As we can see in the April market numbers (see The Market Now section above and full data in the Monthly Stats section below), the Toronto area housing market is losing momentum. Regular readers of my reports will recall that I noted in my March 2022 report that we at our brokerage firm, Realosophy Realty, were seeing very early signs of a slowdown in the Toronto real estate market locally, before it showed in the data.
This shift in the market has led many consumers to ask me whether they should continue with their home buying plan before selling their current home or change their approach.
Sudden changes in the real estate market are a major concern for consumers (read more in the “Why are Toronto house prices falling so fast?” section).
It’s a particularly challenging time for real estate professionals advising clients because even if we can see early signs of a slowdown, we can’t be sure what will come next. The approach I have always taken and trained my team is to follow the market very carefully and keep up with it, discuss the changing pros and cons of different approaches to help our customers decide, which approach works in their particular circumstances.
When we first started advising on a slowdown a few months ago, we had a number of clients who decided to buy a home first because they knew they might be selling in a slowing market because the first sale was out personal reasons wasn’t a practical option or because they didn’t want to give up buying a very unique home.
Given the more difficult nature of this approach, I think it would be helpful to share how we made sure we were able to help all of these clients successfully sell their home after they bought it.
Get the correct order of your steps
Preparing a home for sale takes time – between decluttering, cleaning, making minor improvements and fixing imperfections, it can take weeks to get a home ready for sale. But you can’t waste time selling after you’ve bought it, as you may be risking selling in an even slower market.
For this reason, we advise our customers who are still considering a purchase to prepare their house for sale immediately while they are still looking for their next home. With this approach, we are often able to list their current home for sale within a week or two of purchase.
We also focus on helping our clients negotiate a longer closing date for the home they are buying, typically at least ninety days.
Understand your current market
Before you put your home up for sale, your realtor needs to give you a very good breakdown of the market dynamics in your particular neighborhood. While I’m breaking down market trends in this report to see what’s happening to different segments (homes vs. condos) and communities and regions in the Toronto area, we need to dig even deeper when our clients are selling.
Non-professionals often underestimate how differently each neighborhood (and sometimes even micro-areas within) can behave, with some areas with fewer homes for sale remaining relatively hotter than those with rapidly increasing inventories.
As we carefully track months of data by neighborhood (you can view this data at movesmartly.com), we’re also getting much more detailed. It is critical for us to speak to other agents with similar homes for sale in the same neighborhood and to know how many showings and listings those homes are getting and what those agents are experiencing.
Most agents don’t do this kind of homework. Instead, many rely on just looking at the list information. When they see a similar home nearby recently sold for $150,000 over the asking price, they assume the market is still very busy and advise their clients to take the same approach – a list of offer a low price to attract many buyers with offers for a set night.
But often the real story doesn’t show up on paper. Call the agent who sold the home to ask for more than one and you may find that they had very few showings and were lucky to get an offer on their offer night.
This type of information helps us develop a more resilient strategy for pricing and marketing your home, taking into account what might happen if the conditions you expect do not materialize.
Follow a more nuanced strategy
Before you go to the market to sell, you need to decide if you want to use a common pricing strategy common in hot markets – listing at a low price to attract as many buyers as possible who will compete to get a price achieve well above your listing price – or with the strategy of listing your home for what it’s worth and accepting offers at any time.
Each approach has advantages and disadvantages – deciding which strategy is right for you depends on the current market conditions in your region, but also on your personal circumstances. Your marketing and pricing strategy needs to be very different if you only have three weeks to sell your home instead of two months. With a two-month time frame, you can be a little more patient, list your home at the high end of its value range, and adjust the price if you’re not getting the buyer interest and traffic you want. When you only have three weeks to sell, it’s harder to use this type of wait and re-evaluation strategy.
Do you have realistic price expectations?
If you list your home for sale today, it may be unrealistic to assume that you will fetch the same price at which similar homes sold a few months ago in February. I say “may” because it depends on the type and location of the house. Downtown Toronto homes and most condos have yet to see major price pressures. Many low-rise suburban homes, on the other hand, have seen price falls (see the Data Dive section below), which means your price expectations must match the location and segment of your particular market.
If a homeowner decides to sell their home at a significant discount, that doesn’t mean you have to follow them and accept such a low sale price – a comparable sale doesn’t make a market.
You must base your price expectations on all recent comparable sales, ideally homes that have sold in the last two to three weeks.
In a normal balanced market, it’s common to use comparable sales of houses that were sold 3 to 4 months ago, but in a slowing market where prices are changing rapidly, you need to use more recent sales.
The downside to realistic asking price is not to get too desperate. Many of the sellers we’ve recently helped sell their home after buying it found that the first offer they received for their home was below what they wanted – and below what they ended up buying their home for sold. When a market starts to change, it’s common for many buyers to start testing sellers to see how desperate they are, and we see that on the ground. Some inexperienced realtors may urge their clients to take these low-ball offers if they’re also panicking (see “Why Are Toronto House Prices Falling So Fast?” again).