Anecdotes and Advice from a First Time Home Buyer Part 5 – The Search

by Mike Holman

My friend Christine has kindly agreed to write a series of posts on her experiences with buying a home for the first time which will be posted occasionally.
See Part 4 – What to Buy

Friends who have recently survived the house hunting experience have faced and lost bidding wars and have even come across “bully bids”. Bully bids are offers submitted early (instead of on the pre-arranged date) and way above the asking price. Thus, the search may not be an easy one and may take a while.

Part of our house search strategy involves educating ourselves about the factors which determine a house’s value. For that reason, we are also looking at properties outside our budget to look at how much more $50,000 or $100,000 buys. This exercise is also useful in considering our willingness to take on a fixer upper in a hot area. We are also considering taking on a tenant to be able to increase our budget.

So what does roughly half a million dollars buy you in Toronto? The answer is not much from what we have seen.

Open houses provide a fantastic opportunity to compare different neighbourhoods or to just scope out renovation ideas. With this in mind, we made open houses a regular part of our routine for a while. What was disconcerting is that open houses in the more popular areas tend to be very busy and attended by couples fitting our demographic. We are essentially competing with others just like us in terms of age and income – not a surprise perhaps, but a sobering realization of how many people we are up against.

Recognizing that our money would stretch farther if we left the downtown core a bit, my husband and I considered houses along Yonge Street between Eglinton and Lawrence, areas outside our dream locations but still along the subway line. In these “cheaper” areas relative to the Annex, our budget still only allows us to afford a semi-detached.

A semi at Yonge and Eglinton was well-priced at $549K, however proved tiny in its overall size and room proportions. Despite its uninteresting curb appeal, a semi at Eglinton and Mt. Pleasant listed at $619K was very intriguing with beautifully spacious rooms, 4 bathrooms and even a sauna. Its flat roof (potentially expensive and a worry with our winters) and steep staircases (rebuilding a staircase could involve costly structural alterations in the tens of thousands) ruled it out.

An elegant detached century home at Yonge and Eglinton seemed to offer good value with 3,000 square feet of living space and an asking price of $899,900. With well maintained original floors and stately wood detailing, it was still a fixer-upper with outdated kitchens and bathrooms, oil tank heating and some knob and tube wiring. It remained on the MLS for only a couple of weeks.

Some of the other listings that our agent sent were close to Avenue Road and the 401, a beautiful area, but too much of a hike from transit for non-drivers like us.

Downtown, at first glance, a detached house with its dramatically renovated interior looked promising at $649K. However, the lot size and rooms seemed small. Also, its location close to Alexandra Park, a tough public housing area was not ideal. I also couldn’t help thinking that it might be considered a better house in a less desirable area and was worried about its resale appreciation potential. Nonetheless, the house sold for $60,000 over asking after only 12 days.

An updated Annex townhouse had spacious rooms, but had only two bedrooms for a $749,000 asking price. Inexpensive tiles and finishes too traditional for our taste were also off-putting.

Thus far, I am still optimistic, but recognize that either our neighbourhoods or budget may have to change. I have been diligently checking the MLS each day, and am hoping to look at houses each weekend and during the week as they become available.

The search continues…

Read the next post in this series “Week One With an Agent” .

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{ 17 comments… read them below or add one }

1 Sods

I wanted to start by saying I enjoy this series, It is alot like our situation last year. We are in Waterloo, so thankfully not as crazy as T.O.

The one thing I wanted to mention that may help is to get your agent to send you listings as they post. Most agents get listings on their internal system 2-3 days before the MLS. Our agent actually setup and automatic search criteria, so anytime something was posted within our price, and feature list, it was automatically emailed to me. If you are having difficulty finding the perfect place, this may help you out.

2 PK

Interesting series. I went through the same thing 4 years ago. What might be worth trying is to look at houses which have been “sitting” listed for a longer period of time (say 6 weeks+) in the neighborhoods of one liking. Houses don’t sell sometimes because they have some problems and most of the people don’t want the hassle/expense of correcting them. If house sell routinely over asking price withing a week or two and there is an old listing check it out! Now if consider that houses in hot areas sell for 50K or more over asking prices ask yourself a question: Can I fix the problem of the house that’s been sitting unsold for the amount I’d have to offer to overbid several other couples on another house?

I did just that 4 years ago. The basement carpet was wet during open house and afterwards and no one wanted to touch the house. It sat for weeks. We ended up putting an offer on it which was much lower than asking price while most of the houses sold for at least 10% over asking at that time. The total cost to repair the problem ended up only about $500! Clogged gutters and piles of garbage lined up against the wall were the reason! After cleaning everything up and replacing one interior wall and carpet problem is gone.
In the end even if it was to cost $10K it still would have a great deal.

