It has become commonplace to see blind bidding wars in real estate when the market is hot (and sometimes when it isn’t). The concept of open real estate auctions is quite popular in countries around the world, but is only starting to show up in listings in Canada. As the owners of the brokerage that brought the concept to residential resale in Ontario, Daniel and Katie discuss how they built the auction approach, why it is a useful alternative for buyers and sellers, and how the whole process works.
Tag: bidding wars
Why ‘Sold Over Asking’ Doesn’t Matter in Toronto Real Estate
“Sold Over Asking” — a phrase those watching the Toronto housing market hear quite frequently these days.
This phenomenon has captured the attention of the news media, who have crafted such intoxicating headlines as “GTA house goes for $400,000 over asking: ‘It was like a rock concert'” as seen in the Toronto Star, and “Toronto house sells for more than $1M over asking” as reported by Global News. Agents also cash in on the glamour, adding massive “Sold Over Asking” banners atop their sold signs
It has also been one of the many driving forces and motivations for On The Block to change the way real estate is bought and sold in Ontario.
With homes regularly being “Sold Over Asking,” what does the phrase really mean?
A “sold over asking” sign is on display on a house for sale in Toronto, Ont., Oct. 21, 2016. (Photo: Hyungwon Kang/Reuters)
In 2016, out of a total of 17,862 homes sold in Toronto, 6,583 sold over asking, or 37 per cent. Markham had the second-highest numbers, Richmond Hill third.
The number of freehold homes, which include detached, semis and townhomes, that sold by at least 10 per cent over asking last year clocked in at 16,000 in the GTA — up more than 160 per cent from 2015. That’s 1 in 5 (22 per cent).
Likewise the number of GTA freeholds that sold by at least 20 per cent over asking reached 4,800 or six per cent — up more than 251 per cent from 2015.
Traditionally priced homes in the GTA are becoming few and far between. In a market where inventory is low and demand is high, prospective buyers are bound to see higher than normal prices. The homes in the aforementioned news headlines both sold for market value.
In many cases, realtors and their seller clients are strategically pricing their homes competitively and letting a property go to the open market to create a sense of affordability and desire. This makes the terms “asking price” and “listing price” irrelevant. Case in point: Some realtors are listing their properties at $1, so those will obviously sell over asking. Further, introducing terms such as “holding back” and “offer date” have become the new normal, creating an auction-like setting for prospective buyers, which leads to the coveted “Sold Over Asking” designation.
On one hand, sellers and listing agents are loving it, as they are obtaining record-setting prices for homes in record-setting times. It’s important to remember that despite a ‘flattening’ of pricing in recent months, homes in hot areas continue to set offer dates, and price misleadingly low.
Prospective homeowners hoping to buy, however, are faced with largely stressful, emotional experiences in which many end up empty-handed. Many just don’t offer at all.
When individuals are ready to submit an offer, there are many different types of buyers they might be competing against. There is the buyer who might have just begun looking, who submits an offer under asking. This unfortunately drives up the purchase price, as they appear to be competition. There are usually a couple of strong offers over asking, some with conditions and some without, and these are probably in and around the true market value of the home.
Sometimes, one of the offers is substantially higher than that of the closest competitor. That offer can be $10,000, $25,000, $50,000 and in some rare circumstances in excess of $100,000 more than the next highest offer, usually with no conditions, or what we call a “firm deal.” This buyer is not just any buyer, but the “Right Buyer.”
This Right Buyer is what every listing agent and seller dreams of. He or she is often fed up with looking, fed up with losing other properties, and in some cases is an investor or foreign buyer. The public is led to believe that all properties are selling for hundreds of thousands of dollars over the asking price, but the important question to ask is how much the home sold over market value. Market value is much different than asking price.
Regardless, many buyers are sitting on the sidelines waiting for demand to lessen, supply to increase or rules to change so there is transparency within the offer system.
If you are a prospective buyer, choose to work with a realtor who will leave no stone unturned.
Elsewhere in the world, like in Australia for example, agents choose between arranging a traditional offer or hosting an open auction. Just like an art auction the house goes up for sale with a starting price, and a crowd openly auctions for it. Everyone can hear what the top bid is, and the choice is theirs if they want to go higher. Having a system like this could certainly end the hysteria and the act of overpaying for a property. The Right Buyer would have to outbid his or her competition, but would know by exactly how much, so we probably wouldn’t see someone outbid their closest competitor by ridiculous amounts, as they wouldn’t have to.
Would something like this work in Toronto? On The Block thinks so, and it’s about time to give Ontario some choice. It isn’t about whether the market is ‘hot’, ‘cold’, ‘cooling’, ‘a bubble’ or a goldmine’, the key is that the market has been dictated for buyers and sellers by fictitious figures and a nontransparent system. Opening it all up means buyers aren’t scared away, and fair competition will rule.
In this lively market, it is that much more imperative to choose the right real estate agent. Sellers, interview several prospects. Choose someone who knows how to make your home stand out and can find you that Right Buyer to get you the best price for your home. Be sure they have a steadfast marketing plan and they go over the shortfalls of the standard listing agreement.
If you are a prospective buyer, pay attention to comparable properties that have sold, ask a lot of questions, and don’t feel like you are being rushed. If you aren’t comfortable, there is a reason for that. Circumstances are different for anyone, for a purchase this important, you shouldn’t become the “Right Buyer” by virtue of coercion or unreasonable deadlines.
