Monthly Archives: February, 2014

January 2014 Market Review

February 10th, 2014 Posted by Market Review No Comment yet

January was a bit of a frustrating month in Toronto real estate. The number of active listings declined from 14,231 in January 2013 to 11,903, a decrease of 16.4%. The number of new listings was to 8,822 down a similar amount (16.6%). This exacerbated the on-going shortage of listings that I have mentioned (many times) before. Inevitably, the result was fierce competition among buyers, and an average sale price of $526,528 – a 9.2% spike. 

The 4,135 sales were 2.2% fewer than last year – so surprise there. January is usually a slow-ish month, often due to cold and/or snowy weather. We’ve had that in spades this year, but that’s not the only reason for fewer sales. It’s that cursed supply problem! Once we get more listings, we’ll see less competition – by which I mean maybe three offers on a house, instead of the dozen or more we’ve seen on numerous houses over the last few weeks! With some luck, we’ll see a few opportunities to buy without competition. I’ve just done an update of my blog about bully offers, which you may want to read….

In all seriousness, though, we should see more listings in the coming weeks, just like we always do at this time of year. It may not be enough to make things much better, but it will happen. Ideally, we’d see the recent price appreciation push a few homeowners to sell now and downsize to that condo, or the cottage, or wherever they’re planning to retire to. That would put supply on the market without adding buyers. It may sound like a pipe dream, but a guy can hope! 😉

Bully offers

February 5th, 2014 Posted by Commentary, First-time buyers No Comment yet

Before I started blogging I used to send out an e-newsletter to my clients. Way back in January, 2008, I wrote a piece about bully offers. At the time, they were a relatively new phenomenon. In the years since, the practice has surged and waned, never going away completely, but not always playing a prominent role in the market place. Over the last few weeks we have seen a handful of big plays, resulting in some eye-popping numbers. It’s hard to say how much influence they have on the overall monthly numbers, but it is fair to say that the bully offer is something to consider/watch out for – depending upon your perspective. Anyway, here (below) is what I wrote back then:

As some of you have experienced recently, there is a relatively new phenomenon occurring in the Toronto real estate market: the Bully Offer. By now, most market watchers are familiar with the typical marketing cycle for homes listed for sale. The listing is posted this week, an open house is scheduled for the weekend, and offers will be reviewed next week. In the hectic Toronto market it has become important to make sure that we do sufficient marketing of a listing to ensure as good exposure as possible; we don’t want a listing being scooped up in one day. That leaves everybody wondering if the listing could have sold for more money – and maximizing the proceeds from a sale is the listing real estate agent’s duty to the Seller.

This procedure has basically become the de facto standard in recent years. However, a counter-strategy has emerged that can really make things difficult for everybody. A “bully offer” is one registered prior to the scheduled date – often several days early – to be presented ASAP. The Listing Agent is obliged to present the offer to the Sellers. The ball is then in the Sellers’ court: do they take the ‘bird in hand’, or wait for the scheduled date in the hopes of getting competition? To be attractive to the Seller, the bully offer is typically (almost always, in fact) for more money than the asking price, and often ‘firm’, meaning with no conditions attached. It’s a tough decision that can only be made by each Seller on a case-by-case basis.

What about other potential Buyers? The Listing Agent is obliged to inform only Buyer Agents who have registered an offer intended for the scheduled date. Since we usually don’t register until the scheduled day of offers, every other Buyer who has looked at the house may be left out. However, it seems most Listing Agents are taking the time to notify every other agent who has shown the property. (Also, I typically call the Listing Agent if my Buyers express any interest at all in a property; I ask to be kept up to date with changes or developments.) A bully offer puts tremendous pressure on the other Buyers, who may have been counting on more time to make their decision, arrange financing, etc. But, that’s the point of the bully offer – to ‘box out’ the competition.

How do you beat a bully offer? Firstly, be as ready as you can be to make a purchase: have your financing pre-approved and your deposit money readily accessible. Secondly, if you are interested in a property, consider a pre-home inspection. That costs money, and you might still get out-bid, but that will allow you to make a ‘firm’ offer, if necessary. Thirdly, try not to fall in love with any particular house! You may not get the house, and if you are emotionally committed to it you risk disappointment. (Remember: in any negotiation, you have to be ready to walk away if you don’t get what you want/need.) If you are ready and willing to make a competitive offer, you have just as good a chance against a bully offer as any other situation.

Being prepared to deal with bully offers is now part of the whole buying process. No matter what we encounter, I always recommend that my clients be flexible and co-operative in negotiations – even if the other side starts to get prickly. Staying cool and ‘professional’ helps get you through even the most difficult negotiations.