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A fickle market with price-sensitive buyers
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Setting the right asking price has become a precarious art
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By CAROLYN IRELAND
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Friday, June 14, 2019 – Print Edition, Page H2


TORONTO -- The Toronto area's spring real estate market typically begins winding down in June, but a stretch of cold and wet weather that lasted into May could delay the summer slowdown.

"The whole market is at least six weeks behind," Andre Kutyan of Harvey Kalles Real Estate Ltd., says. "I'm hoping it will spill over into the summer."

Sales jumped a healthy 18.9 per cent in the Greater Toronto Area in May compared with the same month in 2018, according to the Toronto Real Estate Board (TREB).

TREB points out, however, that the tally is still behind the average for May in the previous 10 years.

"After a sluggish start to 2019, the second quarter appears to be reflecting a positive shift in consumer sentiment toward ownership housing," TREB president Garry Bhaura says.

But in such an uncertain market, some properties languish while others spark bidding wars.

Some receive only one offer but it lands on the table within a day or two.

"If you're aggressive on the asking price, you'll get action," Mr. Kutyan says.

In the upscale midtown neighbourhood of Lytton Park, Mr. Kutyan persuaded the homeowners to set a realistic asking price when he listed a large four-bedroom house for sale at 51 Alexandra Wood.

A competing listing nearby had been sitting with an asking price of $3.495-million, so Mr. Kutyan recommended listing at $3.295-million for 51 Alexandra Wood.

A buyer stepped up with the full asking price on Day 1.

Mr. Kutyan says selling quickly inevitably leads to some homeowners questioning whether they should have asked for more.

But Mr. Kutyan has to reassure sellers that setting the correct asking price is crucial for getting the attention of buyers. A property that is priced too high out of the gate will stagnate, he says.

After 51 Alexandra Wood sold, the rival property's asking price was cut to $3.295-million. It eventually sold for less, he says.

"The sellers who list at the right price from the beginning end up doing better," Mr. Kutyan says.

Mr. Kutyan says many homeowners will push to list high and then cut the asking price if necessary, but he believes that tactic is a mistake because buyers will still worry that there is something wrong with the house. "Even then they start questioning, 'Why hasn't it sold yet?' The buyers stigmatize a house very quickly." Mr. Kutyan worked with sellers in northern Leaside who resisted his suggestions for marketing the property. The homeowners didn't want staging, a "for sale" sign on the lawn or any open houses, he says. They pressed for an asking price of $2.579-million, which was more than Mr. Kutyan's suggestion of $2.495-million.

The house sat for 40 days without an offer, he says, despite the fact that more than 50 potential buyers had traipsed through.

At that point, the sellers agreed to try it Mr. Kutyan's way and reduced the asking price to $2.499million. The house sold within two days for $2.48-million.

"The market is so price sensitive," he says. "The buyers who bought didn't look at it when it was above $2.5-million." That's a common theme for buyers these days, he says, with lenders becoming more conservative in their financing and after the federal banking regulator's introduction of a mortgage stress test in 2018.

"If it's just outside of reach, they won't even look at the house."

Ksenia Bushmeneva, an economist at Toronto-Dominion Bank, says recent economic data have been reassuring. After two quarters of tepid growth, the Canadian economy is emerging from its soft patch.

Ms. Bushmeneva says that's the view of the Bank of Canada, and TD agrees.

Some green shoots have emerged in the housing market, with activity rebounding after the nasty weather dampened sales in the first quarter, she says.

Ms. Bushmeneva says she is encouraged by the May results, which showed sales and prices rising compared with April.

Mr. Kutyan says the properties that consistently sell quickly come out around the $1-million mark or less in Toronto. Neighbourhoods south of Highway 401 are still hotter than those to the north for the most part.

In one case, Mr. Kutyan listed a move-in ready, three-bedroom detached house at 330 Fairlawn Ave. with an asking price of $1.095-million. The detached house near Avenue Road and Lawrence Avenue West received 15 offers and sold for $1.450-million.

"There's a lineup for that sort of thing," he says.

Mr. Kutyan says the asking price was "aggressive" and meant to draw multiple offers. He says he figured the house would sell for $1.4-million or more but he didn't think it would surpass $1.5million.

Not every property will spark a bidding war, he stresses, but he does recommend that sellers set a price based on what comparable properties have sold for, not what neighbouring properties are asking.

"Sellers look at the competition - what's on the market now - that's a big mistake," he says, pointing out that those homeowners haven't struck a deal.

It's far more accurate, he says, to examine the ones who have.

The most stubborn are the investors who are aiming to improve their bottom line. Mr. Kutyan recently met with two builders who put their plans to tear down vintage bungalows and rebuild them on hold when the market took a dive in 2018.

Now the investors want to unload the properties.

In one case, the flipper had paid $2.4-million for the modest house in Willowdale East in late 2017.

Mr. Kutyan delivered the grim news that he didn't think the property would fetch $1.8-million today.

Another builder paid $1.75million for a post-Second World War bungalow in 2017. Mr. Kutyan's current assessment for the property is around $1.2-million.

Mr. Kutyan says the sellers had both listed with other agents in the past without striking a deal.

But he advised them that he wouldn't be willing to take on the listings unless they were willing to face reality.

He can understand their plight.

"Quite frankly, I don't think they liked what I had to say," Mr.Kutyan says. "It's hard to stomach."

Associated Graphic

This house at 51 Alexandra Wood in midtown Toronto sold at the asking price of $3.295-million just one day after going on the market.

PHOTOS COURTESY OF HARVEY KALLES REAL ESTATE

Real estate agent Andre Kutyan, who sold 51 Alexandra Wood, says it is important to set a realistic asking price. When sellers set the asking price too high and the property sits on the market for a long time, buyers start to wonder if something is wrong with the house, Mr. Kutyan says.


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