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Being a buyer in a seller’s market

Lindsay Smith

By Lindsay Smith/Columnist

Every week it seems I encounter sales reps who bring different levels of experience to our sales interactions. I was involved in a multiple offer situation this past week, representing the seller, and it caused me to think how experience in this type of market is critical.

When you are a buyer in a low inventory market, getting an offer accepted can be a challenge. The average detached home in Oshawa at the end of June 2020 was $630,000. When I am helping to educate a buyer on market conditions, I refer to an “Absorption Chart.” This simply shows how fast (or slow) homes are selling in different price ranges. In the average range in Oshawa, last month, there were 42 homes sold with only 22 left on the market at the beginning of last month. This means it is taking about two weeks to sell all of the available homes in this price range. These are the real challenges that buyers are facing.

When a buyer finds a property they are interested in purchasing, here are the steps I find useful to navigate the process. The first and most important step is to get pre-approved by a lender. Next steps are:

  • Do a market evaluation on the property to determine what the approximate selling price range “should” fall into.
  • Have a conversation about a “walk away” price.
  • Create a strategy based on the number of competing offers at play.
  • Do our best to approach the process as a business transaction removing as much emotion from the purchase.
  • Make your offer as attractive as possible, offering things like pre-approvals and generous deposits.

It is not overly difficult to determine what a home is worth. Comparing the home for sale with others that have sold recently will give you a range of value. This is critical in helping the buyer to understand that the home may be priced at market value or, as seen in some homes for sale, up to $100,000 under market value. Once you have established a range, the next step is the “walk away” price. Usually, this is a narrative that starts with a price over the range the home “should” fall inside. If a home is worth around $650,000 you might start by asking if you offered $650,000 and another buyer bought the home for $5,000 more, would you be upset? This helps you get to a number where the buyer would rather lose the home than overpay for it.

Creating a strategy on how many competing offers you are dealing with means you may have to go to your walk away price immediately rather than offering a bit lower and working up to that price. Deleting things from the offer, which may be distractions, can be the difference between buying the home, or losing the home to another buyer. Some items I have seen recently that have resulted in a buyer losing out on a home are:

  • No pre-approval when the listing agent requested one.
  • Low deposits.
  • Clauses that ask for items that are difficult or impossible to obtain (an example would be asking for a survey showing all buildings/structures for a home built 50 years ago. Even an added deck makes an original survey unacceptable).
  • Asking for a closing date the seller indicated they cannot accept.
  • Asking for items that do not exist. (I have recently had buyers ask for dishwashers and central air units when the homes did not have these items.)

 

I have found the best way to buy a home in a heated market is to help educate the buyer. Knowing what to expect, and having a strategy for buying is key to success. Buying a home in this current market is challenging, however, 91 homes in Oshawa sold last week, so it is possible. One part of our business I have never been comfortable with is having to share the news with a sales rep (and their client) that their offer was not accepted. It is especially painful when you know that the buyer would be the winner had the negotiation process followed the rules we just covered. When more than one buyer bids on a home, someone is going to be left disappointed. When it happens with a buyer I am working with, I find it best to break down what happened and learn from the experience. Sometimes the home you didn’t get opens the door to an amazing property you are yet to find.

If you have any questions about the buying process, or if you can see a real estate emergency on the horizon, I can be reached at lindsay@buyselllove.ca.

Lindsay Smith

Keller Williams Energy Brokerage

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