While policymakers are discussing what measures need to be taken to slow down out-of-control housing markets from the top down, the Real Estate Council of Ontario (RECO) is taking a different approach with their annual consumer campaign, which launches September 9th in Toronto.
The campaign, the Be Home Smart Tour, cautions home buyers of making rash decisions when it comes to competitive housing markets and comes after a RECO-commissioned poll was conducted.
“Because of the hot market and all of the issues that have been arising, we thought it would be helpful to do some polling to see how Ontarians were dealing with the challenge of this hot real estate market in what’s becoming more and more the norm for areas in the GTA and beyond, where there’s a lot of competitive bidding for available homes,” said Kelvin Kulcey, Deputy Registrar at RECO. “So we wanted to see what was going on in the minds of Ontarians when they were dealing with that.”
The polling results found that almost half of those polled would consider paying up to 10 per cent over their budget in order to buy a home and 31 per cent would consider offering 10 to 20 per cent more than their original offer to outbid the competition. In the Greater Toronto Area specifically, 57 per cent of respondents would consider offering up to 10 per cent over budget and 38 per cent would consider going over their budget by between 10 to 20 per cent.
“Our research findings make it clear that too many Ontarians may be struggling to keep a cool head in the hot and highly-competitive real estate markets,” said Joe Richer, Registrar of RECO, in a press release. “Buying or selling a home can be a rollercoaster of emotions. People tend to let their heart rule their heads, especially first-time buyers.”
Kulcey said that RECO was surprised by the findings of the poll, even with all of the attention that the Toronto market has been getting in recent months, and that it also reveals problems hiding behind the headlines.
“When you’re buying a million dollar home and you’re prepared to go 10 per cent over that, and half of the people who are buying are prepared to do that – or more than that in Toronto – that’s a bit of an eye-opener,” Kulcey said. “It’s almost as if they’re getting caught up in that challenge of wanting that house they want and other people also wanting the house. So they’re getting – certainly have the optics of getting – caught in the hype of the competitive sales market.” And, he adds, the collateral to that is the concern about financing. About 27 per cent of the buyers in the GTA and a little bit lower province-wide are making these offers without secured financing. “They’re overextending their budget, they’re spending more than they anticipated and they’re doing so with the risk of not being able to actually follow through on the deal.”
The Be Home Smart community outreach campaign extends into 2017. It will tour 13 locations across Ontario including London, Sudbury, Ottawa, and the GTA as a part of exhibits including home shows and new Canadian shows. The target audience is engaged/newly married couples, new parents, and downsizing boomers, and the interactive display booth includes a quiz on real estate knowledge, among other features that encourage participants to take advantage of the resources available in order to making smart and informed decisions when it comes to buying a home.
So what’s the overall takeaway from the Be Home Smart campaign?
“There’s a lot to think about, that it’s not just a simple transaction,” Kulcey said. “Really it’s [for buyers] to exercise caution in what they’re doing, make sure they understand exactly what they’re signing and ask questions, don’t be rushed into signing any kind of agreements. And always have a backup plan. If one deal falls through, don’t despair, have a backup plan.”
“Real estate transactions can happen at lightning speed, especially in markets where there is a shortage of listings. The best way to make quick decisions in the heat of the moment is to prepare in advance,” Mr. Richer said.
Kulcey adds that one of the most important preparatory steps to home buying is to be discerning when selecting a real estate agent. Find out upfront what their ideas and attitudes are when it comes to helping you buy a home so that you avoid the risk of feeling that your agent isn’t working in your best interest later on in the process. “We know that Ontarians are fairly savvy with real estate and the issues,” Kulcey said. “We want to be a resource for them if they have any questions.”
Since the Vancouver housing market seems as if it may be slowing down somewhat, all eyes are now focused on Toronto, where home prices keep rising. At the end of the day, buyers are responsible for where the market is headed next, and RECO is addressing those buyers, giving them resources to stay grounded when a bidding war gets out of control. Because while tactics such as bidding wars and bully offers have been commonplace in Toronto for years, Kulver says that Realtors in Kitchener-Waterloo, Brantford, and even Ottawa are saying that overall competitiveness and the delayed offer process are hot topics. And with such “pent-up” demand and limited inventory, there’s no expectation that the situation will end in the near future.
“There is an onus on people to take the time to educate themselves as to what they’re doing,” Kulver said. “From our perspective, the best way to maintain a stable and realistic real estate market is make sure that the consumers are all educated to the best of their abilities and that they have a lot of resources at their fingertips and they just need to access them to get some level of comfort.”
RECO regulates the real estate profession in Ontario and is part of Consumer Protection Ontario (CPO), an awareness program from Ontario’s Ministry of Government and Consumer Services. CPO helps Ontarians learn about the right questions to ask before making important purchasing decisions. For more information, visit www.reco.on.ca.
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