Critical Advice for Buyers Right Now

The Toronto market is shifting, and for the first time in quite a few years, we actually saw a price decrease in May 2017 (vs April 2017). If you’re a frustrated Buyer, this might just be the opportunity you’ve been waiting for.

BUT….there are some really important things you need to know:

1. We’re still in a Seller’s Market, so your lowball offer isn’t likely going to fly….unless the Seller is desperate and needs to sell ASAP. There’s usually room for some negotiating after a property has been on the market for a bit – but recognize that Sellers are still adjusting to this new reality and may not be open to lowering their price just yet. You might have to be patient.   
2. Get your financing in place. If like most people right now, you’re able to score a home without a bidding war, your agent will likely be able to negotiate a financing condition. That’ll give you and your lender a few days to make sure that financing is in place. Getting your financing confirmed is an important step, as shifting markets tend to make lenders nervous. A pre-approval is not a mortgage commitment, so while it’s nice to know how much you can afford, you’ll want your lender to commit in writing to providing you with a mortgage for a specific property. [Related: What You Need to Know About The Financing Condition]
3. Don’t forget about the bank appraisal: Banks will likely be conservative over the next few months, so now is NOT the time to overpay for a house…at least not without a Plan B. Make sure to discuss the need for an appraisal with your lender and your options if the appraised price comes in lower than what you paid. [Related: All About Appraisals]
4. Be careful with your closing date: If your mortgage will be with a non-traditional lender (in other words, not one of the big banks), find out how long they will need to close. There have been some recent cash issues with Home Trust (one of the biggest B Lenders in Canada) that have resulted in longer than usual closing times required by some of the other B Lenders. Make sure your lender is comfortable with your proposed closing date before you agree to it.
5. The home inspection condition is back. At long last, you’ll probably be able to do your own home inspection – AFTER you’ve secured the house and the Seller has accepted your offer. Expect to see fewer pre-listing home inspections (inspections provided by the Seller) as Sellers anticipate that Buyers will perform and pay for their own inspection. [Related: Top 10 Things to Know About Home Inspections]
6. Remember that negotiation is a give-and-take. Go after what’s most important to you (i.e., price, or conditions, or closing date) and be prepared to give on some of the other stuff. Both Buyer and Seller will likely need to make concessions to come to an agreement. A good agent will be able to guide you through this.  Pro Tip: Make sure you’re working with a Certified Negotiation Expert! Negotiation skills are sadly lacking in the real estate industry in Toronto, so make sure you’ve got a strong negotiator on your side.
7. If you’ve got another home to sell...consider selling before buying. If you decide to buy first, make sure you know all of your options for financing if your current home doesn’t sell by the closing date or if you don’t sell for as much as you’re expecting. [Related: Should I Buy or Sell First?]  In Toronto, we aren’t yet in a market where most Sellers will agree to a condition that allows you to back out of a sale if your home doesn’t sell…but this does work in other markets and may make a reappearance in Toronto at some point. 
8. Think long-term. It doesn’t matter if prices go down unless you need to sell. Case in point: my house appears on paper to have gone up $250K in value since I bought it…but unless I’m selling it right now, that’s not real money. If you buy a house for $950K and prices go down 5% in the next year..it doesn’t matter unless you sell next year. So if your plan is long-term, you can protect yourself from any dips in the market…by simply not selling.

(Don’t worry, we didn’t get our advice from this book.)

How to Get a Deal RIGHT NOW!

The big opportunities lie with the Sellers who NEED to sell and those who are nervous. I’m not advocating taking advantage of people in bad situations – that would be bad karma for everyone. But the truth is, some Sellers are more motivated to sell than others and want you to bring them an offer…any offer…and if they’re motivated, you might just be able to score a deal.

The key is locating people who NEED to sell:

• People who are stuck between the old market and the new market – in other words, they bought in April at the peak of the market and now need to sell during a decline.
• People relocating to other cities – if someone was recruited to another city for a job, it’s quite possible that the company is making up any loss on the sale of the house, so the Seller may be more willing to negotiate.
• Flippers who didn’t finish their renovations in time to take advantage of the March/April market and now need to get their equity out and move on to the next project. House flippers work on short timelines and making $$ for them requires quick sales and quick closes. If they’ve already purchased their next house, they may be eager to move on from the current one. 
• Estate sales – I’m obviously not advocating taking advantage of anyone who’s lost a family member…but estate sales tend to have motivated Sellers who might be more willing than other Sellers to negotiate.
• Sellers of the “non-perfect” house. I know, compromise isn’t fun, but this is prime time to buy a house that isn’t ‘perfect’ –  maybe it’s on a busy street, backs onto to the train tracks or doesn’t have exclusive parking. When Buyers have their pick of houses (as they do now), they aren’t clamouring to the ‘not perfect’ house- which means it just might be an opportunity to buy. 

How to Spot a Deal

If you’re looking for a deal, look for:

• High Days On Market (DOM) – Toronto Buyers tend to overlook properties that have been on the market a “long time” – and in Toronto, a “long time” can be as little as 14 days. Keep in mind that it’s commonplace for agents to re-list properties that aren’t selling so that they appear ‘new’. Sometimes they do that after a failed bidding war (when they didn’t get offers or the price they want – the price is usually INCREASED in these cases); sometimes they do that just to get attention. Your agent will be able to tell if properties have been listed more than once and how long they’ve been on the market in total. 
• Repeated price decreases – This is a sure sign of a motivated Seller who is listening to the market and wants to sell. 
• Bonus paid to the agent for bringing a Buyer – There’s a whole section in an MLS listing that isn’t seen by the public, and that includes the commission offered to the agent who brings the Buyer (also known as the Cooperating Agent). Sometimes, we see a Seller offering a bonus to the agent if they sell the property by a specific date. For example: “$5,000 bonus if sold firm by May 15, 2017”. This is a sure sign of a motivated Seller who is more than likely willing to make a deal. 
• Vacant properties – Owning a vacant property costs money: there are mortgage payments, taxes, utilities and ongoing maintenance costs. Sellers of vacant properties may be more willing to negotiate down from the asking price in order to save themselves those monthly costs. Properties are usually vacant for only a few reasons: the tenants have left, the owners have already moved to their new home, or the property has been flipped. In all of those cases, selling quickly is worth real money to the Seller.
• Properties looking to close on a specific date – MLS listings include the Seller’s desired closing date, and when it’s very specific – e.g.,. May 11, 2017, that’s a good sign that date may be more important to them than money. They may have bought a house that closes on that date; they may be leaving the city or have a mortgage that’s coming due – all good reasons for them to be flexible on price to save themselves headaches.