How to Effectively Buy A Home In A Seller’s Market

Posted by A&A Editor

When it comes to buying a new home, Windsor is experiencing a bit of the Wild West! 

Thanks to record-low mortgage rates and a low supply of obtainable homes, buyers both locally and across Canada are being subjected to a seller’s market – resulting in a jump of more than 60% in the past year in Windsor alone.

If you’re thinking of moving or downsizing, the odds are in your favour that an erupting bidding war or getting the price you want for your home is almost guaranteed out of the gate.

Of course, finding something cheaper, due to the factors mentioned above, is part of the challenge.

Here are some tips that might help you land the property of your dreams in what has turned out to be an ultra-hot market.

What Should Be Cold Is Hot, Hot, Hot!

Firstly, don’t assume that the market cooled due to the pandemic. 

In fact, the opposite has happened: cash-strapped owners unable to work are not unloading their homes at favourable prices. In fact, they’ve found conditions are catering to their desires because buyers, motivated by low interest rates, are actively seeking to purchase single-family homes – especially if they include backyards – because they minimize their exposure to others and offer outdoor space for safe socializing during the pandemic.

Simultaneously, other owners refused to sell because they were worried about strangers traipsing through their homes and making the owners more susceptible to contracting COVID-19.

MoneySense reported that in January 2021, the Canadian Real Estate Association found fewer than 100,000 residential listings on Canadian MLS Systems – the lowest ever.

This record-high demand and record-low supply hasn’t done any favours for potential buyers, resulting in the actual national average price of a single-family home increasing by 17%  to $740,900 over the past year.  In the GTA alone, an average $921,600 home shot up to $1,074,600 – and in the Windsor-Essex County area, CTV Windsor claims the average dwelling cost $571,000.

Good News: Mortgage Rates Are Low!

Brett Renaud of Mortgage Architects says if you’re applying for a mortgage, the time is prime in terms of rates.

“Right now, is a great time to get a mortgage because rates are low,” he explains. “The variable is hovering around 1.25% to 1.75%, depending on the mortgage product. Some fixed rates are below 2% and some are just above 2% if you’re talking five-year terms.”

In order to qualify, however, Renaud recommends that the homebuyer does their homework in terms of figuring out what they may qualify for, because financial lenders will most certainly be doing theirs.

“The main factors contributing to an approval would be credit score, household gross income before tax versus debts, and then the down payment,” he notes. “The lenders have to do a lot of due diligence just on down payment because of regulations. You can’t have $5000 just show up in your account and not have a paper trail from where that money came from.  The money needs to be in an account for 90 days or show that you’re accumulating those savings for 90 days.”

Renaud says the fourth factor would be employment, which could be difficult for some to prove in terms of consistency with the on-again, off-again nature of lockdowns.

“It can be tricky,” he admits.

Before You Buy: Some Considerations

New vs. old: is it more advantageous to buy something that might still have a warranty and is move-in ready than something more established that may require renovation or customized remodeling?

In this era of the “bully offer,” have you considered the possible risks you might assume if you don’t include a home inspection as a condition of purchase?

Can your budget accommodate subject-to-change cost factors such as insurance, monthly mortgage and taxes? And if you’re buying a condo, throw monthly maintenance fees into the mix.

Sticking with the subject of condos for a moment, is there a sufficient reserve fund being held by the Condo Board for future repairs? Are there any outstanding major repairs? Are there adequate funds invested for potential future use?

If you are considering a brand-new property build, how well do you know the construction company? Has the builder had any claims or been the subject of lawsuits? Are there any current liens on record against your property? Is it located in a flood-prone area?

