I’m always advertising that I’m an honest, no-nonsense Realtor who shoots from the hip, and tells it like it is.

So for that reason, I feel I owe it to prospective buyers to tell them EXACTLY what to expect when looking to buy a single-family home in Toronto, whether they want to hear it or not.

Maybe it’s harsh, and maybe it’s dream-crushing, but I figure I’d better tell them sooner rather than later, otherwise, I’d just be coddling them and stringing them along like any other salesperson.

If you are looking to buy a single-family home in Toronto today, you have to accept current market conditions for what they are…

A colleague heard me on the phone the other day, talking to a prospective client, and he asked me, “David, were you trying to scare that person away?”

No.

I’m just telling them the truth.

About once or twice per week, I get a phone call that starts with, “Hi David, my name is blank, and I’ve been reading your blog for the last six months or so, and well, my boyfriend and I are looking to buy a house in Toronto.”

I’m always excited at the prospect of a new client, but today’s clients can be basically grouped into three categories:

1) Condo Buyers
2) House Buyers over $1,000,000
3) House Buyers under $1,000,000

Those are three very different buyers, working in three very different markets.

And it’s that #3 market that is so incredibly tough in 2014’s Toronto, and it is to those potential buyers that I give the brutally honest truth.

I’ve surmised in past blogs that part of the reason the $600-$800K price point in Toronto is so hot is because of Jim Flaherty’s decision two years ago to implement a mandatory 20% down payment on houses over $1,000,000.  This was intended to cool down the market, by causing borrowers to take on less debt, and take some of the borrowers out of the market, but instead, it caused the sub-$1M price point to catch fire.

You might say that overnight, $650,000 homes went up to $750,000.

And every house that’s listed for $599,000 today seems to be selling for upwards of $800,000.

So when I get a new buyer on the phone, and they tell me, “We want to buy our first home in Toronto,” I don’t waste any time telling them what the market is like.

I’m paraphrasing myself, but these are the bullet points I’ll make during our initial conversation, and yes, I’m aware that these are, in essence, generalizations:

1) “This is the hottest market I’ve ever seen in Toronto.”

I can’t sum it up any more succinctly than that.

I want to get it out there right at the start – this IS the hottest market I’ve ever seen for single-family homes, and so if you’re a buyer looking to get started now, you have to put things into perspective.

People come into the process with all kinds of ideas and notions, many of them so far-fetched that it can take a long time to undo their misconceptions.

When somebody says something like, “I want to get a super deal,” I have the unthankful task of telling them that we’re working in April of 2014, in Toronto, and not some other market, in some other city, where “super deals” are routinely possible.

2) “Starter homes are essentially $700,000”

I’m sure you can get a house somewhere for less, but for the most part, you’re looking around $700,00 for a starter home.

Yes, you can get a fixer-upper for less.

Yes, you can get a 2-bedroom house for less.

Yes, you can get a house with a few red flags and drawbacks, ie. no parking, only a crawl space instead of a basement, a short 60-foot lot, etc.

But with the average price of a home in Toronto (including the whole of Toronto, both houses and condos), hovering close to $550,000, it shouldn’t be hard to see that your average 3-bedroom home in the Central, West, or East TREB districts is going to be around $700,000, and some agents would suggest that starter homes start even higher.

3) “You WILL be in competition at some point.”

I refuse to accept otherwise, so long as you’re working in the $600-$800K range.

If I had a prospect tell me, “I’m not going to do one of those stupid ‘bidding war’ things,” then I’d question the reality that they live in.

Just as with point #2, there are circumstances where this will prove wrong.  But for the most part, you WILL be in competition at some point.  It’s unavoidable.

You can’t come into the process looking only at houses where there won’t be “offer dates,” because any $599,000 or $749,000 house in Toronto IS going to have an offer date!

The only houses without offer dates are over-priced houses that have seen their offer date come and go, and maybe where the seller has actually RAISED the price of the house.

I can’t change the market in which we work.

I wish to God that it wasn’t this way; that we didn’t have to “bid” on houses, on “offer night,” but that’s the way it is.  And it’s not going to change.

You aren’t going to see a $699,000 house in Danforth Village hit the market with no set offer date, and thus you are always going to be in competition on these homes.

Maybe not next month or next year, but right now – this is the way it is.

4) “The search process might not be fun.  It might actually be very frustrating.”

