What's Happening in the Housing Market?

As we transition into the "spring market" many buyers are looking for answers to their questions regarding our market.  Many media outlets prophesied doom and gloom and painted pictures of bubbles bursting throughout 2012 but, since it now appears clear that we're experiencing a soft landing, we're reading stories of confusion.  If I received my market information from the news, I too would believe that Toronto is filled with real estate agents who are just shrugging their shoulders and scratching their heads as they wonder what will happen next.

While none of us own a magic crystal ball, to me, this spring doesn't look too unlike other years.  Perhaps buyers are a little wearier but, as a recent Globe and Mail article points out, there are still homes selling for over asking in multiple offers.  Some condos and overpriced houses are sitting on the market but a recent Toronto Life article reminds us "Realtors are reporting bidding wars for the first time in several months with the interest mostly focused on larger and older condo units, and homes in desirable neighbourhoods with limited housing inventory like the Beach."

Basically, if you are priced reasonably and have something fairly unique that people want, 2013 (at least the beginning) will look similar to 2012.  And what if you don't?  Hire a good agent and price it fairly.  Torontonians (and I'm going to extend this to the burbs) who own homes need to accept that the fast sales and bully offers we noticed last year are very unusual.  If you can sell the average home in 28 days for a good price, that is still an indication of a good seller's market.  We need to adjust our expectations.  Buyers also need to ask their agent what they can honestly afford as we are still seeing some prices which appear artificially low since the seller is unaware that the expectation of crazy bids may not be quite as realistic.

Overall, it usually takes a few months after a shift in the market for buyers and sellers to catch up.  This means a few months for many sellers to begin pricing their homes properly and a few months for buyers to realise the market isn't crashing and decide to actually take the plunge and make an offer.  I think we can look forward to a stable year.

Will a Home Inspection Clause Disqualify my Offer?

Most buyers today generally accept the value of a home inspection.  This is especially true with many of the older homes in some of Toronto's established neighbourhoods.  A recent Huffington Post article reminds us of some of the areas an inspector typically examines and there are many sub-areas of specialty including termites and old wiring.

For between $300 and $500 on average, buyers can have an expert set of eyes examine their prospective home or sellers can obtain a pre-listing inspection as an added value feature to entice buyers.  So, what happens when a buyers is competing against multiple offers and the seller's agent is asking for "clean" offers (without conditions) only?

Only the buyer can make this decision.  I've seen buyers fall in love with a house and ignore the odd problem uncovered in a home inspection.  In fact, I typically remind buyers that in my experience, a home inspector always finds something... even if it's small, since no house is perfect.  On the other hand, there is something to be said for entering into the largest purchase of your life with open eyes and an awareness of major repairs that may arise.  Indeed, an inspection is not a guarantee and sometimes there are issues that cannot be examined due to access, time of year etc. but my concern for buyers who ignore this step is that they may wonder "what if..." down the road.

For buyers who are worried about forgoing an inspection in order to make their offer more attractive, I remind them that it is their choice and leave them with the options:

They may waive the inspection entirely (I don't advise this) and hire an inspector once they move in to give them some awareness of any upcoming repairs or preventative maintenance.

They may request a copy of the pre-listing inspection (if there is one) and allow their own inspector or contractor to read through it.

They may ask the seller permission to pay for an inspection prior to submitting an offer.

OR, They may include an inspection clause in the offer with a short conditional time.  In this case, it is up to their agent to convey to the seller's the good intentions but fair concerns of the buyers and highlight the other attractive aspects of the offer.

I often ask my clients to imagine two different frames of mind when paying a roofing company to re-shingle the roof one year after moving in.  Would you rather be thinking: "Well, we knew we'd need to do this and we budgeted and considered it in the purchase price." or "I can't believe we're already spending more money!  I wonder if we would have bought this place if we had known we'd need to do this so soon."

In the end, the answer to the question in the title is a definite MAYBE... Many sellers would likely prefer to take a "sure thing" which in this case comes in the form of an offer without conditions.  A buyer who insists on an inspection may not get the house but I'm a believer that you'll never know if you don't try.

In a HOT Seller's Market, Where is the Line Between Savvy Business and Sneaky Tactics?

In a recent Globe and Mail article Carolyn Ireland asks this very question and many agents (like myself) who have both buyer and seller clients are pondering a fair answer.  While, in many pockets in Toronto, it is currently normal to expect a listing to sell for over asking, some of the severely underpriced homes on the market can be misleading and frustrating to buyers.


For sellers who may want to draw as much interest as possible, or who list low expecting multiple offers (or, as many like to call these scenarios- bidding wars) and are disappointed when they don't see numbers as high as they had hoped, this strategy seems reasonable.  After all, it may be a great time to be a seller in Toronto but aren't we all just trying to make the most of our investments?


For buyers however, who may have already placed offers on other homes which were not acccepted, the thought that some of the properties on the market may be listed in a totally different price bracket may seem overwhelming.  Ireland's article seems to scoff at the fact that this obvious game playing is legal and accepted practice.


At one point, Ireland asks if a customer would expect to walk into a retail store and offer the proprietor the $2.99 posted price for a tube of toothpaste only to be told by the owner that, they were actually hoping for $3.45 since there are many customers and few tubes of toothpaste and they will not accept anything under $3.20?  Of course this sounds ridiculous but it works the other way as well: In a time of toothpaste abundance, a buyer would likely not expect to offer the shop owner $1.75, "take it or leave it" and make much progress.  Well, this is exactly what buyers expect in a real estate market which favours buyers so why shouldn't the reverse be acceptable for sellers?  In the end, this is a very important and large purchase for most people (unlike a tube of toothpaste) and is therefore very obviously subject to the laws of supply and demand.


My opinion?  Buyers need to find an agent whom they trust and ask candidly about properties that seem too good to be true.  This market requires some strategizing and preparation on the buyer's end but with the right information and advice, it is just another minor challenge to overcome on the road to a new home.


As for the "games", I advise my buyers to remember that just as we are trying to find the best terms for them, the seller's agent is doing the same for their client.  I like to think of the lowball listings as just another strategy... Good or bad, it is just that.