The weather is slowly getting warmer. That means many things, but for those interested in real estate, spring is all about a sizzling, busy market.
This year, reports are warning us this could be the last hot spring market for awhile. Yeah, right. I bought my first house a decade ago, when the market was hot. It hasn’t cooled since.
Still, warnings about the economy, housing market and interest rates are putting a spotlight on this year’s real estate activity. If you are buying or selling soon, this puts more pressure on you. As if there weren’t enough already.
Working a real estate deal when the market is hot adds in a whole extra list of factors. Are you ready? Here are some suggestions for staying cool when the housing market is on fire all around you:
If you’re selling
Forget certainly. Your agent will suggest how much to list your house for and how much interest it should generate. But your agent doesn’t know, really, how much you will get for your home and how many offers will come in. That’s because anything can happen. Something in the news, like a big layoff in your area, could impact buyers. Or a fabulous house down the street could go on the market at the same time and outshine your abode. A water main could burst outside your house and city crews could hamper buyers.
Don’t get greedy. Even if prices are soaring in your neighbourhood, be cautious about asking the moon for your place. A too-high price can turn off buyers, even when there are lots of them.
Think like a buyer. It’s difficult to see your home with fresh eyes. But even if the market is on fire, buyers may still shy away from your place if you have no backyard, your kitchen is seriously outdated or your condo faces a highway. Listen to your agent and make the kind of upgrades and repairs that will satisfy today’s buyers, even if you’re not crazy about them.
If you’re buying
Know your budget. It’s a risk for any buyer to get in over their head with a too-high investment. But you’re at higher risk of bidding $20,000 or even $50,000 over your budget price when there’s a bidding war afoot. It’s difficult when you fall in love with a place, but you may need to walk away if the price gets too steep. Just remember to factor in all costs associated with buying a home and owning a home. You’ll need to make the mortgage payments, pay the utilities, do household repairs (which will run you an average of one to three per cent of your home’s purchase price every year), plus shell out for all your other regular expenses.
Know your budget for the future. Interest rates are at historical lows. Inevitably, they will rise. Before you sign a deal, calculate how much you’d be paying a month for your mortgage if rates rose to 5 per cent. (When I bought my first house a decade ago, my mortgage was 7.5 per cent. And honestly, no one made a big deal about it at the time). You’ll probably sign a 25 or 30 year mortgage, and most of those years you’ll be paying a higher interest rate.
Crunch the numbers again. Not to harp on the money issue, but buying outside of your price range is a sure way to put you on the slippery slope of racking up consumer debt. Don’t just turn to your bank for advice on how much you can borrow. Talk to a financial advisor, accountant or run the numbers carefully yourself to be sure you truly can afford the mortgage on the table.
Get out of the pack. Some houses attract a big group of buyers and provoke a bidding war. Where I live in Toronto, nicely renovated homes and those just steps from the subway make people crazy. Get out of the group mentality and look for a house that’s a 15 minute walk to transit, needs some renovation work, has a shared driveway or another feature that other buyers might shy from. A colleague of mine who was buying in a tough time a few years ago purposefully targetted homes that were sitting on the market. He eventually got a house simply by bidding on one at the right time, when the seller was fed up with waiting and accepted a low-ball offer.
Know your needs. Make a list of what you truly need in your new home (ample backyard perhaps; maybe an office space). And make a separate list for wants (fancy kitchen, hot tub!). Don’t sacrifice your needs or buy a house you truly don’t like, simply because you can get it. Remember: you can only make a house bigger if there’s enough land (and money) and while you can renovate, you can’t fundamentally change a home’s layout or its location.
Stay cool. Choose an agent who can help you navigate bidding wars and keep your head when things get intense. Make a pact with your partner (or find a close friend if you’re buying alone) to keep your price and needs list in mind at all times.
For anyone, buying or selling in a busy spring market, probably the best advice is to be patient. Sometimes you don’t have a choice and need to get in or out of a home quickly. But if there’s flexibility time-wise, lay low and wait for the right house or the right offer to come your way and snap it up when it truly makes sense for your heart and your budget.
Writer for RateSupermarket.ca