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Five things we learned about Toronto’s real estate bidding wars from the Globe and Mail

Toronto Life

Ssome basic math: one hot Toronto hous­ing mar­ket plus sev­eral banks offer­ing his­tor­i­cally low mort­gage rates equals some seri­ously ludi­crous bid­ding wars (case in point: the Wil­low­dale bun­ga­low that sold for $1.2 mil­lion ear­lier this month – $421,800 over the ask­ing price).

A recent Globe and Mail fea­ture delved into Toronto’s bid­ding bat­tles, shar­ing night­mar­ish tales from home­buy­ers and a few words of cau­tion from experts. Here, our top five highlights.

1. Crafty real­tors are using psy­cho­log­i­cal tricks to start bid­ding wars
Under­pric­ing prop­er­ties to ignite bid­ding wars is a win­ning tac­tic. Low prices cre­ate “auc­tion fever where more bids result in it being bid up higher than what it might have been had it started at a higher price to begin with,” accord­ing to one busi­ness psy­chol­ogy professor.

Com­ment: Duh. This has been going on since 2006, why do we keep treat­ing it like a new phenomenon?

2. Toronto attracts for­eign buy­ers with lots of money—and they’re spend­ing it
The story con­tains a few strik­ing illus­tra­tions of how for­eign buy­ers are fuelling the mar­ket. The woman who paid $421,800 more than ask­ing for that Wil­low­dale bun­ga­low was orig­i­nally from China, as was a buyer who paid $1.4-million for a Don Mills unit listed at $1.25-million. An agent with Har­vey Kalles said she’s sold more than a dozen suites in one shot to her for­eign clients.

Com­ment: Can we let this racist thread just die? Please?

3. Des­per­ate would-be buy­ers are break­ing the rules of home-buying eti­quette
When agents were sub­mit­ting offers for one Mis­sis­sauga town­house, one deter­mined buyer showed up in per­son to plead her case. At least that house was for sale, though—a cou­ple who have been look­ing since Christ­mas have started hand­ing out let­ters at any attrac­tive houses they pass by, ask­ing if own­ers would con­sider selling.

Com­ment: Because there is no inven­tory. There are 10x more buy­ers and sell­ers. That is why there are some many bid­ding wars and upward pres­sure on prices. Grade 9 eco­nom­ics, too much demand and not enough sup­ply causes prices to rise and short­ages of product.

4. The school year is behind the spring­time sales boost
The warmer weather isn’t the only rea­son the hous­ing mar­ket heats up in the spring. House sales peak in March and April because fam­i­lies who buy now can move over the sum­mer, mean­ing kids won’t be chang­ing schools mid-year.

Com­ment: They same as it has every sin­gle year before this. And the peak is actu­ally May. Same rea­son there is a bump in the fall, peo­ple want­ing to be moved before Xmas.

5. Banks are offer­ing up more money than buy­ers are ask­ing for
Econ­o­mists argue that low inter­est rates are encour­ag­ing peo­ple to overex­tend them­selves, but the banks, appar­ently, are doing their share of prod­ding. “I go to the bank to get pre-approved for a mort­gage,” said a buyer, who ended up stay­ing put.”I’m think­ing a max­i­mum $600,000 mort­gage, and the bank is telling me ‘why so lit­tle? Why don’t you go to a $900,000 or $1-million mortgage?’”

Com­ment: That is the bank say­ing they can afford more, based on their info. Of course they want us to bor­row more, they want more inter­est! This is how banks work, have always worked. Why is this now surprising?

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Con­tact Lau­rin Jef­frey for more infor­ma­tion – 416−388−1960

Lau­rin Jef­frey is a Toronto Real­tor with Cen­tury 21 Regal Realty. He did not
write these arti­cles, he just repro­duces them here for peo­ple who are
inter­ested in Toronto real estate. He does not work for any builders.

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