Toronto’s Fiercely Competitive Rental Market
“From there to here, from here to there, funny things are everywhere!” – Dr. Seuss
From a one-bedroom shoe box in the Financial District to a three-bedroom townhouse in Markham to a four-bedroom semi in Oakville, the rental market in the Greater Golden Horseshoe Area is seeing some unusual, unexpected and fast-paced activity. To an outsider, this rental market can be downright amusing to hear of multiple offers, bidding wars and listings renting within hours of being uploaded onto realtor.ca. Unfortunately, this hectic environment is stressful to say the least for tenants. With that said, here is our list of top ten reasons why renting in today’s market truly sucks:
- Your credit report is reviewed with a fine-tooth comb. Sure you might have a great credit score but missing a credit card payment by one day five years ago may cost you big time.
- Your employment letter is scrutinized. Why aren’t you making more money? Why have you only been employed for three years? Why doesn’t your title sound better? Your manager sounded weird on the phone when called for a reference.
- You feel pressure to leave your pets behind. While a landlord can’t kick you out for owning a pet after you secure a lease, you can be pooched if you disclose your pet loving habit to a landlord when making an offer.
- Expect to compete. If you happen to find a place within 30 minutes of it listing on realtor.ca and the landlord’s agent miraculously needs less than the standard 24 hours to review the offer, you might be able to have your offer reviewed and accepted prior to another offer rolling in. Any other time, you should expect to put on your boxing gloves and fight to the death for that 500-square foot condo with a view of the GO Train.
- Expect to lower your expectations. As rental prices increase, all of your hopes and dreams for a new rental home might have to simmer down. You might need to opt for a smaller unit, an option that is less updated or a home without appliances (I kid, I kid).
- Give away your car. Many condos and some homes closer to the city don’t offer a parking spot. With many new condos offering limited parking to the larger units in the building, expect to be paying a couple hundred extra to rent a spot (if you are lucky enough to find one for rent).
- Expect that the process will take longer than you think. A few years ago, renting a condo was actually enjoyable. You checked out a couple places at your leisure, chose your favourite option and negotiated on the price. Now? The struggle is real. You and your agent desperately scrape together a few decent options to view within an hour of them being listed, you choose your least-hated option and offer hundreds of dollars over asking only to find out that your offer was not accepted. The next day, you do it all again until one day, the rental gods take pity on you and convince an unsuspecting landlord to accept your offer.
- Expect to be rejected. Rejection is never fun but if you are not a perfect, prospective tenant, rejection is imminent. Work on contract for more money than if you had a full-time job? Sorry, out of luck. Need a guarantor? Go live with your guarantor. Your partner goes to school full time? Make an offer once he graduates and has full time employment.
- Expect to be surprised. Some rentals fly off the shelf so quickly that the rental agents don’t have a chance to update you and your agent prior to your showing. You can fall in love with a unit and decide to make an offer, only to be informed that the unit leased the night before and it’s no longer available.
- Expect to drink. Lots. After every rejection, every missed opportunity and every unsuccessful experience, you might need a drink or two. Don’t worry. It’s completely normal.
As we have experienced and seen our fair share of nightmare rental search stories, believe it or not, there is a light at the end of the tunnel. The right place will come in time and you just need to be as prepared as possible. Here are some tips to get you through your rental search.
- Drink (see point 10 above).
- Hire an experienced Realtor who can guide you through the process. Sadly, some agents who list units will ignore requests from potential tenants to schedule a viewing. In this market, they probably figure they can rent the listing quickly without having to do much work, including showings of their own. By having your own Realtor, you can schedule showings easily and efficiently.
- Be organized. Have all of your paperwork ready to go – credit report, rental application, employment letters. You need to be ready to make an offer immediately when you find a place you like.
- Don’t negotiate. Look at the comparables and if other units/homes in the building/neighbourhood justify the list price, then offer that. The moment you fool around with offering a lower amount, the less motivated the listing agent and landlord will be to review your offer in a timely manner.
- More is more. Provide as much ammo as possible to prove you are the best choice. Previous landlord recommendation letters, ensuring your references are ready to take a call and give you an amazing reference when the time comes, bank statements showing you can easily afford the monthly rent payments, offer to meet the landlord in person – all of these can help to strengthen your offer and put you ahead of the competition.
- Audit your social media accounts. You can bet that landlords and landlord’s agents are checking you out on social media. Set your accounts to private, remove those incriminating pictures from yesterday’s kegger at your current home and tone down any profanity or strongly opinionated posts.
- Know the market. Ask your Realtor to send you recent leases in the neighbourhood that you are searching so you are familiar with the inventory and pricing in order to bring you down to earth when it comes to your must-have rental list.
- Make yourself available. Your daily lunch break at Burrito Boyz might have to be cancelled in order to check out a potential rental. Friday nights and weekends may become a little less exciting during the search process but you’ll get them back eventually.
- Don’t limit yourself. Creating a search parameter of a half block radius around the DNA condos on King West might not yield too many results and will lengthen your search process substantially. Consider different streets and neighbourhoods based on recommendations from your Realtor, friends and co-workers.
- Don’t give up. You will find a rental when the time is right. Although this post might have put the fear of God into you, you might end up being pleasantly surprised by your own search process.