Megann  Willson

Megann Willson

Real Estate Agent

HomeLife/Realty One Ltd., Brokerage

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What will you actually pay for that home that’s listed in your budget?

I’m the first to say, we don’t have crystal balls in our industry. Anyone who tells you that he or she can predict the price your home will sell for, or what you will have to pay to have your offer accepted, is about as likely to be spot on with their number as a carnival fortune-teller. That said, we do have a number of tools in our toolkits that help us provide you with a more realistic picture of the price a certain type of home will fetch in a certain neighbourhood. And the best place to start is to look at the data, for what homes have been selling for recently.

Let’s take the up-and-coming downtown east as an example. Lots of first-time buyers look at this part of the city because it tends to be relatively affordable compared to other downtown areas. It also has great transit, good restaurants, lots of recreational spaces, and a wide variety of newish to new condominiums. Condos are the most affordable way for most buyers to get into the real estate market. First time buyers I meet, come to the table expecting to pay somewhere between 500 and 600 thousand dollars. They’ll see some one-bedrooms listed in this price range, and sometimes bachelor units as well. C08, the code for this area, includes neighbourhoods like Cabbagetown, St. James Town, Regent Park, the Church-Yonge Corridor, Moss Park, and the part of the waterfront to the east of Yonge Street.

They may have gotten some advice from their parents, who have regaled them with stories of getting their first home for less than the asking price. That’s not happening very often these days, although we are certainly seeing a shift in the market. In the last month, 36 condos have sold in C08, ranging in listing price right in that zone I mentioned earlier – 500-600K. But how much did buyers actually pay? First, let’s compare apples to apples. I might look at up to 90 days of data in a stable market, but given that things are changing rapidly, I’ve opted to look at only the past 30 days. There were a couple of two-bedroom units, as well as a sprinkling of bachelor suites. But the majority of the 36 condos were one-bedrooms – 28 in total. Some had dens, some did not. The lowest price paid was 97.5% of asking, and the highest was 133.06% of asking. The average was about 11 or 12% over asking, according to TRREB reported sales during the past 30 days. If you are represented by a brokerage, your agent can look at these statistics with you and determine the direction they’re taking. We use them as one of the signals as to what a seller might accept when they see a buyer’s offer. Of course, the buyer will want to buy at less than the list price – and the seller wants to sell at that 30ish percent over asking. You can see where this is going, right? The asking price at this point, is a starting point, and unless there are mitigating factors, you should expect to be paying more when you figure out what you can manage to afford. And both sides will have to compromise on their expectations to get to an agreement.

The first place to start is to find out what you really can afford, before you get your heart set on a specific type of property. A great mortgage agent can help you work through different interest rate and down payment scenarios. (For example, did you know that you would need more of a down payment if it were going to be used as an investment property, than as your residence?) That’s right. If your sale is an assignment sale, there will also be different down payment expectations from lenders. Once you know how much you need to put down, and you’ve determined how much your monthly payments will be, that’s all, isn’t it? Unfortunately, no. Make sure you have put aside enough money for closing costs. They’ll probably be anywhere from 2% to 4% of the purchase price, depending on the property you buy, and a host of other factors. There’s land transfer tax (both provincial and municipal, if you’re buying in Toronto), lawyer’s fees, (here are some other people you need on your team). the cost of mortgage appraisals, and government registration fees. If you’re lucky you may be eligible for a first-time homebuyer rebate. Suffice it to say, the calculation of mortgage amount plus down payment isn’t all you’ll need to have on hand.

And, of course, that’s not all. You’ll be paying condo fees on top of all that. The price of movers will figure in, or at least a rental truck, and some food and beverages for the best friends who will give you a hand. You’ll pay property taxes, utilities, and you may need window coverings, some furniture, or other items essential to the care and maintenance of your new space.  

Given all that, it’s not surprising that home buyers at the bottom end of the neighbourhood price range (in any neighbourhood), are searching for bargains. You’re all in the same boat. There’s a lot of competition, and not nearly enough supply to meet the demand. I’ve heard more than one person say that they can’t possibly get into the market – but if you want to, what can you do? There are a few levers you can use to make home ownership a bit more accessible, although I’ll be the first to admit that it isn’t easy these days. First, be willing to invest some sweat equity. The unit you buy may not have been well-loved. It might need a bit of work, some paint, new faucets, or other items that have been subjected to a lot of wear and tear. As long as it is functioning, patience is your ally. Learning to do basic repairs and to paint and decorate on your own will serve you well as you move up the property ladder. You can also get creative and decide to opt for a bachelor suite instead of a one-bedroom. There are a wide variety of modular furniture companies these days making combination murphy beds with desks or couches as part of the design. You don’t have to have your friends over to a place that looks like your teen bedroom. Think of all those cool New York lofts you’ve seen in decorating magazines. The third most common lever is to consider other neighbourhoods with a longer commute. This may be easy to achieve if you are able to work remotely, although in my experience people don’t just want to live near their work – they also want to live near their friends and the things they want to do in their spare time. A long commute will put that spare time at a premium, and for some buyers, the compromise can be simply too much.

Only you can ultimately decide which of these options (or a combination) will be right for you. But if you have a great agent, she’ll work with you to talk through the different choices, the pros and cons of each, and prompt you to think carefully about what is most important to you. After all, we REALTORS© are in the relationship business, so when we help you buy a home, we also have our eye on the long-term relationship equity we’re creating, and it’s in our best interest to help you feel satisfied and optimistic about your purchase.  

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