would have thought I was misguided.
Recently, a condo with parking included hit the market listed in the low $600s, which my spider sense told me was a little low. It went live on a Sunday morning and resulted in four offers being registered within hours. I had a client bid on the property and they were pretty close to getting it, but, they were out bid. The unit sold within less than 12 hours of actually hitting the market with a total of 5 offers in the end.
Another of my buyers is looking for a studio or small one bedroom unit. One condo we recently saw was going for a loft-style aesthetic, but ultimately felt rough around the edges and unfinished. The property was priced at $399K (a low price sure to get attention) and scheduled an offer date. However, there was a pre-emptive (bully) offer which resulted in five additional offers and a sale that was approximately 20% higher than asking.
But it’s not just the condo market…
I was listening to a podcast hosted by two financial advisors from the US who were astonished that properties in New York City were selling for $50K over asking and I had to laugh.
Recent examples of property sales in Toronto include a house in South Riverdale which was recently listed for $1.2M and sold for $1.8M. Another property was listed for $2.4M and sold for $3.2M. The prices are astounding, but this may just be what the market will bear. One must treat “list price” as a guide, understanding it’s used as a marketing tool and is generally no indication of sale price.
Many buyers feel it’s difficult to navigate this market. It appears frenzied and buyers are bidding as if money doesn’t matter. Some may even feel there is a sense of desperation in terms of getting a house.
It’s frustrating for buyers to see these types of prices because they aren’t based on past sales but they do set a new precedent. One explanation is that buyers feel a sense of urgency to the market because prices have risen so quickly. In some cases, FOMO (fear of missing out) has taken hold. Whatever the reason may be, there’s a pent-up demand and with both inventory and mortgage rates impossibly low, this creates a perfect storm for sellers.
I read recently that the average home price is expected to reach over $3 million dollars as of 2030. The big question is – how and when will this end? I’m hopeful that more homes will come onto the market this spring. I’m seeing more selection coming to the market as the weather improves and we get further into spring. More inventory should calm the frenzy feel a little. Few pundits believe the market can sustain itself at the current level of growth and activity.
Interestingly, I have a number of buyers with healthy budgets, and not surprisingly, as the price points keep rising they are rightfully wondering if they’ll ever get into the market. It’s one thing for a property to sell for $100K or even $200K above asking, but when a home goes for $600K above asking, that’s a tough pill to swallow.
For those buyers with past experience in buying and selling it’s even tougher to accept the level the market is at; one has to accept that the market is what it is now. It doesn’t matter what happened in the past – to be successful in this market, you have to accept that you’re going to be competing, you have to accept that prices are well beyond what one could ever have imagined them to be and you can’t live in the past. Chances are we won’t be going back to where we’ve come from.
Most buyers I’m working with are having to revisit conversations with their mortgage brokers about whether they can afford a little more. Current budgets are already generous but most often, simply not enough for this current market and I don’t think prices are going to go down.
Frustratingly, the underpricing of properties well below what everybody knows it’ll sell for makes things even more challenging. Our current market allows for the strategy of the seller setting a date to review any offers from interested parties BUT it’s become common place to announce the seller has received a pre-emptive or bully offer, which means that if you’ve seen the property and are considering making an offer, you now have to make a much faster decision and scramble to get an offer in.
Buyers have to manage both the stress of buying a home (often your first), the stress of dealing with multiple bids, and making decisions very quickly should a pre-emptive offer be registered for the property you love.
Please know, none of this is meant to talk people out of the market, but you have to set reasonable expectations and know how the market works. Having patience, tolerating the stressful bumps and knowing that there will always be another home that is meant for you helps keep everything in perspective and certainly helps ward off the inevitable “buyer fatigue”
… and it always helps to have an experienced realtor on your side to help guide you. ?