How’s the Market?

If you’re buying a house or a condo in the Toronto Real Estate Market, here are some things to consider.

It has been a sellers’ market for many years now. There was a 5 month window of opportunity from October 2008 to February 2009 when we were all wondering about the state of the world’s economy, Toronto’s included. This was an excellent time to buy real estate in Toronto but by the same token, banks and lenders were tightening their borrowing policies.

By the spring of 2009, bidding wars were back for many neighbourhoods in Toronto and even in suburban communities of the GTA.

It is very common for homes and even condos in areas such as Riverdale, The Beach, Leslieville and downtown Toronto to sell with multiple offers. The bidding war process is a blind auction. Buyers are not told what the bids of competing offers are and thus have to make an offer based on their own comfort levels. It is not uncommon for buyers to make several offers before successfully buying a home. If you’re interested in knowing some key steps to making your offer stand out, here are some key points to help you get that home faster.

5 Key Elements to Winning a Bidding War

Conditions in your offer

Typically a buyer would always have conditions in a offer – such as a condition for a satisfactory home inspection. Once an offer was accepted by a seller, then the buyer would proceed to have the property inspected. Assuming a satisfactory home inspection, then the transaction firms up and the deal is done.

In a competing situation, any conditions in an offer should be removed including a condition for financing as well. This could be problematic if the seller has not provided a pre-list home inspection of the property at the time the home was listed. Imagine in the scenario above, 8 competing offers. In theory, there could be 8 separate home inspections all taking place on a Monday afternoon if offers are to be reviewed that night. Crazy to be sure, but I have been in a home where several home inspections were going on at the same time.

·         Get your home inspection completed before the offer if one has not been provided

·         Speak to your mortgage consultant and explain the situation. There could be consequences when over-bidding in a multiple offer situation

Closing Date

Ideally, your closing date should be the one that is desired by the sellers if at all possible.  Often the listing says 60 or 90 days. Which is it? I would always contact the sellers’ agent and ask if there is a specific date preferred.

Deposit Cheque

A deposit cheque is given to the sellers broker and is held in trust by them until the closing date of the transaction.  A deposit is given to show your intention to close the deal. In a bidding war a bigger deposit cheque is always better! Remember that the deposit is part of your down payment and your lawyer will sort all that out on closing. And secondly, try to bring a certified cheque or a bank draft with the offer. 

·         Make sure you bring a certified cheque or bank draft

·         Larger deposits help make your offer more appealing

If you’re a first time buyer and your down payment is tied up in a RRSP account, getting access to the money quickly is a challenge. So to first time buyers, see if you can get the money withdrawn sooner rather than later!

How much do I pay?

This is always the most challenging aspect of any bidding war. How much over the asking price should you pay?  This is challenging because suddenly any comparable listings I use as a reference have no bearing.

It is important to know how many competing offers there are and the sellers’ agent by-law has to provide you with that information. And if at all possible, it would be good to know who the other agents are. This is not required but my own Brokerage –REMAX Hallmark - has set a policy so that everyone knows who is involved in any bidding war.

Some agents suggest that for every offer that is in play- add $10,000 to the purchase price. In the situation above where there were 8 offers, that means $80,000 over the asking on a home listed at $379,900! That would be nuts! Every situation is different and there are no hard and fast rules to deal with this aspect of a bidding war. Experience matters

So in a bidding war, you need to know:

·         How many other offers are in play

·         And who are the other agents involved.

Intangibles

Most homes in Toronto are sold with the appliances and light fixtures included in the purchase price. Sometimes not! In a bidding war situation, if the seller wants to keep a dining room chandelier for instance, then you’re best off to make sure that this chattel excluded.

Sometimes, sellers are selling before they have bought and therefore don’t know their next address and don’t know when they will be moving. In this case, I would add a clause allowing for the closing date to be moved if necessary.

Some of these intangibles can only be determined if I stay in constant contact with the sellers’ agent as they would have some insight into what would make the sellers happy thus making your offer the one that stands out from the crowd!