And by “home-buyer” I mean home, as in house, as in freehold.
Yes, the “first-time home-buyers,” those looking for a freehold home in the central core, $650,000, $700,000, $750,000 – whatever today’s going rate provides, represent the most unfortunate souls in the buyer pool.
So today, let me be the man who told you there was no Santa Claus, and maybe, just maybe, you’ll thank me for it when you find yourself well into the process, grinding away…
That’s you, right?
Or that’s going to be you, once you find the right home?
I like to throw the word “honesty” around a lot on my blog, and maybe it’s getting old. But “blunt” will never go away.
When I talk to a new client for the first time, specifically those looking for a freehold home in the central core, I’m honest, blunt, and I tell them exactly what looking for a home is going to be like.
I don’t sugar-coat it, and I figure it’s better to tell them at the onset, then to spring it on them later.
Maybe I get approach from my father, who infamously sent me to Camp Kawabi in 1986 as a 6-year-old, when all the other campers were at least seven, and who told me, in the parking lot, as all the kids were boarding the bus “There is no Santa Claus, it’s something parents make up for their kids.” He knew I was already at a disadvantage for being younger than my cabin-mates, and in his own way, he thought he was helping me.
Maybe my approach isn’t one used by every real estate agent out there, but I think after the initial shock (if there is shock, since many buyers are already aware of what they’re facing) wears off, my buyers are far more prepared for the market and the process of buying a home, and they’re always grateful for my honesty.
So having said that, let me now take everything that I would want to tell today’s would-be, first-time home-buyer, and put it in an open letter…
Dear 2016 Toronto House-Buyer,
So you’re doing it, eh?
Good for you.
It’s a great decision, and I can’t wait for the day you move in!
But I have to be honest: it’s not going to be easy.
Wait, that sounds cliche. “It’s not going to be easy.” Actually, that sounds like the most simple explanation of what lays ahead.
It’s not going to be easy, in fact, it’s going to be tough, and at times, seem near impossible.
It’s going to be far more difficult than you could have ever imagined.
It’s going to take a lot longer as well.
It’s going to be frustrating.
You’re going to hate it.
It’s not fun, trust me. Forget about what you see on TV – you won’t smile once during this whole process.
You’re going to cry.
You’re going to argue with your partner.
You’re going to doubt yourself.
Your parents are going to tell you you’re over-paying.
Every colleague, friend, or family member is going to give you unsolicited advice, most of it conflicting and contradicting.
And you are going to pay more for a house than you thought you would – both in terms of your overall budget as you came into the process, and for the actual house you end up buying.
But that’s just a brief summary of what to expect.
Let me start from the beginning…
You are now embarking upon an incredibly difficult journey: buying a house in what could be, the hottest market on planet earth.
“Planet earth.” Those words are most often used in extreme exaggerations, metaphors, and euphemisms. But I mean it – if you put together a list of the hottest markets in the world, in terms of the deficit resulting from supply and demand, and the price appreciation, Toronto might actually be at the very top of that list.
So that’s what you’re doing, or trying to do.
You’re not “house shopping,” but rather you’re trying to buy a house in one of the hottest markets in the world. Do not, at any point, lose sight of that fact.
You’re not shopping at Loblaws. There are no items “on sale.” If you’re looking for tomato sauce, you can choose between Primo, Prego, Classico, Hunts, Bertolli, Ragu, Unico, and maybe even No Name.
But the Toronto real estate market is different. There aren’t a dozen types of an item, with hundreds of each type from you to choose from.
Buying a house in Toronto in 2016 is a process unlike any other you’ve experienced before.
At the most basic level, you need to start by understanding you’re not going to get what you want. You have to be realistic, and basically take everything you want in a house, and cut it in half. If your budget was unlimited, then yes, you can get whatever you want. But you, with your $750,000 mortgage pre-approval, are not getting a 4-bed, 4-bath house in Riverdale with a 2-car garage. So do yourself a favour, and figure out what you can do away with first, and then second, and so on…
You need to also acknowledge that you will be in competition with other buyers.
It’s probably been a few years since I’ve had somebody tell me, “I’m not looking do do a ‘bidding war thing’ for a house; I won’t make an offer if there are other people interested.” And while I’m cautiously optimistic that even today’s most uninformed buyers still know that virtually every entry-level home in Toronto has competition, I want to make sure YOU know that as well.
You’re also more than likely going to lose an offer, or two, before you buy a house.
It’s only natural.
You can’t imagine how much you’re going to have to pay for a home, and it’s not easy to “throw the boat” at a house your first time around.
When that $599,000 house, that your agent tells you will sell for $750,000, ends up selling for $768,000, you will feel silly for offering $660,000, and you won’t do it again.
You’ll learn from your mistakes. You have to.
You’ll also learn you had emotions you didn’t know you possessed, like hate.
You hate all those other couples you see at open houses, who are also vying for what you expect to become “your” house.
You hate their agents too. They look so smarmy, and you just want to punch them in the mouth, and wipe that fake smile off their face. Although come to think of it, they look just like your agent.
You hate your friends and colleagues who already own homes.
