We’re only two weeks in, and already, I have more stories than I can possibly ever tell.
I knew this fall market was going to be crazy, and yet I feel like I was unprepared for what we’ve been experiencing thus far.
This week, I’ll tell you three stories, that underscore just how busy the Toronto real estate market is, and I expect these stories to make the “bears versus bulls” look like the Sharks versus the Jets, as both opinions will be out in full force…
If you’re a bull, then these stories will help you justify why the Toronto real estate market is a fantastic place to put capital, and why it will continue to rise.
If you’re a bear, you’ll use these stories to point out how panic, fear of missing out, and lack of logical decision-making is what is pushing our market into an inflated state.
I simply sit back, and work in the market I find myself in.
I have no vested interest in this market going up or down.
I don’t want to be labelled a real estate cheerleader; I’m just telling you what’s going on in the market.
As an aside – now is a good time to tell you all, once again, that when I tell stories on TRB, I will change the location, time, date, dollar, name, gender, and anything and everything else, ever-so-slightly, to protect the anonymity of those involved. A while back, an agent emailed me and told me I was full of you-know-what, and that I make up my stories, because he couldn’t find the east-side, $499,900 loft I mentioned in a blog post. I emailed him the west-end, $488,800 loft that I had written about, and he never responded…
Earlier this summer, a client of mine reached out to say he would be selling his condo to move out-of-Province with his girlfriend, and asked me to come in to take a look.
I sold him the unit five years ago, and I was shocked at how quickly time flies. Blink in this industry, and your single-woman client calls you for an evaluation, and you find now she’s married with two kids.
I told my client that he had to wait until the busy September market, and that any agent who came in and sat down in his living room, in late July, and said, “Now is a great time to list,” would be selling a bale of hay.
The September market, I explained, was going to be absolutely bonkers, and if he put a little bit of work into the property, then we would do really well.
We spent August getting the unit ready for sale, and we were ready for the September market right after Labour Day.
My client and I disagreed on the price, however, as he seemed to want close to $500,000 for the unit, and I told him honestly that it was worth $475,000.
The same model had sold for $415,000 about 14-15 months earlier, and $475,000 would represent a 14.5% gain in that time!
I know that the “average home price” shows gains of 16-17% in August, but that’s an average, and that includes freehold properties. I figured that the condo market had gone up maybe 8-9% in this building, but that at $475,000, we might be capitalizing on a very busy September.
My client was insistent that the condo was worth $500,000, so I told him that the only way to achieve anything close to that price was to list at $449,900, and hold back offers.
Now, you all know I don’t like this strategy, so feel free to call me a hypocrite.
But I work for my sellers, and I know with 100% certainty, this is the best way to maximize the sale price.
And it’s not just the “under-pricing” that’s the strategy here, but rather it’s the “holding back” that’s important. In this market, you want to make sure there’s enough time for every interested buyer to gain access to the property.
$449,900 is not “stupidly under-listed,” when I think the condo is worth $475,000. This isn’t the $1.2 Million house being listed at $799,900.
But I needed to “hold back” offers in order to ensure we got people through the unit.
Besides that, I predicted in an August blog post that most condos would have offer dates this fall, and that’s proven to be true. You can hear me patting myself on the back, as I lose in competition with just about every buyer I work with… 🙁
But as I’ll explain in subsequent blog posts this week, the hold-back on offers for condos is here to stay.
So we put the property on the market, and I had 16 showings booked on the very first day.
My expectation, fyi, was probably about 8-10. As with everything else in this market, my expectations were blown away.
My client and I had discussed the possibility of a bully offer, but we agreed that unless it absolutely blew us away, we would wait through the week to make sure we got as many people through the unit as possible!
On the first day of the listing, another agent called me and said she would be bringing out the same unit a month later – and that her client expected over $500,000 for hers.
I told her she needed to temper her client’s expectations.
I felt this unit was “worth” about $475,000. I could see it getting $485,000 or maybe even $490,000, but that’s a lot of money for 740 square feet in this building.
But I also received two calls from agents who had shown the property, asking “Would your client accept a bully offer?”
The answer is always, “Sure, but it would have to blow us away.”
Little did I know, on the second day of the listing, I would put that theory to the test.
