Toronto Income Property Newsletter – August 2013
It’s summertime, summertime, sum, sum summertime. Hope you are all enjoying your summer thus far. As per usual, the Toronto real estate market has slowed down as new inventory often drops for July and August. Expect things to roar back to life after Labour Day. I’m hoping for a bunch new plexes to hit the market so we can get busy again in the fall. Let’s just hope that the overall demand will level off a bit so it is not so competitive out there.
Check out my articles this month as they both come directly from actual real stories that I experienced in the field over the past few weeks.
Enjoy your summer everyone!
Welcome to Bizarro World
Imagine going into your grocery store and grabbing a loaf of bread for $1.99. When you get to the counter and plunk down your toonie, the checkout person says sorry, but they want $3.00 for it. You calmly explain that the price says two bucks and there are many loaves on the shelf on sale at that price. The checkout person says that since he currently owns the loaf of bread and you really want it then you will pay whatever he likes, not what the price tag says. Take it or leave it. The price tag is merely a suggestion of where you can start but in actual fact you will need to pay more.
Sound crazy? Well, welcome to the Toronto Real Estate market where sellers can ask for more money than the list price even when there is no other competition for the property. This has happened to me more than once and I have to say that it is absolutely insane. There is no other kind of market where this goes on.
Everyone understands that competition drives up price and that in a multiple offer situation one expects to pay more than the list price. But why pay more when there is no one else at the table? “Well, the Seller expected multiple offers and really wanted a higher price” is what you hear from these listing agents who obviously did not have a clue of where to price the property in the first place. To offer list price and have it thrown back in your face is insulting and in my opinion the result of Sellers becoming way too greedy in this market.
When I get a sign back higher than the list price and there is no one else interested in the property I advise my clients to walk away. Why should you be negotiating against yourself? Why should you be the victim to a greedy and unrealistic Seller? I advise all buying agents to take this approach, but unfortunately most agents can’t afford to do this. Since most agents only do two or three deals a year, they have do whatever it takes to make a commission, regardless of what position it puts their clients in. And this is the real shame.
Over the past few years, the Sellers have held all the cards in the prime Toronto neighbourhoods, but like any cycle things will eventually change. I look forward to the time where I can go back into a property and look at the list price and have some sort of idea as to what price to pay. It will be nice to know that maybe I can pay a few bucks less than automatically having to assume that the sale price is going to have to be higher than the list price.
It would also be nice to put my negotiation and business skills to use instead of just hoping that our number is the highest.
Always do a Home Inspection
In multiple offer situations some buyers elect to purchase a home without getting a home inspection. In my opinion, this is a very risky move and I strongly advise against this. Usually, a seller will have a presale inspection done if they are looking for an offer with no conditions. Often there is sufficient time for the buyer to do their own inspection in advance of the offer date. It may be a shame to dan inspection on a property that you will not own, but that is better than buying a place without knowing for sure that there aren’t any major deficiencies.
I don’t care how new a house looks or how much renovations have been carried out. It’s the stuff that you don’t see that concerns me. This past week, a client of mine almost bought a completely renovated house with a basement suite. The Seller was hoping for multiple offers so that an inspector wouldn’t walk through the place and find the hidden deficiencies. More than half the house was still wired with knob & tube even though the panel looked completely clean. Also, the flat part of the roof was completely shot. Mind you, the sloped part which was visible to the eye had been replaced. Luckily, this Seller didn’t get away with anything as his house is still for sale. His agent now has to disclose these very major (upwards of $30K) problems.
Remember that all due diligence is on the buyer’s shoulders. Don’t trust Sellers or their agents. The Seller isn’t warranting anything when you buy a place so please be careful and get your property inspected before you spend your life-time savings on it.