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House Wars: true tales from the Toronto real estate market

Real Estate Bidding Wars

The second listing on their tour that day was another house on Ellsworth Avenue. It was too small, so Slutsky, Brand and the ever-positive Chapnick went to the last house of the day, on a nearby street. This one was a newly renovated three-bedroom semi, listed at $699,000. It had exposed brick and a fireplace in the living room, a kitchen with an island and lots of storage, and a finished basement with a separate entrance (and, weirdly, two bathrooms). The backyard had a parking garage, a big deck and enough room for a child’s sandbox. Slutsky thought the place might be too small, but Brand was off and running. “I love it,” she said. “Do we need to do an inspection? What’s another $500? Should we bully? $730,000? $740,000?” The two stood on the front porch, judging the view inside and out. It was time to make another offer.

The next week, Slutsky called me, bummed out. He had gone through the house with a home inspector, who advised that the renovation job was sloppy and had been done without permits. The furnace was cheap and improperly vented, and when the inspector touched the fence in the backyard, a board fell out. The house was no good. “We’re really depressed,” Slutsky said. “We’re at our wit’s end with this whole process.” Meanwhile, the house had sold for $737,000, five per cent over asking.

“I’ve got an idea for a new reality show,” a friend of mine recently said on Twitter. “Contestants fight to the death for a detached home with a garden.” To house-hungry Torontonians, that probably doesn’t sound like a joke. Prices have raced upwards for well over a decade, with an all-time sales record of 93,193 set in 2007, when the average home price was $376,236. Even the recession caused by the U.S. mortgage crisis hardly made a blip: in 2008, sales dropped to 74,552 homes, but the average value stayed steady, at $379,347. Since then, dollars and sales have continued to climb. There were 89,347 sales in 2011, and this past June, the average home price was $508,622.

Condo towers keep rising, but people who want an actual house in the city limits have a finite number of options—“They aren’t making more land” is a common refrain. This makes buyers competitive and aggressive, two traits selling agents know how to exploit. When I bought a house two years ago, my mom (who last moved in 1984) suggested I offer $15,000 below the asking price. I laughed. To buy a house in Toronto today you must follow a common schedule: watch for new listings on Thursday, go to the open house that weekend, then get ready to make an offer above the asking price that Monday. Buyers fall in love with a kitchen, or a neighbourhood, or an imagined future life.

Looking for a house is like taking on an all-consuming part-time job. As interest rates dropped over the past few years, the process has grown ever more frenzied. On the evening of the offer, hopeful buyers hunker down in cars as agents scurry to and from the house, wanting to know if their clients can throw just a little bit more on there, a little bit more. So they do. And they do. And they do, again. One disgusted buyer told me she lost a bidding war when another person added a pair of Leafs tickets to their offer. “I am already giving you $700,000,” she said. “I do not have to sweeten the pot.” Buyers use the language of battle: fellow bidders are “the enemy,” to buy a house is “a win.” The person who names the highest number is the victor, and the rest go home to recover, then start again.

Scheduled offer dates, bidding wars and climbing sale prices are a city-wide phenomenon, but there are significant neighbourhood differences. Shabby North York bungalows famously go for a million to builders who plan to put up two new houses on the 40-foot-wide lots. For buyers who want to actually live in the homes they’re bidding on, there are a few trendy neighbourhoods where the wars are dirtiest. As the hip ’hoods of the early 2000s—Riverdale, Little Italy and the Annex—move into the $1 million–plus range, the areas around them have become ruthless battlegrounds. A redone semi in the downtown west end, from Trinity-Bellwoods out to Parkdale, now starts at $800,000. Hordes of young families are trying to get into east end areas like Danforth east of Pape, and south through Leslieville and the Upper Beach, where there are still houses that don’t yet bear post-renovation price tags. Meanwhile, north of Bloor, the St. Clair streetcar right-of-way and Wychwood Barns cachet has helped launch Hillcrest into the bidding war game.

