Are you familiar with the real estate market in the United Kingdom?

I mean, if you are, then you have a problem.  A big one.  Not only are you on Toronto Realty Blog every day, reading about local real estate, but you’re also checking in on the inner workings of a real estate market on the other side of the pond?

I kid!  I joke!

Personally, I love looking at real estate markets around the world, not only because what you don’t already know can be a fascinating learning experience, but also because it’s fun to compare and contrast other markets with ours.

We’ve talked about this quite a bit over the years on Toronto Realty Blo.

I remember when the peanut gallery first started clamouring for an “open bidding process” in Toronto, suggesting that auctions were the solution, and further suggesting that we should “do things like they do in Australia!”

March 28th, 2018, I wrote: “Is The Grass Greener Down Under?”

In this blog post, I exposed the myth of this somehow being a “better system,” since property owners who list their homes for auction can sell before the auction (like a “bully offer” here in Toronto), or set a reserve price that isn’t met by the auction (like a seller in Toronto turning down offers on the scheduled offer night).

March 2nd, 2015, I wrote: “Gazumped!”

This was about the real estate market in the United Kingdom, where “firm sales” aren’t really all that firm, since the seller can re-sell the property to another buyer, for a higher price, before closing.

Imagine that?

You’re a buyer here in Toronto, and you purchase a home for $1,200,000 with a scheduled closing date of May 1st, 2026.

You then provide notice to vacate your rental property to your landlord for April 30th, 2026.

Everything is going along swimmingly until April 17th, when the owner of the home that you purchased notifies you that he has sold the home to somebody else for $1,230,000.

Oh no!

You got GAZUMPED!

That is how the real estate market works in parts of the United Kingdom, and this is what I explained in the blog post above from 2015.

In our example above, the original buyer of the house was a renter, and while it’s awful to be “gazumped” and have the house you thought you bought taken away from you, rendering you homeless, it’s even worse when you have an existing house to sell.

What happens in that case?

Imagine you’re the buyer of that house for $1,200,000, and you turn around and sell your existing home or flat for $750,000.  What do you do when you’re gazumped and somebody steals the house from you for $1,230,000?

You pull out of the sale of your $750,000 flat.

And what happens to the person who bought your $750,000 flat?

Well, they pull out of their deal, and so on.

This is referred to as a “real estate chain,” and it’s exceptionally common in the U.K.

So common, and so disastrous, in fact, that you’ll routinely see properties listed for sale with the phrase “not part of a chain” detailed in the listing description, or the term “chain-free” being used.

This is an absolutely fascinating topic and, in all honesty, it deserves a dedicated blog post.  I wrote the post above eleven years ago, and a lot has happened since then!

If you require more reading, HERE is a great article, albeit from 2022.

The point that I want to make in today’s blog post is this:

While we don’t have a true “chain” like that which is common in the U.K., we are seeing a dramatic decline in inventory because buyers and sellers are all linked together.

Linked in a……….chain?

Let me explain…

Clients of mine have a fantastic house in East York that would surely do well on the open market.  It’s a typical “infill” house, built about a decade ago, with four bedrooms, four bathrooms, a private driveway, and in the $1.9M price range.

There isn’t enough of this product out there right now, and when I listed a similar property last fall, I ended up with two offers (organically – no offer date) and it sold over the list price.  That was a shock to all of us, trust me!

But my clients aren’t sellers.

They’re buyers.

I view them as buyer-clients who, after finding their future “forever home,” will turn around and sell their existing East York home.

What are they looking for?

Well, that’s the problem…

My clients are looking to move to Leaside but don’t want the typical 30 x 120 foot infill house that trades between $2.8M – $3.2M (which is also lacking in supply right now), but rather they’re looking for that next “step up.”  They would like a 35-36 foot lot, ideally 130-feet deep or more, and they’ll go upwards of $4 Million.

But this house doesn’t exist.

I mean, there is over-priced builder garbage out there, for any of you who are jumping on House Sigma or Realtor.ca and trying to challenge my stance.

But a traditional red-brick home, built new in the last fifteen years, loved by a family ever since?  Nope.  Doesn’t exist.

So I did what I had to do: I started calling around.

What many people don’t know about the Toronto real estate market (topic for another day, perhaps) is that many agents network behind the scenes.  Depending on “who you know,” you might find an off-market opportunity that would never have seen the light of day, and this isn’t available to every agent.  Experienced agents, well-connected, well-respected (sorry to sound like an ass…), and trustworthy; those agents can network, trade favours, and find properties that other agents can’t.

In any event, I’ve been making calls since we started back in January, and last week I was speaking to a colleague (with a different brokerage) who told me about another colleague (with a third brokerage), who might have an opportunity off market.

So I called her.

And guess what?

She had the perfect house!

