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The changing Toronto market
Jun 09, 2017
Adapted from Garry Marr Financial Post
The potential for real estate prices to drop in Southern Ontario is forcing appraisers to have a second look at properties they have already assessed to see how much the market has shifted.
Claudio Polito, a Toronto appraiser and principal owner of Cross-town Appraisal Ltd., says lenders basing mortgage decisions on the value are asking if the property is still worth $1 million if they are loaning for example $650,000.
He estimates prices in the GTA have dropped anywhere from 5-15 per cent over the last 30 days. The next set of statistics from the Toronto Real Estate Board are due out June 5th and will be the first full month of data since the provincial changes to cool the market that included a tax on foreign buyers.
A lower appraisal could be an issue for people with previous deals, not yet closed, especially when buyers are coming up with the minimum 20 percent down payment for a non-government backed loan.
If the appraisal falls short some buyers will have to search for a second mortgage at a higher rate to maintain the 80-20 per cent ratio.
Polito said that they are seeing some people walk away from deals because they can’t close which poses a myriad of problems if the sellers seek legal damages. Sales in January and February are maintaining their values but Toronto prices in March rose 33 per cent from a year earlier which could make it hard to support the value..
Keith Lancastle, chief executive of the Appraisal Institute of Canada, said the warning for buyers is probably not to get into bidding wars if they don’t have a cushion to come up with the higher down payment.
He says the volume of sales in Toronto makes it easier to find comparable sales but the pace at which the market is changing is “tough to keep up with” and can be hard for appraisers to ascertain if it is a trend or an irregularity.