Susanne Hudson2013-06-20T04:16:03-04:00Susanne Hudsonhttp://www.huffingtonpost.ca/author/index.php?author=susanne-hudsonCopyright 2008, HuffingtonPost.com, Inc.HuffingtonPost Blogger Feed for Susanne HudsonGood old fashioned elbow grease.Ask a Realtor: Should I Just Rent in This Market?tag:www.huffingtonpost.com,2012:/theblog//3.15688692012-06-07T07:32:46-04:002012-08-07T05:12:03-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q: Should I continue to rent, or is buying a better option in this market?
Renting is always an option but the allure of owning your own home is hard to beat! And over the long run owning a home that is appreciating in value is a good investment. Where else can you enjoy the comfort of an investment and pay no capital gains when you cash out?
Many people enjoy renting and find it carefree. No repairs to pay for, no lawn to cut, no snow to shovel. But if that is your goal, perhaps sell the house and buy a condo, a co-op or a loft!
When you rent, your landlord might be slow to do repairs or might list the house for sale when you are a tenant. The new owner has to keep you as a tenant until the end of your lease but they may not renew your lease if they want to live in the house themselves. If you rent part of a house, the same thing applies. If you're in a duplex, for example, and they want to convert the house to a single family dwelling or put a relative in your unit, then you're out at the end of your lease. If you have a month-to-month tenancy then they just have to give you two month's notice if the same conditions above apply. Most people don't want this insecurity. They want the decision to move to be their own.
The joys of owning your own place are numerous -- the privacy, the fact that you can decorate it the way you want, the fun of planning improvements, a garden etc. Yes, there are many costs involved, but if you work from home you can write off part of your living expenses, part of the interest you pay on your mortgage, part of your heat, hydro, repairs etc. To a lesser degree you can also write off part of your expenses if you rent.
So what to buy and where? It depends on your ability to pay but also what your needs are. If you're a young single you might want a condo or a loft in an area where there are like-minded singles. If you have a child, you probably want a backyard so a house -- semi or detached -- is maybe what you're looking for. Or maybe a townhouse. If you have kids in school or preschool, looking for areas with good schools is usually top of mind. If you're renting there is more chance that you will be moving at some point and your child will be changing schools. If they're older, they'll be leaving friends behind.
If you're an empty nester you probably still want some green space so a condo with a terrace or a small house or townhouse is maybe for you. Renting or owning are both good options as maybe it's time to cash out. Whatever you decide take the time you need to decide what is best for you at this stage!]]>Ask a Realtor: New Condo or Resale?tag:www.huffingtonpost.com,2012:/theblog//3.15597752012-05-31T13:16:43-04:002012-07-31T05:12:17-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q: Should I buy a new or resale condo?
The advantages of new condos
There is much to like about a new condo. All new kitchen, bath, windows, etc.! And when you buy from a floor plan, you can also sometimes ask for custom finishes and certainly upgrades. You get exactly what you want. Also, if it's in a great location, has a balcony or a big terrace, even better. Many new condos also have fabulous rooftop gardens and some come with private elevators. If you buy a penthouse....lucky you! Is it more complicated than buying a resale condo? Yes.
Will you make money when it is finally built? Most likely, but probably best to wait until the building is registered because it's hard to sell the "paper." This is the original agreement (amount paid including the down payment, usually 25 per cent) plus what is the perceived dollar increase in market value of the unit now. This calculation determines the new asking price. With a newly-built condo you will have a phantom mortgage (like rent to the builder) until the building is registered -- usually when 90 per cent of the units are sold. Only then will you put your own mortgage in place.
Once the building is registered you are the owner, and by doing comparables in the area, you can list the property for what you and your agent determine is its market value.
What about a resale?
Resale condos have many pluses. Firstly, they may have been built many years ago. They will be bigger than new condos for the money. They may be recently renovated and if not you can certainly entertain that possibility. But you're stuck with the windows unless the building has replaced them. The building will also have an established board. As well, they have a built-up reserve fund for ongoing major repairs.
