Trish Bongard Godfrey

Deals Not Done & Who Is Cashing Out Next

01 December 2016
Trish Bongard Godfrey

In my office we have a white board where agents post their recent sales. It includes the address, list price, sold price, number of offers and who represented the Buyer and the Seller.

The board I wish we had is the wall of deals not made: Deals Not Done. These would offers prepared and presented in multiple offer situations for clients and who did not get the deal, because that would be very revealing, too.

Recently I represented Buyers for a lovely home that sold for well over list price. There were 6 offers all together. There had been 7, but one dropped out I assume because of the competition. The next night, a colleague texted me at about 9 PM to say she was sitting in a car, waiting, and was representing one of 20 offers on a property that was a “first time buyers” home, on a busy street in the far east end of Toronto. It sold for over $900,000. These are just anecdotal stories: we all have them. You’ve heard them.

Each of these offers represents a lot of buyers and professional time, gas, and congestion. It’s a bit mind-boggling. In the case of the east end property with 20 offers -- each Buyer has probably visited the house at least twice, and perhaps a couple of these Buyers have paid for a home inspection. And let’s say each property visit is in two cars (client and agent), so that’s at least 80 car trips from somewhere. And in at least ¼ of these visits from serious buyers, I am betting the parents came along. So, add on another 5 car trips. And that doesn’t include all those people who went to see the Open Houses who didn’t make an offer! Probably many of these Buyers engaged a home inspector, an insurance broker, a banker, a contractor, a lawyer, and a decorator. You get the idea.

Each offer takes a lot of time and effort to get prepared. Check title, owner’s names, the listing and sales history on each property. Pour over data to suggest a price valuation. Other research: find out if the pad parking is legal; check if building permits were taken out on the construction work, and were they closed? Inquire if the local school is being closed? Did the Sellers do a termite inspection? Does the pest company treat in that area? Ask about that encroachment that was mentioned on the previous listing? Inquire about that development permit across the street. There are loads of questions that should get asked.

Then the offer gets drafted, details reviewed, edited, signed, etc.

During offer presentations, quite often, clients stand by while they wait for feedback from the listing agent, who, on their clients instructions, has send some or all the offers back to see if they can get more money for their property. Families, lenders, contractors, and friends all get calls during these times while the Buyers consider whether or not to continue with the auction. It’s stressful, and takes a lot of energy from Buyers and Sellers alike.

There is a whole lot more that goes into this process, but I am telling you these anecdotal stories because it’s still happening. The listings have slowed down this week, as they do every year, but I think when the market stats come out next week, we’ll find there are still many people looking to buy houses, and not afraid to step up.

What’s it all mean? Well, I have been bullish on the market, but the one caveat to my enthusiasm for 2017 would be if the government decides to interfere in a significant way—adding a new tax, or changing the mortgage lending rules.

The other thing that would make me cautious is that we are running out of inventory. We have lots of condos, but sooner or later we are going to run out of single-family homes in Central Toronto that are priced under $1,000,000. That’s the magic number under which a buyer can get a CMHC insured mortgage if they have less than 20% down payment, and that has fuelled the market. Sooner or later, if trends continue, these buyers will only be able to get a condo in the GTA. And will they want that? Clearly, many will, but many will also want a proper home to raise their children, and they will leave the city, commute back, or make their careers in smaller – cheaper - communities elsewhere.

The other thing I think is going to happen is that these prices are going to loosen up the market. I believe people ages 55-70 are starting to think about taking some of their real estate investment and diversifying their assets: many into their children’s homes. If someone’s primary asset has become their Toronto home, and the kids have left, I am guessing there will be a tipping point at which more owners start to say, “you know, its time to take some profits”.

I can’t bear to mention the election, the impact of that is not clear at all.