When it comes to the average resale price of a home in Toronto, it’s increasingly difficult to ignore the overwhelming evidence to suggest that home prices are escalating rapidly in the nation’s busiest and most populated metropolis. The real estate market in the GTA has been big news as of late, making headlines in February, when the average resale price of a detached home in Toronto eclipsed the $1 million mark, and again in March, when house prices overall went up an additional 10% from the previous year. Many analysts are skeptical, arguing that such a trend has no foreseeable signs of slowing down, attributing these price gains to increased demand and competition in the market, with many new potential homebuyers entering the market that has a depleted housing supply. The only units in the GTA that are abundant are condominiums, but if you are looking for a home, many have to prepare for the bidding war that will inevitably ensue. It’s these bidding wars that many believe, is what’s causing prices to balloon at an accelerated rate.
The new trend now, especially in the luxury housing market, has been to completely embrace the bidding war, and transform the sale of the home into an auction. If such a strategy is successful at selling homes that cost millions of dollars, it may be only a matter of time before such a strategy is adopted by the average home seller. It does have some benefits, pitting wannabe homeowners directly with one another, in a forum that is bound to see prices go well above asking. Plus, the seller gets the peace of mind of knowing that his or her home will definitely be sold.
In preparation for this possible future, we thought it might be prudent to offer a few tips on how to purchase a home at auction.
The first, and arguably most important tip, is to do your homework. You want to know every last detail of the home you are thinking of purchasing, and if possible, have someone conduct a thorough assessment of the home to point out any areas that may need improvement or immediate renovation. You also want to be familiarized with the ins and outs of the auction process. Contact the auctioneer or the attorney handling the home, find out how much money you’ll need to have as a down payment. Also, some auction companies will require you to bring a certified cheque in the amount of a few thousand dollars, in order for you to demonstrate legitimate intent.
In the same vein, you also want to do some research on the area the home you’re considering buying is located. Find out how much other homes in the area have sold for, which can be done using websites like Zoocasa and Zillow, and determine what a fair selling price for the home might be, and gauge how much you’re willing to spend from there.
Another useful tip, once the auction process has begun, is to keenly observe the other bidders. It is sometimes very easy to get lost in the theatrics of the event, and to get sucked in to the bidding after the price has gone far beyond what you expected to spend, simply for the thrill of participating, and the chance of winning.