Home buyers might assume there's no need to work with a REALTOR® when purchasing a pre-construction build. After all, the builders and developers have on-site representatives promising to take care of all the paperwork, right? 

Not so fast. There are a number of advantages to working with someone who has your best interests in mind. Here's what you need to know if you're thinking about buying a brand-new build.

A REALTOR® makes the sales process less overwhelming

GIF of a man saying: "Calm down, beathe."Via Giphy

Buying a new build can be a lot more complicated than purchasing a resale. You'll benefit from working with a local expert who knows the project's neighbourhood, target audience, materials used and sales data. Enhance your search for homes by saving your search and getting notifications from REALTOR.ca favourites. Most importantly, they'll know which builders are most reputable for delivering on time. A REALTOR® can also offer information on what is the best time to buy—pre-construction, mid-construction or after the building is completed—since they might have intel on upcoming promotions. For example, builders may be a free parking spot during pre-construction or they may lower the purchase price when the building is unloading the last few units.

A REALTOR® can negotiate on your behalf

GIF of a woman in a store saying: "I'l give you a dollar for all of this"Via Giphy

Sure, you can simply trust a sales representative to haggle with the builder, but that may not get you the best deal or added perks, like free upgrades or new appliances. Understanding the fine print in a purchase contract is not for the faint of heart. A real estate professional can point out the confusing clauses you're better off negotiating on. 

You'll get the low-down on the up-sells

GIF of a man signalling to another man to not do/go for somethingVia Giphy

Immaculately designed model homes offer all the bells and whistles, tempting buyers into adding all sorts of extras onto the standard price. Sometimes, these upgrades aren't worth it. Your REALTOR® can help you decide what's worth doing and what can wait.

You won't fall for sales pitches that seem too good to be true

GIF of a man in a suit asking: "Are you sure?"Via Giphy

Buyers are led to believe if they don't use an agent, the builder will subtract the price of a REALTOR®'s potential commission from the purchase price. But since the seller (i.e. the builder) pays your agent's commission, it only makes sense to insist on having one. Builders are reluctant to reduce prices because those discounts are available for other buyers to see. 

A REALTOR® will provide guidance and support throughout the transaction

GIF on a girl in a crowd cheering someone onVia Giphy

When it comes to pre-construction, home buyers must navigate multiple steps and interact with several people before closing. In addition to making decisions around design, buyers must also make technical choices about electrical work or construction add-ons during the build. In addition, some buyers will be dealing with loan officers, appraisers, notaries and home inspectors. Having a trusted REALTOR® means you can access their vast network to find the best professionals.

Bottom line? The builder's rep has the builder's goals in mind, while your own agent is a valuable resource with just one person to satisfy: You.

a illustrated quiz about whether of not you should use a REALTOR when buying pre-construction
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Sales Commentary


February sales as reported by The Toronto Real Estate Board were disappointing.  At just over 5,000 units, that was 2.4% lower than February of last year. The uptick from January was 26%, versus a monthly increase of 29% from 2018 which was supposed to be the bottom of the market. Granted bad weather had an impact but this was not the start that most people were expecting.

Lower sales for most markets usually mean that prices will decline as well. But, that is not necessarily true for real estate. Owners have two choices when the market slows: reduce the price or take the property off the market. They only choose the first option when they are forced to sell. Currently, mortgages in arrears in Ontario lent by the 9 banks are at a record low. The second area to look at is the buildup of listings if sales are soft. For February, ‘new’ listings for the month were 6.2% lower than for February of last year and ‘active’ listings at the end of the month were .6% lower than at the same time last year. 

Sales in the overall condo apartment market were down by 5.7% in February versus February of last year. The Downtown and Humber Bay markets are underperforming the overall condo market. Sales are down 9% over February of last year. At the same time, ‘new’ listings are up 2% and ‘active’ listings are 9% higher. The explanation is twofold. First, this market outperformed the overall market in the first six months of last year and prices increased by over 10%. Secondly, the entry point in the 416 is now $500,000 which discourages many buyers and most condos are priced much higher than that. Still, any condo priced under $600,000 will attract multiple offers. We have prepared a graph of condo sales by price range for February of 2019 versus 2018. While total condo sales are down, all of the decrease is in condos sold under $500,000.


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GTA Condo Apartment Sales by Price

This graph plots condo sales numbers by price range for February of 2019 versus 2018. While total condo sales are down, all of the decrease is in condos sold under $500,000.This graph plots condo sales numbers by price range for February of 2019 versus 2018. While total condo sales are down, all of the decrease is in condos sold under $500,000.

Rental Commentary

Downtown condo rental activity was down 13% from January. This is not unexpected as January is the start of the business year and the school half year. Still rental volumes were 5% higher than February of last year. It does appear that rental increases for vacant condos has started to level off. We compare rental rates for February of 2019 to February of 2018 in the Graph below. 

Many condo investors decided to rent their units out because of the jump in rents in 2018, but as rent controls impact investors when tenants stay, we believe we will start to see more units for sale. We would warn investors selling their unit that many buyers ask for ‘vacant possession’. If the buyer does not move in to occupy the unit, but instead intends to rent it out again, the seller will be liable for any fines and penalties under new legislation. How you protect yourself is something that you need to talk to an agent with condo expertise.

Downtown Rental Rates

This graph compares the rental prices of downtown condos from February of this year to February 2018.

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The big or new story with this market is the Shrinking sales numbers - lower sales have been recorded every month since March. 

Starting  in the first two weeks of April, sales on TREB averaged 435 per day. The last half of April the daily number was 345. In May we waveraged 329 sales per day and with the mid-month report for June, we ae at 214 sales per day. 

Historically, May and June are the biggest sales months of the year. For 2017, our biggest month has been March.

 

So why have sales Dropped? It began with prices skyrocketing by 30% att he start of the year. Buyer couldn't wait to throw mony at average properties because there was little to choose from. Everyone knew this price explosion would not last long. It was just a matter of time, and that time came at the end of March and the first week of April. 

 

Governments and media kept claiming a major price correction was coming. At the same time, we had no listing inventory. Today listing inventory is normal. In Today's market, seller are still asking for April prices and buyers want a 20% price reduction This expectations gaap produced significantly lower sales, 

Which side will cave first?

 

On the seller Side, we see more cancellations with plans to come back next year. (Sellers don't have to sell now unless they get their price - mortgage arrears are at an all time low) Buyers are waiting for a major correction - it will not come and they will be back in the market in a matter of months. The long-term growth fundamentals for Toronto tell us that. 

 

Cetain market areas and property types are still selling well. These are prime properties where buyers are looking long term and are confortable in paying today's prices. One area of strength has been the downtown condo market. In May sales on TREB were down 20% while downtown condo sales were only 3% lower than the same month last year. 

In Humber Bay Shores, condo sales this year in May were the same as last year. 

 

Our advice to Buyers: Use the market pause to spend more time to find and buy the perfect property for you. For Sellers:  take ta little less to sell now or be prepared to wait until next year. 


From Jaime Johnston Broker of Record

Owner Remax Condos Plus 

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