Tensions are high: one agent threatened to throw a punch; another received obscene late-night text messages from a competitor

These neighbourhoods share certain characteristics. Decently sized lots and good-to-great schools are a given, but more urban features are important too, like reasonable access to transit and amenities worth hanging around for on weekends. Since the American mortgage crisis of 2008, U.S. researchers have noted that the neighbourhoods bouncing back the quickest aren’t suburban paradises with big lots, but dense urban areas with high “walkability,” the capacity to meet everyday needs by transit, bicycle or foot. A recent New York Times story estimated that every “step up the walkability ladder” added $82 per square foot to the price of a residential home, and mentioned the website Walk Score, which rates this latest real estate must-have.

Walkability matters in the slightly less combative areas, too. Streets off Gerrard Street East, in the heart of Leslieville, earn 77 out of 100: residents can walk to green space, Little India fruit stands and hipster espresso shops, but transit access is poor. On the other side of town, a quick streetcar ride up to the Bloor-Danforth subway is one factor that has made Roncesvalles a million-dollar neighbourhood. Unsurprisingly, it gets a near-perfect walk score.

Convinced that walkable Toronto has more buyers than houses for them to live in, people have become desperate enough to take dangerous risks. Everyone knows that houses are sold as-is, with buyers bending over backward to submit frictionless offers, free of home inspection conditions and with closing dates that suit the seller’s needs. Home inspectors are now most often enlisted by sellers, who then leave a binder out for buyers to flip through. Some buyers pay for a walk-through with the seller’s inspector, or try to nail them down for a quick, free phone chat. The most conscientious buyers jostle to squeeze in a fresh $350 inspection in the hours between the open house and the offer date—Matthew Slutsky and Carlie Brand paid for two inspections and a walk-through on their first three bids, and Brand has a friend who paid for 10 pre-offer inspections before finally buying a place.

  • leslievillian

    I don’t know… we got our house for $405k (a semi) through a bully offer when the market in leslieville was very hot (it still is). There was only one other offer made… the house was in horrible aesthetic condition but was functioning well. It’s not so hard to find a house. That was our first offer.

    As for condos, a couple years earlier I searched for months and found a condo in yorkville, over 650 sq ft, 2 parking spaces… for less than 300k. Also first offer.

    In my experience, staying alert and moving fast works. p.s. we aren’t aggressive people either. Just knew a good thing and decided to try a “bully” offer. It worked.

  • Chuck

    Wow… long read but interesting. Is it me or its not sellers that driving this mad market but vicious realtors who are the ones making lots of $$.This article spoke about April and June…. but the market has shifted somewhat since August…where does things stand now ?

    Buy before you sell if you are dependent on the net proceeds of the sale is the dumbest thing anyone can possibly do.Its a nightmare and again, crappy realtors will not advise people to always sell, know your equity and then buy. The house you think you love so much, must have for $100K over asking and your dream house is only a fragment of your imagination built upon by your very wealthy realtor basking in 4-5% commission!!

  • Chick

    Travelling through Nova Scotia and New Brunswick this summer we noticed about 95% of properties were listed privately through companies like Property Guys. How long will it take for sellers in Ontario to catch on and stop lining the pockets of greedy realtors?

  • EZEKIAL

    So what, exactly, do real estate agents do besides make really lame commercials?

  • PrivateSale

    Simple solution to all of this. Do your due diligence and find out the value of your house. If you want to stage it or fix it up to help curb appeal do so by sourcing the right trades to do the job. Realtors do not have ANY secrets that the general public does not know. Know the value of your house, present it the best you can, and settle on an offer that meets your needs. There is no need to have a Realtor taking 4-5% of your potential profits. Put in that extra 20-30 hours of work and pocket that commission for yourself. Realtors are not rocket scientists, they are over-paid glorified car salesman that are polluting the real estate market with greed.

  • Jeff

    I agree that over paying is madness – and could be in part due to pressures from the sales side of things (I’m sure there are other variables too). However, commission at 4-5% is divided at least 2 if not 4 or even 5 times. The agent with a great split (high) is getting 2.25%, possibly, possibly 4.5% at most if they rep’d both the buyer/seller.

