In the Toronto region, 38 per cent would consider going 10- to 20 per cent over budget to get a house.
An RBC report called affordability "a growing source of concern," particularly in the detached home category. (ANDREW FRANCIS WALLACE / TORONTO STAR)
How much financial comfort are home buyers willing to risk to win a bidding war?
In the Toronto region’s take-no-prisoners real estate market, more than half of consumers said they would consider going up to 10 per cent over their budget — as much as hundreds of thousands of dollars more — to emerge victorious.
A poll for the Real Estate Council of Ontario (RECO) found that 57 per cent of Toronto-area buyers would exceed their set maximum, compared to only 41 per cent province-wide.
Thirty-eight per cent of respondents said they would consider going up to 20 per cent over budget to get a house. That is particularly concerning, given that the average price of a single-family, detached home in Toronto is $1.2 million, said Kelvin Kucey, RECO deputy registrar.
As part of its consumer protection mandate, the agency in charge of regulating realtors is launching an awareness campaign called, Be Home Smart.
It is setting up booths at 13 Ontario events, including Canada’s Bridal Show in Toronto this weekend, where consumers can take a quiz to evaluate their real estate savvy. The idea is to inform and caution people about the risks of letting their hearts lead when it comes to the housing market.
The campaign launches as RBC’s Canadian Housing Health Check showed Toronto area home affordability is in the red zone. The bank’s Thursday report called affordability “a growing source of concern,” particularly in the detached home category.
Kucey said he was particularly struck by a poll by the Real Estate Council of Ontario that found almost one-third of Toronto-area respondents would be willing to submit an offer without knowing their financing was secure.
The online Angus Reid Forum survey of 505 Ontarians who bought or sold a home within the past five years is considered accurate within 4.3 per cent, 19 times out of 20. It took place Aug. 25-29.
In the Toronto region seller’s market, the push to compete means buyers are dropping conditions such as financing or home inspections.
“They’re getting caught up in the bidding wars and they’re not even sure they have that 20 per cent of that budget over the $1.2 million available but they’re entering into a legally binding contract,” he said.
The poll found first-time millennial buyers, the cohort aged 34-and-under, are most vulnerable to buyer’s remorse. If they’re buying a new condo, there is a 10-day cooling off period in which a consumer can withdraw from the purchase, said Kucey.
“But if you’re buying a re-sale home, or you’re buying anything other than that type of new construction, you’re legally bound,” he said.
“We see buyers expecting to go over budget in as many as 80 per cent of cases,” said Tariq Gidamy, founder of online brokerage, TheRedPin.
“We handle this by setting clients expectations around affordability early on, and making sure their bank pre-qualification is iron clad. Setting financial tolerance early on is key, and stops both disappointment on bidding day as well as panic calls to mum and dad asking for extra cash,” he said.
Teaching clients the difference between marketing or list price and market value, is a key piece of education when realtors take on a buyer, said Tim Syrianos, owner of Re/MAX Ultimate in Toronto, a brokerage with 260 agents.
They also make sure buyers are aware of the real estate and carrying costs associated with their purchase.
Buyers do waive financing conditions. But, he said, “typically they’ve been waived after financial advice has been received.
“I really don’t believe they’ve been waived just because of a multiple offer. I believe they’ve been waived because they feel confident in being able to afford a property at that price.”
Meantime, Statistics Canada’s new housing price index showed prices in new homes have risen nationally for 16 consecutive months, with a 0.4 per cent increase in July over June.
The combined region of Toronto and Oshawa was the biggest driver with a 7.0 per cent increase over the 12-month period.
Files from Canadian Press
The cost of winning a bidding war
Toronto-area consumers who would consider going up to 10 per cent over budget to win a home, compared to 41% of Ontarians.
Ontario consumers who would consider going 20% over their planned budget to outbid the competition on a home.
Toronto-area buyers would go 10 to 20 per cent over budget, compared to 27% province-wide.
Ontario consumers who said emotion influenced their home purchase, including 42% of millennials and 32% of those 35 and older.
Home sellers who said their decisions were influenced by emotions
Article Written by: TESS KALINOWSKI