Let’s say someone pays hundreds of thousands of dollars over asking on a house you’ve put a bid on.
Your reaction can be telling.
Do you throw up your hands, feeling defeated and dejected, and decide to give up? Or do you realize that’s got nothing at all to do with you, file it away as a crazy story, and continue your search?
There’s definitely an undercurrent of fear among buyers, says James Dwyer, Real Estate Agent at Engel & Völkers. It’s the fear of being priced out of certain neighbourhoods.
“Fear is never a good thing to be in the mix when you’re trying to buy a house,” he says.
It doesn’t help that the usual logic doesn’t seem to apply right now. Normally you can anticipate where prices will go, based on previous sales and research. What’s happening now, though, is that a buyer makes an offer on a house and they don’t win. Each house they look at is a bit more expensive than the last. Eventually they start to panic, thinking if I don’t buy this house right now I’m never going to be able to buy in this neighbourhood.
“When the next one comes up, they push all the chips in,” explains Dwyer, “That’s where we start to see some of this runaway pricing.”
“Fear is an incredible motivator and it’s a big factor in the market right now,” says the agent. “Buyers are hearing and reading all the same stories the rest of us read: a record-setting price for this house and that house. For some people, that can work them up a bit, get them on edge and worried. That’s when strategy goes out the window and it’s all in, all or nothing.”
Dwyer doesn’t want buyers to lose sight of the fact that it’s all about timing. You can still try to find efficiencies in the marketplace, even in the midst of all this madness.
“The one thing I do notice, regardless of whether we’re in a hot market or not, is that a buyer’s perception of things changes throughout the process of looking for a home. In most cases, people end up with a house that was not what they intended to buy,” he says. “It’s not a negative thing; it’s just that once you get looking at all of these different houses, you start to see things differently.”
You might end up in a completely different neighbourhood or buying a completely different type of housing. What’s important is re-thinking the process and expanding your parameters. Stay open to the possibilities.
“Try to block out the hysteria that’s happening within that marketplace. Try to forget that. Don’t worry about how many people you’re competing against,” says Dwyer.
The advice he gives his buyers? Base your decision on the numbers and put your best foot forward. The purchase has to make sense to you as a buyer first, so ignore the competition. You don’t want to overextend yourself and end up with buyer’s remorse. If you know going in that you’ll probably have to offer $40,000 or $50,000 over asking, accept that and be prepared for it.
Another effective strategy is to look at lower price points. Since you know you’ll be going into competition for a house, if you start off at a lower price point, having to come up in price and pay over asking won’t hurt as much. You’ll still be within your budget too.
If it’s the type of house you’re devoted to, try looking for the same kind of house just a little further out. “When someone wants to be downtown and have a certain type of house, well, that’s a certain price point,” says Dwyer, “but you can find that house elsewhere in Halifax at a lower price point. Just like any city, the most expensive real estate is going to be in the core.”
Being on edge and nervous doesn’t help. While there’s a normal ebb and flow to the usual house hunting process and any buyer can have periods where they feel defeated and unmotivated, it’s usually just a sign that it’s time to change course.
Don’t get hung up on thinking this will be the only house you’ll ever buy. “Maybe the house you want to buy you can’t afford right now. Why not buy something cheaper, live in it for a couple years, build that equity, pay off that debt a little bit, re-sell it and use that profit to get the house you really want,” he says. “The whole process involves some deeper thinking now.”
The one thing about real estate is that it doesn’t change in real time, explains the agent. Nothing happens overnight. There might be a change in legislation or from the Bank of Canada, but it takes time to have an effect on the market. It’s Dwyer’s job to make sure his clients aren’t buying at the top of a spike, when buying may not be ideal.
“Just because somebody is willing to pay $250,000 over asking does not make it a good buy. If someone is willing to do that, let them. That’s not your problem or concern; that’s not your mistake to make,” he says. “We accept the fact that it’s a hot market and that we’re going into competition, but when you see some of the shocking prices houses are selling for, those are outliers.”
FOMO (fear of missing out) is another fear motivator. He’s seeing buyers who really feel the push to just buy something. He would rather see them get on the property ladder without over-extending themselves, even it means buying a mini home or condo apartment instead of a detached bungalow. “The quicker you get in, the faster your equity grows. Just get into the game and start reaping the benefits,” he says.
His motto with buyers is patience and persistence. As new listings come up, he suggests viewing everything. Even if the house is just a maybe, it will help frame up the really good houses you’ll see later on and help with your decision-making process.
“Yes, we have ridiculously low inventory but we’ve got a lot of listings that come up, they just sell quick. There’s still lots of property coming on, it just gets all gobbled up. As long as new stuff is coming on the market and you’re viewing it, it’ll happen,” he says.
“Don’t get too excited or overworked, too emotionally involved or attached to a home. Treat it for what it is—it’s a business transaction, first and foremost.”
For more information, visit James Dwyer at Engel & Völkers or call 902-209-6291.