Ask a real estate expert : if you invest in Toronto real estate, this may be of some interest.

Posted on 23. Apr, 2010 by in General

It’s back to boom for the Toronto real estate market. Prices have surged and there’s a record number of For Sale signs on the city’s lawns. In many neighbourhoods, mulitiple offers are commonplace, with some hard-fought bidding wars resulting in selling prices 20 per cent or more over the list price.

John Pasalis is the broker-owner of Realosophy Realty Inc., a Toronto-area real estate brokerage.  He is a frequent contributor to movesmartly.com, a prominent Toronto real estate and neighbourhoods blog. Realosophy has just released Neighbourhood Match, an online tool that finds home buyers their best matches from over 170 Toronto neighbourhoods. Realosophy.com has quickly become a favourite online resource for consumers and real estate industry professionals alike.

John Pasalis takes your real estate questions:
 
 
Comment :  Have you seen any evidence of buyers pulling away from participating in bidding wars or at least an end to some of the craziness than ensues?
 
 
John Pasalis: 

I’m definitely seeing a change in mood from buyers. Buyers are feeling more encouraged by the increase in inventory they are seeing coming on the market. We are finding that buyers are more cautious when it comes to competing in multiple offers. Many houses that are holding back for offers aren’t actually getting multiple offers and those that do are getting 2-3, not 8-10.

 
 
Comment:  One of our readers commented on the story earlier: “Wait until short term mortgage rates go to 6%. that’ll put a damper on High Park.”  We keep hearing real estate professionals say that the Toronto market is stable because it is driven by fundamentals. Are rising interest and mortgage rates necessarily going to cool off a hot market?”
 
 
John Pasalis: 

As I mentioned earlier, rising interest rates are going to cool off a hot market that needed cooling. We say the toronto market is stable precisely when it is largely being driven by fundamentals and not being unduly skewed by short term factors such as low supply, as we saw in 2009. We are expecting prices to stabilize or stay flat over the next couple of years as the market becomes more balances, which is a good thing.

 
Comment:  Hi John, I own a toronto home which i am tempted to sell in this type of market, and downsize for a townhome or condo. BUT – it seems like I will get less for my money if I do that. In other words, condos seem overpriced. Do you see an investment in buying a condo or do you think the prices will remain static over the next decades?
 
 
John Pasalis: 

Thanks for your question, I’m not sure I understand the purpose behind your strategy, so I’m afraid I can’t comment on the details feel free to drop me a line later. When it comes to investing in a condo right now, I don’t think we are going to see a significant difference in appreciation between condos and houses. Some people were actually worried that an oversupply in condos would make that market less stable……

 
 
Comment: We have been looking in Avenue/Lawrence area for one year, and prices seem to be running away from us. Unlike other areas, new listings are rare, and snapped up quickly. What’s your take?
 
 
John Pasalis: 

We are finding a significant shift in buying preferences (think Toronto’s increasingly insane commute times) that are driving many buyers, first timers and empty nesters, to opt for more centrally located condominiums, so there is real demand behind the trend. It’s very important to recognize that not all locations or buildings are equal though. I have seen an alarming number of units that do not even accommodate a double bed, let alone a Queen size bed, in what are supposedly couple or family oriented units. You need to be smart about separating the details that really matter from those that are really cosmetic. You can always upgrade cheaper finishes, but if you can’t sleep in your master bedroom you likely have a problem. Certain neighbourhoods are also safer bets because they already offer a very walkable lifestyle with lots going on, rather than banking on something that may or may not happen 5 to 10 years from now.

 
 
Comment:  Are there any pockets in the City that you feel are currently undervalued or will experience greater growth/appreciation relative to their counterparts?
 
 
John Pasalis: 
I think Leslieville and Roncesvalles are both great picks because they are already developed enough to meet the needs of individuals and growing families allowing them to stay in their homes over a longer period of time (compare these to waterfront communities which are still in the very early stages of development, forcing young couples to move elsewhere once they plan to have kids). And just as important, these neighbourhoods still have a lot of upside potential as buyers can opt for more affordable homes that can be fixed up over time.
 
 
Comment:  I’ve recently heard of buyers submitting “bully” offers (where buyers don’t wait until sellers are accepting offers). And by law the selling agent must present the offer to the homeowners right away. Can you comment on this practice, and also on general strategies for making offers in a multiple offer scenario?
 
 
John Pasalis: 
There are many things with the way multiple offers are conducted that I find troubling. I’m personally interested in systems that are transparent rather than blind. They have open multiple offer systems in Australia for example. But you ask about bully offers. Any time a buyer submits an offer on a house, bully or not, the listing agent must always notify the seller and present the offer to the seller, so you’re right. But here is where the rules get a little grey. A professional listing agent would notify all buying agents who have expressed interest or who have viewed the house of the bully and would give them an opportunity to present their own offer. Unfortunately, not all agents follow these best practices which makes it difficult to compete as a buyer.
 
 
Comment: Can the seller reject any offer even if its for list price? I put an offer in and they were expecting multiples, I was the only one so I went in at list. they rejected it.
 
John Pasalis:  We are seeing this more and more often in this market for a few reasons. Sellers are intentionally underpricing their houses in anticipation of multiple offers. While this worked well in a heated market, this strategy is not working as well in a market that is cooling down. The seller does not have to accept an offer for their house, even if it is at list price. When this happens, what many sellers tend to do when they don’t get the price they want is to relist the house at a price that more accurately reflects its value or the price that they are looking for and accept offers any time.
 
Source: the globe and mail, April 22 2010

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