Ontario’s housing market is tight. Don’t panic. You can still get your foot in the door, if you act quickly — and rationally.
Take the Pressure Off Home Buying
First time buying a home? Don’t feel pressured to buy the first one you see (unless you like it a lot). Cool down! When you wait long enough, another just as nice property looking for a buyer often comes your way.
Get Your Priorities Straight
Start with a list of what you want in a home, where you want to live and how much you’re able to pay. Be realistic. Knocking some luxuries off your list, like a two-car garage or third bath, could get you what you’re looking for. In your price range.
You Gotta Look Around
Check out open houses in the same neighbourhood or go online to see if your expectations are realistic. GTA properties were on the market an average of 15 days in July. That gives you time to look around before you take the plunge.
Bidding War Realities
The reality is, sooner or later, you can expect to be greeted by a bidding war for a highly desirable property in a neighbourhood where you want to live. See if your realtor has a feel for what the seller wants. It might not be all about the money. A quick closing could seal the deal if they are moving or school starts soon.
Fair Dealing and In Good Faith
If you must put in a bid, limit it to one property at a time. Putting in an agreement of purchase and sale is serious business. Legal contracts rely on good faith and fair dealing. When you make multiple offers at once, you break the sellers’ trust. Not only could you be held to your offer, you could lose your deposit and even be taken to court.
How Much Deposit to Offer
Sellers’ reasons for picking a winning offer are impossible to predict. It could be something as illogical as they like you better. Think of their property as their baby. A higher than usual deposit (5% is average) could put you over the top. You definitely don’t want to offer less. In the heat of the fray, what can you afford to lose — 5%, 10%, 15% — if you have to back out?
Bidding Up Your Offer
Realtors aren’t beyond bidding up your offer. So think about how much you’re prepared to pay before you’d rather just walk away. $5,000 to $7,500 is a good rule of thumb for each additional offer beyond your first. Most GTA properties were selling for 105% above list price in July.
When You Pay Too Much for a Property
Getting the price right is important. Your mortgage may get turned down or you may have to come up with more cash if the selling price and property appraisal don’t match up. You could also try negotiating with the seller. With the deal on the line, they might be willing to come down, especially when confronted with the real value of their home.
You may be anxious to get the home, but don’t forget the basics:
- Get preapproved for a mortgage so you know how much you can afford.
- Reduce your other debts first.
- Protect yourself with “subject tos” — you could be glad you did.
- Get a home inspection.
- Make your offer conditional on mortgage financing.
- Sell your existing house first or arrange bridge financing if you expect to carry the mortgage until it sells.
- Mind the deadlines. A late deposit or failure to close on time could void the deal.
CERB, COVID-19 and Your Mortgage
Uncertainty is running high for CERB’ers worried about their benefits ending and finding work. If you’ve been laid off and are wondering if you have a job to go back to you, talk to an Axess Law real estate lawyer. You may be better off to go ahead with the purchase and outwait the job market. You can always sell, rent or take in extended family to help with the mortgage payments.
Backing Out of An Offer
Backing out of an agreement of purchase and sale seems like it should be simple enough. Like any legal contract, whether you can actually do it depends. The seller may be only too willing if they have multiple offers as rich as yours. Depending on how strong the local market is or how aggressive the seller and their realtor get, you could be out your deposit.
Worst Case Scenario
Back away from an impulsive offer and you could pay the price. The next buyer may offer way less than you did, prompting the irate seller to take you to court to get the difference. Avoid a home buying mishap by doing your homework in advance. It’s hotter than a Windsor summer out there.
Legal Advice on Closing Real Estate Transactions
Axess Law Ontario real estate lawyers help you close real estate transactions. Video conference online with our licensed lawyer from anywhere in Ontario. Dial toll free to 1-877-552-9377 or 647-479-0118 in Toronto or use our online booking form for day or evening appointments, 7 days a week. In person appointments are avaiable at our Toronto, Scarborough, Vaughan, Etobicoke, Ottawa, Mississauga Winston Churchill or Mississauga Heartland law offices.
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