Due to a 13.2 per cent price increase over the last month, the average detached home in Toronto now costs, on average, nearly $1 million. The price change is basically a reflection of supply and demand, but in this case, it is mostly demand. It was not only detached houses that were affected by the uneven supply-to-demand ratio. The price rose across the whole house type spectrum.
There is no such thing as a slam-dunk house sale, even in downtown Toronto. This means that there are opportunities to be had. The most important thing is to prepare the home properly and price it competitively.
We are seeing buyers and their agents often look at the price and then add at least 10 to 15 per cent on it and decide whether it is worth buying or bidding on! How confusing is that? This means that if a buyer sees a house and they think it is well priced, they assume it will go in a bidding war — they automatically add $60,000–$100,000 to a $600,000-priced house. The thing is that they don't always have a ton of offers. Recently, we had a listing that only had two offers but a lot of interest. Buyers make this calculation, then decide not to offer, which is a huge opportunity for the one or two that do go to the table on the offer night.
It sounds like some agents might be getting burnt out as well and giving up too soon. Keep at it, agents! Give your buyers a chance! Buyers sometimes need the experience of going through a bidding war, so don't assume. (Remember the definition of assume? makes an ass out of u and me.)
If a house is worth getting into a big bidding war, then a key item in convincing the seller to accept their offer is to bring a substantial bank draft (5 per cent or more of the list price) to the offer. If offers are close, this gives a buyer a huge advantage. It shows how serious the buyer is and means they have locked themselves in with a firm offer, including a deposit.
Another concern with these fast-rising house prices is the question of whether houses are appraising out. There are quite a few sales in 2014 for the banks and appraisers to use as comparables, so this happens on occasion, although it is not the norm. Agents need to educate their buyers about this and have a contingency plan.
As for condos, they are definitely a more balanced market. The condo market is going well, as there are many condos selling and changing hands. Prices are staying stable and have not declined. It does take longer to sell condos, and buyers have a much wider selection. We finally sold our listing in 55 Stewart after the winter.