Interestingly enough, it wasn’t one of the two agents I had spoken to the night previous that brought the bully offer, but somebody I hadn’t even conversed with. The offer just came out of left field.
I got the email on my iPhone – it read, “David, here’s our pre-emptive offer for a price that we think is really good, based on recent comparable sales.”
Oh yeah. Sure.
I love when I get those emails; agents telling me that their offer is “really good” and “based on recent comparable sales.” It’s almost like firing a warning shot, saying, “We don’t like your price, and here’s what we think it’s worth.”
But as you might expect, given the title of this blog post, and the lead-in up to this point, the offer was unbelievable.
Was it the $475,000 I thought the property was worth?
Was it the $500,000 my client wanted, despite there being no basis for that pricing?
No.
It was neither.
It was $530,000.
And suffice it to say, we accepted.
We did page, email, and fax every agent who had shown the property, to let them know there was a pre-emptive offer, irrevocable at 2:00pm that day (as we are required to do), but nobody wanted to compete.
And here we were, with an absolutely record-smashing, logic-defying price.
What a story!
And with that, you may now all discuss the market.
.
.
Wait.
There’s more…
Would you believe that the day after we sold our unit for $530,000, the exact same model came out again?
$460,000 list price, with a hold-back on offers.
Only there was one major difference between this new listing, same model, comparable finishes, and ours: this unit had no parking space.
So for this model unit – which I thought was “worth” $475,000, which on a great day would fetch $500,000, which sold for $530,000 – what do you think it’s worth without parking?
$500,000?
Is that fair?
Parking is worth $30,000, so having just sold my unit for $530,000, should we expect this unit to sell for $500,000?
Or less, perhaps?
Maybe the sale of my unit was an anomaly?
Maybe somebody made a mistake? Maybe they overpaid?
No, it would seem.
Because despite all logic to the contrary, this unit – same model as mine, without parking, sold the day after my $530,000 sale…….for $531,000.
That buyer just paid $31,000 more than the same “product” that sold one day earlier.
And the “crazy buyer” who bought my unit for $530,000, is already up, on paper, $31,000.
That was the true “story” I wanted to tell today.
Sure, my sale – the bully offer for $80,000 over list, a modest 27.7% increase over the last sale 15 months ago, was impressive.
But the fact that somebody would obliterate that sale one day later is rather telling of how the fall market has started thus far.
I’ve made my arguments many times as to the state of the Toronto market, the short-term future, and why I think that the market, despite all logic, will continue to rise.
So use this example to make your argument – the market will rise, or the market will fall.
I’ll be back Wednesday and Friday with two more tales, just as crazy as this one…
Appraiser
at 8:39 am
The state of the market is not a matter of opinion – it is a matter of fact. Latest TREB mid-month data is as follows:
September 16, 2016 – Greater Toronto Area REALTORS® reported 3,847 home sales through TREB’s
MLS® System during the first 14 days of September 2016. This result represented a 19.1 per cent
increase compared to the first two weeks of September 2015. Annual sales growth was strongest for
condominium apartments, but double-digit increases were also noted for low-rise home types on a GTAwide
basis.
Not only are sales up almost 20% year over year, but the busiest segment of the market is condos. So yeah – the market is red-hot!
Joel
at 12:21 pm
I feel like with the limited supply of single family homes it only makes sense that the busiest segment is condos. There are a lot of units in the core and I think that they get overlooked too often with the sfh hype in the Toronto market.
Ed
at 9:23 am
I think the market is over saturated with real estate agents and this is a great thing if you are a seller. Imagine for a moment that you are an agent who is working with a buyer and time after time you end up on the wrong end of a bidding war. Week after week you clients are losing out on properties. So what do you do? I would imagine that many agents would tell their clients to ‘go in with their best offer’ and then some. Potentially overpaying, making the seller a very happy camper.
It would suck to be working with a buyer losing out on all bidding wars AND have nothing to show for your time.
Lawrence
at 9:59 am
In my opinion the agent that bought the suite for $531,000 without parking screwed over their client big time. Classic example of an agent taking advantage of their clients emotions.
Peter
at 11:35 am
That’s such a simple answer to blame the agent.
Will buyers ever be held accountable for their actions?
Libertarian
at 3:36 pm
If the agent told the buyer that $531,000 was too much to bid, but the buyer did it anyway, then yes, the buyer should be held accountable.
