Welcome to the July 2018 Home of the Month! This feature provides a snapshot of what Urbaneer’s Buyers have recently purchased in the City of Toronto.
This month’s real estate buy shares the journey of first time buyers whom – after 16 months from the start their search – secured a property conditional on financing on their first offer attempt!
When my Buyer first reached out to me – at the beginning of 2017 – he identified a desire for a 2bed stacked townhouse with parking in the price parameters of $600,000 or so in the central east end – including Regent Park, The Danforth or Riverside/Leslieville. He expressed resistance to high-rise condo living as he wasn’t attracted to buildings that had multiple amenities spread out throughout. As he wrote “This type of living almost seems like I’m going back to a school dormitory; you only go back to your condo to eat and sleep; most everything else is in a communal shared space within the condo building”. Although he ultimately coveted a detached bungalow, he also understood that our housing stock in the central core is old and tends to require a lot of maintenance and “I am not skilled at fixing plumbing, electrical, etc.”. This is what prompted him to consider the stacked townhouse – as it seemed to be the housing type which best balanced his wishes, wants and needs. As he succinctly wrote “This leaves me to consider a stacked townhouse condo (where I only have to pay maintenance fees and avoid the repair and replacement costs associated with plumbing, electrical, and heating/cooling issues) which unfortunately may not appreciate in value at the same rate as a freehold house. What I have to reconcile is the appreciation of property versus having no headaches.”
For any buyer who has an aversion to doing repairs or renovations, given our housing stock in the original City of Toronto is now approaching or exceeding 100 years old +, one is better off considering a townhouse or condominium if you’re looking to do as little work as possible unless you have a sizable budget to buy a renovated dwelling. Also, prices are quite high for freehold housing in the central city. Today, a freehold property selling for under 850k is really land value, as I documented in my post called Exploring Toronto Real Estate Property Values. So if you’re committed to living within the original City of Toronto as close to downtown (or on the subway line), you pretty much have to reconcile that if your budget it under $1mil your best option is a condo/townhouse, and if you can surpass $1mil then you will have entree into the freehold housing market (though for the most part still requiring repairs and/or upgrades).
In this situation, as the year progressed my Buyer shifted his focus – as he and his fiancee – began considering upgraded and renovated freehold dwellings on the east side. They started attending open houses most weekends where the list prices were anywhere from $699,000 to $999,000 with a holdback on offer date. Their objective was to purchase a house for under $1mil – as the moment one goes over $1mil one is required to put a minimum 20% down which (at the time) they didn’t have. Now, if you’re not familiar with the ‘holdback on offer process’, it’s where a property comes to market with offers being received at a later date, where the intention of the Seller and their listing realtor is to create competition between buyers through a resulting bidding war. If the turn-key houses didn’t receive a Bully Offer before the holdback offer date, then they would receive anywhere from 6 to 20 bids! Here’s my blog called About Holdbacks On Offers, Bully Offers & Bidding Wars For Buyers.
20 offers on your home?! That’s enough to make you feel like…
As my Buyers became more engaged in the market, they began realizing – and witnessing – that the properties in move-in condition were most likely to go into bidding wars, and sell for sums significantly over asking. In fact, it wasn’t unusual to see houses selling for between 14 and 35 per cent over their list price, so that houses offered for $899,000 or $999,000 were consistently selling for sums anywhere from $1,100,000 to $1,300,000. While the original City of Toronto never saw prices or demand drop like the suburbs have since the government interventions, this past Spring the downtown market roared back to life, prompting me to write in my Tales From The Real Estate Trenches this March 7th, 2018 post called On Toronto’s East Side 42 Buyers Bid On 3 Properties Tuesday Night.
Despite the freneticism in the market, when this upgraded bungalow came to market 2 blocks from The Danforth and the Coxwell Subway Station for $899,000 (and near the high school my client had attended), my Buyers – who had increased their down payment and could now qualified to purchase a property for over $1mil decided this property – despite needing some work – was a good match for their long term needs.
