The spring of 2017 was the hottest market I have ever seen. It was probably the hottest market that any Realtor, regardless of his or her experience in this city, has ever seen.
I told a lot of stories back in the spring on TRB, many of which conveyed exactly how hot the market was.
But one story was left untold, because it just concluded. And ironically, it took place after the market changed, as our journey began in June.
Allow me to regale you with the Tao of the 2017 Buyer…
Back in 2014, I wrote an epic four-part blog series which I entitled, “The Tao of the 2014 Buyer.”
Ah yes, 2014 – back when I wrote four blogs per week, rather than the three that I cut it back to in 2015 when I started my Thursday “Pick5” feature. Four blogs. Wow. I actually just got anxiety thinking about that…
A four-part series wasn’t how I set out to tell that story, but as I began the framework for a post that I thought might result in a “To Be Continued,” I soon realized that in order to properly convey the story, I needed to let the post write itself.
I remember that spring, 2014 market very well.
It was a continuation of a 2013 fall market that just seemed to come out of nowhere, culminating with a whopping 11.3% year-over-year increase in average home price in the month of November. Yes, 11.3%. Remember when that was significant?
When the spring of 2014 began, we all knew it would be busy.
The average home price of $520,398 in December continued to rise and rise throughout 2014, hitting $585,204 – a 12.4% increase in a mere 5 months; an annual rate of close to 30%.
I was working with a lot of buyers in that market, and every buyer who purchased between January and June continued to follow new listings, and send me emails with, “Did you see the sale price of such-and-such house? Wow, am I ever glad we bought!”
One of my buyer couples from that spring (actually from the fall of 2013, if you read the series) had just about the worst luck I had ever seen, in all my time in the business.
While we often say there is no “luck” involved in buying real estate, that’s not entirely true.
I’ve sold houses to buyers on the night of a storm, or an election, or a holiday, that would have, could have, should have sold for more. That’s lucky, for certain.
I’ve won in multiple offers because the buyer picked a price that ended in say, “512,” because they got married on May 12th – enabling them to beat the second-highest offer which ended in “000.” That sounds skillful, but it’s luck.
Luck is ever-present in real estate, especially on the buy-side.
But my clients from the 2014 “Tao” blog series had no luck, and as a result, they lose EIGHT offers, before finally securing a property on their 9th try – a journey that began on October 1st, 2013, and ended on May 5th, 2014.
They bid $781,200 on a house, and lost to a bid of $785,100.
They bid $800,000 on a house, and lost to a bid of $805,000.
They bid on eight houses, with an average loss margin of 3.0%, and taking away the two blowouts, their loss margin was a mere 1.45% on six lost properties.
Well, if this doesn’t entice you to read a four part blog series, then I don’t know what will!
I’ll make it easy on you, here are the four parts:
My clients paid $776,00 for a house that’s probably worth $1.1M today, and like so many people before them, they likely thought, “This amount of money is just absurd for what we’re getting,” only to watch the market continue to grow, month after month, year after year.
A question I’m asked by a majority of buyers at the onset of the search is, “How many properties would you say your average buyer sees before they buy one?”
That’s a good question, but unfortunately, the answer is of zero help to the buyer.
“Eleven point four,” I might tell them, whether that’s in any way accurate.
The problem with putting a number to that question is, if the number is high, the buyer might feel like he or she should pass on the perfect property, right there in front of them, in order to simply “see more of what’s out there.” If the number is low, the buyer might feel rushed into making a decision, when he or she isn’t really ready.
Every buyer is different, pardon the obvious.
Every buyer comes into the search with a different amount of knowledge, about real estate, but also about personal finance, mortgage regulations, Toronto’s geography and demographics, and a host of other variables affecting the search.
The second question I get with regularity, specifically in the midst of hot market cycles, is, “How many offers do your buyers lose before they win one?”
And perhaps this time, the answer I provide could shed some light on their search.
I don’t know the answer, but if we’re talking freehold buyers, in 2016 through 2017, I’d say probably 2.5.
Now, because I know that you’re very curious to know the answer, I’ve just taken about 45 minutes while writing this, to log all the offers I made in the spring, and find out the real answer to this question.
I think this will be tremendously helpful for active buyers, even though the market has changed.