She told me that the house was on a 36 x 135 foot lot, red-brick, built new in 2012, traditional in style with crown moulding, wainscotting, and light colour tones, built-in garage, private driveway, 4-bedrooms, and 5-bathrooms.

The price?

A paltry $4 Million.

I hit the jackpot.  I absolutely nailed it.

My buyer-clients were going to be so absolutely happy with me, and I couldn’t wait to tell them we had found the perfect house!

I asked the agent when I could show it, and she paused.

The pause lasted way too long for my liking.

Then she said:

“David……my clients need to buy before they sell.  I can’t get you in there.  I need to find them what they’re looking for first.”

Dammit!

Do you see the problem here?

That prime inventory is “trapped.”  It can only be freed with the right key, and that key is hardly a one-size-fits-all.

The agent told me, “My clients need to find a unit in the Kilgour Estates, and they have some parameters…”

Oh, of course they do.

She explained that they had a budget they wanted to work with, and a target square footage, layout, and exposure.

Like I said: a key.  A one that’s nearly impossible to copy.

So while these folks had the perfect house for my buyer clients, they would need to find their own perfect condo before they were ready to sell.

Now, while I have all kinds of stories about trapped inventory, let’s stick with these same clients for a moment.

In mid-January, I spoke to another colleague about an off-market exclusive that he had.

Ironically, I called Betty, who called Jane, who let me know that Billy had this house up his sleeve, once again demonstrating the power of connections in the business, not to mention the fact that these agents from different brokerages weren’t afraid to help each other!

I eventually got in touch with Billy, who told me about his exclusive listing.

It was almost exactly like the one I described above.  This was a nearly identical 36 x 130 foot lot, also red brick, also a 4-bed, 5-bath, different layout, but a newer house and debatably better finishes.

Billy said that his clients were looking for around $4.2 Million, and while it was above my clients’ budget, they could probably stretch, plus, it was a dynamite location!

I asked Billy if I could show the house, and he said, “Let me get back to you next week.  I want to chat with these guys one more time.”

I got excited.

I shouldn’t have.

I called Billy the following week, and he said, “Look, these guys don’t plan on being homeless.  I need to find them a place to move into first, then I can show you the house, and maybe we can do a deal.”

I asked Billy what these folks were looking for, and he said, “They basically want a smaller version of this house, but closer to Yonge Street.”

How often do those come up for sale?

Do they even exist?

Billy said, “I know it’s a bit of a needle in a haystack, but let me know if you have anything, or if you know anybody that does.”

Oh man!

This house was trapped outside the market too!

What’s worse is that in order for me to get my buyer clients in to see the house, Billy needs somebody else to have a pocket listing of their own to satisfy his sellers………..and now he’s asking me if I’ve got an exclusive!”

Does this all sound quite circular to you?

Or is it less like a circle and more like one long line of individuals and properties, connected somehow?

Kind of like a……….chain?

Stories like this are a dime a dozen out there in today’s market, and they demonstrate just how much high-quality inventory is waiting on the market sidelines.

Pick your analogy here; maybe the snowball rolling down a hill is apt.

With every subsequent trapped listing that gets unlocked, it helps to unlock another one.

If there’s a detached, four-bedroom house in the Beaches that finally comes to market, which helps to unlock a high-quality semi-detached in Leslieville in that coveted $1.2 – $1.4 Million price range, that’s owned by the future buyers of that detached house in the Beaches.

But you can’t have one without the other.

Maybe we’re into chicken and the egg territory now?

Which one comes first?

I think this is a combination of both analogies.  It’s a matter of one property being trapped by the other, but without knowing which is unlocked first, and by whom.  But once one property is unlocked, then it unlocks a second, and on, and on, as the market gains momentum – like a snowball rolling down a hill.

I know that I sound like a broken record, but there’s a dearth of quality inventory in the market right now, and any good property in the central core is getting action.  I said “good” property.  The great ones are going bonkers.

On Tuesday night, a cute little semi-detached house on a small 15-foot lot on Woodfield Road received twelve offers and sold for $352,000 over the asking price.

If there were five other houses like it available for sale that week, would this house get twelve offers and 132% of the list price?

That question is so rhetorical, I’m not even going to answer it.

But those homeowners obviously found what they were looking for, which allowed them to turn around and sell their house.

That exceptional house, which was so loved by the market and the buyer pool that it received twelve offers, was only made available because the owners found something else to buy.

In all my time in this industry, I’ve never felt this feeling of so much inventory being “trapped” out there.

I keep hearing about properties that I would love to see, for which I have buyer clients, but those properties can’t be sold until the owners find their next home as well.

I know that you want to offer solutions.

Purchase conditional on the sale of the buyer’s property.

Sell to rent.

Extended closing dates.

And so on.

But people are loath to think outside the box these days, and even less likely to do something imperfect or uncomfortable.

So for now, we continue to wait!

Bring on the deluge of inventory, because the market is going to need it…