An older building will have an established clientele and you will be privy to much information about the running of the building when you obtain the status certificate. The size of the reserve fund, the yearly financial report and minutes of the board meeting. Are there any assessments? (Charge to condo owners if the reserve fund can't pay for an unplanned additional expense.) You can also find out how much of the building is rented. The by-laws will be available to you; can you have a pet? A barbeque? All of this will have been decided by the board of directors.
And most importantly your closing date is firm. With new construction the move-in date for a new condo might change, or be delayed several times. But don't forget with a new building there will be little in the way of major repairs for several years but with an older building the repairs are ongoing, though built into the budget. Good research to see both new and resale condos.
What about a loft?
They are fabulous spaces with soaring ceilings and often open ductwork and steel beams and seem to do very well on resale. With "new" and resale lofts, they are often former commercial spaces. Sometimes the building is a combination of converted commercial space and new build. If it's the original commercial space just make sure that the sound-proofing is okay. But very little deters the loft buyer!
So whether it's a new condo, a resale or a loft, enjoy the process and make sure you buy what's best for you and what best suits your needs! It's very much a personal choice....]]>Ask a Realtor: Have I Paid Too Much?tag:www.huffingtonpost.com,2012:/theblog//3.15431852012-05-24T13:35:17-04:002012-07-24T05:12:07-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q: Did I pay too much for my new property?
A: A fast market, mostly a seller's market can lead to multiple offers. Perhaps you've come through this type of offer scenario successfully and are now the proud owner of the home of your dreams! You are thrilled with your purchase but you realize that you did go well above the asking price. Was it too much?
These are the factors that may put your mind at ease:
You were probably in a holdback offer situation. In these marketing scenarios the house is listed at perhaps five to ten per cent under market value. This doesn't always result in the final price being way over asking. It depends on the house and the number of offers. The amount that these homes sell for over the asking price is from two to 18 per cent and probably 12 per cent on average.
Is the house a beauty, perfectly renovated? Does it feature a main floor family room, renovated kitchen and baths, a master ensuite bath, walk-in closet, beautifully landscaped etc. Or is it an outstanding condo? If so, I say this time there were many offers, next time there will probably be many offers too! It has just that much appeal.
Importantly, did you look at comparable sales with your agent before the night for offers? If so, you have a fair idea what similar homes or condos sell for, or have sold for. This analysis would have involved discussion with your agent. And this research/knowledge will certainly increase your comfort level!
Did you set an upper limit? If so did you stick to this price, or close to it? If the answer is yes, in the scheme of things, you're probably ok.
Are you likely to move from this new place anytime soon? Or do you imagine being there for a long time. If you plan to stay put and really enjoy this property and feel that it suits your every need, then you're okay. The amount over asking will even out over time.
And most importantly, did the price of the property appraise by the bank? If it appraised at very close to what you paid for it, then you've paid market value.
So relax and enjoy! The future will look after itself......]]>Ask a Realtor: Is a Home Inspection Worth it?tag:www.huffingtonpost.com,2012:/theblog//3.15237732012-05-17T08:32:54-04:002012-07-17T05:12:20-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q: Is a home inspection worth the $450?
Well, if your house is your biggest investment, I think you want to know how solid that investment is. Four hundred and fifty dollars is the cost for a home inspection on an average three-bedroom house. The price is calculated on the size and price of the house and will vary somewhat in price across the country. In making your decision think about this: Is there a wet basement, mould, knob and tube wiring, or asbestos? If so, how much will it cost to get rid of them?
There are several scenarios for a home inspection. If you're buying a home and you're the only one who puts in an offer, you can ask that it be conditional on a home inspection (usually a three-day condition). If you're looking at going in on a multiple offer situation -- i.e. holdback offers -- they may provide a home inspection but you may want to do your own before the offer date.
What do I get for the cost?
A home inspector's skill and time. The average home inspection takes approximately three hours and the inspector starts outside, examining the roof and the exterior features of the house: the eavestroughs, downspouts, brick, stucco or frame exterior, grading etc. He or she then moves into the house and checks out the mechanics; the wiring, plumbing, and the furnace. He or she also examines the basement foundation and looks for signs of water in the basement, etc. You as the buyer are invited to join him or her as he moves about the house. Ask questions, it's incredibly useful information.
Which are the top areas of concern?