I think a lot of buyers get so excited about the idea of buying a home, that they don’t do any research on market conditions, the offer process, and how the market for single-family homes actually works.

I’m working with three couples right now who have lost in competition four times or more, and all three couples are a bit tired.  They’re still excited to buy a house, and all three couples remain positive and optimistic, but they’d be the first people to admit that the search process could have been easier, could have been quicker, and could certainly have been less stressful.

I’m not trying to be a downer when I tell somebody who I just met on the phone, “The process can be very frustrating.”  But I am trying to accurately convey how things could play out.

Isn’t that better than surprising them?

5) “Searching for a house is a full-time job.”

You have to look at houses online every day, and you have to be out looking at houses at least twice per week.  Likely one weeknight, and then either Saturday or Sunday.

You’re going to me making several offers before you finally tie up a home.  If you get the first house on which you offer – then you’ve done very well!

You’re going to be signing a lot of paperwork.

You’re going to get to know your bank teller as you get certified deposit cheques, and then put the money back in your account if/when your offer is unsuccessful.

You’re going to be talking to your mortgage broker and real estate agent more than your best friend.

Searching for a house is a full-time job in this market, and if you miss a day, you could miss an opportunity.  Those agents who work part-time are doing their clients a major disservice, and likewise, the buyers who have one foot in the pool are never going to jump in.

6) “Houses are going to sell for upwards of $200,000 over asking.

It’s just a number.  Like your age.

I know that turning 30, or 50, has a different “feel” than turning 29 or 49, but you have to remember that it’s just a number.

If an $800,000 house is listed at $599,000, then I agree – it’s stupid.  But that’s the way it’s done in today’s market, so accept it at the onset.

When you see that $800,000 house, listed at $599,000, don’t be the person that says, “Why can’t I offer $650,000?  That’s FIFTY-THOUSAND dollars over the asking price.  That has to be enough!”

You can’t get wrapped up in the sale-to-list ratio, or the amount over asking.

Look at the sale prices in the neighbourhood, regardless of the list prices.  Feel out the property and what you think it’s going to sell for.

I lost out on a property that sold for $805,000, with a buyer who had offered $800,000.  The property was listed at $629,900.  It’s no coincidence that both myself and my clients, and the winning buyers and their agent, came up with essentially the same price.

Houses do have a market value, and sometimes, it can be $200,000 over the asking price.  Accept that it’s utterly ridiculous, and move on.

7) “You can’t listen to people who aren’t in the market.”

I’m sorry, but if your uncle knew so much about real estate, he would be selling real estate for a living instead of working at the steel mill in Hamilton.  True story…

If you tell people that you’re looking at houses, you’re going to get a million-and-one unsolicited opinions, many of which have no merit.

Your dad tells you, “When mom and I bought our house in 1981, we offered the sellers 80% of the asking price, and then when they turned down our offer, we came back lower the next day.”

Well dad, that was then, and this is now.  And when there are eleven offers on a property, you don’t have that luxury.

When your boss says, “Trust me – that house isn’t worth what they’re asking,” you are under no obligation to listen to him, just because he’s your boss.  And FYI – that house is probably worth $150K over asking, so he should go back to his desk and make a giant paper-clip chain.

Nosey-Nancy, from Accounts Receivable, who is always asking everybody about their plans for the upcoming weekend……..on Wednesday – she doesn’t know anything about real estate.  So why are you listening to her when she says you should put three conditions in your offer so you “have the option of getting out of the deal if you want to”?

And even your mortgage broker, who works out of Ajax, doesn’t know enough about the Toronto real estate market to be telling you how much you should offer.  You probably know more than him, just based on your weekend escapades to open houses.

Toronto’s housing market is far too dynamic for outsiders to understand on a daily basis, and market conditions change every day.  If you aren’t in the market, you simply can’t be expected to know it.

–

I would rather risk scaring off a prospective buyer, than misguide them at the onset.

I’d rather tell them the absolute truth about current market conditions, then waste their time, and fill their heads with mistruths, as they dream about buying sought-after houses for less than the asking price, and conditional on the sale of their home in Ajax.

If somebody has let HGTV real estate shows shape their perception of the market, and tells me, “I want to focus on bank foreclosures,” I’ll tell them that we aren’t in Florida, and that we are, in fact, in Toronto.

If you were a buyer for a single-family home under $1,000,000 in 2014, would you want me to tell you the truth?

Trust me: acceptance is the first step in the house-buying process…