How Not To Overpay For Your New Home

The idea of not “overpaying” for a home in Toronto is all relative in the current real estate landscape. Even in a soft market, the average price of a house in the region is hovering at more than $1 million. Redefining the concept is a good place to start.

What Does Overpaying Look Like?

“Overpaying” means paying more than the fair market value, which will make it more challenging to build your equity over time. Instead, focus on getting the best value possible, which requires going a little beyond the surface and truly understanding the numbers. For example:

• If the house you buy for $2 million today ends up being worth $2.5 million a few short years from now, you’ve done well for yourself.
• If you get a “deal” and pay $900,000 for a house that decreases in value, you’ve gotten the short end of the stick.

The trick is finding that sweet spot where you find a house that fits within your budget at or below fair market value so you can build your equity and net worth over the long term. This is no easy task in today’s unpredictable market, but here are a few strategies that can help.

Know What Type of Market We Are In

If it’s a busy seller’s market, there’s a good chance that you’ll have to pay over the list price to secure a home that meets all of your requirements. When the market forces your hand like this, you’re not technically overpaying, even if you’re paying more than you would have liked to.

Even more important than understanding the market is knowing it can change almost overnight. Some homeowners might not be willing to accept when it is no longer a seller’s market. As a result, they overprice their homes using data that is out of date.

If you weren’t an informed buyer, you might also make decisions based on inaccurate information. This could lead you to pay more than you need to.

Buyer’s markets are rare in the GTA, given the demand for housing, but they can happen. Ideally, this is when you want to search for a house. But if you wait for “ideal” conditions, you might not buy for a long time, if at all.

Your best course of action is to work with an experienced real estate team who can help you understand what is happening at the time you are beginning your home search. Still, the tips below will help you stay ahead of the curve.

If you want to get a handle on the Etobicoke real estate market, the related reading below will help:

• Real Estate Jargon-What It Really Means
• Know the Real Estate Cycles and Hack the Market
• How Seniors Can Navigate an Ever-Changing Real Estate Market

Avoid Bidding Wars

Bidding wars are common in seller’s markets and less frequent during buyer’s markets. The problem is that you lose even when you win. You might submit the winning bid, which is great if it gets you the house you love. Unfortunately, it also sets you up to overpay for the privilege.

Our advice is to avoid homes with multiple offers as much as possible. This may be a tall order in some markets where competition is high. If you must participate in a multiple-offer scenario, be disciplined about staying within your budget. In all other markets, try to only place offers when you’re the only one doing so.

Use Pre-Emptive Offers With Caution

Pre-emptive offers are also common when there are too many buyers and not enough houses. When this happens, sellers will often set an offer date to allow as many people as possible to see their home. It’s another way to encourage multiple offers and bidding wars.

If you have your heart set on a home with an offer date, you might try putting in a pre-emptive offer (also known as a bully offer). It will likely have to be clean, with no conditions and over the list price for the sellers to consider it. However, if it saves you from getting caught up in a bidding war, you are less likely to overpay.

Avoid Offer Dates

Whenever possible, we suggest focusing on properties with NO offer date. Bring in a clean offer at a reasonable price. This means NO conditions on financing or home inspection. This will require you to be pre-approved for your mortgage and understand any deficiencies in the home you are considering.

Before balking at the idea of buying a home with “deficiencies,” remember that nothing will be perfect. Even a brand-new build is sure to have something you’ll want to change eventually. If the idea makes you uncomfortable, you can arrange for an inspection before you put the offer in. In addition, many sellers will provide a pre-listing inspection.

Look for Motivated Sellers

Your real estate agent can help you look for properties where there was an offer date and the sellers received no offers. The idea is to wait a short time before bringing in your offer, as sellers are likely willing to negotiate at this time.

There are other signs that a seller might be particularly motivated to sell their home quickly. It could be they’ve received a job offer or have a new family member on the way. Whatever their reason, they can’t wait too long to accept an offer. These situations are often the key to paying less, especially when inventory is high and demand is low.

Looking for more tips on getting the best value when buying your Etobicoke home? The resources below might be helpful:

• How Can Home Buyers Find A Great Deal In Etobicoke?
• Can You Still Buy A House In Etobicoke For Under $1 Million?
• How To Tell If Your Dream Home Is A Money Pit Or A Worthwhile Investment

Stay Objective and Grounded

Regardless of the market or your personal situation, it’s essential to stay level-headed and calm throughout the home-hunting process. This can be difficult to do. If you’ve fallen in love with a particular home or have been outbid numerous times already, the temptation to blow your budget is high.

Keeping your emotions out of it is easier said than done! Luckily, a good real estate agent will be there to help you stay grounded and objective. With a disciplined approach and patience, you stand a much better chance of securing an ideal house at a fair value.

Professional guidance is the surest path to getting the best value when buying a home. Our experienced Etobicoke real estate agents can help. Reach to contact@thompsonsells.com or call 647-282-7653 for more information.