Exterior: Is the brickwork in good shape? How about the eavestroughs and the downspouts? Are the windows new/newer? Are there screens? Does the trim need painting? Do the eavestroughs discharge water away from the house? With regard to grading, does the earth slope away from the house?
Structure: Is the house sound? Has there been much shifting? Is the roof leaking and what is its lifespan? Is the foundation cracked?
Interior: Are the floors in good condition? Is the drywall or plaster in good condition? Is the fireplace operational? The liner ok? Is there good water pressure? Is there water in the basement?
Mechanics: Is there knob and tube wiring and if so, how much will it cost to replace it? Are there circuit breakers? How recent is the electrical panel? Is the plumbing copper or old and galvanized? How old is the furnace, is it operating correctly and what is its life span? Is the AC unit functional?
Problems: The home inspector also looks for problems such as mould, Urea-formaldehyde foam insulation (UFFI), asbestos or evidence of termites (though you usually need a termite inspector).
All of the inspector's observations are noted in a binder for the buyer and the home inspector goes over the contents and features of note with them.
In sum, yes, it's worth the time and money to have a thorough home inspection. Get to know your new house and what it needs -- now and in the future!]]>Ask a Realtor: Can I Still Afford to Buy a New Place?tag:www.huffingtonpost.com,2012:/theblog//3.14991382012-05-10T07:31:02-04:002012-07-10T05:12:16-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q. What are all the costs I need to consider before knowing whether I can still afford to buy a new place?
Take heart, this is a daunting task but it is just a matter of making sure you know all the costs upfront. So, before you set out to look for a house or condo you should make an appointment with your lender, be it your bank or your mortgage broker. They will determine how much you can spend by doing a debt:income ratio analysis to determine the amount of mortgage that you will qualify for. The market has changed and you can expect to pay more...so get ready!
What will my lender or mortgage broker need?
They will need to do a credit check and you will have to provide them with proof of income and an employer's letter. You will need a down payment of at least five per cent of the purchase price and if it is less than 20 per cent, your mortgage will have to be CMHC insured. Your lender will determine the price range for properties you are able to afford -- a combination of your down payment and the amount of the mortgage you will need. The new property will be appraised by the lender before closing.
What are the monthly carrying costs for a house or condo?
If it's a house, you have heat and hydro, cable, water and realty taxes to pay. And of course there will be ongoing minor repairs, occasional major repairs, snow shovelling, gardening, etc. If it's a condo you pay a monthly maintenance fee that typically includes common area expenses, building insurance, parking, and water. Sometimes heat is included but you usually pay for your own hydro. You also pay your own taxes, usually your own cable and if your own hydro, it includes hydro costs for central air.
What is bridge financing and will I need it?
If you have a property to sell but buy first, bridge financing is the amount you may need to borrow to carry both the new property and the old property for a short period of time. This happens if you have to pay for both mortgages because the new property closes earlier than your current property. A month overlap is typical. Speak to your lender about this.
At the offer stage you may make the offer conditional on a home inspection, the cost of which depends on the size of the house (approx. $450 for a three-bedroom home). You will pay your lender a mortgage appraisal fee and a home appraisal fee. At the time of closing your lawyer will co-ordinate this and you will also pay the Land Transfer Tax if applicable in your province.
In Toronto, there are two: One for the province and one for the municipality. You will also pay the legal fees as well as adjustments (real estate taxes prepaid, gas in the furnace etc.) and disbursements. Add to this the cost of moving. And don't be shy about asking your lender or your lawyer to double check your calculations!
Happy Hunting!]]>Ask a Realtor: How Can I Help Sell My House?tag:www.huffingtonpost.com,2012:/theblog//3.14563542012-04-26T13:40:25-04:002012-06-26T05:12:01-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q. How can I help sell my house?
Yes, you've hired an experienced agent, one who knows your neighbourhood and has a successful track record. They will be proficient at marketing, negotiating and closing the deal. But you have to be totally onside. If you don't get into the process, your house will take longer to sell. And working with your agent can be fun. When this "project" is successful it will mean a profitable outcome for you! After the initial prep part of the process, your involvement will take just minutes a day.
