Melissa Leong, The Financial Post, March 22, 2014 - Home buyers of all ages are finding themselves facing multiple offer situations across the country and not just in the hot markets of Toronto and Vancouver. “It’s becoming more of a reality,” says Belinda Lelli, a Toronto realtor with Royal LePage. “There’s just nothing out there. There is zero supply and 100% demand.”
And as the spring market heats up — the Canadian Real Estate Association and Sotheby’s International Realty Canada released reports this week predicting growing sales and prices nationally — the forecast is for the tight supply to continue.
“In Toronto and Vancouver, we’re starting to see bidding wars that we haven’t seen in two or three years,” says Ross McCredie, president and CEO of Sotheby’s International Realty Canada.
“That is shocking a lot of people; despite all of the headlines about our over-inflated real estate market, we continue to see a lot of demand.”
With the increased competition, Ms. Lelli says people could face a number of rounds of bidding which means you may have a few chances to increase your original offer. But with BMO research saying that one in three Canadians are willing to enter into a bidding war and a third of first-time home buyers will break their budgets for the right home, people need to be careful not to get too emotional.
We spoke to Canadians about their experiences with bidding wars:
Who: Aliza Amlani, a 36-year-old editor, and her husband Kurt Wilson, a 35-year-old operations director, looked at about 100 houses for over a year in search of a three-bedroom home to start a family.
Where: Central Toronto
What: The market was extremely competitive. “People were coming into open houses with their inspectors and you knew there was going to be a bully offer on the place – where people will go in with a higher offer,” she says. “Everything was going for at least $100,000 over what it was listed for. We thought we had a good budget but it was not working out.”
They found a beautiful three-bedroom home on the outskirts of their desired neighbourhood.
How it all went down: “Everything in that area was hovering in the $500,000 range and some would go into a bidding war and it would hit $600,000,” she says.
They offered $520,000, bidding $30,000 over asking with a condition of an inspection.
“[The real estate agent] called me and she said there were two other bids. We discussed it and said we’ll try for $530,000. At the end of the day, she called me and said, ‘You got the place,’” she says.
“That same day, I called an inspector to go in and have a look at the place. The inspector went in and what they unfortunately found was in the ceiling area; they had plastered it over but there was a ton of termite damage.”
They backed out of the deal.
“That taught me that no matter the bidding war, it’s good to get the inspection because you’re already putting out more than your budget; add [anything] to that and you’re getting into dangerous unknown money territory.”
Who: Chuck Brady, a 33-year-old corporate salesperson, and his wife were looking for a house in B.C.’s lower mainland.
What: After looking at more than 20 homes, they found a 2,000-square foot detached home in Burnaby with a basement to rent out. “We were restricted by what we could qualify at the bank. The house itself was listed at $560,000 — $100,000 above our budget.”
How it all went down: The price did not deter them. From the property’s listing, Mr. Brady saw that the owners only owed $200,000 on their mortgage. The house needed some work and the owners were renting it out.
“We said: Which [houses] can we negotiate on? Which ones are homeowners under water and which ones are flush?” he says. “There are a lot of people out there who are throwing offers around. They’ll have a 60-day close on them [pending conditions].”
He sent his private broker the listing and got pre-approved. He also sent an inspector over to the property before writing up an offer. “I was able to give the seller a condition-free offer. I offered $430,000…[and said] they’d have the money in their bank account in three days.”
The owners received two other offers, including one that was about $100,000 more than Mr. Brady’s offer, however, with conditions. The owners accepted his.
Who: Marco Ouji, a 34-year-old communications consultant, was looking for a two-bedroom home in a pedestrian-friendly neighbourhood within 10 minutes from a subway.
Where: Central Toronto.
What: He listed his house for $379,000 and sold it for $450,000. This began the race to purchase a new home. He got involved in two bidding wars. The first was for a fixer upper listed at $495,000.
How it all went down: “My first offer was $555,000. It was declined. My agent told me that [there’s another buyer] and it’s considerably higher,” he says. “I bumped it up by another $20,000. I really wanted this house. It was over my budget. I didn’t realize at the time but I realized later on.
“There’s this fear that you need to get that property. I just thought, ‘My window is going to go… Prices of homes have gone up so much. I really want to live in Toronto and I want to own a home in Toronto.’”
Mr. Ouji’s new offer was declined and he walked away. The property sold for $675,000.
He later bought a home for $485,000 — $15,000 under asking.
“You have to be realistic. You have to be able to have something you can afford, not something you won.”
Who: Meredith Phillips, 32, and her partner, 30, both work for the federal government. She wanted to stop renting and buy her first home.
Where: Downtown Ottawa.
What: “I’m a pretty good saver. I had money — I just hadn’t bit the bullet to buy a house as yet. My partner put together a spreadsheet of different interest rates and different payments and what that would be in bi-weekly payments. We wanted to stick close to the rent that we were paying.”
They looked at houses that were $325,000 and under. They found a three-bedroom home listed at $299,000. “It needed a lot of work. It still had an oil tank and knob and tube — that old electricity. There was a deck in the back but it was rotting. But the bones of the house were nice.”
How it all went down: “I went with my real estate agent to the realtor’s office. They told us there were 15 other bids. We decided that $315,000 was our limit. [Our realtor] came back and said, ‘I don’t think you’re going to get this one.’ It ended up going for between $330,000 and $340,000.
“We wanted a house but we needed a house that was right for us. We had a budget and we really didn’t want to push it too high. [It’s about] being able to go into a bidding war and still having it be on your own terms. How do you do that? Setting a budget and being realistic. I didn’t want to put too much emotion into it. At the end of the day, it’s a lot of money.”
They ended up buying a home with two-bedrooms and a den for $315,000. There were no other competing offers.
Who: Ashley Fraser-Sexsmith, a 34-year-old entrepreneur, and her husband are searching for a home in a neighbourhood with a good school for their five-year-old son.
What: A 2,400-square foot renovated three-bedroom home in their desired community came on the market and the couple rushed to see it. Two other realtors were sitting in the driveway — the home had seven showings that day. It was listed at $699,800.
How it all went down: “We came home and wrote an offer and put it $200 above asking. One that sold the week before in the same neighbourhood had sold for asking,” she says. “We thought $699,000 was $20,000 more than what people should pay.”
Two other offers came in. The winning offer was $710,000 without conditions.
“They paid $10,000 over asking with no conditions. I would never buy a house that old with no conditions,” she says of the house, which was built in 1985.
“You get caught up in it and you think, “Aw, I got to get this.’ It didn’t work out but probably for the best.”
They’re still on the hunt for a home.
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