Back in January I saw pricing increase at unsustainable rates. I listed a home in Milton for $759,900 and sold it for $821,000 which was by far a record price for that model home. I remember having over 50 showings in the first two days and when I did an open house on the Saturday, a couple of days after listing almost 30 groups of people came through. Remember, this was January – not April or May, traditionally one of the slowest months of the year. A month later a virtually identical model (but it was much nicer inside) listed in the mid 850’s and sold for over $900,000. That’s an increase of around 10% in a month!

Real estate typically increases 3-5% per year so it was only a matter of time before things changed and of course they did. Why? Well in my opinion there were quite a few factors to consider. One of them and perhaps the biggest was that people were just simply priced out of the market and decided staying put until things calmed down was their only option. The Toronto Real Estate Board claimed that foreign buyers only accounted for 5% of the home purchases. Technically this could be true but realistically it was far higher than that. Homes were bought by Canadian residents using foreign money, mostly from China. When Vancouver introduced their foreign occupancy tax the next big city in Canada where real estate was still fairly “cheap” on a worldwide scale was the GTA. Buyers paying all cash, sometimes without even looking at the home before offering wasn’t unusual. Trump had something to do with it too. Good old stable Canada looks like the best place in the world right now to live and foreigners considering emigrating to the U.S. or Canada chose the safer and friendlier route. Interest rates are still low too (and will remain low for decades despite what people think) adding fuel to the fire.

But, now it’s all ended. Foreign buyers have moved onto buying in Montreal, Canadian buyers are sitting on the fence wondering when the prices are going to stabilize and the media is a having a frenzy reporting the real estate market is crashing. The media sure does love a story don’t they!?

Where do we go from here? There are buyers who bought at the absolute peak of the market at the end of March. Now they’re in a position of having to sell for less and carry a larger mortgage than expected or try to walk away from their purchases. Is it possible to simply walk away from a purchase? No. You’ve clearly breached your contract and you are liable. As a buyer if you do not close on your purchase the home owner can re-list the home and if it sells for less than what you originally agreed to pay, the buyer can be liable to pay that difference, PLUS any other costs incurred by the homeowner in having to resell it. Of course this would all be decided by the courts but it sure is a road you don’t want to go down. As a seller you cannot simply pocket the buyers deposit and re-list the home. The buyer has to sign a mutual release allowing the seller to keep the deposit. The buyer could refuse to sign and in the end things end up in court. Again, as the buyer this is not really a route to take as it could cost them a heck of a lot more than just their deposit when you start tacking on lawyers’ fees and court costs.  When the market is going up or stable it’s more likely for a sellers to negotiate keeping the deposit if the buyer can’t close but when the market is correcting it’s a tough pill to swallow by both parties.

So what’s my advice to a seller right now in today’s market? Be VERY accurate on your home pricing. Take the sales from February, March and even a few weeks in April and throw them out the window. They DO NOT apply in todays’ market. If the Jones’ down the road sold the same model as yours in March for a million, don’t think you’re going to get a million for the your home today. It’s just not going to happen. The market has corrected and in my opinion will correct or just be slow for the next two years.

If you bought a house and your closing date it approaching and you still haven’t sold yet, LOWER your price! It’s not rocket science. Increased supply and decreased demand means one thing…lower prices. It’s economics 101. Try to think ahead too. What’s your home going to be worth in 3 or 6 months or when the dead of summer hits? Less?? If so drop it to a price that looks like a bargain right now but in 3 to 6 months will look like you sold at a good price. Think of it as catching a falling knife. As it gains speed the longer you wait the deeper the cut.

If you bought a home and absolutely need to sell at a certain price in order to qualify for the mortgage then you’re in a real pickle. Time to call family and friends to possibly help you out financially or talk to your bank to see what kind of arrangements you can make. It’s not an envious position for sure.

Advice is always free! Feel free to contact me anytime!