Getting it Ready
It's your house or condo, but now it becomes a marketing tool. You have to get rid of the clutter; clean out the cupboards, the garage, perhaps rent a storage locker to store all the extra furniture, junk in the basement etc. Get the small repairs done that you've put off doing, the windows cleaned, carpets cleaned, paint rooms that need it, touch up the exterior trim.
Throw out magazines. Get new bath mats and put out your best towels. Depersonalize the house: no family photos on the fridge door and put the toys away. Beautify with plants and maybe get a new urn or two for the front porch to reflect the time of year. Grass cut, hedges trimmed, etc. If you have no interest in doing any of this talk to your agent about having the house professionally staged, hire a gardener to deal with the grounds etc.
Deciding the Listing Price
Pricing is everything and make sure you have an agent who knows the market, the recent sales in your neighbourhood and specifically your street. Your agent may bring along a couple of other agents for the evaluation and that is often a good idea. You and your agent will discuss a probable price range and how to achieve that. Should there be holdback offers or offers anytime? Which is the best marketing strategy?
Give Your Agent Free Reign Re: Marketing
Your agent will want to do an open house for agents and perhaps a lunch. These are both good ideas for getting agents into the house. A "For Sale" sign is a must. Agree to open houses for the public on the weekend. If you're doing holdback offers, discuss having a pre-listing home inspection.
Your agent will also suggest that it's best for you to leave the house for showings and half hour showings can easily turn into an hour, so don't rush back. This is an important purchase decision for the buyer and you want to give them time to look at everything in the house!
Keep the House Looking its Best
You will get telephone notice from the agent's office regarding showings and your agent will go over the daily times set aside for showings with you. Every showing counts and you should leave the house neat and tidy with the overhead lights on, every day. If no showings have been booked for that day, before you leave for work, leave the lights on. It's a long day and showings may be booked later.
Remember, it is still your home but for the purposes of selling it's now a "model suite"!
Listen to the Market
Fair market value is what an unpressured buyer would pay to a knowledgeable and unpressured seller for a property that has had reasonable exposure to the market. When you list the property, the price is an educated estimate of value. If, however, you are getting resistance to your price and it doesn't sell in a normal length of time for your neighbourhood, it might be wise to take a reduction.
Discuss this with your agent. You can take a reduction now or at the time an offer comes in. But sometimes a timely reduction results in renewed interest in the property and, if you're lucky, two offers!]]>Ask a Realtor: Should I Buy a Condo or Co-op?tag:www.huffingtonpost.com,2012:/theblog//3.14526622012-04-26T08:10:36-04:002012-06-26T05:12:01-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Is it better to invest in a condo or a co-op?
Perhaps you're thinking of downsizing since you don't need the four-bedroom house anymore. Sick of shoveling the snow? Want more time to travel? A hassle-free condo lifestyle might be what you're looking for. Condos and co-ops are both good alternatives to owning a house, but there are pros and cons to both.
Condominium apartments
A Condominium apartment (condo) is the most common type of apartment ownership and is governed by the Condominium Act, a piece of legislation brought into effect in the 1960s and updated in 1998. Each unit is separately owned and unit owners share ownership of common areas such as hallways, roofs, exteriors and amenities such as the underground parking, swimming pool, gym etc. After the building is registered, a condo corporation is formed and its executive oversees the management of the building and the annual budget. As an owner you pay a monthly maintenance fee for common element expenses, building insurance, the reserve fund, usually parking and sometimes a concierge. Heat and hydro are usually separate but heat is often included. Taxes are not included. You can rent or sell the unit without restriction. Most lenders arrange mortgages for this type of property.
Co-ownership apartments
A Co-ownership apartment (co-op) represents a system in which registered owners have an undivided percentage interest in the whole property. Each owner has shared rights with respect to common elements of the property as well as exclusive rights to a particular suite (a parking spot and locker are included in most cases). Maintenance fees are usually as per condominiums. Taxes are included. There is a board of owners that oversees the maintenance and the annual budget. The board also approves potential buyers but this is usually a rubber stamp process. Financing is limited and the rate is usually higher. There is usually a restriction regarding renting these units.
Are they both a good investment?
