Buyers get out of the GTA Real Estate Market!
You might be thinking Mr. Jas, what the heck (or expletives) are you talking about? What’s the catch in this blog of yours? We have thousands upon thousands of Buyers looking to purchase that can’t find a place in the Greater Toronto housing and condo market and you’re telling them to get out of the GTA Real Estate Market!
That is precisely why I’m asking Buyers to get out of the GTA real estate market. If there are more Buyers then there are properties, this causes a huge supply and demand issue, which causes properties to sell way over asking! “Half” these Buyers aren’t willing to pay “way over asking!” Since they aren’t willing to pay way over asking, they are hurting themselves in the long run by competing in this market!
Read carefully now.
If there are 5000 homes on the Market. (Feb Stats show 5400) and for argument sake, there are 10,000 Buyers (probably more). That would mean for every house we have 2 people wanting the property and you would expect multiple offers on any decent property. If however, half of these Buyers who don’t have the large deposits, extra cash from parents, high incomes and approvals from banks, etc. step out of the Buying market we would be left with 5000 homes to 5000 Buyers. With less competition, less Buyers in multiple offers. More importantly, every Buyer in the long run wins with LOWER PRICES.
Example: Buyer A is approved for $600K and has $50,000 cash deposit. Buyer B is approved for $600K with $200K cash available. Buyer C is approved for $700K and has $150K cash available.
House is listed for $550,000. Approx. Market value is actually $650K. There are 3 showings on this property. However, if Buyer A knew that the market value was at least $650K for this house, she would have never viewed it. However, not knowing she books a viewing. Buyer agent feels obligated to show or hasn’t done the research to know its true value “yet”. She likes it and wants to put an offer.
Buyer B and C probably would have looked at the property if it was even listed at $650K. Now only Buyer C truly likes it to place an offer.
Buyer C is competing with Buyer A and has no idea what Buyer A can afford or what the offer is. Buyer C’s REALTOR® does the research and lets him know similar houses sold for $650K but you’ll need to offer more because you are in multiple offers, that is if you really want it! Buyer C ask’s how much? REALTOR® advices and Buyer C decides $50K more than $650K and submits an offer at $700K (also what’s he’s approved for). Buyer A could only go to a maximum of $650K (approval plus cash deposit) and she places an offer in for that.
This selling agent asks both REALTORS® can your clients improve their offers or is this their final?
Buyer A and Buyer C have no idea what the other offer is. Buyer C has room to maneuver and really wants it and adds another $25K to this offer. Buyer A can’t do anything and says, that is my final offer.
House sells for $725K. REALTOR® advertises it as SOLD $175K Over Asking. Buyer C has no idea they have paid $75K more than the second offer. They are just happy they got the place!
The lesson here is that Buyer A did not do herself any favour by participating in this multiple offer negotiations. She helped the Seller get $75K more than market value. This sets a new “standard” in pricing. Now every Seller in the neighbourhood will want at least $725K, and likely more!!!
Now you understand why I’m telling Buyers literally GET OUT of the GTA Real Estate Market!
I know this argument is a hopeful one, because humans are full of desires. Everyone wants a piece of Toronto and those who should step out of the market, still have remnants of hope that they can find something! The REALTORS® working with them are clinging on to the same “hope.” They’ve invested many hours and money showing them properties, writing up offers and hoping that just maybe they’ll get lucky and win the lottery of multiple offers, even though, logically speaking, many of these Buyers should never be participating on many of the properties in the GTA Market.
Now Part 2 of this Blog…. Buyers literally GET OUT of the GTA Real Estate Market!
Many of you are all ready doing this… buying into Oshawa, Bowmanville, and west to Hamilton. I think we’ll have to start looking further to Clarington, Coburg and the Niagara peninsula. Housing is cheaper there compared to the GTA. Once again there too, multiple offers are on the rise. But at least if you have a large savings and huge bank approval, you can be the big dog in those markets.
Finally, buy something that is not “move in ready!” You are paying an arm and a leg premium for move in ready properties. You can always save a bit and renovate later. You’ll not only get it at a relatively cheaper price, you’ll also be able to renovate it to your liking!
Sellers, the good news is, nothing is going to change. Very few REALTORS® and BUYERS® will read this blog and follow the recommendations. So if you are thinking of Selling call me and let me help get the most for your property!
Watch out for my next blog – Sold in 0 Days, Sold over asking… what does that mean!
Cheers, Jas Jagpal, Broker