Bidding wars, million-dollar shacks and open house burnout: Buying a home in Toronto has become an emotional rollercoaster

Mudit Rawat and Sheena Rangroo endured five bidding wars before finally “winning” a semi-detached house near Casa Loma in downtown Toronto in June 2020.

Although they love their home, the search has been a daunting task.

“It’s a stressful process. And you feel pretty discouraged if you don’t even get a call from the seller,” Rawat said. “You imagined your perfect home and within hours that dream was gone.”

“We didn’t think it would be so difficult. You start to doubt yourself and think maybe we should wait for the market to cool down or buy a condo instead,” he added.

The Toronto couple, whose budget hovered around $1.1million, began their search for a detached family home around the same time COVID hit – the couple thought the pandemic was a good time to get into real estate, especially with low interest rates.

They had been casually searching the market for some time, ready to move on from their two-bedroom apartment. The search began with excitement about buying their first family home, but both felt discouraged after losing their first bidding war.

“Our first offer was in the east and we stayed close to our budget,” Rawat said. “We later discovered that over 50 offers had been made at the house.”

The property sold for $300,000 more than asked.

“To be outbid by offers that far exceed demand is so disappointing,” Rangroo said. “Finding the perfect home that ticks all the boxes is hard enough when there aren’t many homes on the market to begin with. And then get out of the auction with offers that far exceed the requests; it’s discouraging.

But they relied on each other for emotional support and refused to “give up hope.”

The couple’s experience is a story shared by countless other house hunters in the Greater Toronto Area. Bidding wars – where two or more parties bid against each other to win the price – have become all too common in the real estate market. According to experts, potential buyers often lose in multiple rounds of auctions and will likely go through multiple bidding wars before landing a property.

The process can be an emotional roller coaster, especially with a significant financial and personal investment at stake.

People need to have reasonable expectations in this process, said Claire Tsai, a marketing professor at the University of Toronto. Begin by acknowledging that the sale price is often 10-15% higher than the asking price.

“If you focus more on the selling price, you won’t feel like you’re paying much more,” she said. “This is especially important for inexperienced buyers.”

The more people participate in bidding wars, the less personal the process becomes. With practice, potential buyers will feel more comfortable and confident, Tsai said.

“Remember, when there are 35 bidders, 34 of them will lose,” Tsai said.

Realtors don’t necessarily have an advantage over other home buyers.

GTA real estate agent Michael Tam and his wife, Sariyya Panahi, recently went through six bidding wars before buying property in Pickering in February 2022.

“Because of my job, my emotions are different because I see so many bidding wars,” Tam said. “But my wife was upset and wondered if we would ever find a place. You may feel desperate, but I knew we would find something.

They moved in last month. And even though the location wasn’t their first choice, after losing the sixth bidding war, they adjusted their expectations.

“It was really tough in the fall and early winter because there was no supply at all,” Panahi said. But after crunching the numbers and recalculating their spending, the couple increased their budget to the maximum they could afford.

They pulled out all the stops, even writing a personalized letter to the seller stating that the house was a long-term investment and including a picture of their husky pup.

Often people envision their life in the house they are bidding on, which creates higher emotional stakes. It’s a real estate agent’s job to provide emotional support and guidance every step of the way, Tam said.

“I take them to a good mortgage broker so they know their budget, and we start looking well in advance for their ideal move date,” he said.

Real estate agents also gather comparables in the neighborhood — sales and competition in the area — to get an idea of ​​how much homes are selling for and how many offers they’ve gotten.

It’s important for buyers to be flexible, Tam said.

“The further you get (from the city), the more affordable it becomes, so it’s good to adjust expectations,” he added.

According to Tam, in his practice, there are typically 10 to 15 offers for a condo in downtown Toronto and about 15 to 20 offers for a house.

“You’re going to be in a bidding war 90 percent of the time,” Tam said. “It depends on the region and the value. If the unit is over $1.2 million, there will be fewer bids, and if it’s under that amount, there’s more competition.

Alexander Coutts, an associate professor at York University’s Schulich School of Business, suggests planning for all eventualities.

“That includes imagining the worst-case scenario,” he said. “For example, if multiple bidders are going way beyond the ask, ask yourself what would be the highest bid for you in that intense moment.

“Think about different scenarios before you get there,” Coutts said. It’s important to do this so you don’t bid more than you can afford, he added.

“When emotions are high, we don’t make very clear decisions. It is better to be in a cool or calm state, where you have time to think.

Tam said it’s best to be patient because the right property is out there.

Homeowners in Downtown, Rawat and Rangroo agree that patience is the key to enduring the difficult house-hunting process.

“We kept telling ourselves that if we just stayed patient, we’d find the perfect home,” Rangroo said.

Although it took a few months and several bidding wars to find their dream home, they are both thrilled to have found a semi-detached house in the heart of Toronto. They don’t miss the stress and psychological turmoil of house hunting.

Finding a home to live in for the long term entails “so much emotional investment,” Rawat said. They are grateful to have successfully come out of it on the other side.

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