Condos are usually a better investment as they are easier to sell and buyers don't have the same restrictions as they would with buying a co-op.
Co-op owners are also usually older, coming from a house, and paying cash for their co-op. Because of the restrictions with co-ops, these units are also somewhat larger for the money than condos. So if you are retired for example and want an apartment that is a reasonable size, at a reasonable price and you don't need a mortgage, a co-op might be a great alternative for you.
If you plan on moving again in a couple of years and investment growth is very important to you, then a large condo is perhaps the way to go. This holds true for a large co-op apartment in a premium building as well.
]]>Ask A Realtor: Do I Really Need an Agent?tag:www.huffingtonpost.com,2012:/theblog//3.14353672012-04-19T08:45:58-04:002012-06-19T05:12:01-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q. Do I really need an agent when selling a home?
Selling a home in 2012 is a big undertaking and usually accounts for one's biggest asset. Doing it right is a challenge and in my view you need a good agent to price, market and sell your property for the best price possible to a qualified buyer who will be able to close the deal.
Talk to your agent about commission but keep in mind they have perhaps been working for you already, keeping you abreast of market conditions, sending you comparables, occasionally updating you on the value of your home.
They know the sales on your street or condominium complex, and how best to get the property ready to sell. The going rate for sales commission is five per cent for the sale of a property and that is split four ways, 2.5 per cent for the agent and their listing broker and 2.5 per cent for the selling agent and their broker.
Remember that the listing agent has associated advertising costs, including signage, ads in the local newspaper, website, feature sheets etc. They also have realty association dues, insurance and course fees. On the buy side, they may have spent several months with you looking for the "new" place. To that end, the agent is often negotiable if they are going to get the sale of your property and the purchase of another.
Is it better for me to go with a "do-it-yourself" broker and save money on the commission?
Well, that depends.
Can you market your property as well as your agent with professional photos, a virtual tour, feature sheets, etc.? Can you represent the house as objectively as your agent? Will buyers believe you or do they want a professional, knowledgeable third-party agent pricing the property and doing the negotiations?
I have only been involved in one of these transactions and the owner needed me to help them read the offer. They had no feature sheet, the property did not show well and they felt very unknowledgeable in the negotiation. Because the property showed so poorly my buyer was only prepared to offer the seller below the asking price and that is what it sold for.
I think the seller thought they were saving sales commission by going alone but they ended up with a sale price below market value!]]>Ask A Realtor: Making an Offer on a "Hot" Propertytag:www.huffingtonpost.com,2012:/theblog//3.14214452012-04-12T14:27:31-04:002012-06-12T05:12:01-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q. What is the best strategy for bidding on a property that will likely get multiple offers?
In a seller's market, many "hot" properties come on the market and often with holdback offers. These homes are usually newly renovated, nicely decorated and have many features that buyers want. A "hot" property can also be a fabulous water front condo, a bungalow on a wide lot, a ravine property. There are many different versions of "hot!"
The property is listed with a holdback offer date at a specific time, one evening at the beginning of the next week. This comes after an open house for agents on the day the listing comes out and open houses for the public both days on the weekend. There may be a pre-listing home inspection available to buyers and their agents.
So, how can you get this house?
See the property on an appointment with your agent and have a second appointment with the rest of your family later in the week. Discuss with your agent comparable recent sales of houses in the area and specifically on this particular street. With condos also get comparable sales.
Make sure that you have been approved by your lender for the amount of mortgage that you may need. If you have a property to sell make sure that you qualify for bridge financing if the closing of the new house and your current house do not coincide. You should also discuss the applicable closing costs.
Read the home inspection if there is one available and discuss with your agent. Have any questions answered by the owner through their agent. If there is no home inspection, book one with a home inspector of your choice before the offer date.
If the property is a house, ask to see the survey and discuss with your agent. If not you will want to get title insurance. Your lawyer is a good person to speak with about this.
You will probably be asked for a bank draft of five per cent of the purchase price to accompany your offer. Arrange to have this ahead of time and by the offer date. Make it out to the listing broker in trust. On the day of offers, if they are to be presented at 7 p.m. that evening, you will meet with your agent to sign the offer sometime in the afternoon. At that point give your agent the bank draft regarding the deposit.
