09 Dec 2016

The 5 Biggest Risks You Will Face in the Toronto Real Estate Market in 2016

Did you just start your real estate search? A quick MLS listing search will show you that the Toronto real estate market is unlike any other in Canada. Houses for sale in Toronto are snapped up quickly in hyper-competitive bidding wars. So, when you’re trying to find a real estate agent in Toronto, you need to be picky.

You also need someone proven and experienced, so you can trust them to guide you through this emotional rollercoaster.

With that in mind, here are 5 risks you will face in the Toronto real estate market. Be sure to ask your would-be Realtor how they plan on helping you deal with these risks.

Real Estate Market

1. First-Time-Buyers May Be Frozen Out By the New Mortgage Rules

The government recently put new sanctions in place to keep Canadians from buying more house than they can afford. As of October 2016, all insured mortgage applications have to pass a “stress test.” This test gauges your ability to make mortgage payments on time at a higher interest rate.

Many have predicted this is going to be particularly tough on first-time-buyers in Toronto. In the past, many people buying their first home would expect to “just get by” for the first few years after buying a home, as they build up their financial footing. Some would even brace to be strategically “house poor” for a few years while they work towards a higher salary or better job. Maybe your partner is just finishing up their education, and you expect them to start contributing more financially in a year or two.

It’s going to be more difficult to make that case with this stress test in place for all insured mortgages. It’s there to keep people from taking on more than they can realistically budget for.

2. The Toronto Real Estate Bubble Looms Large in People’s Minds

Here’s the good news: The new rules were put in place with this much-feared bubble in mind.

However, seeing a dramatic market drop in Vancouver in October was certainly enough to make any Torontonian’s heart skip a beat. But this drop had nothing to do with Toronto’s market, and was not a sign of something bigger on the horizon.

In fact, most experts softened their bubble predictions after the government put new rules in place to protect the market. This includes the stress test mentioned above, as well as a new 15% tax for foreign investors looking to buy in Canada. So the drop in Vancouver was exactly what the government was hoping to see when they put these rules in place. It’s a sign that people are buying responsibly.

3. A Pre-construction Condo Can Be a Gamble

You might get sick of looking for houses for sale in Toronto, and grow tired of your daily MLS listing search. So you snap up a pre-construction condo, and tell yourself you’re only going to live at home or rent an apartment for 1 more year while it’s being built. A year and a half at the most. Right?

It doesn’t always work out that way. In fact, pre-construction condos are a risky proposition. It could be something small like a toilet that runs, or a light switch that doesn’t work. But, you also hear horror stories of people being promised an amazing view, only to learn that their new condo looks right into a building across the street. Or, some don’t quite get the layout or square footage they were promised.

The problem is, obviously, you can’t really see what you’re buying. You’re taking a lot on faith. You’re buying with the hope that this will be ready on time, and you will get what you were promised.

There’s also the issue of having to pay rent, on top of having to pay occupancy fees while your condo is being built

How can you avoid this? Your best bet is to buy from a reputable builder/ developer, who has a history of delivering on time. Do your homework online. If a developer has left a trail of unhappy owners, you shouldn’t have to search too hard to find them online.

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4. Competitive Markets May Lead to Unethical Behavior

Desperation leads to people wanting to bend or break the rules. Two of the most common shady practices you may have heard of include:

An agent representing both the buyer and the seller for the same property
An agent representing more than one competing buyer in the same transaction

These things are actually allowed by law, but only if they are clearly communicated and agreed to, in writing, by all parties. But this isn’t always the case.

If you’re trying to find a Realtor in Toronto, and an agent tells you they can block other offers from getting to the seller, you should probably walk away. They’re likely engaged in shady real estate practices and they could drag you down with them.

Of course, Realtors aren’t the only ones willing to do whatever it takes. Some buyers will not only be OK with unethical behavior, they may actually encourage it. In fact, they might offer to pay “under the table” cash incentives for anything that will get them the house they want.

5. It’s Easy to Mistake a Fixer-Upper For a Money Pit

People looking for a home in the Toronto Real Estate Market may also be tempted to grab something with a lower price tag that needs a bit of TLC.

This is particularly true when you’ve been on the losing end of a few bidding wars in a row. Your frustration and desperation will grow with each house that you don’t get. Suddenly, investing $10,000 or so in the home doesn’t seem so bad.

But unless you get a home inspection, you won’t really know exactly what you’re about to sign up for. Your home may need a skilled contractor and a team of labourers, not a DIY expert.

So when you’re trying to find a realtor in Toronto, feel free to ask your candidates about these risks. Your agent should be able to directly address your concerns, and put your mind at ease right away. If they can’t, they’r=e probably not the right Realtor for you.

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