Through the first three parts of this series, you’ve undoubtedly witnessed the Toronto real estate market change as we went from a red-hot spring, through a transitionary April, into a slower May and June, and finally into a tepid July.
Only one of my buyer clients could say they experienced the entire market cycle, and as is the case with many markets, they were the beneficiary of some good luck by the end.
Allow me to present to you the conclusion of one of the most interesting property searches I’ve ever had the pleasure of working on…
As I alluded to in the first chapter of this story, the idea for this post came to me when a client recently asked me, “How many offers does the average buyer make before they’re successful?”
I can provide an average, but it doesn’t represent much for one set of buyers versus the next.
Every buyer is different, and some are destined to be successful on the very first try, whereas others would be a good bet to lose multiple times before winning.
In my 2014 edition of “Tao,” the story of my couple who lost seven times before they won had some real close calls and heart-breakers. It was more bad luck than anything else.
As you’re reading in the 2017 edition, the nine-offer journey with this particular couple had more to do with a changing market, circumstance, and an unemotional approach to buying, the latter of which is something every one of you reading will suggest you’re capable of, but in practice, very few are.
When we last spoke, Jake & Amanda had gone almost a full month without finding a house on which they wanted to submit a bid. This represented a complete one-hundred-eighty-degree turnaround from the previous 45 days, when we had submitted 7 offers.
On a Sunday afternoon, we saw two houses: a detached on Bowmore Road in the Upper Beaches, and a detached just past the boundary of Toronto & Scarborough.
The houses were similar if only for being detached, otherwise, they couldn’t have been more different.
The house on Bowmore was in great shape structurally and mechanically, and had stood the test of time. But it was a bit tired, and the lack of parking, while not an issue for my clients who didn’t have a car, was tough to swallow at the $950,000 asking price.
The house in Scarborough was essentially a 3-year-old house; a complete gut-renovation, with a huge footprint, and more square footage than we’d seen in any house, save for perhaps the one semi-detached in Keelsdale. Listed at $849,000, it had been on the market for about five weeks.
Bowmore had come onto the market in mid-July, after a period dominated by sellers listing artificially-low to try and get multiple offers, but who would most certainly end up re-listing higher after their Plan-A failed. I wrote a lot about this on my blog last summer, and I blamed the sellers and listing agents equally, as the sellers didn’t want to face the reality of a changing market, and the listing agents didn’t actually know what any house was worth.
The $950,000 listing price represented the new trend in the market, where you’d come out at, or above, fair market value.
It was a welcome change for buyers who were worn-out from the spring, or for just about any market participants who simply tired of the “game” of pricing.
The house had been on the market for two weeks by the time we’d seen it, and my clients liked it.
But they also liked the detached, 3-bed, 3-bath, 24 x 110 foot lot in Scarborough as well.
The Scarborough house, if you can believe this, was originally listed for a whopping $1,097,000, which was just so insane, I couldn’t wrap my head around it. A series of price-drops left the house sitting at $849,000, but with the price so high to begin with, plus zero marketing effort whatsoever, the market just hadn’t responded, and the house continued to sit.
My clients realized they were in an enviable position, and one that no buyer in the spring market had been in: they had choice, and time.
Choice AND time.
Consider that one of those, on its own, is significant.
But both? Together? It was unheard of in the freehold market.
Now, throw in price flexibility, and you’re just laughing.
What a market we found ourselves in.
My clients decided that they wanted to “try their hand” at the Bowmore house, and just the idea of “trying one’s hand” was incredible, since it wasn’t something you did in the spring.
In the spring, if a house was listed at $799,900, and there were twelve offers, it just didn’t make any sense to “try your hand” with an $825,000 offer, when the house was going to sell for $1,100,000, or more.
But now we were looking at a completely different situation.
We put together an offer for $900,000 even, and submitted it with the caveat that we were “almost” firm on price.
Why almost firm?
As emotions run high when selling one’s home, many sellers don’t like to feel strong-armed, or like they’re losing a battle. We could have offered $910,000 as a “take it or leave it,” but rather we submitted an offer for $50,000 under asking, for a house that had been on the market 14 days (an eternity in this area), and suggested that this represented just about our best price.
It was now up to the sellers to decide what their price was.
Because if it was $940,000, there was no deal to be had. $930,000, same story. $920,000, and perhaps they might think we’d play ball, but they might not want to risk losing us.
We had expected a sign-back to arrive the next afternoon, but the listing agent called me and said they had received another offer.
The market was cooling, but that didn’t mean we were in a buyer’s market. There was always the threat of a competing offer, and once one came in, the seller could sit back and ask both of us to submit our “best” offer.
Instead, we did something that buyers so seldom do in this market: we walked away.
Our best price was $910,000, and who knows – maybe if we received an actual sign-back at $914,850, sitting in front of us, we’d have accepted it.
But with the prospect of a competing offer, and knowing we were $50,000 under the list price, Jake and Amanda simply said, “Shall we switch our focus to the Scarborough house?”
Bowmore sold three days later for $923,000.
But by the time Bowmore had sold, Jake and Amanda had already bought a house of their own…
Listed for $849,000, we had all the leverage here. This house, which was listed by a relative of the sellers, was on its fourth listing now – this one for 33 days.
We submitted an offer for $825,000, and gave them a “take it or leave it,” but of course, I wouldn’t phrase it like that.