Your agent will be communicating with the listing agent to see if they expect multiple offers. By 5 p.m. you will have a better idea if you are alone in making an offer or if there are others. Once you know there are multiple offers, your offer is unconditional as you have your financing and you've done a home inspection. Price and closing date are now the two most important factors. You will want to give the seller the closing date that they ask for and go in over asking price if there is more than one offer.
Regarding price and how much to go over asking, you should only go as high as you are comfortable and you should discuss with your agent what your top price is. Also what is the top price at which the house will most likely appraise with a lending institution.
What the house sells for depends on many factors. What is the perceived top price for this property compared to recent sales of similar properties? How many offers are on the table? If there are two or three offers the process is fairly straight forward and the best price and the seller's closing date usually take the day. If there are four to six offers you usually have to come in at a higher price to stay in the bid to get this property and the seller may decide to just "work" with the two best offers.
Multiple offers range from two to 18 per cent over asking in a very brisk market. Six to 10 per cent is usually an average percentage over asking price.
]]>Ask a Realtor: Don't Hold Back on Holdback Offerstag:www.huffingtonpost.com,2012:/theblog//3.13864792012-04-05T13:17:17-04:002012-06-05T05:12:01-04:00Susanne Hudsonhttp://www.huffingtonpost.com/susanne-hudson/"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at asksusannehudson@gmail.com, and she will publish and answer the questions of most general interest.
Q. What is a "holdback" and is it a good idea?
Holdback Offers are a marketing tool whereby the property is listed for five per cent under market value and offers are held back for a week. They are taken on a certain date in anticipation of multiple offers with the property selling for 10 per cent or more over the asking price. When you list your home for sale, your real estate agent will talk about how to best market your property. You may decide to list your home at a price comfortable for you and based on comparable sales in your neighbourhood. Your home is basically then ready to receive offers anytime. Or, you may decide to market your home using a holdback offer scenario.
This is strictly a marketing tool but it is most commonly used in a seller's market (very few homes for sale), in a very active market or sought-after neighbourhood, or, with a house that is pretty perfect and will be very attractive to buyers at that price point. It may also be a house that is attractive to developers or an older bungalow on a wide lot -- or even better, a double lot -- that can be torn down and a new house or houses built for three times the price of the lot/bungalow.
Listings with holdback offer clauses predictably come out early in the week with an open house for agents mid-week and a public open house on both days on the weekend. Sometimes a home inspection is done and provided for buyers ahead of the offer date. The offer date may be on the Sunday night or one night the beginning of the following week.
Pricing the property takes into account that you expect multiple offers. The home is listed at probably five per cent under its market value in hopes of getting 10 to 15 per cent over asking. This is not without risk since if there are not multiple offers, you may get one offer at your listing price (five per cent under asking) the night of the offers.
The night of the offers, most buyers have been pre-approved for their financing/mortgage and they have had a home inspection of the property ahead of the offer date (or a current one is made available by the seller). Therefore, In Toronto -- certainly in the central core -- most offers come in without a financing or home inspection clause. The number of offers and the final sale price depends on the number of offers and how attractive the house is to buyers.
Most buyers don't mind paying a bit over the market value if the house and/or area are outstanding and rationalize that the house will probably increase in value by that much over the next year or so. The caveat here is that the house has to appraise at the buyer's accepted offer price and if it doesn't, the buyer has to come up with the difference. In my experience, this doesn't happen very often.
Benefits of holdback offers to the seller: not just an increase in price but also an efficiency of time. Less time on the market if it works and less stress for the seller!
In the first three months of 2012 the percentage of holdback offers have varied and so have the results -- from two per cent over asking in slower areas to up to 18 per cent in more sought- after areas. In the downtown condo market, most of the condos do not have holdback offers and sell close to asking price. Lofts do somewhat better and have perhaps 20 per cent with holdback offers/over asking price.
So in sum, holdback offers are a marketing tool and are most commonly used in a seller's market or an active market. In a buyer's market (lots of houses for sale, few buyers) there will be few holdback offers. Holdback offers have been in place for over six years. There you have it!]]>