I was interviewed about the effects of Toronto’s red hot real estate market on buyers. the lightning fast pace of selling properties can lead to buyer’s remorse, or other situations, that can end up with a buyer backing out of the deal. Despite these bumps along the way, a successful sale can still be accomplished, as Carolyn Ireland reports.
It’s a common refrain in the Toronto area that trading houses is done at such warp speed, buyers must just look at each other and say “what have we done?”
Actually they do.
Real estate agent Elli Davis recently sold a house for about $1.8-million soon after it hit the market.
“It was a nice offer, a very smooth offer – and then everything blew up,” says Ms. Davis of Royal LePage Real Estate Services Ltd.
The buyers seemed so shocked at their own bold decision that – within about 12 hours – they asked to be released from the deal. They didn’t have a problem with financing and there was nothing wrong with the house, Ms. Davis says.
“People sometimes move too quickly without thinking. They saw it, they liked it, they had second thoughts.”
Ms. Davis says the seller could have tried to hold the couple to the deal by threatening legal action, or the buyers could have fought for the return of their deposit, but a costly battle is an unhappy outcome for both sides.
She says it’s better if everyone can come to an arrangement. In this case, the buyers agreed to give up a chunk of the deposit. Then both parties signed a mutual release.
“They were smart. They lost a little money,” she says of the contrite couple.
Ms. Davis says the scenario would have been even more unfortunate if the deal had fallen apart weeks later or at closing. In this case, another buyer was waiting in the wings and they were able to make a deal.
The seller didn’t lose out financially but the whole episode was very stressful for all involved, she says. “It caused a lot of upset to a lot of people. People really have to be aware of what they’re doing. This is not like buying a dress and taking it back if you don’t like it.”
And there’s an update on another deal that soured: Last week, I wrote about a house in Oshawa that received 61 bids after it was listed with an asking price of $200,000 and an unvarnished description that included a warning to exercise extreme caution on the basement stairs. A few days later the top offer for $350,000 vaporized for reasons not made public. The house was quickly back on the market with the same asking price and a new offer date.
It turns out 37 parties showed up the second time around and the house sold for $327,000.
An agreement can go south for many reasons besides buyer’s remorse. Sometimes lenders won’t approve the financing or the appraiser won’t sign off on the transaction.
Meanwhile, Canadian homeowners who are struggling with a big mortgage, a home equity line of credit or other forms of debt may see another cut in interest rates soon.
The 2016 federal budget tabled by the Liberal government this week won’t provide fiscal stimulus in time to improve the dismal economic growth outlook for this year, in the opinion of Capital Economics.
Senior economist David Madani continues to predict that the Bank of Canada will still be under pressure to find ways to lift the economy. He expects a rate cut by the middle of the year.
“But with household debt already at record high levels, this task won’t be easy and has its own set of risks,” Mr. Madani says.
As for the coming weeks, agents are expecting the supply of listings to move from dire to tight, which is as good as can be expected in the Greater Toronto Area this decade. Many homeowners across all price ranges are decluttering now.
This week listings dwindled in anticipation of the Easter holidays. Many private schools in Ontario are also on March break. On Tuesday, Ms. Davis received a list of 10 properties inviting real estate agents to an open house. On some recent Tuesdays, the list numbered 60 or more.
Ms. Davis says she often chooses the quiet weeks to launch properties onto the market because there’s less competition. While people do travel, lots of potential buyers also stay in town, she points out “I’ve always been a contrarian. I like to put out listings when no one else thinks it’s a good idea.”
She says many properties are selling quickly with plenty of offers but others struggle for no apparent reason. Bullies – who show up with generous cheques in an effort to pre-empt the offer date – have become so ubiquitous that they’ve pretty much defeated the whole purpose of holding off offers to a set date and time, Ms. Davis says.
In hot markets such as Toronto’s, it’s common to hold off offers for a week so that more potential buyers have a chance to see the property. But bullies refuse to wait. Sellers can choose whether or not to look at the so-called pre-emptive bids.
She says she is often not setting a deadline these days in favour of saying “offers welcome any time.”