As you may have seen/heard, I’ve been on CBC’s Metro Morning and the Exchange (among others) recently to discuss my marketing for buyer clients. While I’m glad this has struck such a chord with people, the side effect has been that buyers have been branded as “desperate.” While that may be a bit extreme, this year in particular has been rough on buyers as listings have been at an all-time low. I think the most intense case I saw earlier this year was a house that was at a busy intersection and backed onto the loading dock of a grocery store. I checked the comparables for my clients and estimated that it would sell for about $100K above the $599K asking price. Instead, they ended up with 34 offers on the table (no, that’s not a typo) and sold for $260K above asking. Honestly, there’s no rational explanation for that.
So, what are a few basic steps that you can take as a buyer to prepare for a market like the one we’re in? The first step is to get a financial preapproval in hand. For this, you’ll need a downpayment (minimum 5% of the purchase price, but more is always better), and your bank representative or mortgage broker will look at your income and debt ratios. Once you have a preapproval in hand, you’ll know what you can afford, which means that in most situations, you’ll be able to offer without a financing condition (although nota bene, the mortgage offer is based both on you as a buyer AND the house, so each offer will require additional communication with your broker).
Next, pay attention to list price when you’re shopping, as most listings are underpriced in order to attract attention. If you’re preapproved up to $800K, in the majority of cases, it will be an exercise in frustration to look at the listings priced at $799K. Instead, look at the houses priced $100K (or more) lower than your max. In this market, the odds that you’ll end up in a bidding war are pretty high, so it’s best to have some wiggle room to blow your competition out of the water.
Also, while looking at homes, ask yourself (and your agent) what can and can’t be changed about a home. You may not like the hideous kitchen backsplash, but that’s easily remedied; moving a wall to make a bedroom bigger is another issue, particularly if that means stealing space from another room. In general, cosmetic changes mean you’re putting your own stamp on a house and increasing the home’s value, while structural changes can be costly and may not add as much to the home as you envision.
When the big day comes and it’s time to submit an offer, make sure you’ve done all of your research ahead of time. Have your home inspection completed, financing lined up, get a bank draft for the deposit amount (make sure your agent lets the sellers know that they have this in hand) and whenever possible, try to accommodate the seller’s preferred closing date. Also try to learn a bit about why the seller is moving; if the owners have a sentimental attachment to the house, it may help to provide a letter or a card letting them know who you are, why you were drawn to the house, and what your plans are.
Finally, I want to point out your agent’s role in the entire process. They should be not only connecting you to professional home inspectors, mortgage brokers, structural engineers (if necessary), etc., but communicating properly with the listing agent. I’ve seen far too many cases where a great offer wasn’t accepted because the buyer’s agent was overly aggressive or unprofessional at the offer table. Get a feel for your agent’s personality as early in the process as possible. It’s important that they can balance being approachable and cooperative with the sellers while representing you and your interests in the best possible manner.
Buying a home can seem like a daunting task these days, but it doesn’t have to be stressful. If you have any questions or would like more info about taking your first steps into the market, feel free to contact me by email, text or phone. I’d be happy to answer any questions or meet with you to discuss how to make your home ownership dreams come true.