Even though a property may be highly sought after due to its desirable neighborhood, spacious backyard or curbside appeal, homebuyers are only willing to go so far when it comes to purchasing it, a new survey suggests.
According to BMO Economics, when making an offer on a home, the overwhelming majority of Canadians would prefer not to get into a bidding war with another potential homebuyer, as 75 per cent noted this is something that they just as soon avoid.
But even among those who would be willing to put up a fight, there was a limit as to what price they would pay. For instance, approximately 50 per cent said they wouldn't pay any more than 110 per cent of the asking price, while one in four noted 120 per cent of the purchase price would be their final offer.
Laura Parsons, mortgage expert at BMO Bank of Montreal, said that as much as a potential homebuyer may want a particular home, they should do their best not to personalize the issue, as it could lead to financial issues down the road even if mortgage rates are low.
"One of the most important decisions a person will make is the purchase of a home, so it's a good idea to do a thorough financial assessment well in advance to determine what you can realistically afford," said Parsons. "It's important that Canadians keep their emotions in check when looking for the home of their dreams to ensure they do not over-extend themselves," said Parsons.
The poll also looked at whether men or women would be more prone to engage in a back and forth over prices, finding that men were more willing, and were also more likely to pony up 120 per cent of the asking price, at 34 per cent versus just 20 per cent of women.
Just as homebuyers have preferences about the type of home they wish to purchase and how much they'd like to pay for it, they also have inclinations toward the type of home loan they want.
For instance, in a separate survey, conducted by Royal Bank of Canada, when deciding on a type of mortgage, roughly four in 10 homebuyers - 42 per cent - said they were looking for a fixed-rate mortgage over one that had variable mortgage rates. Just 21 per cent said they'd opt for a variable one.