  • opl

    I mapped all the addresses featured in this article and I was surprised to see that so many of the homes featured were sold for a ridiculous amount above asking. Yet, they weren’t necessarily in desirable locations (in my opinion).

  • Jeff

    A good realtor is supposed to act as a guide, consultant and filter. They should also act to protest the interests of their clients, which is to negotiate a great sale and a safe close. I’m not sure about the market out east, but I suspect they have a closer community in general, slower turn over and lower average prices (correct me if I’m wrong).

    Like any other service out there that you can do yourself – they should provide the service for you – in a timely and comprehensive fashion. With 3 sales in the past, I’ve each used a bad realtor, a great one and tested selling by myself. Had I had a poor experience on one of those sales, I would have happily put the coordination, sourcing and research into the hands of the great salesperson who had at that point moved away herself. I would say that having the home owner present limits prospects and negotiating power. No ones complaining when its their house that reaps the 100g over asking (and no sale by owner catches that I’m sure).

  • Jeff

    sorry – protect the interests, not protest (haha)

  • jrm

    Here’s our experience with a bully offer – we listed our Liberty Village townhouse two years ago. We had set an offer date a week out but within a day we were informed that someone wanted to make a bully offer and that it would be ‘generous’. We decided to wait it out…which was stressful, thinking that we completely lost that potential buyer. Well, they still showed up on the offer day (along with three other bidders) and although they were above asking, the offer was far from the best. If we had accepted, we would have lost thousands. The message: not all sellers will be lured in by bully offers – in fact, the idea made us incredibly uncomfortable. We received four reasonable offers and accepted the best one without negotiation. I feel strongly that we did the right thing.

  • Lolatengo

    While certain neighborhoods are still hot, sales have declined yoy in virtually the entire city. This article made sense in May, but now seems like a deliberate attempt to mislead. I get a pretty complete list of properties sold across the GTA every night, and most are now going for under list. The bidding war has virtually dried up in the last few months.

  • keisha brown

    i don’t understand why so many people think this article is no longer relevant. my co-worker was house hunting with her fiancee as recently as late spring/early summer.

    one of the homes they wanted to bid on, they eliminated as the competition put a bid of $70K over asking price.

    with HGTV network and programs, everyone seems to feel entitled to a great neighbourhood, open-concept living/dining and giant kitchen. there are still many willing to do whatever it takes to get it.

    until the government puts it’s foot down on these shady practices – it’s never going to end. toronto is becoming about the haves and the wants. the have-nots are out of luck.

  • John

    It almost seems like the writer is trying to convince herself that she hasn’t made a bad purchase at the peak of what is now a falling market. The cover of the magazine reads “Too many buyers. Not enough houses.” Yet two of the couples interviewed had walked through over 60 houses! That’s a lot of houses. One couple walked through 150 homes. Madness! The only thing being bullied in a bully offer is the buyer’s bank account. Anybody who is willing to throw that kind of money at a house that has tripled in value over the last decade, for no apparent reason other than historic low interest rates, is, to put it mildly, right off their rocker.

  • JB

    FYI, Toronto Life makes lots of money on realestate ads. Just saying.

    There are many stories about mad prices but the ones about great houses not selling are missed here. My next door neighbour in the heart of the Beach could not sell his detached 3bdrm for enough to cover real-estate and legals after living in the house for 18 months. There are also 20 empty condo town homes in the upper beach that the building is ‘holding back ‘ because they can’t sell the first two phases.

    Every story has two versions, just pay attention to who is telling you the story and why.

  • Jason

    Anyone who pays $500k+ for a 50-year-old tear-down dump on a tiny lot in a congested, overcrowded city like Toronto is crazy.

    In Lillooet, British Columbia, you can buy a very nice, 2000 sq. ft home on half an acre with fruit trees, hot dry climate, very little snow in winter for $220k.

