John Rieti and Evan Mit­sui – CBC News

Ris­ing home prices and an appar­ent spike in bid­ding wars are wor­ry­ing the Bank of Canada, while caus­ing headaches for poten­tial Cana­dian homebuyers.

Wayde John­son and Jenn Lum, who entered Canada’s red-hot hous­ing mar­ket four weeks ago, have quickly learned three things: houses are expen­sive, com­pe­ti­tion is fierce and prop­er­ties sell fast.

The young cou­ple plan to sell their two-bedroom con­do­minium and buy a detached home in one of Mississauga’s older, more estab­lished neigh­bour­hoods. And they’re adamant they won’t enter a bid­ding war to win a house.

“We’re going to lose a lot of houses,” Lum said.

“The bud­get is just the bud­get and we’re going to stick to very close to that,” John­son said. “If some­one bids higher than that, they’re going to get the house.”

Com­ment: So go after a house priced lower, know­ing you can bid higher, up to your max­i­mum budget.

That strat­egy may prove dif­fi­cult — espe­cially after a nation­wide sur­vey con­ducted by the Bank of Mon­treal sug­gested one in four Cana­di­ans would will­ingly enter a bid­ding war.

Com­ment: And the other 3 of 4 enter them unwillingly!

How­ever, Canada’s top banker Mark Car­ney is urg­ing Cana­di­ans to avoid spend­ing more than they can afford on a house. In an inter­view with CBC Radio’s The House, he sug­gested the hous­ing mar­ket in the most expen­sive parts of the coun­try, such as Van­cou­ver and Toronto, could be headed for trou­ble, though he stopped short of call­ing them a hous­ing bubble.

Com­ment: Has he been read­ing the reports? Van­cou­ver is already head­ing down, while Toronto’s condo mar­ket has seen price increases cool­ing off.

Carney’s biggest con­cern is that Cana­di­ans may not be able to carry their cur­rent debt level when the key inter­est rate climbs back to “a more nor­mal level” — some­thing he said will even­tu­ally hap­pen. For now, the cur­rent low inter­est rates con­tinue to drive an intensely com­pet­i­tive hous­ing market.

Com­ment: But Toronto was full of bid­ding wars in 2009 when rates were 2% higher than they are now. And the last sales vol­ume record was set in 2007 – when rates were more than dou­ble what they are now.

The Real Estate Coun­cil of Ontario (RECO), the reg­u­la­tory cor­po­ra­tion that admin­is­ters and enforces the Real Estate and Busi­ness Bro­kers Act, doesn’t track the exact num­ber of bid­ding wars but it’s well aware of the issue.

Com­ment: Anec­do­tally, I have heard that some Toronto neigh­bour­hoods are see­ing 7 in 10 houses sell for over ask­ing. But again, those ask­ing prices are set lower than mar­ket value. It is a false stat, pay­ing more than an arti­fi­cially low price. If the entire real estate mar­ket is only ris­ing 8–9% per year, peo­ple can­not be pay­ing THAT much.

Bruce Matthews, RECO’s deputy reg­is­trar, told CBC Radio his orga­ni­za­tion is deal­ing with a surge of com­plaints stem­ming from bid­ding wars — espe­cially after they began an ad cam­paign warn­ing peo­ple about the per­ils that come along with try­ing to out­bid oth­ers for a house.

“Peo­ple allow emo­tion to over­whelm rea­son,” Matthews said. “We cer­tainly sug­gest that peo­ple remain as detached as possible.”

Buy­ers waiv­ing con­di­tions to land homes: RECO

Buy­ers are not only pay­ing a pre­mium to win houses, Matthews said, they’re also waiv­ing con­di­tions like a home inspec­tion and financ­ing, which were once the norm, and can cause seri­ous prob­lems in the future.

That’s what Mark Egan, John­son and Lum’s real estate agent, is wor­ried about as he pulls up to a house with a large back­yard that he’s excited to show the cou­ple. There are already two other fam­i­lies look­ing at the home. A stack of busi­ness cards on the din­ing room table is another sign of the inter­est in the home.

“When some­thing is unique in a house … it’s going to bring mul­ti­ple offers in,” Egan said.

In Egan’s expe­ri­ence, mul­ti­ple offers drive the price of a $450,000 house — his clients’ bud­get — up by over $10,000. And, deals with­out con­di­tions, what Egan calls “cleaner” offers, often wind up win­ning. “It’s not a sce­nario that I’m com­fort­able putting Jenn and Wayde in,” Egan said.

Com­ment: So don’t look at houses too close to the bud­get ceil­ing, espe­cially those set for bids. As agents, we have to help our clients out, keep them away from problems.

‘You have to be good with everything’

Egan’s plan to win the cou­ple a house is twofold: first, they’ll keep look­ing at houses until they know exactly what they’re look­ing for; sec­ond, they’ll see houses as soon as they’re listed with the hopes of strik­ing a fast, fair deal.

Despite some early set­backs — the most frus­trat­ing, Lum said, is see­ing homes adver­tised as “newly ren­o­vated” that fall flat of expec­ta­tions — the cou­ple remains hope­ful they’ll find a good house.

“Every­thing about it has to be com­fort­able for you,” said Lum. “The amount of money you’re spend­ing, where you’re liv­ing … you have to be good with everything.”

“But on the other hand good is good enough. You can’t just expect every­thing is going to be per­fect,” John­son said.

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
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