3 FourPillars

When I looked for my first house at the end of ’99, I knew absolutely nothing and was prepared to buy every house I saw (I wasn’t
picky!). I don’t think bidding wars were very common back then either.

Those were the days… :)

Mike

4 Mr. Cheap

I’m like you Mike, I’d be willing to live in most of the places I’ve ever gone to look at! I guess that’s why we need women in our lives, to make things more difficult ;-)

5 telly

I’ve not read all the posts in this series, so forgive me if this has already been addressed.

Christine mentions she’s worried about resale appreciation potential. How long do her and her husband plan to live in this house? If it’s a long-term purchase then it would seem they shouldn’t be concerned about resale potential. If it’s a short-term purchase, then I’m curious as to why they don’t continue to rent (assuming they are not currently home owners) or rent a suitable place (if they need more space).

Lastly, as far as raising the budget, I’d be interested to hear how they came up with the amount they are using.

Here’s an interesting related article:
http://www.thestar.com/Business/article/273856

I’ll go back and read the other posts in this series. I’ll probably get most of the answers there!

6 FourPillars

Telly – Guinness mentioned that story yesterday. I guess if the couple was able to go from $450k to $700k and still make extra payments then they must have been fairly conservative in the beginning.

I really hope that people don’t read that article and think that you need to spend $700k to buy a house in T.O! If so, they are welcome to buy mine for that much (I’ll even help them move in!)

Mike

7 Christine

Thanks for all the suggestions.

In response to Telly’s comments:

1. Renting – We are quite simply tired of the renter lifestyle. Renting does make financial sense in a crazy market; however it is a lifestyle change we want.
2. The concern about resale is because the Annex is where we ultimately wish to wind up. We will likely buy in a periphery neighbourhood, but hope to “move up” as our income increases.
3. Budget – calculated with the help of our financial planner and by looking at our current spending patterns.

8 telly

Christine, thanks for the response.

Well, maybe the periphery neighbourhood will become as attractive as the Annex and you find you don’t really need to move anymore! :)

When we bought our current home, our plan was also to “move up” within a few years, though the more time passes, the more we enjoy the low mortgage payments and realize we still don’t need to move up (though that may change of course).

I’ve often wondered if we would have been better off renting though if we do decide to move but I have to admit, I’ve never been a renter so I’m not entirely sure what “renter lifestyle” means. There a probably many factors I’ve not considered that I take for granted!

9 SavingDiva

Wow! I guess the housing market in the US is a lot different.

10 FourPillars

SD – how is the housing market in the US different?

11 thickenmywallet

I haven’t read the other parts of the series but have you attempted to look at Bathurst/St. Clair?

My one observation of the Annex is that it has a very old population once you strip away the students. Perhaps you buy something for 5 years and pick up a property in the Annex once everyone begins to downside? As you indicate in your post $500k doesn’t get you much house in T.O. now a days!

12 telly

Mike,
I think SD is referring to the fact that while people are bidding over asking price on homes in Toronto, prices on homes are falling rather sharply in virtually every city in the US.

A lot of the things you hear happening in many cities in Canada (Vancouver, Calagary, Toronto, Edmonton, etc.) such as overbidding, line ups for new condo development sales, 10-20% increases in RE sale prices were the same things you were hearing in the US 2+ years ago.

It sounds eerily familiar…

13 Mr. Cheap

telly: I think we’ll be quoting your comment in a few months or a year and asking you for stock recommendations ;-).

TMW: I used to live in the St. Clair / Bathurst area and I agree, its great! Albert’s Real Jamaican restaurant in the bomb (their curried goat is one of my favourite meals).

14 telly

Cheap:
It’s funny how no one will buy in Windsor right now but people are tripping over each to buy in Vancouver and Calgary where affordability is at an all time low.

Kind of like how everyone’s going goo-goo over Lululemon but won’t touch Citigroup with a 10 ft. pole. :)

I suppose LLL could get to $100 within a year and C could declare bankruptcy but I won’t put my money on it. :)

15 FourPillars

Good point Telly. Since you mentioned that the University was expanding, that would certainly make the student rental housing a lot less risky (in my opinion at least).

Mike

16 Mr. Cheap

telly: Yeah! My brother mentioned LLL to me a while back and thought it was a “hot tip” he should get in on, When I looked into it, I told him that I thought it wasn’t the best stock to be buying now.

Do you have an agent you liked working with? Maybe Mike and I should come down, see a few buildings and take you and your husband out for a meal… What do you think Mike, would the wife let you go out on a road trip with Mr. Cheap? :-)

17 Four Pillars

Nope. :)

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