Five things we learned about Toronto’s real estate bidding wars from the Globe and Mail
Some basic math: one hot Toronto housing market plus several banks offering historically low mortgage rates equals some seriously ludicrous bidding wars (case in point: the Willowdale bungalow that sold for $1.2 million earlier this month—$421,800 over the asking price). A recent Globe and Mail feature delved into Toronto’s bidding battles, sharing nightmarish tales from homebuyers and a few words of caution from experts. Here, our top five highlights.
1. Crafty realtors are using psychological tricks to start bidding wars
Underpricing properties to ignite bidding wars is a winning tactic. Low prices create “auction fever where more bids result in it being bid up higher than what it might have been had it started at a higher price to begin with,” according to one business psychology professor.
2. Toronto attracts foreign buyers with lots of money—and they’re spending it
The story contains a few striking illustrations of how foreign buyers are fuelling the market. The woman who paid $421,800 more than asking for that Willowdale bungalow was originally from China, as was a buyer who paid $1.4-million for a Don Mills unit listed at $1.25-million. An agent with Harvey Kalles said she’s sold more than a dozen suites in one shot to her foreign clients.
3. Desperate would-be buyers are breaking the rules of home-buying etiquette
When agents were submitting offers for one Mississauga townhouse, one determined buyer showed up in person to plead her case. At least that house was for sale, though—a couple who have been looking since Christmas have started handing out letters at any attractive houses they pass by, asking if owners would consider selling.
4. The school year is behind the springtime sales boost
The warmer weather isn’t the only reason the housing market heats up in the spring. House sales peak in March and April because families who buy now can move over the summer, meaning kids won’t be changing schools mid-year.
5. Banks are offering up more money than buyers are asking for
Economists argue that low interest rates are encouraging people to overextend themselves, but the banks, apparently, are doing their share of prodding. “I go to the bank to get preapproved for a mortgage,” said a buyer, who ended up staying put.”I’m thinking a maximum $600,000 mortgage, and the bank is telling me ‘why so little? Why don’t you go to a $900,000 or $1-million mortgage?’”