Category Archives: Bidding Wars
Carolyn Ireland – The Globe and Mail
This week, well-heeled Toronto house hunters were converging on a four-bedroom house in Moore Park with an asking price of $2.175-million.
Real estate agent Janet Lindsay of Chestnut Park Real Estate Ltd., who represented the sellers, booked 38 showings in four days. “They’re all qualified buyers,” she says. “They’re not tire kickers.”
Many of the prospective buyers she sees are families with both parents working, Ms. Lindsay says. Good schools are important to them, and this house is close to Our Lady of Perpetual Help Separate School and Whitney Junior Public School, as well as several private schools.
There’s enough demand for such properties that she held off offers until Tuesday of this week. By mid-afternoon, she had three offers registered and there was still time for more to arrive before the deadline.
Meanwhile, she is receiving calls from sellers who are ready to put “for sale” signs in the freshly thawed ground and she hears plenty of other agents are too. “That’s what the tom toms are telling me.”
Ms. Lindsay says the unseasonably cold weather in March deterred some sellers but with balmy temperatures closing out the month, more listings will arrive. “I definitely think the weather has held us back.”
Jimmy Molloy of Chestnut Park figures new listings after the Easter and Passover holidays will help to calm the more frenzied parts of the market.
“There’s no choice, then there’s too much choice,” he says. “Once the supply comes, the buyers back off.”
When that happens, the market will pause, as it does most years in the late spring, he says.
Comment: What? That is not true at all. Many people are waiting for more listings. I am getting more buyer clients right now. And late spring is a very busy time. April and May are the busiest months of the year. June can also be busy, but the market sure does NOT pause. It used to slow down in July-August, but not any more.
This week, Statistics Canada reported that gross domestic product edged down by 0.1% in January. That marked a dip from Decembers 0.3% growth. Economists blamed the oil price shock and severe winter weather for the stall.
Comment: Things always calm through the winter. Especially with that strange February.
Before the Statscan release, Bank of Canada Governor Stephen Poloz warned that the country’s economy had started the year with an “atrocious” performance. He suggested the numbers will look better in the second quarter.
Now, economists are predicting what these developments will mean for interest rates.
Comment: What? You mean maybe all the “experts” were wrong and mortgage rates aren’t going to jump to 10% this spring or summer?
At Capital Economics, David Madani believes the sharp drop in oil prices will be more negative for economic growth and underlying inflation than the central bank is hoping for. He is expecting another 25 basis point rate cut fairly soon.
Comment: But won’t that rate cut help sell more houses and push prices up higher? Further proving wrong his incorrect prediction in June 2011 that house prices would fall by 25%.
Toronto-Dominion Bank economist Dina Ignjatovic predicts continuing strength in the U.S. economy and a weak Canadian dollar should bolster this country’s export sector. She expects overall economic activity to bounce back above a 2% annualized rate in the second half of the year.
Comment: Job creation last month beat the estimates.
Ms. Ignjatovic is forecasting that the central bank will keep its key overnight lending rate as is through 2015 and into 2016.
House hunters will be watching mortgage rates closely since so much of this seasons heated activity seems fuelled by ultra-low rates.
Comment: Real estate has been fuelled by low rates for 7+ years now. Sure, they weren’t as low as current rates, but we did have 5-year rates in the 4.79% range in 2008-2009.
Ms. Lindsay says she doesn’t sense any nervousness amongst sellers.
For now, the market is moving so quickly in some segments that one agent reports he sold a house for $20,000 more than buyers had paid for its twin two weeks earlier.
Mr. Pope’s client decided to hold off and see how that sale unfolded because the houses were mirror images of each other with virtually the same hardwood floors, tiles, kitchens and bathrooms.
The first house was gone after one week.
Mr. Pope then listed 1D with an asking price of $1.150-million. It also sold after a week for $20,000 more than the other one.
Quick sales and seemingly equally rapid price inflation have been making things tough for buyers – especially in any price bracket below about $1.5-million.
Mr. Pope recalled another instance where serendipity, sleuthing and a well-timed snowfall helped his clients snag a Leaside house with a “bully” offer of $850,000, or $102,000 above the asking price of $748,000. (The tactic is called a bully offer because the clients launched their bid before the date the sellers had set for reviewing offers.)
Mr. Pope says the detached house looked to be in worse shape than it actually was. “In a way it was kind of a diamond in the rough but it looked like a big hunk of coal.”
A few weeks ago, when single-family houses listed for sale were exceedingly rare, the detached house arrived on MLS.
It was an estate sale, Mr. Pope says, which meant the sellers hadn’t provided a lot of information about the homes history. “Nothing cosmetic had been done. You could see from the pictures that there was some evidence of water penetration.”
That’s when Mr. Pope – who was helping the buyers return to Canada from an overseas gig – turned gumshoe.
With the clients still abroad, Mr. Pope went to check out the house with the couples parents. There was no home inspection report so he went outside to have a look at the exterior just as snow began to fall.
He could see signs that work had been done to the outside of the house but he couldn’t tell how much.
While he was poking around, a neighbour came along and they struck up a conversation over the backyard fence. The neighbour verified that indeed the back garden had been dug up and the foundation waterproofed. Mr. Pope also learned new windows had been installed the year before.
Later, as he was standing in the driveway getting ready to leave, the neighbour came running over to say she’d forgotten something: the owner had replaced the roof the summer before.
The snow kept coming all through that day and Mr. Pope figured that the drifts would cover the repairs to the foundation that he had spotted. Competing agents and buyers would only see the damage on the interior. He also figured they wouldn’t run into the loquacious neighbour.
“They’re unlikely to have discovered all of the things I discovered in my little romp in the snow.”
Mr. Pope recommended that the family quickly bring in a home inspector to verify what he’d uncovered. They made a firm offer with a closing date three weeks away and attached a bank draft for $75,000 “so it would be hard for a seller to say no,” he says.
The sellers agent notified all of the other agents who had expressed interest that a bully offer had been registered. Since it was a Sunday, Mr. Pope figures it was harder for any rivals to have a home inspection done on short notice and they may have been scared off by the appearance of the house.
In any case, his clients were the only bidders, and Mr. Pope believes they paid a fair price. Three roughly comparable houses have sold in the area since then and all of those sold at higher prices, he adds.
“This strategy does not always work,” he acknowledges of the bully offer.
But he advises buyers who are having trouble finding a house to keep an eye out for those quirky situations where they can grasp a slight competitive edge.
Mr. Molloy says people buying houses in the crowded $600,000 to $1-million range are usually move-up buyers who are making a change for a reason. Perhaps they’re having another baby or want their kids to go to a different school. “Its a market based on necessity, not on want.”
At the higher end, Mr. Molloy says, price appreciation has not been as rampant as it has in the middle of the market.
Sales move more slowly for houses trading hands at prices in the $3-million to $5-million range because people in that tranche are less likely to have an urgent need to move.
“If you’re buying a $3-million house, you’re probably living in a pretty nice $2.5-million house already.”
Contact Laurin Jeffrey for more information – 416-388-1960
Laurin Jeffrey is a Toronto real estate agent 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.