A combination of record-low mortgage rates and a short supply in the Toronto housing market has created conditions under which housing prices have skyrocketed. It is truly a sellers’ market right now that is resulting in bidding wars and homes being sold for tens of thousands (sometimes hundreds of thousands) of dollars above the asking price.
And while this is great news for sellers, it can be incredibly disheartening to those who are looking to purchase a home in this market. But don’t worry, if you are looking to buy a home, there are some strategies that you can employ to give yourself an edge over the competition.
1. Know what homes are going for.
In a sellers’ market simply looking at the asking price is not very useful. That’s because sellers often underprice their homes in order to generate more interest and create a bidding war. For his reason, it is highly advisable to work with an experienced realtor who can tell you what homes in your desired area are actually selling for. This will help you to understand what kind of home, with what features, you will be able to afford.
2. Consider making a bully offer.
In a sellers’ market, you have to be quick, or a home that you love could be snatched up by another buyer. A bully offer – also called a pre-emptive offer – is an offer that is made when a property is listed on MLS but before the date that the seller has indicated that they will accept offers.
By being ready to drop everything and look at a home when it comes on the market, you may be able to edge out your competition before they are even aware of the listing. To make this work though, you will need a realtor who knows your checklist and is sending you listings regularly. Some agents will even help expedite the process by giving you virtual tours of the property when you can’t make it in person.
3. Make an offer with no conditions.
When a seller has multiple offers to choose from, the ones with no conditions – whether they be for financing or a home inspection - are going to be more attractive. Get your financing in place before you begin house hunting, and if you require a home inspection, try a get it done quickly before you put in your offer.
4. Re-evaluate your options.
If you find that you are constantly getting outbid, it may be time to re-evaluate the type of home you are able to buy. You may need to compromise on some of the features on your checklist or consider a home in a less expensive neighbourhood.
5. Don’t buy at the top of your budget.
Because home prices are rising so rapidly, it is possible that your lender will appraise the home you want to buy at less than what it actually sells for. And since a lender will only allow you to borrow up to 80% of the appraisal value, you run the risk of not having sufficient financing when you shop near the top of your budget.
6. Keep your down payment liquid.
While it may be tempting to try and grow your down payment by investing it in stocks or mutual funds, this is not advisable in a sellers’ market. When you find a home that you love, you must be able to act quickly, and that means having quick access to your down payment – such as in cash holdings in your TFSA, or short-term GIC.
Additionally, by having your down payment tied up in other investments, you run the risk of the market tanking before you are ready to buy your home – which means you might not have a sufficient down payment when you are ready.
Keep your down payment liquid so that you can act quickly.
7. Don’t give up.
While house hunting in a sellers’ market can be discouraging, it is important not to give up. Work with your realtor and understand that it may take some time to get into a home. But eventually, your persistence will pay off.
Contact Mark Adelson or Brandon Weiss
Are you looking to purchase a home in this sellers’ market? Contact Mark Adelson or Brandon Weiss today. We can help you employ the strategies necessary to help you succeed in buying a ho