An update on the mid-Toronto bidding war which took place last night. I told you there were 12 offers and the $1 million house sold for $1.2 million. I lied. Well, more accurately, this blog’s press deadline came before all the dust had settled. So here’s the outcome.
The property was, like me, seductive but not life-altering. Heavily staged, though, it was great house porn. But no garage, small bedrooms, no ensuite, with a McMansion next door blocking the sun and not enough room between properties to take your horse into the backyard. Good street, but still solidly middle class. Low Mercedes sperm count.
The process now has become irritatingly familiar to anyone trying to buy a home. The realtors open the place up for a few days, tell fellow agents on the hot sheet that offers “will be gratefully accepted” at a certain hour on a set day, and must be accompanied by a certified cheque for a deposit not to be less than 5% of the offer price (in this case, at least fifty grand).
Sometimes a rebel buyer will break ranks and make a bully offer. One of those happened a few hours ago in the same hood – with a $1.25 million house getting a $1.45 million offer a day after hitting the market. The owners caved and took it, but deprived of the vicarious joy seeing a dozen couples sit in their cars lining the curb outside, sweating and Starbucking.
Of course, there are no conditional offers. The homeowner might have a home inspection report sitting out for perusal, but anyone silly enough to actually check out what their million is buying, needs to arrange their own inspection in advance of the offer time. Because of the competition, it’s impossible to ask for a few days to arrange financing, to sell another property, or even to suggest a closing date other than the one perfectly suited to the sellers.
As for knowing what to offer, you can’t. The list price is just a fuzzy starting point. The more offers that are registered (the typical cut-off is an hour or two before showtime), the more the winner ends up paying. Since the process is akin to a silent auction, no suitor has any idea what anybody else is throwing on the table – but it’s fairly certain everybody needs to exceed the asking price. It’s a total shot in the dark.
“The seller has absolutely all the cards,” a long-time agent laments to me. “And the buyers have none. It is quite regrettable that this has been allowed to happen.” But it’s everywhere in Toronto now, in these uncharted times.
In the couple of days, for example, 98 Churchill (Yonge/Eglington) sold for $1.25 million, after being listed for $979,000 for six days. 45 Churchill (Trinity-Bellwoods) sold for $1.2 million after seven days at $999,000. 14 Vermont (Bathurst/Vermont) went for $1.41 million desite its $1.2 million price. And the wars are not just for the rich. 337 Westmoreland listed for $379,000 and sold for $469,000. 584 St. Clarens came to market at $499,000 and six days later was worth $636,000.
Yet despite this intense competition for limited listings, the Toronto Real Estate Board reported this week only a small average price hike in recent weeks over last year. In fact in 416 the average detached home fell by more than $40,000. That hardly matched the $100,000 crash in average prices in Vancouver, but it was meaningful after months of relentless gains. “Competition between buyers remained strong in many parts of the Greater Toronto Area during the first half of April,” TREB said, “with many listings attracting a lot of attention. Strong competition meant that, on average, sellers priced within market value range received offers that matched their asking prices within three weeks.”
Of course, the realtor cartel hasn’t suggested how people looking to house their families, who need to live in the big city, should deal with this phenom. Agents work for sellers. It’s where the money is. So bidding wars are purposefully created. Offers are held back from sellers. An auction environment’s created. Listings are low-balled to goose demand. Vendors move out and stagers move in. Days on market are shaved, so showings cascade upon each other. The moment of truth has all the drama of an Oprah sighting or the gore of a UFC event. As agents stand on the lawn and their buyers vex, the envelopes are opened.
On this night – the one before last – there were not twelve offers, but 15. Each one was for more than the asking price of just over one million dollars. After reviewing them all, 12 couples were sent home with their certified cheques. Three others were asked to enter a second round of competition, given a few moments to add fifty or eighty thousand dollars. Within minutes the sellers had a firm offer of one used Hyundai less than $1.3 million. And, thus, the value of this home increased 30%. It became a comparable for every other owner on the block.
As important, 14 jilted, rejected purchasers drove off into the dark, either determined to win next time, or disgusted they’d been so used.
Yesterday I wrote about the inevitable and coming increase in interest rates. But higher rates are not a prerequisite for real estate’s temple to fall. The cost of money’s still dirt cheap in Vancouver, for example, and yet both sales and prices are tumbling. A year ago bidding wars turned every listing there into an emotional battleground. Today the buyers are leaving.
Over and again I’ve reminded you that real estate is the most emotional of assets. Its value determined by want and lust, greed and fear. Soon you can add revulsion.