What a difference a few months has made. In April, before the Ontario government introduced its Fair Housing Plan, buyers’ hysteria had clearly taken hold in Toronto. Bidding wars had become commonplace for properties across the city, including Toronto townhouses and Toronto condos, meaning homes were selling for hundreds of thousands of dollars above asking price in many cases. The belief seemed to be that it was better to get into the market then, than six months later when prices may have doubled. It’s safe to say that sentiment isn’t so apparent now, in the dog days of summer.
The Ontario Fair Housing Plan, coupled with a rate hike by the Bank of Canada, suddenly means we find ourselves in a buyer’s market for the first time in over a decade. Many realtors probably forget what one even looks like, but here we are, with latest data from the Toronto Real Estate Board revealing that home sales were down 40.4 per cent on a year-over-year basis in July.
INFOGRAPHIC: July GTA Sales Plunge 40%
Buyers Changing Their Strategy
For those at the buying end of the equation, it’s welcome news after months and months of double digit inflation. Home prices remain high of course, but it now appears that a degree of normalcy has returned to Toronto’s housing market.
With properties staying on the market longer, and more new listings sprouting up, buyers now have more leverage. It means they are more likely to attach certain conditions to a sale agreement, something that had become pretty rare in the GTA up until this summer.
What is a Home-Sale Condition?
A home-sale condition means the buyer must first sell their own property before completing the purchase of another. As Chantel Crisp, agent at Zoocasa explains, it’s a regular request in other parts of the province, but one that would not have been countenanced in Toronto over the last number of years.
“It used to be a pretty common practise, and it still is pretty common in cottage country and other rural areas in Ontario,” she says. “In a seller’s market it would be pretty rare to see a condition like that attached to an offer. Now that we are in a buyer’s market, sellers are not entirely confident that they can get their house sold at a price they require in order to buy their next home.”
Usually the timeframe involved for a home-sale condition is between 30 and 90 days, after which the deal will die on the vine if the buyer doesn’t have the required financing. Including such a proviso also protects the buyer in that any deposit will be paid back if the deal doesn’t go through because they couldn’t first sell their home.
It’s certainly not something a seller six months ago would have had to consider, but as Crisp explains about the current lay of the land: “behaviour changes when the market changes.”
Sellers Can Also Use Escape Clause
That shift in sentiment means that properties that sold in a week in March, now take a month or longer. A flood of new listings after the Fair Housing Plan indicated that many sellers believed the top of the market had been breached. Buyers, in contrast, have adopted a wait-and-see approach. That isn’t to suggest that sellers don’t have conditions of their own regarding a deal for their protection, as Crisp explains.
“When there’s a condition for selling a home with the buyer, the seller can also install an escape clause,” she says. “This means that if another buyer comes in with another offer, then they have the right to listen to that offer. They can then give 24 hours to firm up your offer, and if you don’t, they can accept the other offer.”