  • jen

    Is it really worth it to spend 50% of your income on housing? I’m amazed that people so easily engage in bidding wars and pay $700,000 plus for the privilege of owning a house! Their monthly costs are guaranteed to make them house poor. Renting is a much better option, and you certainly don’t have to pay a fortune for a tiny condo in Queen West. This market is making me very, very glad that I am single with no desire for children or an HGTV-inspired open-concept 3-bedroom uber-designer home in a hip neighbourhood.

  • Ian

    The article is no longer relavant as many buyers get fatigued, the three – six month contract with the buying agent has expired and they’re exiting the game until next year.

    In the Beach it’s not uncommen to see four or five open house sign’s on every corner in the spring and almost zero come August September.

    I’ve bought two wonderful homes in the Beach both at the end of the year with January closings for well under asking.

  • Joe Q.

    Buyers over-pay in bidding wars because they have the money to do so.

    They have the money to do so because the banks lend it to them.

    The banks lend it to them because they can insure the resulting mortgages through the CMHC.

    The CMHC offers this insurance because it is back-stopped by the federal government.

    House prices in Canada are strongly correlated to total mortgage debt, which is in turn correlated to changes in CMHC rules. The Toronto market only really took off in 2003, when the CMHC started insuring mortgages of any size — before that year, Toronto house prices had been stagnant for a decade (you can look it up and see for yourself). As the CMHC loosened its own rules, insuring $0-down mortgages and 40-year amortizations, things really rocketed up.

    That’s why the recent changes to the CMHC lending rules are so significant. The CMHC will soon reach its cap, and mortgages will be much harder to obtain, regardless of interest rate. Marginal borrowers will be squeezed out.

    Remember, people can’t buy houses if they don’t have the money, and most buyers can’t pay cash for a house. If you want to see where house prices are going, keep an eye on the lending rules.

  • Susan

    I have to say that I don’t understand the two couples in the story. One has walked through over 150 homes and the other, 60. Haven’t these people heard of the Internet? While it’s unlikely that you’d base a purchase decision solely on an online listing, there’s enough information there to reject ones that are have ridiculously tiny bedrooms, don’t have a yard, or needs a reno job.

    Our family has been house hunting for over a year now, so I know how crazy this market is. We were involved in two bidding wars, and in the end we bought a house that no hold-off on offers. I’ve never been to three open houses in one weekend and certainly not with our agent in tow. We’ve stuck to our budget and expected to see an inspection report before finalizing a purchase. It was a long, tough process, but it’s the only rational thing to do.

  • Lou

    Susan writes in, “It was a long, tough process, but it’s the only rational thing to do.” And she’s not wrong, of course, searching for a new home on the Internet is the best way to narrow it down. BUT, it is totally irrational to buy in this market. We have seen young couples, in our somewhat pricey neighbourhood, buying homes with $800 thousand mortgages only to gut and renovate them with $250 thousand second mortgages. We’ve had the audacity to ask them, “How will you furnish the place? It’s massive!” and they’ve replied, “That’s what a line of credit is for.” Leased cars, unpaid student loans, planning on starting a family. Word to the wise, before you buy a home, the only RATIONAL thing to do is google the words, “financial advisor”. This market is over cooked. Look out below!

  • Wayne

    Prices keep rising, sales keep rising, bidding wars continue unabated. Right, so, wasn’t somebody saying something about the municipal land transfer tax dampening the real estate market? Maybe it should be dampened. If people are so willing to overpay, maybe we should raise the tax not kill it.

  • Joe Q.

    The comment about the municipal land transfer tax dampening the RE market came in a press release from the Toronto Real Estate Board earlier this summer. They blamed a 2012 vs. 2011 YOY decline in sales on the municipal LTT, which came in 2008. It was a silly comment and certainly took their credibility down a couple of notches.