You hate when they talk about their houses, and you hate when they give you advice. What the hell do they know anyways? They lucked out. They only bought three years ago because they got knocked up, not because they were smart. Their parents helped them anyways. And you used their bathroom when they had you over for dinner that one time, and they had ugly-ass wallpaper. Who has wallpaper anyways? It’s 2016! You would do it differently; you would do it better!
And those real estate TV shows that you love so much? You’re going to hate them as well.
You’re going to see just how unrealistic they are.
A happy couple goes and looks at three houses, then goes for a beer, and “chooses” one of them?
What a joke.
It doesn’t work like that in Toronto.
If there were three houses, and there’s usually one if you’re lucky, one would sell with a bully offer before you saw it, one would be wrong for you on many levels, and if you did “choose” one, you’d still have to outbid a dozen other couples that look exactly like you.
You’re going to learn to live and breathe real estate.
You’re going to have multiple real estate apps and websites on your phone.
You’re going to wake up in the morning thinking about houses, and go to bed at night thinking about houses.
You’re going to think about houses during your office meeting, and during your spin class, and during the entire TTC ride, both to, and from work.
You have no idea how much real estate is about to take over your lives.
If a house comes out on Tuesday afternoon, you’re going to have to see it on Tuesday night, otherwise, it might sell via bully offer.
So whatever plans you had on Tuesday night, you’ll have to break them. You’ll have to miss hockey, and your buddies might be upset, but they went through this last year, so they know.
And on Friday night – as you’re getting ready for dinner with Jonathan and Vicky, your agent is going to call you and tell you there’s a bully offer on that house that was supposed to review offers on Tuesday, but now you have no choice but to jump into the mix, or lose the house.
You’ll connect with Jonathan and Vicky another time…
You have to answer your phone at the movie, or at the wedding, or at the funeral. It’s your agent! It’s important!
You’re going to learn your agent’s middle name, by the way. Those MLS listings emailed to you, from “DAVID JOSEPH FLEMING” will give you equal feelings of excitement and anxiety as soon as you see them in your inbox.
Your weekends are going to be busy! Sure, you’ll probably see houses 1-2 weeknights per week, but you’ll probably have a sort-of “standing date” with your agent every Saturday to see properties. And then on Sunday – your day away from real estate, you’ll probably end up driving around and going to open houses. Hey we’re all addicted to something, right?
You’re going to get frustrated, eventually.
And then you’re going to get mad.
You’ll be mad at your partner, mad at your agent, and mad at the market.
But don’t get so mad that you do something crazy – like turn this into something it’s not.
Because one thing this is not, is unfair.
You have to remember that. The process of buying an entry-level freehold property in Toronto is difficult, and time-consuming, and expensive, and frustrating, but it is NOT unfair. It’s supply and demand, nothing more, nothing less.
The moment you start to feel that you are being hard-done-by is the minute you’ve taken a step out of reality, and into fantasy.
A lot of people fantasize.
I have people give me “what if” scenarios for houses, like, “What if this house didn’t get any offers?”
That’s a fantasy. That’s something the rational-you wouldn’t think about, and it’s how you know you’ve taken a step back.
Your frustration might lead to anger, but you can’t let that anger become personal, and then push you off course, by convincing you that the process is unfair.
Because once you believe it’s unfair, you might look for a reason to quit.
The market is going to cool.
It’s going to be easier in the summer.
The fall is always cheaper than the spring.
Your parents say prices have to level off.
The Bank of Canada is going to raise interest rates.
If you want to find a reason why real estate is going to drop in price, look hard enough and you’ll find ten.
Denial has stolen hundreds of millions of dollars worth of tax-free capital gains from people who get frustrated with the market, decide not to buy, and then tell anybody that will listen, “the market is going to correct” for years on end.
So in order to not get to this point, just go back to the very beginning, and note the underlying theme of this letter: preparation.
This letter might frustrate you, but only because it’s true. Acknowledge the content, and you will be well-prepared.
Some people don’t like to be made aware of inconvenient truths, but others will absorb the truths and use it to build knowledge.
So then be prepared.
And be committed.
Be committed to the process, and everything it entails, because the buyers who are “casually looking” won’t buy in this market cycle, and it’s going to cost them more later. The buyers who are willing to offer “what they would like to pay for the home” end up being the ones you hear about through a friend who have, sadly, lost nine offers, and who say, “We’ve been searching for a home for over eighteen months.”
Above all, you must be accepting.
You simply have to accept the market conditions for what they are, otherwise you’ll never be able to transact. You, and you alone, cannot change the forces of supply and demand, and those forces have made the 2016 Toronto market what it is today.
Best of luck, and I hope to see you in a house at some point in the near future.
Well, I’ve read it through, and there’s nothing I’d change.
I wouldn’t add anything, and I wouldn’t take anything out.
It’s blunt. Oh yeah, I don’t think that’s in doubt.
And it’s honest. Maybe too honest for some, but such is life…
Above all, however, it’s accurate.
We’re not talking about condos here, and we’re not talking houses over $1,000,000, or in Scarborough or Mimico – we’re talking about entry-level freehold in the central core, around $700,000, where every buyer is looking.
If a would-be buyer in that part of the market were to read my letter, I don’t think they could possibly be better prepared for what lays ahead.
Some might rather not hear it, and would rather “ease” into the process.
But what good is a 35-year-old who still believes in Santa Claus?