For years, real estate has always been a hot topic of conversation. Whether it’s at a cocktail or dinner party, in the grocery store or just out on the street, I am often stopped and sometimes by people that I don’t even know all asking the same question, “how’s the market?”
Over the past year the question has changed from “how’s the market” to “how long with this real estate boom last?’ Unless you’ve been hiding or have no access whatsoever to any media coverage, everyone knows that we have seen some unprecedented market activity with respect to Canada’s housing market. With soaring prices, homes selling in a matter of hours not days or weeks and often for well over their respective asking prices it’s little wonder that the new question on everyone’e mind has become “how long can this crazy market activity last” and perhaps more importantly “will there be any negative fall out once things return to normal?”
It remains to be seen how much longer the current market conditions can be maintained. Personally I am finding that a growing number of consumers, are getting tired of the bidding wars, escalating home prices, that it’s a Seller’s market which it is and as Buyers they feel they are being taken advantage of. Many have lost out on their dream home or at least the home they wanted and or needed for their growing family, to be closer to work or in another community altogether. In a balanced market that favours neither Sellers or Buyers, deals typically don’t come together for three or four main reasons.
First the Sellers and Buyers cannot come to an agreement on price or perhaps it’s the closing date. Once those hurtles are crossed, the Buyer will often have financing/mortgage, home inspection and even insurance conditions that need to be met before a deal becomes firm. These conditions are all fine in a balanced market or in a market that favours Buyers but they don’t hold much value in a market like we have seen in the past year or more where the Sellers are driving the bus and the Buyers are unwillingly along for the ride.
Waving or foregoing conditions for financing and home inspections etc. in an Agreement of Purchase and Sale is a risky proposition for Buyers. We’ve all heard the phrase “buying a pig in a poke” the meaning of which is the buyer is purchasing something without knowing its true nature or value. This is particularly true in real estate. Buyer’s in multiple offers where you are competing with any number of other potential purchasers leaves you no room to determine a home’s true value or to obtain a home inspection that might identify some problems or defects in a property. In multiple offer situations like we have seen in recent months, you’ve got one chance to go in with your best foot forward which means no conditions and above all else, the best price you are willing to pay which hopefully beats our the competition.
Over the years, I have been involved in several multiple offer situations and for the most part my Buyer clients have been successful. Prior to the market we now find ourselves in, multiple offers in the past has meant there were two, three or perhaps a handful of Buyers. In those circumstances the final sale price was a few hundred and maybe a few thousand dollars over the asking price. These days it is not uncommon especially in the Greater Toronto Area and other large urban centres to hear of 40, 50 or more Buyers all competing to purchase the same home with the final sale price being three or four hundred thousand over the Seller’s asking price. That’s great news for the Seller(s) but what about the Buyer(s)? Buying that “pig in a poke” is okay when you are purchasing something for a few dollars but it’s a different matter all together when it’s hundreds of thousands. What if after you move in you discover the home needs thousands of dollars in repairs that you hadn’t budgeted for?
Personally, I believe the biggest question these days is not “how’s the market” or even “how long will the current real estate boom last?” The real questions both Sellers and Buyers need to be asking and considering is “what happens once the boom is over?” Further, “how and when will the Canadian and global economies rebound from the pandemic” and “will interest/mortgage rates increase?” There are lot’s of questions that should be asked but given that the world has never been through a global pandemic like COVID 19, the answers may not be readily available or even accurate.
In my next post I am going to provide some comments based on my experience with respect to multiple offers, specifically the matter of price. In every multiple offer situation there are a number of potential Buyers that come up short in their efforts to but a home hence they go away empty handed. Given our unknown economic future after COVID 19 has been wrestled to the ground and its impact on the Canadian real estate market in general, perhaps losing out in a home purchase in today’s market is not such a bad thing. As the saying goes. “good things some to those who wait.”
As always, my main goal as a REALTOR is to help real estate Sellers and Buyers make some informed decisions and I hope you find my Market Reports and blog posts helpful. Please feel free to Contact Me if you have any questions, my answers will be honest and if I feel you need some expert legal or accounting advice I will be the first one to suggest that.
Stay safe and stay healthy….