And perhaps the most interesting term of the offer was that it was conditional on a home inspection – something we didn’t see in the spring, when every house had a pre-inspection, and the buyers had to either rely on that inspection, or conduct their own, before “offer night” when a dozen unconditional offers would materialize.
We tied up the house for $825,000, conditional, amid a lot of groveling from the other side, but no real action.
I don’t blame the listing agent for acquiescing. He simply had no leg to stand on. You can’t bargain without any chips.
We used my preferred inspector from Carson Dunlop, somebody I’ve used probably a hundred times, and he gave the house rave reviews. My clients are extremely intelligent, and far more informed about the inner workings of a home than most buyers, and they hit it off with my inspector as we went through the house. The inspection revealed a few things to “keep an eye on,” but more importantly, it identified how well-done some of the renovations were.
We signed the waiver of our condition, and voila – we had bought a house!
Anticlimactic? Maybe a little, based on how I allowed the end of the story to unfold.
But that’s the point with this particular real estate journey: despite the nine-offer process, there were never any tears, and a fraction of the emotion you might otherwise expect.
Now, the story isn’t over quite yet.
Jake and Amanda had purchased a home, but the next order of business was selling their condo.
A funny thing happened this past summer, which has since been documented: while the freehold market, which has traditionally outpaced the condo market in virtually every arena, started to slow, the condo market just kept on going.
Jake and Amanda owned a small, 1-bed, 1-bath condo, about 539 square feet.
We were working off two sales in the building, both 568 square foot models, which sold for $425,000 and $418,000 respectively back in the spring.
Based on the price per square foot of the latter sale, Jake and Amanda’s unit would be worth $396,704.
The problem, of course was that the comparable sales were from the spring, and that represented the peak of the market.
Those two units also faced south, were higher up, and had better views.
As a result, I felt Jake and Amanda’s condo was “worth” around $380,000.
But as we know, a property is worth what somebody is willing to pay for it, not what comparable sales suggest.
I told Jake and Amanda that we should price the unit at $399,900, and that anybody who walks through the door in the first 48 hours and likes it would probably end up submitting an offer for near the asking price, regardless of the comparable sales.
I don’t believe that today’s buyer agents, many young, many inexperienced, many poor “A.F.” as the kids say, have any clue what any condo is worth. As a result, I often price my listings higher than they’re worth, because I know some rookie buyer-agent who needs a paycheque is going to do the “selling” for me.
But as it would turn out with Jake and Amanda’s condo, we didn’t need an inexperienced, rookie agent to sell the unit, since the market sold the unit for us…
On the second day of the listing, an agent (yes, a young, inexperienced guy) registered an offer, and called me to discuss. I naively assumed it would be at the list price, and also naively assumed it would be irrevocable until 11:59pm that night.
I was wrong on both accounts.
Not only was the offer for $389,000, which was $10K under list, but it was also irrevocable until 6pm the next day, meaning I had time to sit and wait, and let other agents know we had an offer.
I asked him, “Why in the world are you coming in under the list price?” and he told me, “We’re here to negotiate.”
Had he submitted a full-price, $399,900 offer, with a midnight irrevocable, and had I worked the phones to draw up other interest, and come up empty, we’d have accepted that offer.
But instead, he submitted an offer under the asking price, and tried to sell it to us with an extended irrevocable as if to say, “Take your time, sleep on it, we’ll be here tomorrow.”
Of course, the next day, two more offers were registered, and this guy had cost his client a property.
The higher of the two offers was $425,000, unconditional, whereas the other two offers both had conditions.
Jake and Amanda were over the moon, and for good reason.
They had hoped to get $385,000 – $390,000 for the unit, and here we were, with three offers, and $25,000 over asking in a “cooling market.”
And that agent – the first one who submitted an offer, now had a buyer who saw she could have got a unit that sold for $425,000, for $399,900, if they had simply played the game correctly.
The sale set a new record for price per square foot in the building, and it confused the hell out of me about the market!
How in the world could the freehold market be cooling, but the condo market was still red-hot?
Entry-level-condos, that’s how. There’s not a lot out there at $399,900, and this unit looked A+, as I always stage and market the hell out of my listings. It was probably the nicest-looking 1-bedroom on the east side at that time, and a lot of buyers out there have already made their minds up by the time they browse through those twenty MLS photos.
By the end of Jake and Amanda’s real estate journey, they had likely purchased the best house out of the nine on which they had submitted offers, and they had sold their condo for a lot more than they’d expected.
They got every feature in a house that they wanted, and then some – the master ensuite bathroom was unexpected, as was the full 800 sqft basement with a rec-room, 4th bedroom, and bathroom. They got parking, which half the other houses didn’t have, and the house was detached, which again, half the other houses were not.
It’s funny how these stories turn out sometimes. You would think some folks in their position would eventually “settle,” or not find anything, or end up with an inferior home. But for Jake and Amanda, the ninth time really was the charm. Really, and truly. Perhaps the semi in Keelsdale was larger; maybe it’s a tie, who knows.
But they sure didn’t feel the same way about that house as the one they ended up with, and being able to take their time, play one house off the next, submit an offer well under list, refuse to negotiate on the price, and conduct a home inspection, put the proverbial icing on the cake.
So ends their journey, and every day in my line of work, another begins.
The TREB numbers are coming out this week, and I’m sure we’ll have lots to discuss on Wednesday and beyond…