In the flabby Toronto-area real estate market, figuring out which seller is motivated to sell at a discount is a game impatient buyers are prepared to play.
One tactic is to post a lowball offer.
Bidding well below the asking price is a strict negotiation strategy that risks offending the seller, who may not respond at all.
But the trick can also lead to a bargain.
The Tuesday after Labor Day is the traditional start of the fall market. This year, broker Andre Kutyan from Harvey Kalles Real Estate Ltd. Four offers on three properties that day.
By the time the bargaining ended, only one property had been sold.
“They’re just trying to test the water and see who’s hungry,” he says of buyers.
The explosion of late activity led to a sales rebound in the Greater Toronto Area, which saw an 11 percent increase in transactions in August compared to July.
Rishi Sundi, an economist at Toronto Dominion Bank, notes that sales fell in nine out of Canada’s 10 provinces last month, with only Ontario managing to post gains as a result of the GTA’s recovery.
However, Mr. Sundi warns that it is difficult to say conditions have reached a tipping point: sales remain 30 percent below pre-pandemic levels in the GTA, the balance of supply and demand is tilting in favor of buyers, and the benchmark price is down two percent in August. (August of July).
The slowdown is expected to continue to ease after the Bank of Canada raised its key interest rate by an additional 75 basis points this month. The rate hike for the fifth time this year raised the overnight interest rate to 3.25 per cent.
In Mr Sundy’s view, Toronto’s recent gains are unsustainable as a major economic slowdown is likely. He expects the national median home price to fall about 20 percent by early 2023 from its peak in the first quarter of this year.
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Against this background, sellers and buyers navigate a rocky area.
Mr. Kutyan says buyers often set their sights on three or four properties and will bid one by one until they find a seller with sufficient motivation.
Some sellers are comfortable receiving an offer asking below because it at least indicates an interested buyer and an opportunity to negotiate. And when an offer lands, it often prompts another buyer to make a more serious bid.
The deal that was struck was to sell a luxury condominium in Yorkville for a asking price of $6,999,000. After protracted negotiations, the two-bedroom unit 6A at 36 Hazelton Ave was sold. Company, for $6,660,000.
The 3,150-square-foot unit in a boutique building has been lowered several times since it was first listed with an asking price of $825,000 in July 2021.
“It’s hard to put the price down because there are no comparisons,” says Mr. Kutyan, adding, “It’s just a limited number of people who can afford that kind of thing.”
One bid arrived last year when the asking price was $7.995 million, but the seller needed more time to test the waters, he explains.
Mr. Kutyan advised the seller to drop the price below $7 million in late August, and the move prompted a second buyer to step up.
Mr Kutyan says the bid received in 2021 was slightly above the selling price this month.
But that’s not necessarily bad news as the seller plans to downsize to a smaller home in the area. The price that a seller would have to pay for a house in the nearby Annex neighborhood, for example, fell over the same period.
“Prices have fallen even in areas where there is such a high demand,” says Mr. Kutyan.
On the same day, Mr. Kutyan received an offer for a newly built house in Bedford Park, which he had listed for $3.995 million at the end of June.
With supply chain disruptions and labor shortages to contend with, the builders spent more than two years building the four-bedroom home on a 30-foot-wide plot at 388 Elm Rd.
When a buyer made a low bid, Mr. Qatian notified all the agents who had shown the property. This prompted another buyer to come to the negotiating table, but a second buyer also brought what Mr. Kotian considers a “smelly offer”.
He says the builders are well funded, and they are not ready to settle for low prices after investing in land, construction, taxes and other concessional costs.
Mr. Kutyan points out that the Greater Toronto Area Market is made up of hundreds of smaller markets. Within general trends, different price segments and pockets often trade in different ways.
He notes that the record price for a single-family detached home in Bedford Park and the surrounding area rose 7 percent in August compared to August 2021.
By comparison, the family-friendly neighborhood of Leaside and the surrounding area saw its record price for a detached home drop 3 percent in August compared to the same month last year.
Mr. Kutyan adds that there are quite a few competing properties in the neighborhood and the sellers are in a position to hold out.
“I’m the only game in town if you want 30ft in Bedford Park. They won’t give up on the house,” he says. “Before the salesman drops his pants off big, they’ll see what’s going on in the market.”
On the same day, a first-time buyer placed a low bid for an apartment near Avenue and Saint Clair Avenue West with an asking price of $2.849 million.
He says the buyer got support from the “mother and father’s bank”.
“It’s a loathsome attempt – they’re trying to rob the place.”
The parties could not reach an agreement and the buyer disappeared.
says Daville Morrison, Realtor at Bosley Real Estate Ltd. In Toronto, buyers and sellers are still hesitant.
“They’re trying to read the market and figure things out.”
Some people like to trade, she says, but many prefer to buy first because they fear being forced into a panicked decision.
“Where they live now is good enough – yes, they want something more but they don’t want to sell and they put a gun in their head.”
Sellers also sometimes fail to understand that the same dynamics that drive down prices for other properties will also apply to their properties.
“The market has changed and it takes time to look that into their heads.”
She says that unrealistic sellers also run risks even if they find a buyer to pay the number they want. Many lenders are unwilling to accept a mortgage if the buyer offers too much.
“The lender will send in an appraiser and give everyone a reality check,” she says. “A bank appraiser will win this argument.”
And while real estate is on the decline in the market, some buyers are still willing to jump into the competition – especially if they realize that someone else wants the property.
Bidding wars are hard to conjure up these days, but setting the asking price at the right level is key.
During the summer doldrums, a couple planning to downsize their 1980s-era home hired Mr. Kutyan to list the property in a Richmond Hill subdivision.
When he looked at the competition in the area, he found 55 properties listed between $1 million and $2 million.
Some of the other houses were larger, but Mr. Kattan’s slate was propped up in a small pond.
The four-bedroom home at 55 Samantha Circle was listed at an asking price of $1.395 million and drew 121 bids in six days. Fifteen bidders came to the table the night of the show and the house sold for $1.625 million.
“The door was swinging,” he says. “People lined up in front of the house. It becomes a commodity too good to be true.”
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