Buying Tips for the Spring Market

As Toronto is still experiencing a really hot sellers’ market, there are some tips that I find extremely useful for my buyers. A sellers’ market simply means that there are more active buyers in the current market than there are listings for them to buy. This often puts buyers in the unenviable position of having to outbid others in a multiple offer situation.

Things to consider when in multiple offers:

1. KNOW YOUR NEIGHBOURHOOD: Make sure that you have done your homework and are aware of what similar houses in the same neighbourhood have sold for. The price point in one neighbourhood for a renovated square plan can be totally different to that in a nearby neighbourhood. You don’t want to be paying the price for an A+ neighbourhood if you are actually buying in an A- one. Price points can change from one block to another, and sometimes even mid-block. Make sure that your agent shows you these boundaries so that you understand what you are buying.

2. ANALYZING TRUE VALUE: Once you know what similar houses have sold for in the area of the subject property, you will have an educated opinion as to what you believe is the actual value of the house you are wanting to buy. Please note, there will always be variances in the values between one house and another, even of the same size, as the level of maintenance, renovation quality, etc. will vary with each house. You will, however, have a stronger and more accurate idea of what you believe the value to be. Your agent will have lots of experience to help you with this.

3. AVOID BUYERS’ REMORSE: Perhaps you really like the house and are willing to pay a bit of a premium to get it. That is your decision but I would advise that you determine what you are willing to pay as a maximum before the night of offers. You don’t want to get caught up in the emotion of out bidding others and regret the price you have paid the next day.

4. UNDERSTANDING THE FINE PRINT BEHIND YOUR MORTGAGE QUALIFICATION. Once you have a mortgage commitment from a financial institution you will know how much mortgage they are willing to lend to you based on your qualifications. This is part 1 of your mortgage commitment. In the fine print it will also say that this commitment is conditional on the bank agreeing with their appraised value of the property. If you are putting 20% down they will only lend you a mortgage for 80 percent of THEIR evaluation of the property. You don’t want to have paid more than the bank appraisal and be caught a week before closing trying to find another $10,000 or $20,000 in cash in order to close your deal. This is another good reason not be get carried away on offer day. This is not to frighten anyone. It doesn’t happen often but is something that buyers should be aware of. If you have the backup of the “Bank of Mom and Dad” or extra funds in reserve, buying in this market is somewhat easier.

5. AVOIDING THE COMPETITION: In this day and age I find that most buyers want to buy a home that is totally renovated with all of the bells and whistles and they focus on those that look like a really low price. As a result, many buyers are offering on the same property and forced to bid against one another. By the end of the day what looked like a very low price is bid up to the true value of the property or more.

• Some houses are actually put on the market at their true value but agents and buyers assume that these sellers want much more for their house and so don’t even bother putting in an offer. Don’t be in this group. If everyone else avoids it and you are the only offer you are golden.

• Have your agent keep their eyes open for properties that might have been on the market for some time which have been forgotten by most agents. These might be an ideal buying opportunity. There are many reasons that a property has been overlooked:

• Some might look tired and were therefore passed by but could be improved with a minimum of effort.

• Some might have been priced a little high by a too hopeful seller. Once this seller sees that everything around their property is selling but not theirs they are often open to a lower offer and you could be the only buyer at the table.

My best advice when buying is to think creatively. Don’t necessarily follow what everyone else is doing. Thinking outside the box can be very advantageous.