Consumers must remember that 'market value' can be defined as the amount someone is willing to pay for a property. Based on location, size of the house and its perceived condition, the sky is almost the limit right now in many areas of Toronto.
A bank will qualify a buyer based both on their credit record and total debt service ratio. In other words, as long as interest rates are very low, a family earning (combined) over $100,000, for example, in a year can -- in theory -- afford a very expensive home. I won't do the math for you here, but even in Woodstock there are buyers for homes priced well over $400,000.
In Toronto, you really don't buy much of a house for $400,000.
No matter how much interest there is on a property, buyers must hire a qualified inspector. It's more than just peace of mind, it's good sense.
Buyers must also hire an experienced Realtor to help them weigh all the pros and cons -- market knowledge, depreciation of a home's elements, and costs for modest updates.
Read this story from The Toronto Star and be glad that the Oxford County market is realistic.
Thinking about buying in the near future, contact me (519 537-1553; mschadenberg@rogers.com) -- 13 years of full-time experience in real estate with Royal LePage.
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Bidding wars spark complaints from homebuyers, says Real Estate Council of OntarioBy Susan Pigg Business Reporter, The Toronto Star, March 27, 2012
The Real Estate Council of Ontario is feeling the heat from Toronto’s hot housing market with a surge in calls from potential homebuyers upset they’ve lost out — or won — high-stakes bidding wars.
About 30 per cent of the 15,000 inquiries the council has had in the last year are from house hunters overwhelmed by the multiple bids process, says Bruce Matthews, deputy registrar in charge of complaints for RECO, the regulatory body for Ontario’s 58,000 Realtors.
What’s most worrisome is how many homebuyers have waived home inspections in a desperate bid to win the house of their dreams, only to end up with a nightmare of costly repairs and upgrades later, says Matthews.
The concerns and confusion around multiple offers, which have spiked across the GTA in the last six months in particular, are part of the reason the council is launching a new education campaign this week.
The ads on public transit and YouTube are meant to encourage house hunters to do their homework before making the biggest purchase of their lives — and look beyond whether the home is in the best neighbourhood or school district.
"We’ve had numerous circumstances brought to our attention where a buyer, even against the advice of their Realtor, has waived home inspections or conditions around financing when they found out there were other offers on the property," says Matthews.
"Unfortunately in bidding wars, reason and rational thought are often replaced by emotion and haste. We can’t legislate human behaviour, but we’re trying to put more of the emphasis on information and knowledge in advance (of going to open houses and putting in offers) to prevent these kind of situations."
The council has seen some homebuyers walk away from hefty deposits, or end up in costly court cases, because they waived financing conditions to get a leg up in multiple bids. Some couldn’t close because they were rejected for financing or the bank felt they had paid too much, says Matthews.
Others found out too late that the house had knob and tube wiring or structural damage that would have been discovered in a home inspection.
Some of the calls have come from house hunters angry that they lost out to a lower bid.
"With the current supply and demand issue, a lot of power is with the seller," says Matthews.
Sometimes a seller will choose a lower bid because the buyers can close at a specific time, have kids or don’t plan to raze the house: "We don’t regulate the buyers or sellers themselves," says Matthews.
The council has a website and a host of information brochures meant to educate buyers, and sellers, about the ins and outs of bidding wars, the legal obligations when you sign a contract with a Realtor, issues around mortgage fraud. It also has a complaints line and email address: 1-800-245-6910or complaints@reco.on.ca
The council also stresses safety and recommends that sellers put personal photos, valuables and medicines out of sight during open houses. The photos, for instance, can tip would-be thieves off to the fact you live alone or travel a lot.
Realtors are required to alert all potential bidders that multiple offers have been registered against a property. The council has had what Matthews calls "sour grapes" calls from house hunters who believe those numbers are being exaggerated to drive up emotions and house prices.
RECO has the power to investigate so-called "phantom bids" which are prohibited under the code of ethics in the Real Estate and Business Brokers Act which regulates Realtors.
Even some Realtors are becoming concerned at how high emotions are running in the Toronto market right now, fuelled by low interest rates that have no where to go but up. Last week ReMax reported that some 50 per cent of homes in the "coveted" $600,000 to $900,000 range in prime Toronto neighbourhoods have been selling over asking.
But bidding wars are also emerging in Winnipeg and a number of other resource-rich areas of Canada, it noted.
"We want people to really think about what they’re doing," says Tom Wright, president and CEO of RECO. "Buying a house is the largest transaction most of us are ever likely to make and it stays with you for years."
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