Property hunters need to take a breath before committing to risky offers as the Toronto real estate market heats up again.
After a brief slowdown in the early months of the pandemic, bidding wars and bully offers are well and truly back in the GTA.
While the Toronto Regional Real Estate Board reported 7,000 sales in January – a significant increase over the previous year – that’s still not enough to match the demand spurred by record low mortgage rates and signs of pandemic recovery.
“The pandemic certainly resulted in an unprecedented year for real estate in 2020, but it hasn’t put a damper on the overall demand,” said Jason Mercer, TRREB’s Chief Market Analyst. “Looking ahead, a strengthening economy and renewed GTA population growth following widespread vaccinations will support the continued demand for both ownership and rental housing. But over the long run, the supply of listings will remain an issue, particularly in low-rise segments.”
As far afield as London, Ont., buyers are feeling pressured into firm offers to give their bids a serious chance of success, according to this CTV News report.
“Honestly at this point, having an offer come in with conditions is the abnormal, I don’t see it,” said a credit union financing advisor quoted in the story.
But buyers should be careful not to get carried away in the craziness of a hot real estate market.
Even if you’re pre-approved for a mortgage at a certain amount, that doesn’t mean your financier will hand over what you need just because you want to spend it.
If you get into a bidding war and make a firm $2-milion offer on a house that your mortgage provider appraises at $1.5 million, then you could be stuck trying to make up the shortfall without a home financing condition.
In my own practice, I was recently contacted by a realtor who wanted a status certificate reviewed ahead of an unconditional offer on a condo. But upon closer inspection, I found the documentation on the condo corporation was missing critical information, including detailed financial statements, by-laws and declarations.
It’s good to be proactive, but it can also be dangerous. If you want to go in with an unconditional offer, make sure you have an experienced real estate lawyer perform an in-depth review of the documents to give you a complete picture of the situation before you dive in.
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Jacob Manishevitz is a mortgage agent with iBridge Capital. His brokerage donates to several charities that range from providing drinkable water to people in need in developing countries; and supporting important organizations by way of activity-based fundraising. If you are looking for worthwhile causes and want to jump on board, please reach out to Jacob.