27 Mar Selling Your Old Bungalow In Toronto’s Hot Real Estate Market
No doubt you keep seeing media stories about old bungalows commanding astronomical prices during this hot Toronto real estate market. The headlines are only shocking if there is no context to the story (and most people only read the headlines). Here is what you need to know if you own an old bungalow in Toronto and are thinking of cashing in on your pot of gold.
Who is buying these old bungalows?
Speculators: A majority of buyers in today’s market (March 2017 as of writing this) are speculators. They want to hop in and out of the market and make a few hundred thousands of dollars. Surprisingly, this hot Toronto real estate market is allowing them to do so even with the steep Toronto land transfer tax as well as the realtor fees.
Builders: Many people think that builders have unlimited money and are snatching up all the old bungalows in Toronto. Builders will eventually be the ones knocking down these old properties. But they make calculated decisions. They aren’t outbidding speculators if the numbers don’t make sense. If brand new houses are selling for 3 Million dollars in a neighbourhood, they will not be the ones paying 2.2 Million for an old bungalow.
Foreign Buyers: The whole Vancouver situation has given foreign buyers a bad wrap. Like the builders, they are also blamed for this hot Toronto real estate market. Foreign buyers like Canada because of the security and stability it provides. They will always own that piece of land they buy, something that may not be true in their country. They might be willing to live through a market downturn because they know in 20-30 years, they will still own that piece of land and there is a big chance prices will have gone up by then. So yes it is an investment, but it is also a safeguard for their wealth. Many of them also send their kids to school in Canada and think of it as a win-win situation.
What type of lots are they looking for?
Size and location is of most importance to speculators and builders. When speculators flip a property, it needs to be something in demand. When builders sell their property, they are catering to people paying millions of dollars for a home. The lot needs to be perfect.
50 foot lots are the gold standard. Bigger is also great, but we get into a different price range. 50 foot lots are the sweet spot of an expensive newly built house. Builders love it because it allows them to build a nice sized house, and speculators love it because they know that it will be in high demand once they flip it. Most new houses in subdivisions are built on 35-40 foot lots. They don’t build on 50 foot houses these days since there are rules requiring new subdivisions to have a certain amount of density when it comes to population, jobs etc. That is why a 50 foot lot in the heard of Toronto is such a hot commodity. 40 foot and even 35 foot lots can still be expensive in certain parts of the city, but they won’t attract as much attention as the 50 foot lots.
Location is obviously also a major factor. Go to Yonge and 401 and you will find 40 foot lots selling for 2 Million dollars. Go one major street up and the values fall to about 1.6 Million. Your neighbourhood will determine the value, so don’t always expect to match something outside your immediate zone.
Although old bungalows are usually best and highest use (meaning they are only worth the land they are sitting on), updated bungalows will command a slightly higher price than others. Many speculators and builders will rent out the properties until they are ready to move along with their plans. Renting out a dump is very hard.
What types of lots are they NOT looking (VERY IMPORTANT)
This is probably the most important section of the article. Don’t expect to get as much as others in the area if there is a problem with your lot. Here is what speculators and builders avoid:
-A lot that backs onto a main street.
-A lot that backs onto houses that back onto a main street
-A lot that backs onto apartments or commercial property.
-A corner lot on a main road.
-A lot that is at the intersection of two streets (at the T of two streets)
-An irregular lot that gets smaller in the rear.
-A lot that has a short depth and restricts building permits (130′ is preferred)
-A lot that has an easement on it (hard to tell if you have a major easement or not)
-A house that someone passed away in
-A house number that certain cultures hate (4 for the Chinese)
You need to be realistic about the price of your old Toronto bungalow.
It is important to respect the market. Your lot is only worth what someone is willing to pay for it. The data tells the story. Unfortunately many people look at the sold prices and add an arbitrary $100,000 or $200,000 to the number (sometimes more). When the market brings them a number they don’t like and they try and justify it. But the truth is, the market has spoken. As of writing this (March 27 2017), we are in a very hot real estate market. Most likely in bubble territory. Houses take a few days to sell. A monkey could sell a house in this environment. You cannot ask for better conditions. Sellers have all the power since there is no inventory. If 5-6 people show up on offer night to present offers and you don’t think you got a fair number, you are not respecting the market. The house is only worth that the next person is willing to pay for it.
As always please reach out with questions or if you are looking to purchase a real estate investment property or a personal home. You can find me on live chat during most hours at the bottom right corner of the screen. If not, shoot me a text, e-mail or give me a call.
Norman Hill Realty Inc
20 Cachet Woods Court #2