14 Home-Buying Tips :

  1. Do your research:  Know what homes are going for in your desired area.
  2. Most owners underprice their homes to create multiple-offer scenarios. So focus on the selling prices of homes in the area.
  3. View multiple homes and see what features your money can buy.
  4. Focus on your timing: it may get to the point that you need to make a “bully” offer: be vigilant in checking the MLS listings and react quickly. You might be lucky to land a quick sale.
  5. When a home comes on the market, make an appointment to see it immediately.
  6. Create a checklist of your wants and desires for home features. It could save a lot of stress and guess work if the home you see isn’t right for you.
  7. The bully offer can work to your advantage as the seller’s first offer – they may not want to wait for other offers, especially if yours is a solid one and one not worth losing.
  8. If you’re at work and can’t see a property immediately,  perhaps your agent can conduct a virtual showing for you.
  9. Make an offer with no conditions. Unconditional offers are competitive against other buyers.
  10. Get pre-approved financing.
  11. If you need to conduct a home inspection, have an inspector on standby because time is of the essence.
  12. If you’re frustrated, re-evaluate your options. You might have to re-think your preferred home’s size, location, amenities or price. And revisit your budget.
  13. Don’t shop at the top of your home-buying budget. Your bank lender may appraise the home’s value below your purchase price. Banks will only lend you 80% of the home’s appraised amount.
  14. Don’t panic or give up. Persistence will eventually pay off…although it may take a while.

8 More Tips For New Home Buyers …

  1. Consider Your Lifestyle – Are you a city dweller, or would you prefer a quieter suburb? Do you have or are you planning to have kids? Where would you like them to attend school? Would you like a pre-wired “smart” home with a gourmet kitchen, or something more rustic? Freehold? Condominium? Consider construction timelines and warranty coverage, which differ in each case.
  1. Affordability – Meet with a financial representative and a mortgage broker to see what you can comfortably afford. Contact the Canadian Bankers Association at www.cba.ca.
  1. Research Your Builder – Talk to neighbourhood homeowners in the locale in which you’re interested to gauge owner satisfaction. Look up the builder in the Ontario Builder Director to ensure their legitimacy, view their 10-year track record and discover if they’ve had any claims.
  1. Consult a Real Estate Lawyer  – Before you sign on the dotted line, have your Agreement of Purchase and Sale or Contract from A Custom Home reviewed by a qualified real estate lawyer. You can’t be too careful, especially considering the investment you’re making in your future.
  1. Prepare For Your Pre-Delivery Inspection (PDI) – This is where you will learn how to operate and maintain your new home and ensure everything listed in your purchase agreement has been honoured.
  1. Tarion Homes is a great place to go for warranty information and the process for getting warranty assistance.
  1. Complete your Statutory Warranty Forms on time just in case some items are either missing or not working properly.
  1. Home Maintenance: Find a guide that provides maintenance tips on how to look after your home throughout spring, summer, fall and winter.

Insuring Your New Home

A&A Insurance owner Harry Yashpal says when it comes to insuring your new home, some considerations will be weighed by potential insurers depending on the age of the building.

“When they insure a house, they ask such questions as, ‘how old is the roof? How old is the plumbing?’” Yashpal explains. “Is the plumbing copper or plastic? When was it last updated? How old is the furnace? “

Water tanks also fall into the same category, and if it’s located in a building that’s more than four decades old, an insurance provider might send an inspector to check out the roof, the plumbing and the other aforementioned fixtures before signing off on a policy.

“Older homes have galvanized plumbing,” Yashpal says “And the majority of companies do not insure them.”

Other Insurance Factors

When determining your premium, there are other factors the insurance providers consider: 

  1. Whether it’s a single-or-multiple-family dwelling, a rental property, a condominium or recreational property.
  2. The type of construction material used (brick, cement) as well as its age, size and location
  3. The land grading
  4. Fire protection, which might include a distance from a fire hydrant or fire station.
  5. A neighbourhood’s “loss experience,” which may include the local crime rate and number of fires that have occurred in the locale.
  6. The types of coverage, optional coverage and deductibles
  7. Your claims history and discount eligibility.

Also, worth considering are the types of home insurance,  including rebuilding costs should there be any serious damage or destruction in the future, as well as title insurance, which protects your ownership interest in your property from losses suffered due to unknown defects or other covered matters.

Call A&A Insurance to discuss home insurance options today…and happy house hunting!