Palmerston home buyer disparaged for paying $600,000 over asking
Agent says naysayers fail to factor in the emotional draw a property can have
In early 2018, the Toronto-area real estate market has become a far more genteel place than it was at this time last year. Sellers no longer have an iron grip on desperate buyers and negotiations between the two sides are common.
But that doesn't mean that some eye-popping sales aren't still happening. Competition is still fierce for singular properties.
One sale last week was labelled a "blood bath" by some market watchers, who were merciless in their deprecation of a buyer who paid $600,000 above the asking price for 822 Palmerston Ave. in the city's west end.
Leslie Battle of Royal LePage Real Estate Services Ltd., who represented the buyer, finds the comments vexing. "Everybody has different motivations and it's not always money," she says.
The detached, two-storey house near Bathurst and Dupont streets was listed with an asking price of $1.822-million. After a week of showings and buzzing open houses that included a food truck parked at the curb, 13 bidders put offers on the table.
When the top three were invited back for a second round. Ms. Battle asked her client what she would like to do. "I want the property – go do what it takes," the buyer told her. At the end of the night, the sellers accepted her offer for $2.417-million.
What the naysayers fail to factor in, Ms. Battle says, is the huge emotional draw of a particular property.
In this case, the buyer is downsizing and wanted to return to the Seaton Village neighbourhood where she raised her kids and still has friends. She also loved the home's interior, which had been renovated without removing all of the charm and quirkiness, Ms. Battle says.
She says they arrived at the final price by looking at such factors as the number of bidders and the current low inventory. The only other nearby detached that sold in the past year went for more than $2.7-million.
The house, with three-plus-two bedrooms, includes a separate suite above the double garage. That suite could provide the potential for rental income if the owner wants to apply for a permit in the future, she points out. "That's often the case with buyers, they're buying a little bit of potential."
Ms. Battle adds that since her client had sold another house, she has much more flexibility in deciding how much to pay than someone relying on debt. She says it's much tougher for first-time buyers or others without a lot of equity.
One aspect that seemed to bring out snark in the comments was the food truck serving up mac and cheese and other comfort foods. But Ms. Battle says that attraction did nothing to sway her client. "I don't care if she has five food trucks and Santa on the roof. We can't pull offers out of thin air."
Alex Brott of Sage Real Estate Ltd. represented the sellers. The food truck was her idea. She says the Palmerston house was the ideal location because she could have the truck parked in front of the driveway without taking away parking from neighbours who park on the street.
"It was a ton of fun," she says. "I think it made the people who came back for their second visit or their third visit stay a bit."
Ms. Brott says she set the asking price for 822 Palmerston slightly below her estimate for market value. She wanted to draw a large number of house hunters without making the list price insanely low.
"The market will dictate what's it's worth," she says. "What I didn't know was that it was everyone's favourite house in the neighbourhood."
Ms. Brott says there were some low-ball bids in the first round and the others were spread across a range, but the top two bids were very close at the end. "The person who won the deal won by a painfully small margin."
In addition to practical matters such as the parking, Ms. Brott says potential buyers appreciated the character in such elements as the arches and curves of the plaster walls. A wide front porch faces Vermont Square Park across the street. "The emotion that that house brought out was fascinating. It had such a warm vibe. It was unusual. But not the unusual you want to back away from."
Many agents are anxious to see if listings will become more plentiful after the Easter and Passover holidays. Ms. Brott says demand is high – particularly among move-up buyers.
Listings are relatively tight, however, and sales in the Greater Toronto Area in February plummeted 35 per cent from the same month last year. Many are predicting that March sales will also come in far below March of 2017.
David Madani, senior Canada economist at Capital Economics, warns that he sees signs of a national house price correction. He believes the country may face a debt-driven deleveraging process this year. He calculates that the seasonally adjusted household debt-to-income ratio stood at 170 per cent in the fourth quarter, down from what was probably the peak at 170.2 in the second quarter of 2017.
The economist says that heavily-indebted households found out last year that a modest rise in interest rates can lead to significantly higher debt servicing costs.
His bigger concern is that these large debts may have been used to finance speculation in real estate and bid home values up to what he considers ridiculously high levels.
"Although household assets have risen in value faster than debt, they are highly variable, whereas debts are fixed," he points out.
Ms. Battle says the current fervour in downtown Toronto neighbourhoods is partly driven by the lack of listings. Sales in areas farther out of the core are moving more slowly. But while year-over-year February sales fell in the GTA, early 2017 was a phenomenon, she says. "Our previous February was off the charts. That was an anomaly."
Ms. Battle has participated in six offers in the past 10 days, in price segments ranging from $600,000 to $2.4-million. All six have sold in competition, she says. It's particularly difficult for people trying to enter the market.
She senses that a lot of sellers are hesitant to list because they are waiting to see how this market shakes out.
As such, market conditions remain difficult for buyers who want to get into prime pockets, she says. "As far as first-time buyers go, it's a miracle they hang in sometimes."