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Priced Out, Maxed Out: Buying in a Hot Toronto Housing Market

Priced Out, Maxed Out: Buying in a Hot Toronto Housing Market

Author: Tracy Ruddell

Author
Apr 22nd 15

It used to be simple. Buyers with tight budgets looking for deals on houses for sale in Toronto could simply seek out the worst house in the best neighbourhood–providing they had the budget and stomach for a renovation. Now, flippers and end-users alike are competing for even the worst, tear-down and gut-job properties, driving prices of original condition Toronto homes to record-levels. The competition on renovated properties is even fiercer, with bidding wars being the new norm. In short, there’s rarely a deal to be found in today’s Toronto housing market.

So what’s a buyer to do when they find themselves priced out? Keep the Real Estate faith. There are ways to successfully navigate even the toughest of markets starting by finding a Toronto REALTOR® who is highly knowledgeable and has your back. Once you’ve found your REALTOR® match, follow these tips for buying a house in today’s Toronto Real Estate market.

How to Buy in a Red Hot Toronto Real Estate Market

Be Flexible on Neighbourhoods

We all know the old adage: location, location, location. But in today’s market, you can’t always get what you want if what you want is an Annex dream on a Bloor West budget. Even original condition homes in prime neighbourhoods can fetch top dollar, particularly when close to the subway and inside coveted school districts. The bottom line is that you may have to compromise on neighbourhood.

But here’s the good news. As Toronto continues to rapidly develop and gentrify, there are so many up-and-coming pockets that are just blocks away from prime neighbourhoods. Often times, you only have to extend your search by half a dozen streets to get far more bang for your buck. And you can bet that the unofficial borders of your prime neighbour will bleed over towards you in time. Just look at what’s happening in Little India where investors have created the next Leslieville in just a few short years.

East-enders, interested in Leslieville homes for sale but priced out? Check out Upper Beaches homes for sale for close proximity at reduced entry prices. Set on a Riverdale home? Try Pocket homes for sale.

West-enders keen on a house in the Annex but priced out should consider Seaton Village homes for sale and Christie Pits homes for sale. Both neighbourhoods are close to the Annex and offer similar character-filled homes at more reasonable entry prices. If it’s the size and grandeur of Annex homes that has you salivating and you’re willing to go a little further out from the core, check out Dufferin Grove homes for sale and Parkdale homes for sale

There are many more lower-cost, alternative neighbourhoods to prime areas that can make excellent investment and starter ‘hoods. Contact us for more info.

 

Don’t Get Into Bidding Wars Unless You Can Win

Carl Langschmidt, co-founder and CEO of Property.ca, has written on this topic before in the article how to win bidding wars on our sister site MrLOFT.ca.

Here’s the thing about bidding wars–they happen because a property is either incredibly rare or it’s under-listed. Most often, it’s the latter. When REALTORS® under-list, they rarely do so by a small margin. That defeats the point of positioning a house for multiple bids. The more bids, the higher the price gets driven up, and so agents typically under-list a house by at least $50,000 but it can be considerably more at $100k+ under market value.

The problem is, a lot of buyers (getting bad advice from inexperienced agents) think they can get the house by going in $5,000 or $10,000 over or, incredibly, at list price. All this does is drive the price up further. It’s like hands going up at an auction.

Now you may think, so what? It’s better to have tried and lost and have no regrets. If I lose the house, it’s no big deal. I’m not the one paying $100k+ over list. And this is the underlying issue because the next house that goes up for sale in that neighbourhood is going to use this recent sale to set their price, and so on and so forth. You’re shooting yourself in the foot in the long run by contributing to skyrocketing prices across the entire neighbourhood. So don’t bid unless you have a good chance of winning and to know that, you have to do your research in advance and get advice from a realtor who knows that neighbourhood inside and out.

 

Do the Legwork up Front for Low- or No-Condition Offers

This one’s a no-brainer but it’s amazing how many buyers fail to do this - get pre-approved for your mortgage. Mortgage rates are incredibly attractive right now, 2.69% 5-year fixed is fairly standard this month (at time of publishing), but that doesn’t mean it’s easy to get approved. Banks have actually been tightening up on lending policies over the last few years. You don’t want to lose a house because you can’t secure a mortgage nor do you want to lose a bidding war because of a finance condition.

Also, have your down-payment ready to go. It should be accessible immediately and not tied up in investments that take days or weeks to cash out. Many multiple-bid situations now require prospective buyers to submit a cheque with their offer on offer night.

 

Jump on New, No-Hold Listings

No-hold offers are rare in today’s market. Sellers’ realtors tend to hold on offers for at least five days to allow for a high number of viewings and an open house. Offer dates are typically early the following week, designed to drive multiple bids that can be leveraged to drive up the final sales price. More often than not, offer holds are accompanied by a below-market list price designed to drive a bidding war.

The best bet for buyers who find themselves on the losing end of bidding wars is to have their realtor alert them immediately of all new listings within their search parameters that are not holding back offers. We have negotiated many successful purchases for clients by being the first offer out of the gate on the first day of showings. Remember though that you have to be flexible with your time (you’ll want to view the property the first day the listing comes out which is typically a weekday, so that you can wrap up your offer process before the weekend open house).

 

Go for House B on Offer Night

When listings are healthy in number, particularly during the spring market, buyers may find themselves interested in several houses in the same neighbourhood that are all taking offers on the same night. Buyers are then forced to choose between the two which can be heart-breaking if you lose on House A, only to find out you could’ve won House B if the selling price turns out to be below what you would’ve offered.

Your REALTOR® should be liaising with both sellers' agents throughout the afternoon on offer day to see what the competition is like on each of the properties. One of our Property.ca PROs Alexia Lewis recently switched tactics with her client on offer day, pulling out of one house where competition was too steep (they ended up getting over twenty offers), bidding instead on their second choice down the street where they were one of only three bidders. They got the house.

 

Lead image: hot property by Gustavo Frazao from Shutterstock.