  • Jill Kerby

    These frantic bidding wars and desperate measures to get onto the property ladder as so very familiar to the young professionals with kids here in Ireland, who are now the lost generation, destroyed by the biggest property bubble of them all. It’s time to start asking yourself? Is my annual pay increase matching or exceeding the rise in house prices this year? Will the mortgage represents c3-4 times my or even our annual income? What happens if one of us loses our job or has a pay cut? Or taxes rise? What happens when the tap of cheap credit is turned off and tighter lending rules are introduced? (Big price falls, that’s what.)

    Canada has weathered the great global recession better than most countries, but your property market is overheated and Canadians are carrying vast amounts of personal debt. The demand for commodities is slowing down and the US/Euro debt crisis is still just warming up. Exploding property bubbles have terrible consequences if accompanied by job losses – Ireland’s case was pretty unique in that it was tied into a government generated building boom with developers and builders throwing up apartment buildings and entire estates of semi-detached homes that were housing the construction workers from eastern Europe who were building them. Yet the country sucked up the myth that there was huge demand between 2001-2008 when in reality, cheap credit was fueling the entire mad show.

    The one ‘truth’ behind all the real estate industry spin is that property is just like any other asset. If you really want to know what a property is worth and whether it’s good value, focus on the net yield. A 500,000k house, rented out, that produces a net yield (after mortgage, taxes, insurance, maintenance costs) hat comfortably beats the best deposit rate you can find by 2%-3% is a pretty good buy in any country. As an ex-pat Canadian, living in Ireland and familiar with the sort of houses/neighbourhood’s described in this article, I’d be renting and putting any spare cash into gold and silver. Bad times are coming…from this side of the pond.

  • Monica

    We were the other offer on Olive Ave.(my dream house in Seaton Village) and we lost that bid too! We eventually bought privately in Seaton Village from our friends who won their bidding war on Palmerston Ave. It has been a win-win all around. The war can be won.

  • Wow

    hope you’ll indulge me and allow me to get serious for just a moment: the pricing in toronto is insane today ….zero value.

  • JenniferB

    I’m sorry, but did no one ever advise these people to take the emotion out of the equation when shopping the market for real estate? “When I lost that house, I felt like I had broken up with someone.” Give me a break.

    No piece of property is worth what is described here. The Toronto market and its buyers have lost perspective. Good luck paying off those million dollar mortgages… oh yeah, and the renovations!

  • Kerry Mantziounis

    21 Heydon Park Rd SOLD $225,000 over asking price. I was so happy that my clients the Sellers received so much money for their home. It is a combined effort of a Realtor and the Owner of the property to de-clutter and stage a property to it’s full potential no matter how old or how much work the property needs. My clients asked me what needed to be done to get the property ready to sell. I gave them a list of things we needed to do and they agreed to everything. It is not easy for a home owner to have someone walk in their home and tell them that they need to do item 1, 2, 3, etc….. There are a lot of emotions when you live in a house for a long time. Your house becomes your home. The best advice I can give anyone out there thinking of selling their home is to not get emotional if your Realtor asks you to change some things in the property before it goes on the market for sale. De-cluttering and Staging a property does pay off in a big way because your property will sell faster and for more money.

  • scar007

    scary! the prices are ridiculous! most of these homes are brutal-looking too…at least from the exterior.

  • opensource

    buying your home is an emotional experience. If you say otherwise, I would suggest you don’t own your home. I bought 4 years ago, paid a decent price, never regreted the decision.

  • crystalcastle

    How do these incredibly young people afford million dollar homes? Maybe you could write an article on what amount of mortgage the bank offers them and how that compares to their salaries? And what their quality of life is? I just bought a house and we went the super conservative route, sacrificing to some degree location and parking, to keep the price waaaaaay down. We were also lucky there were no other offers. Now, we don’t make a ton of money, but I would say we get by for middle class. These people snatching up these million dollar properties don’t seem middle class, even though their jobs suggest they are. Please help clarify this insane discrepancy! Or am I really in such a low-earning income bracket that I should now be considered below the poverty line? And yet, I can afford a home in downtown Toronto that would be average price anywhere else in the province?

  • Tom Giannos

    that is True … they will realize the bills latter and the taxes and etc stuff

 

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