If you’re looking to buy or sell your home in the upcoming months, you’ve probably heard the phrase “buyer’s market”. But what exactly is a buyer’s market and how can it impact your home purchase or sale?
A buyer’s market occurs when there are more houses on the market for sale than there are potential buyers. This surplus gives buyers several advantages when looking for their dream home, including financial savings.
A buyer not only has more options in homes for sale but they also have more negotiation power as sellers are pushed to accept lower offers or reduce the asking price for a sale. A buyer’s market can also see quicker closing dates and incentives from builders and sellers.
Toronto Is Now the Closest It Has Been to a “Buyer’s Market” Since January
While the Toronto housing market has seen a slight decline since July 2023, the latest report by RBC Economics suggests that home prices are following suit. This is a significantly different take than the bank had in its August 2023 report wherein the prices gradually stagnated.
As of November 2023, RBC found that Ontario has had one of the quickest housing market declines across the country due in part to the high-interest rates. October 2023 was the fifth consecutive month for the number of home sales to drop, creating a buyer’s market.
According to the report, buyers successfully obtained price concessions from sellers in the past two months. The national home price index (HPI), a tool used to gauge the price of homes in a particular neighbourhood, also fell 0.8% in October. RBC expects this downtrend to continue in the upcoming months.
Common Mistakes When Buying a Home in a Buyer’s Market
In the current real estate market, it is easy for both first-time and veteran homebuyers to overlook and underestimate the costs and long-term implications associated with a buyer’s market. Below, we list some common mistakes homebuyers should be aware of before making an offer on a home and signing on the dotted line.
Failing to Research the Market
The real estate market is like a roller coaster, and what goes up will eventually come down. Make sure to do your due diligence and research the current housing market so that you can make an informed decision on what would be best for you. For instance, right now house prices are lower, but interest rates are sky-high. If you can’t manage a high monthly mortgage, buying now, even if it’s a buyer’s market, might not be the best idea.
Skipping Pre-Approval
As the majority of homebuyers require a mortgage, it is advisable to obtain a pre-approval mortgage before your house hunting begins. Too often, a buyer will stray from their initial budget by making an offer on a home that is above their financial means. Having a pre-approval can save you money, time, and heartache when you finally find your dream home.
Not Setting Clear Priorities
Sellers often try to sweeten the deal in a buyer’s market by upgrading the home with luxurious amenities and advanced technology. It’s easy to become mesmerized and forget about your must-have list versus your nice-to-have list. In all consultations with your realtor, be clear about your priority list to prevent homeowner’s regret after the sale.
Underestimating Total Costs
Far too often, when determining how much they can afford for a home, homebuyers only consider the purchase price, their downpayment, and mortgage amount. But there are other costs to buying a home, such as the land transfer tax, mortgage insurance, home insurance, title insurance, and/or legal costs. Rarely are homes “move-in ready” as advertised and you may also need to make some cosmetic changes—all of which will eat up your budget.
Skipping Home Inspections
A home inspection performed by an independent, qualified, and reputable professional can be one of the most important steps during the home-buying process. Having information at your fingertips about major repairs needed or structural issues with the home can prevent financial losses in the long run. Make sure the Agreement of Purchase and Sale includes an inspection clause with your initial offer.
Ignoring Future Resale Value
It may sound redundant but when looking for your next home, consider the potential for resale along the line. Life throws curve balls and buying a home today to make it your “forever home” may not pan out. For whatever reason, you might need to resell quicker than originally planned. Consider the purchase as an investment for future financial gain.
Rushing the Decision
Looking at homes can be an overwhelming experience filled with excitement, anticipation, and hope. Rushing the decision to purchase a particular home may cause you financial and emotional distress if every step is not approached methodically. Research the locations and view multiple properties to find the one right for you.
Not Seeking Professional Guidance
One of the biggest mistakes homeowners make, in any type of market, is failing to work with a professional real estate agent and real estate lawyer. A reputable agent will have the knowledge and information about the home, the property, and the local area. An experienced real estate lawyer can advise on your rights and responsibilities as a homebuyer while protecting your interests.
Not Factoring in Future Growth
While the home itself may be the key to your future, consider whether the location has potential for future growth. Is the neighbourhood dormant or is there an opportunity for increased values of nearby homes? Too many people focus on the present surroundings and do not account for long-term planning.
Talk to the Experts to Avoid Common Buyer’s Market Mistakes
Protect your investment with the experienced team at Zinati Kay – Real Estate Lawyers. We are a full-service real estate law firm with more than 25 years of helping buyers and sellers in the GTA. We have completed more than 25,000 successful transactions in both buyer and seller markets. Call us today at (416) 321-8766.