We’re not even in the thick of the ‘spring market’ yet and it’s madness out there. If you’re a Buyer right now, these are trying times – the worst I’ve seen in all of my years in real estate. And it’s not just house Buyers that are struggling anymore – the craziness has spilled over to the condo market too. [Related: True Tales & Gossip: Condo Edition]
So what’s a Buyer to do?
Buy now or wait?
In previous years, we’ve told our Buyers to be patient and wait out the lack of inventory. This year, I can’t say with any certainty that we’re going to be seeing more listings any time soon – at least not enough to compensate for all the new Buyers that will enter the market as the weather warms up.
And with the average house ($1.5 M) going up by more than $30,000 a month and the average condo ($500,000) increasing in value by $7,000 a month, it’s pure madness. Very few people are able to increase the size of their savings or downpayment in proportion to how fast prices are increasing.
Sell first or buy first? The Circle of Hell
In the past, we’ve counselled our house owners to buy first and then sell, and our condo owners to sell first and then buy. Enter 2017. Unless you’re moving out of the city or you have extenuating circumstances, it’s harder to buy than to sell no matter what you own, so you’re probably better off buying before selling.
Truth: this reality is part of Toronto’s inventory problem. Sellers are afraid to sell in case they can’t find something to buy (legit), so they hang onto to their properties, thus making it impossible for other sellers to buy before selling. I call it the Circle of Hell.
Reasons you might want to sell before buying:
- Your particular kind of property is unusually in demand or getting much higher than usual prices right now. For example: a crazy sale in your condo building or street that defies all reality has just occurred and you want to capitalize on all the Buyers who missed out.
- How much you sell your current home for will determine what or where you buy. It’s hard to value properties right now – really hard. Agents will be conservative in appraising your home, but it may very well sell for $50K or $100K more than anyone is expecting. That may open up new neighbourhood or housing options for you.
- You have a Plan B. If the worst case scenario happens – you’re about to close on your current home and haven’t found a new place to live, having a Plan B – somewhere to live – means you’ve got options. Hey Mom and Dad, I’m back!
- Lock in your gains. No one can predict the future, so while the market is on fire right now, it may not be in another month or two. Capitalizing on great market conditions when you sell means you lock in your returns. But no, I don’t think the market is about to crash anytime soon, so this could be a risky strategy. If prices go up 5% between the time you sell and you buy, you’ll be kissing some cash goodbye.
I know, I say this all the time, but flexibility really does matter. Consider less popular neighbourhoods, ugly houses that are less in demand and older condo buildings. Homes that have less desirable features – for example houses without parking, with unfinished basements or located on busy streets – don’t tend to draw as many Buyers. This might be the opportunity you’re waiting for!
Reconsider buying in the ‘top school’ districts
What? Did she just say that? Don’t worry, I’m not suggesting that the quality of the school your kids go to isn’t important…but it might be more affordable to buy in a mediocre school district and send your kids to Montessori. Seriously. A lot of people do it. And if your kids are still in diapers, the quality of the school will likely change a lot by the time they’re ready to attend.
Any other advice?
Make sure you’re pre-approved for a mortgage in writing and lock in the low interest rates while you can. Have your deposit in cash and ready – at least 5% of the purchase price. [Related: All About Deposits] Do your due diligence (for example, home inspections) before any offers. Know what you want and aggressively go after it. Work with an agent who knows how to play the game and has the skills, speed and relationships to make it happen.