There were a couple of reasons. First, although the presale home inspection disclosed a number of deficiencies – of which the most significant was knob and tube wiring – this 3bed bungalow offered generous proportions, a wide corner lot with south-east exposure and garage, and a large fairly high basement with 2 entrances that presented an easy income supplement opportunity which could offset around $350,000 of mortgage debt. Yes, it wasn’t aesthetically on trend and did need TLC, but for the savvy buyer who could reconcile doing some maintenance and upgrades, I thought it a terrific opportunity. Although my Buyer had originally expressed resistance to doing any work at all, he now saw the merit in locking down a property which could be a long term family-friendly home.
In terms of reconciling value – which is part of How Urbaneer Helps Buyers Make The Right Real Estate Purchase – there were a few sales in proximity to the listing which were bungalows. One was a smaller but renovated 2bed bungalow that had just sold for $1.2mil, whereas an estate sale on a larger lot just down the street had sold in January 2018 for $1,277,000. A pretty bungalow a street away that sold nearly a year earlier in May 2017 had garnered $1,050,000. These effectively gave us a range of value for similar properties.
To offers reassurance to my Buyers, there were also twelve 3bed semi-detached houses in proximity to this house which had gone into competition the previous month and all, but one, had gone into competition selling on average for 20% over list and in the range of value of their property pick. One, just a few doors away that was renovated with front pad parking had come to market at $825,000 and sold with a bully offer (actually ten of them) for $1,170,000 (42% over list) the weekend prior to this listing receiving bids. As far as I was concerned, this detached bungalow on a corner lot with private drive and garage was a superior purchase than this property. And while my Buyers were interested in purchasing this as a long-term single family home, I liked that it offered the opportunity of being topped up with another floor if required, or potentially seeing this corner lot being severed into two lots for redevelopment. As a realtor with a background in urban planning, urban design and having been engaged by developers in the 1990s and 00’s for several developments, I’m always on the eye for the future upside in value.
During the Open House the listing realtor told every Buyer coming through the door that the Seller’s expectation was at least $1,050,000, effectively psychologically setting the base-line for value in every potential Buyers’ head. It implied that the most serious of Buyers who would elect to offer on this house must submit bids at that number or more in order to be competitive. This tactic can work when there is a huge pool of buyers and very limited product – as we were experiencing at that moment – so it was important my Buyers understood they may have to pay more to secure the dwelling.
So my Buyers decided to proceed with their top dollar, a quick 28-day closing, and a 3 business day condition on satisfactory financing so they could ensure the appraisal came in. One of three buyers competing for the property (it’s interesting to note how the number of offers do diminish for houses which require some work versus those which are turn-key), they successfully secured this Home Sweet Home.
Here are some photos from MLS of the property:
Congrats to our Buyers! Offered for $899,000, this Danforth detached house was purchased for $1,100,100!
Serving first, second and multi-time buyers, young families, down-scaling Zoomers, renovators and those building their investment property portfolios, our mandate is to help our clients strategically secure the best real estate on offer, while ensuring their purchase best serves their practical needs and their dream of ‘Home’. We identify a property’s best qualities, features and insouciant charm in the context of the future target market while meeting your own wishes, wants and desires.
Curious to see what the Urbaneer Team sells? Here’s Toronto’s Best Houses & Condos Of 2017 By Urbaneer, which showcases our expertise across the original City of Toronto!
Are you exploring the possibility of purchasing Toronto real estate? Here’s some of my most popular blogs
If you, or someone you love, has specific real estate needs, wishes and desires, and would enjoy the personalized service of someone Celebrating Twenty-Five Years As A Top-Producing Toronto Realtor who subscribes to a pressure-free approach – and a specialty in unique and charming urban homes – please know my team and I are here to help!
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-8000
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Keen on Toronto real estate? Here’s Urbaneer’s Toronto Real Estate Forecasts!
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Buy Of The Month