How To: Successfully Buy in the Sellers’ Market
You Keep Hearing: “Bid higher.”, “Sold $100,000 over asking price.”, “There are no houses for sale.”, “I made eight offers in the last six months, and none were accepted.”, “Fifteen minutes to visit, already three offers on the property, and the offer has to be delivered before tomorrow.” and “The property needs $100,000 in work, sold without legal warranty, and no chance to renegotiate… Take it or leave it.”
Under such circumstances, would it be better to postpone the purchase of your home?
This is a legitimate question that comes up in almost every conversation with buyers.
“Should I wait for prices to go down?”
“Is it really possible for prices to rise more?”
These are questions that we have been trying to answer for the last five years, in Montréal.
For new buyers, the current situation can be surprising, even incomprehensible; but, for us, experienced real estate brokers, the situation has been commonplace for several years now.
Five years ago, buyers assumed that the prices of homes in Pointe-St-Charles must be too high; and, that they were sure to drop in the next year or two. On the contrary, prices have increased consistently, almost doubling since then. To this point, even the Canada Mortgage and Housing Corporation (CMHC) has since had to reverse its article, published last year, predicting that prices would drop by 6%.
How does one navigate this real estate market?
It all comes down to the realities of supply v. demand.
Let’s take, as an example, the housing market:
There has been virtually no new house construction since the 1980s, and no available land is opening up, for houses, in Montréal. When land is made available, developers build condominiums, rather than houses, which has had a significant impact on the inventory of houses, while demographics in search of houses continues to grow. House stock remains low compared to the growing demand, and the economic power of those seeking out houses. So:
Prices continue to increase.
The number of houses (the supply) remains low. Low supply, and high demand: Higher prices, inevitably.
Also, with interest rates projected to remain low over the next five years, at least below 4%, this will allow buyers access to inexpensive credit to finance large purchases.
The shortage of houses in Montréal will continue for a long time, and as long as the demand (buyers) does not fall below supply (houses), prices will continue to rise; not necessarily at today’s pace, but certainly no downward correction can occur under these conditions.
Based on this reality, if a buyer decides to wait, they will see their purchasing power diminish day after day, year after year, until they are no longer able to buy the house of their choice, in the neighbourhood of their choice, without a drastic change in economic power. One of the key tools for growing economic power in our economy is home value growth. Given these factors, delay would seem imprudent.
How do you secure your property of interest in a market that is weighted so heavily in favour of the seller?
Our experience has shown us that sellers are looking for the following three things, in this order:
- A qualified buyer who will close the deal.*
- The best price.
- The best/fewest conditions.
*By qualified buyer, we mean a serious buyer who has a bank pre-qualification, or proof of funds; and, a buyer who will not back out during the transaction.
How does one know: What is the best price to offer, what are the best conditions to invoke or avoid?
Start by enlisting the help of a real estate broker.
This service is free, and only the broker (and licensed appraisers) will have access to the data on the properties sold.
Your licensed broker will inform you on market prices, at a given time.
From one city to another, as well as from one neighbourhood to another, prices, inventory, and selling times vary greatly. Your broker, with their resources and experience, will be able to guide you through the process, and will be able to advise you on the market conditions in your area of interest. Your licensed broker is also your expert resource on the physical condition of your property of interest.
You will then have all the information you need to make an adequate offer to obtain the property.
Finally: Stay calm. Houses are a special product, in high demand, and well worth the hunt!
Surround yourself with the right professionals who will accompany you in your real estate project (real estate broker, mortgage representative, etc.) This team can make or break your deal.
Make sure your team is experienced in purchasing in your specific market.
Our team helped over one hundred clients to acquire a house last year; this despite the context of the pandemic, and through the constrained inventory available.
EN TOUTE CONFIANCE | IN GOOD HANDS
Philippe C. Martel
Real Estate Broker, ÉQUIPE MARK-ANDRÉ MARTEL
Philippe C. Martel brings you over a decade of experience in Montréal real estate.
Philippe has participated in hundreds of building inspections and evaluations. His knowledge of the market, his mastery of real estate development and his business sense make him the perfect ally for a successful real estate transaction.