For those in the market to buy a home in 2021 -- or even as recently as January of this year -- the suggestion of including a condition in an offer was laughable.
With inventory of available homes so scarce, even run-of-the-mill properties received tens, if not hundreds, of showing requests and often as many offers. Homes selling for considerably more than list price -- often by hundreds of thousands, or even a million dollars -- became commonplace, including in formerly more affordable pockets throughout the Greater Toronto Area.
To suggest that an offer was contingent on financing or a home inspection would have rendered it dead in the water; successful buyers knew that in order to win a bidding war, they needed to pony up considerably more than the pack, with a cash deposit in hand, airtight financing -- and no strings attached.
It would appear, however, that the tides have started to turn. As an influx of new listings hit the market, and the possibility of higher borrowing costs became a promise, many sellers are now seeing far fewer offers than they would have previously -- and the buyers that do show interest are making demands.
Alan Carson, CEO of Carson Dunlop Home Inspections, says that following an industry-wide slump over the course of the pandemic (just 15% of buyers in the province were getting an inspection at the market’s peak, the Ontario Association of Home Inspectors told STOREYS) requests have skyrocketed in the last few weeks, as buyers increasingly want to look under the hood before committing.
“I was just looking over our numbers today, and in the first 10 days of March we’ve done about 60% of the number of inspections we did in all of February,” he says. “So we are seeing that, and we’re hearing it in people’s voices, in clients and real estate agents.”
“We have actually seen zero decline in the demand for home inspections -- people have always wanted them -- but we had been doing a ton of post-sale inspections, which is kind of heartbreaking, because people have already committed.”
The most recent data from the Canadian Real Estate Association confirms that, from a big-picture perspective, buyers are indeed facing less competition than they did in previous months. Nation-wide, there was a flood of newly-listed homes in February, a month-over-month increase of 23.7%, lowering the national sales-to-new-listings ratio (SNLR) to 75.3% from 89% in January. (According to CREA, an SNLR of between 40-60% indicates a balanced market, with below and above that threshold reflecting buyers’ and sellers’ market conditions, respectively.)
The Greater Toronto region enjoyed an even greater increase in supply, up 42.9%, lowering the local SNLR to 65.9% from 88.9%: a considerable dip in just one month.
Emma Pace, sales representative at Zoocasa Realty, says that while the condo market has remained hot, she’s certainly seeing this play out among freehold home types, particularly in 905 regions like Peel and Halton.
“If we look at it on a spectrum, [sellers] went from getting 15 offers, and nobody with conditions, to now, you’ll maybe get a couple of offers -- and if you don’t get any offers, the conditions start to come in after,” she says. “It’s definitely not like every offer out there is having conditions by any means, but I do think with the bulk of inventory, sellers are getting less offers than they would like to, and not all those offers at this point in time are going to be firm.”
“The First Real Opportunity for Buyers”
In Pace's opinion, this slowdown marks the first real opportunity this year for buyers looking to get into the market on easier terms -- a stark contrast to those who bought just one month ago.
In fact, she says, it’s those January buyers who are likely fueling much of today’s softer conditions, as they’re now under intense pressure to sell their existing home to avoid defaulting on their upcoming firm contracts.
“The bulk of the people on the [sellers] market have already bought something else, and I think that’s the main motivation,” she says. “If you think about the timing, most of those people have gone under contract in the last 30 to 60 days. They probably bought at the absolute peak of the market with the expectation that, should the market continue on the same roll that we’d been on, there’d be no problem selling their house. But now, they’re in a position of, ‘I kind of need to do whatever I can to get this property sold, because I’ve got another contract coming and I need the money from this house.’”
She’s using this new leverage to give her buyer clients every advantage she says, noting that when they’re the only ones to make an offer, she’s sure to look into whether the sellers have recently made a purchase of their own. “If they’ve already got something else under contract, then we know they have higher motivation to work with us on certain items,” she says. “If they need a certain price to close, then maybe we can ask for a condition, there’s a little bit of a trade-off now.”
Sellers Must Put in the Effort
Overall, sellers these days are having to put in a bit more elbow grease to prepare their properties for sale, investing in staging, high-quality photography, and being as accommodating as possible with showings.
Another telling sign is a surging demand for pre-listing inspections, says Carson, as they currently account for 75% of his business.
“What that tells me is that the sellers are starting to see that buyers really want inspections, and to maximize their chance of having a good sale, quickly and for a good price, they need to be making the inspection available so people can make a sensible and informed decision, and that they’ll come to the table with better offers,” he says. “So, we’re seeing all of that movement, and it’s really been over the last month or two, than over the last six months.”
“Sellers didn’t have to invest in a home inspection at the beginning of the year; they could have just put it up and they still would have got a firm offer. You probably want to spend the $600 now if you want a firm offer, because buyers are not willing or as forgiving to let that go by the wayside.” says Pace.
“And now, it’s our job as agents to set the right expectations; if you set poor expectations with your clients at the beginning of the year, now we need to bring them back down to earth.”
In fact, she says, the biggest indicator the market has undergone a fundamental change is that listing agents are suddenly acting a whole lot nicer.
“The communication between agents is a very strong indicator of conditions in the market,” she says. “At the beginning of the year, you couldn’t get a listing agent to call you back even if you were going to bring them $100,000 over asking -- they were like, ‘Don’t even talk to me.’ Now, they ask, ‘Oh are you thinking of bringing something in? Is there anything I can do to help you? I’ll call you back’. When they have 25 people lining up, they’re not going to call you back.”