Just over a year now since the pandemic halted the 2020 spring real estate market, we’ve seen an exciting rebound that defied conservative expectations, with record-breaking sales pushing prices to record-breaking highs in many parts of the country.
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Booming sales have been driven, in part, by a shift in what Canadians expect from their homes: more than ever, they’re looking for bigger houses better suited to living, working, and learning in place. And if that weren’t enough to heat things up, historically low lending rates have brought more buyers to the market and created a firestorm of demand – particularly for detached homes.
Yet, amidst all this clamour for housing, new listings – which took a massive hit last spring – never came back with the same gusto. As a result, inventory levels in many local markets have been at record lows for months, and a lack of supply has become the defining characteristic of Canadian real estate since the pandemic began. So, with 80% of the country’s markets in seller’s market territory, should you sell or buy a home? To find the answer that’s right for you, here’s what you need to consider.
Sales are happening fast
In seller’s markets, things move quickly. In seller’s markets amidst a pandemic, they move at lightning speed. Right now, buyers need to know what they want before going to see a home and you have to be ready to make a quick decision about putting in an offer – we’re talking hours in some cases – because there are so many other buyers to compete with.
Apart from needing to be able to commit to a home in a condensed time frame, you need to be financially ready to make a move. We have the ability to get our clients pre-approved for a mortgage-this is an absolute must in markets like today. It’lll show you what you can afford, signal to sellers that your offer is serious, and spare you having to rush to get your finances in order while other offers pile in.
Offers are strong
Even if you don’t find yourself in a bidding war during the second wave (which is when the seller stipulates the date and time when they’ll review offers en masse to compel buyers to put their best foot forward), chances are good that other buyers will still be making offers on the home you want. Thus, you’ll want to make your offer as strong as possible.
There are a couple of ways to do this, but the most obvious – and possibly the most effective – is to make your offer the biggest. Depending on the market you’re in, this could mean offering well over what the seller is asking, but how much you offer should depend on a couple of things...
First, you need to be aware of what comparable homes in the neighbourhood were listed for and what they sold for – This will give you an idea of what the seller is hoping to get, as you can assume the seller’s REALTOR® showed them the same market data. This is an important factor in making your offer. Working with the right REALTOR® is key. As your REALTOR®, we are here to educate and guide our clients allowing them to make the best offer when purchasing their home.
Then, with your budget in consideration, decide how much the home is worth to you. If there’s a price you’d be happy to pay to get the home, but anything more wouldn’t be worth it or you can’t afford it, then that’s probably the amount you should offer. If the seller accepts– the house is yours. If you’re outbid, at least you won’t have to live with the regret of overpaying.
Of course, if you’re planning to flex some monetary muscle to land a home, it’ll still need to fit within your budget. That means you’ll probably want to shop for homes priced below the upper end of your pre-approval amount.
Conditions are dropping
Another strategy to up the appeal of your offer in a seller’s market is to forego adding conditions, since they can draw the sale process out and the seller has no guarantee of a firm deal at that end of it.
Three of the most common offer conditions are for financing, which lets you off the hook if you can’t get a mortgage, a home inspection, which lets you negotiate or walk if major problems are found, and the sale of your property, which means you don’t go through with the sale until you know there’s a buyer for your home (although the last is more common in buyer’s markets when it’s more difficult to sell).
Leaving off conditions affords you less protection as a buyer, but if landing the home is worth it to you, being your REALTOR® we can talk about the pros and cons and weigh out the risks. For example, if you’re not a first-time buyer and you’ve been pre-approved for a hefty amount, you might feel confident enough to make an offer without a condition of financing. Or, you might feel secure in your ability to suss out problems with the property and eschew the home inspection (another option is to pay an inspector to come with you to your showings, which could get costly).
On the other hand, if you’re not comfortable leaving certain conditions out of your offer, you can use good old-fashioned money to tip the balance back in your favour: a higher offer with a condition or two could feed the seller’s appetite more than a lower, unconditional offer. Whichever route you take will depend entirely on your comfort level.
One of the most important things to consider if you’re planning to buy during a pandemic seller’s markets – besides your health and safety, of course – is the need for flexibility.
You’re about to jump into a fast-moving stream that’s not going to wait for you, so you need to ride the current. Maybe the strategy you start out with won’t hold up after a few offers get rejected; maybe you’ll compromise on location to get a better house for a better price. In markets like these, your hopes might get dashed a few times, but if you’re prepared and keep your eye on the prize, you’ll probably enjoy the ride.