But if the agent recommended to the buyer that $531,000 was a fair price, then I agree with Lawrence, the agent screwed over the buyer.
Condodweller
at 11:34 pm
What’s the lag of posting a recent sale price on MLS? Is it possible the agent didn’t see the price of the unit with parking one day earlier? You gotta think they considered the one with parking and would have known it was sold and a good agent would have checked how much it went for before making an offer even if it wasn’t available yet on MLS.
Kyle
at 1:16 pm
I will preface this by saying i am a firm believer in staying within one’s budget, but in this market once you’ve decided that this is the home for you, you need to act decisively in order to succeed. The reality is $30K is only another $140/month. Someone who has been searching and bidding on property after property in vain for a year, seeing the options become slimmer and slimmer each week and realizing a lot of people spend more than $140 on cable and internet…Assuming they can comfortably absorb that, i can easily see how they would be willing to just lock it up.
WEB
at 9:11 pm
I think prices of central core condos will outperform all other real estate in Toronto over the long term. I make this prediction because of gridlock that has been caused or will be caused by numerous factors including a growing population, a rapidly expanding bike lane infrastructure, new streetcars (which will be harder to pass) and other developments such as the proposed King St. redesign which will effectively take out an entire artery for cars through the downtown core. Further, this gridlock is going to result in a further acceleration of condos built along the subway line and a deceleration of condos built in neighbourhoods outside of the core, which are not on the subway line. Therefore, the already packed subway is going to get even more jammed, making the commute on the subway line during rush hour as terrible as for those commuting from outside the core and not on the subway line. (Yes, for those that commute to work on the subway, in the long run, bike lanes and other changes will negatively impact you as well!) Eventually, the only reasonable commute will be for people who literally can walk into work, or for those that live very close to the core (no more than say 4-5KM.)
Detached houses outside the core have outperformed in recent years, but when the land for new condos in the central core gets used up, prices are going to far outperform those detached houses outside the core. By the way, I live in a detached house outside the core and not on the subway line. I am 9KM from my work and my commute has increased from 25 mins to 45 mins over the past decade primarily due to bike lanes and if the King St. redesign goes ahead, my commute will likely increase to 60 mins. It’s getting ugly. And who knows what the hell else is next! Maybe they’ll ban anyone who lives outside of the core from working in the core!
Last, I should say that my predictions relating to real estate over the years have been a disaster! I thought real estate prices were ready for a steep correction 7-10 years ago (thankfully I consider a home much more than just an investment, so I bought one 7 years ago) and made other silly predictions that never came true. So chances are good I am wrong wrong wrong about my new prediction!
Negotiator
at 6:01 pm
Bike lanes and seperated light rail transit are overall good for gridlock (both move far more people in a smaller space than cars) but otherwise I agree with your general point about there being more gridlock in the future (but due to a growing population and the importance of the core as a work destination) and a rise in value.
EastEndUpperB
at 9:59 am
this is more a comment on houses not condos – but the buzz on our street is that a detached house – up for sale for 3 days listed at 799 sold for 1.1 with a bully offer. Don’t know if it’s true. But if it is….. And the house is nothing great. But semi’s are selling for 900 now…. Great street – but wow…
T
at 8:59 pm
“I have no vested interest in this market going up or down.”
Not sure you that’s really what you mean?
Lucielle
at 9:33 am
Stories like this terrify me because they make an already nerve-wracking and emotional transition period even more unpredictable and situationally charged. I really didn’t want to sell my home, but my husband’s work had changed locations. My daughter convinced me to post it (for free!) on Prelist.org. Now, I had no intention of selling the place myself, but she pointed out that we could have a look at market response before we proceeded any farther with the sale. I was shocked, not only did we get responses, but leaving it up there for a few days let me get more comfortable with the idea of a sale. We contacted our agent and gave him the information we’d gathered so far, and are now proceeding full steam ahead. I’d highly recommend people try listing homes on this site before contacting their agent. It’s free after all.
Rick
at 2:34 pm
This is something that scares me. I already don’t like the idea of buying a condo because I can’t control/manage that condo fee if my neighbours/renters don’t care about their unit or the condo corporation doesn’t manage the funds properly.
But even if I wanted to buy, this makes me think, I can never make a purchase that will be within a budget!