Reading time: 3 minutes | Writing mood: grinning ear to ear | Writing track: Guns ‘n Roses – Patience
Patience, You Must Have
One of my favourite songs from Guns ‘n Roses; Patience. You needed it in the 90’s to tie a bandanna and wear a baseball hat backwards over top. It’s what I preach to my buyer clients because it’s a tough go out in the real world that is being a home buyer in the Toronto real estate market.
Recently, I had the privilege of working with an amazing couple who were pursuing their first home. They’re the prototypical Toronto first home buyer, in their thirties, both have established careers and had visions of where they wanted to live.
The neighbourhood of choice was my backyard, Danforth Village / East York. They wanted to be a reasonable walk to the subway, which is not a problem in this neighbourhood.
What They Wanted
They weren’t picky on whether the house was a semi-detached or detached as long as it had good bones and a total of three bedrooms. One advantage they had was not being car dependant. This meant they could search a house without parking which would be a non-starter for buyers who preferred a house with a parking spot.
Their search began in the early part of the white hot spring real estate cycle. If you’re not familiar with the spring real estate market in Toronto, it’s nuts. Houses routinely sell for hundreds of thousands over the listed price. Their budget was in line with prices in the neighbourhood. The problem was that it was a price point where a lot of other buyers were as well. With little houses on the market, the competition was strong.
During our first meeting we reviewed where they wanted to buy and made sure they could afford it. I let them know that the market is challenging and that they should be patient. Typically, I find it takes between 3 to six months to find a home and close on it. I also explained that they should be prepared to have their hearts broken a couple of times along the journey.
They had their hearts broken a couple of times…
$699,000 seemed to be a listing price we came across most often. The problem was, we found these houses selling anywhere from $890,000 to $1,200,000. How the hell were we to establish a realistic price point? We stepped back and looked into what they were comfortable with in terms of carrying costs (monthly payments once we factor in mortgage payments and property taxes) and went back to January and looked at selling prices to gauge if they could realistically expect to find what they were looking for since the market was unpredictable in terms of selling prices.
We found they could but again, they had to be patient and jump on an opportunity once it came up.
Remember back in April when the Ontario government decided they were going to help with affordability (and grab votes since their ratings were lower than any government in history (I wrote a blog about it here))? That was the opportunity they were looking for. They were ready to buy and a house came up that was almost perfect in every way (you’ll never find a perfect house).
A week before the announcement, this house would have had 5 or more buyers bidding on it. They were the only ones ready on offer night. What happened was old fashioned negotiations.
We prepared an offer below what the”market value” was for this property and were greeted with a counter-offer. A counter-offer or sign-back from a seller was virtually unheard of in the previous year of real estate offers.
The counter-offer was for $135,000 more than the listed price. Perfect. At least I had a sense of where the seller’s expectations were. The sellers had a home inspection done and made available to everyone who asked for it. That was the real starting point for the negotiation from me.
The roof needed to be replaced. That’s a big put off for most buyers because, well, it’s expensive. If a roof costs $6,000 to replace, in a buyer’s mind it’s $10,000. Also, it wasn’t noted as having knob and tube electrical but, since I’ve been through two houses that have been completely rewired, I’m familiar with the signs of knob and tube. I used this against the inspection as well.
Where the seller’s agent failed in negotiating was the fact that the furnace, windows and air conditioner were all about 6 years old. This is a huge bonus for the buyers since 3 out of the 4 major items in terms of cost to replace were done.
Where the price ended up was about $45,000 less than what similar houses were selling for in the neighbourhood and, $24,500 less than the sellers countered with in the beginning.
Since the time that my buyers bought, similar houses have been selling roughly $21,000 more than they paid.
Opportunities are out there right now. You just have to have patience and a willingness to pull the trigger when an opportunity presents itself.
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