Of all the freehold properties I sold to buyers in the spring, 2017 real estate market, and not including buyers who made offers but didn’t eventually buy (there were a few), here is the number of offers that my successful buyers made:
That’s an average of 2.53 offers per buyer.
And since I had guessed 2.5, I feel like I just wasted an hour of my life.
Oh, the things we do in the pursuit of integrity…
You’ll notice that at the bottom of the list, is the number “9.”
At the risk of spoiling the conclusion to this blog series, let me clarify that, yes, this is the story I want to tell today.
The tale, story, journey, or Tao of the 2017 real estate buyer, but also the excitement, heartache, anguish, anxiety, frustration, and experience of two very normal people, well-informed, well-qualified financially, and extremely intelligent, who, as was the case with my couple in 2014, simply had, dare I say, bad luck.
This is, as you would assume from the list of offers above, not the typical real estate experience. But it’s a learning experience for those of you reading it, since we had not one, but many odd situations and events through the course of our search.
All of these events make for those learning moments that so many would-be buyers seek while reading Toronto Realty Blog.
You just hope that they don’t all happen to you…
Jake and Amanda emailed me in March of 2017 to say that they were getting married, and needed more space, and like many buyers in their position, they found that browsing what was available on Realtor.ca wasn’t providing enough information.
I had sold Jake the condo way back in 2010, and while small, it had brought him through a series of transitions in life that one in their 20’s and 30’s would experience while living in downtown Toronto. When I think back to where I was in life when I bought my first condo, and where I was when I left five years later, I can’t believe how many miles I put on the odometer of life.
Jake’s condo was small, and I could imagine how two people living there would be tight. Imagine my surprise when we finally met up and they told me they’d been living there together, in 540 square feet, for several years!
That is certainly getting the most out of your investment!
What’s more, is they absolutely loved the place, and Amanda beamed as she told me what life in the condo had been like.
We got together in April when their search went from browsing online to checking out open houses in person, and they told me that they were looking to spend around $850,000, but were completely open to location, style, and size.
Everybody says they’re completely open; flexible, willing to compromise, make concessions, etc.
In practice, however, I find most buyers have no idea what “concessions” really are, and when you’ve got Cadillac-tastes on a Pontiac-budget, in this market, it makes it very difficult to get in tune with reality. Many of these buyers, unfortunately, get left behind.
But once I started searching with Jake & Amanda, I realized they really were open to just about everything. Our search would eventually take us from Scarlett Woods to Scarborough, and just about everywhere in between.
That flexibility ultimately enabled them to look for value in a market where there often wasn’t any, and draw a firm line in the sand with each and every property. Rarely, if ever, did they get emotionally involved with a house.
After our initial meeting in April, Jake & Amanda hammered out their “must have” list as follows:
- 2+ Bed; 1.5+ Bath
- Turn key (limited renos if any (cosmetic only); finished basement)
- Walkable neighbourhood; near transit
- In/Around Toronto (40 minute max commute to, say, Eaton Centre)
They set their ceiling at $800,000 even, and our search began.
When meeting with clients who have broad search criteria – whether it’s geographic in nature, or rather they’re open to various housing styles, I find it’s best to see a property, any property, and do a thorough walkthrough, pointing out the pros and cons.
The first property we saw together was a small rowhouse on Norwood Terrace, just west of the bridge on Main Street, south of Danforth.
While walking up to the house, we encountered a middle-aged man doing crossfit on the sidewalk, completely in a zone. He was skipping, doing burpies, and I believe he did a few overhead dumbell snatches as well. If that isn’t “a sign” that this is your future neighbourhood, then I don’t know what is.
I immediately saw how organized Jake & Amanda were, as Jake came equipped with pages of notes, transit routes, and important questions to ask.
Listed at $668,000, I told them I thought the house would push $800,000, and for a 2-bed, 2-bath, with no parking, they just didn’t “connect” with the house.
It ended up selling for $765,000, and they had no reaction whatsoever. They had already moved on to other options.
This would become a pattern in a very rational, unemotional search, the likes of which are extremely rare in this business.
The following week, I took them to Danforth Village to check out a few houses that I really liked, and we would end up putting our first offer on paper…
(TO BE CONTINUED…)