By Lisa Bohler
October 2nd, 2023
BURLINGTON, ON
In Toronto’s 2023 housing market, buyers are often finding themselves entangled in costly bidding wars. While the temptation to outbid others is high, such competitions often lead to inflated prices and buyer’s remorse. But it’s not decided that you’ll end up in such a predicament. There are proactive measures to take that could circumvent this roadblock altogether. Let’s break down the lesser-known tactics that can provide you with an advantage.
Overbidding Trends: What You Need to Know
Recent data analysis reveals that overbidding is becoming increasingly common in the Greater Toronto Area (GTA). A study conducted in May found that 68% of GTA neighborhoods saw homes selling for more than their list prices. The increase in overbidding is a consistent trend that began in February. The data considers both condos and houses and excludes neighborhoods with fewer than five transactions per month.
It is not surprising that homes priced below their actual value tend to sell quickly, often at or above their listing price. So, if you wish to avoid getting stuck in a bidding war, it’s important to be aware of this trend.
Areas with Affordable Underbids
The same study also points out areas where homes are selling below their listing prices. Here are some neighborhoods with median prices below $700,000:
York University Heights, North York
In York University Heights, the median sold price for homes stands at $630,000, with an average underbid of -$4,000. This suggests that homes in this area tend to sell for slightly less than the listing price, making it a good area to explore if you wish to avoid a bidding war. The affordability of this neighborhood is a significant advantage for potential homeowners, especially first-time buyers.
Yorkdale, North York
Similarly, Yorkdale in North York features homes with a median sold price of $646,000, and an average underbid of -$4,500. This area also offers the opportunity for buyers to potentially negotiate a lower price than the listing. The proximity to Yorkdale Mall and accessibility via public transit make it an attractive area for many buyers, yet the prices remain relatively modest.
Erin Mills, Mississauga
Erin Mills in Mississauga presents a different scenario with a median underbid of -$14,000 on a median sold price of $660,000. It indicates that the homes in this area generally sell for significantly less than the listed price. Given the spacious lots and family-friendly environment, this makes Erin Mills an ideal target for those looking to avoid getting caught in bidding wars.
Concord, Vaughan
In Concord, Vaughan, the median sold price is $670,000 with a median underbid of -$9,000. The area is known for its convenient location and burgeoning community facilities. Yet, the median underbid value suggests that buyers still have a good chance of avoiding a bidding war here.
Smithfield-Clairville, Etobicoke
With a median sold price of $695,500 and a median underbid of -$4,900, Smithfield-Clairville in Etobicoke is another area where buyers may not have to face stiff competition. The neighborhood is up-and-coming, with several new developments and community centers, making it attractive for young families.
High-End Neighborhoods: A Different Scenario
When it comes to more affluent communities, the pattern is quite distinct. Only 25% of such neighbourhoods witnessed underbidding. Here are some examples:
Hoggs Hollow in North York is an affluent neighbourhood.
Hoggs Hollow, North York
In contrast, Hoggs Hollow in North York is an affluent neighbourhood where the median sold price is significantly higher at $1,705,000. The area typically sees a 5% underbid, translating to around -$92,750 less than the listing price. Though the homes here are expensive, the tendency towards underbidding means that well-off buyers can still avoid a bidding war if they choose wisely.
Southwest Oakville
Southwest Oakville also falls in the high-end category with a median sold price of $1,842,500. With an average underbid of -$84,000 or about 4%, this area provides opportunities for negotiation even within the luxury market. Its lakeside location and well-maintained neighborhoods make it an attractive option for those with a bigger budget.
Old Oakville
Lastly, Old Oakville features a median sold price of $2,350,000 and typically sees underbids of around -$79,000 or 3%. Given its historic charm and luxurious amenities, the lower bidding activity might come as a surprise. Yet, for those with the means, this means a potential deal without engaging in intense bidding.
Townhouses, Condos, and Homes: Different Effects
Another important consideration when navigating the housing market is the type of property you’re interested in. Whether it’s a townhouse, condo, or standalone home, each comes with its unique market dynamics.
• Toronto townhouses for sale are particularly interesting, as they often serve as a middle ground between condos and detached homes. The demand for townhouses is usually steady but may not provoke the same intensity of bidding wars as detached homes, mainly because they offer fewer amenities than full-fledged houses but more space than condos.
• Condos are generally the most abundant and may offer the most opportunity for avoiding bidding wars, particularly in buildings with many similar units. Often located in dense urban areas, the sheer volume of available condos can sometimes counteract the high demand, allowing for more negotiation room on price.
• Detached homes, on the other hand, are often the trigger for the most intense bidding wars, especially in highly desirable neighbourhoods. With land at a premium, these properties are fiercely competed for, often driving prices well above the listed value.
Practical Tips to Steer Clear of Bidding Wars
Conduct Thorough Research
Doing your homework is instrumental in avoiding a bidding war. Being well-informed about current real estate trends in Toronto, especially in neighbourhoods you’re interested in, puts you a step ahead. Research can include anything from understanding the average price range for homes in specific areas to the rate at which homes are selling over the list price. With increasing overbidding trends in the GTA, having up-to-date information is particularly valuable. Thorough research will not only help you set realistic expectations but also better prepare you for what lies ahead.
Having a mortgage pre-approved is often underestimated,
Pre-Approval is Key
Having a mortgage pre-approval is often underestimated, yet it holds significant importance. A pre-approval letter from a reputable lender shows sellers that you’re financially secure and can afford the home you’re interested in. This not only speeds up the purchasing process but also gives you an advantage over other potential buyers who may not have taken this step. In a seller’s market, where overbidding is increasingly common, having this competitive edge can be highly beneficial.
Hire a Skilled Real Estate Agent
Navigating the Toronto real estate market can be complex, especially with the growing number of neighbourhoods experiencing overbids. In such conditions, professional guidance is not just helpful but almost essential. A competent real estate agent can provide insights that might not be easily accessible otherwise. They can also assist in strategizing your bids and negotiating terms that could save you money in the long run. With the right agent, you can better understand the subtleties of Toronto’s housing market, such as why some neighbourhoods like Markham are hotspots for overbidding while others offer more reasonable pricing.
Flexible Timeline
Time is another important factor to consider. If you’re not under immediate pressure to buy a home, observing the market for a better entry point could be advantageous. While waiting might not seem ideal, it could result in more favourable conditions. For example, there may be months when fewer neighbourhoods are experiencing overbids or seasons when sellers are more inclined to negotiate. Flexibility can make a significant difference, offering you a chance to purchase without engaging in a bidding frenzy.
Negotiation Skills
The art of negotiation can never be overstated in real estate transactions. Knowing how to negotiate effectively can help you get a fair deal without necessarily engaging in a bidding war. It can be particularly helpful in affluent neighbourhoods like Hoggs Hollow and Southwest Oakville, where underbidding is more common. Effective negotiation involves multiple elements, such as timing your offer well, understanding the seller’s motivation, and being prepared to walk away if the deal isn’t right.
Vigilance, preparation, and a well-thought-out plan can be your best assets.
Home Inspection
One of the most important aspects of home buying is having a thorough home inspection conducted. This step not only provides assurance of the home’s condition but also offers room for negotiation. For instance, if the inspection reveals issues that will require immediate repairs, you can use this information to renegotiate the purchase price. A detailed home inspection can also prevent you from making a costly mistake, particularly in areas where the home prices are high.
The Bottom Line
Vigilance, preparation, and a well-thought-out plan can be your best assets. The stakes are high, but the advantages of sidestepping a bidding war are even higher: financial stability, peace of mind, and the opportunity to invest in a home that you can truly afford.
