According to real estate agents, the apparent softening in Canada’s housing market is leaving many buyers and sellers alike perplexed about how to price and bid on properties in the typically feverish spring market.
According to those who talked with Global News, the new market is putting bargaining power back in the hands of purchasers in many circumstances.
The contrast between the mid-winter market — before the Bank of Canada began raising interest rates — and now, according to Nasma Ali, broker and founder of One Group Real Estate in Toronto is “night and day.”
In an interview with Global News, she noted that in January and February, houses across Ontario, whether cottages or in the urban center, were all getting numerous bids and selling for much above asking.
“All single houses that went on the market expected and received multiple bids, absolutely incredible demand,” Ali said.
The technique then saw sellers accept proposals on a single day, betting on a bidding battle to drive up the final price. Buyers had little influence in this situation, she observed because sellers were under no obligation to accept the first offer they received.
“Why would they pick a bully when they might obtain an enormous, miraculous figure on offer night?”
The Toronto Regional Real Estate Board revealed this week that the number of April sales in the market fell by around 41% from the same month last year and 27% from March.
Many prospective first time buyers, according to Ali, are waiting to see where interest rates will fall and how the home market will react before resuming their hunt.
According to the Toronto Regional Real Estate Board, the number of April sales in the market declined by roughly 41 percent from the same month last year and 27 percent from March.
According to Ali, many prospective buyers are waiting to see where interest rates will fall and how the housing market will react before continuing their search.
According to Munn, the key reason preventing Vancouver from becoming a buyer’s market is a shortage of supply.
Why are house prices so high?
While buyer demand is easing, property prices are taking longer to stabilize.
The average home price in Toronto was over $1.2 million last month, down from about $1.3 million the month before, but still, around 15% more than the year before, when the average price was under $1 million.
However, this pricing shift did not occur overnight. Ali saw a progressive decrease in the number of people attending showings, as well as sellers gradually realizing that their house may not be able to produce the enthusiasm it once did when the market was hotter.
They began taking bids based on, for instance, what a nearby property on the block had sold for, rather than waiting to see what they could receive on offer night. As a result, prices remained inflated for longer until purchasers became aware of the true market realities.
Marc LeFrancois, a broker with Royal LePage Tendance in Montreal, recently told The Canadian Press that he’s seen properties sell after a single offer, or just a couple, rather than the 20 bids that brokers were used to dealing with months ago.
However, the smaller number of offers received on some homes has some of LeFrancois’ customers wondering why they should bid much over the asking price if sales are down.
“The purchasers are a little wary. “They’re concerned when they buy a house and it wasn’t done via several offers,” he explained.
“I had a client… who said, ‘Did I pay too much? “No one else was bidding,” she says, “which is unusual considering that a house had 20 purchasers in the previous two years.”
How to Write a Bid
According to Pritesh Parekh, a Century 21 realtor in Toronto, the cooling property market has fundamentally impacted how consumers should perceive list pricing.
Parekh stated that he has had several people come to him in recent weeks who are unclear about how to digest the sticker price.
Because there is less demand driving up selling prices than in past months, the list price may be closer to what a seller expects. He even suggested that there could be potential to negotiate lower.
“You can see how difficult this is,” Parekh added. “When a client sees a house listed for $1 million, they have no idea if it’s worth $900,000, $1.1 million, or just what it says on the sticker.”
The type of offer presentation — whether a residence accepts bids at any time or only on a particular night — is one of the greatest indicators of the list price.
“When you say ‘anytime,’ it is expected to sell for somewhere in or around that amount,” Parekh says. “When there is a bidding war on an offer date, it is always underpriced with the expectation that all offers will be higher.”
According to Ali, there are still a few properties that may spark bidding wars — these are truly jewels that “check all the boxes,” he says — but the bulk of homes can’t.
“You’d be shocked what you can haggle down” on 90% of properties on the market right now, she added.
Conditions are once again on the table.
Buyers have greater latitude to add conditions to their bids in a less frantic market, according to the brokers who talked to Global News.
“In this business, you can always bargain,” Ali said.
She’s seen restrictions added to deals in Toronto for inspections, financing, and even escape clauses – stipulations that allow a buyer or seller to pull out of the contract.
While escape clauses may allow a seller to scout around for other offers while keeping a prospective buyer on the hook, Ali claims that after a conditional sale is signed, few people are actively viewing that house as being on the market.
“When your house status changes to SC – which means it’s being sold conditionally – you can be sure that practically no one will come to look at it,” she added.
Back in Vancouver, Munn says he’s hearing that circumstances are improving, even in the most expensive property market in Canada.
“Anecdotally, we’re hearing more of that returning to the market, as well as fewer multiple-offer scenarios with that tremendous competitiveness,” he added.
In other cases, buyers may want to increase their bid amount “to demonstrate they’re serious” if they want to include a condition, according to Parekh.