We’re currently in a buyer’s market in Toronto and the GTA as a whole. Whether is the number of active listings, the months of inventory or the sale to list price ratio, all of the stats clearly position us in a buyer’s market.
Such a market, where there are more sellers than buyers, is characterized by properties sitting on the market for a long time. With so many choices for buyers – and so few buyers for the number of properties for sale – we’re seeing lots of buyers making lowball offers.
As the name implies, a lowball offer is an offer significantly below the asking price of the property. Depending on which side of the transaction you’re on, it’s either a predatory attempt to “steal” a home for sale at a bargain price, or a fair offer relative to the market conditions.
In a buyer’s market, all offers need to be considered and we’ve helped a lot of our seller clients decide on whether a lowball offer they’ve received is worth taking.
Here are the three things you need to know so you can decide what to do with a lowball offer.
What does it cost to keep on, keeping on?
Lowball offers most often come during a buyer’s market, in which properties take a lot longer to sell. As such, the carrying cost – and lost opportunity cost – of the home need to factor into your decision.
On the carrying cost side, all properties have ongoing costs you need to pay during your ownership. If you’re still living in the home during the listing period, this is often not considered, but it should be a part of your decision process.
Whether it is property taxes, utilities, maintenance fees (for condo or parcel-of-tied-land properties), upkeep costs, mortgage payments or rental contracts, it can cost a lot to stay in a home. When you’re living there it is simply part of your cost of living, but once you’ve made the decision to sell the home, you need to compare your carrying costs against what it would cost once you’ve sold the home. If this is a secondary home, or an investment property and you’re not buying another property, then any continued expenditures on the property you’re selling are just reducing your eventual funds received from the sale.
In all cases, you absolutely have carrying costs that give no ongoing value to you as the seller. You need to pay them while you own the property, but the sooner you sell, the sooner you stop paying those costs. It is very useful to have that cost determined so that you understand what your monthly, weekly and daily costs are to continue to own the home.
A large part of carrying costs is typically mortgage payments, so a quick note on how to include them in your calculation. All mortgage payments have a principal component, so while the interest part of your mortgage payment is simply a cost, the principal you pay each month increases your equity in the home. Your carrying cost calculations should remove the principal component if you want a true cost of what you’re paying to continue to own the home. The principal component you’ve paid over time and the equity in your home is, however, crucial to the second question you need to answer.
What are you going to do with the money when you sell?
In a buyer’s market, where homes take a while to sell, you will see properties for sale for months, sometimes even years. Most sellers look at the sale price as a static number and don’t consider the length of time it takes to sell. As we discussed above, there are carrying costs for all properties that effectively reduce your eventual sale proceeds.
What is often overlooked is where the money in your home is going when you sell. If you are retiring or downsizing, you will have a chunk of change as a result of the sale. While investing risk levels – and investment returns – vary based on your preferences, there are a lot of ways in which the money could earn you more money once you have it.
It’s August 2025 as we write this article, and many banks are offering special savings rates to customers. We saw an offer today for a 4.90% interest rate for three months on a deposit into a savings account with a major bank. If a home took three months to sell, consider what the seller could have made if they’d taken an offer on the first day.
At the 4.9% interest rate offered, every $100,000 of equity in the home would have earned about $408 a month. That’s about $14 a day. Not exactly a windfall, but many of our clients have significant equity in their home after years of ownership. If you have $500,000 you’ll clear from a sale, you could earn over $2,000 a month on it by depositing into a savings account like in the offer above. That’s $68 a day you’re foregoing by holding on to the home. Obviously, the higher the equity you have in a home – and the intended investment opportunity – the more money you’re losing by having those funds trapped in a home that isn’t selling.
It is a very useful exercise to speak with your financial advisor to discuss specifics of what you could earn on the proceeds of sale from your home. It allows you to accurately assess how much a quicker sale – or closing – is worth to you. Sellers often agree to a sale date without much consideration of how much it is costing them from either a carrying cost perspective, or a lost income perspective. A buyer who wants an extra month or two for closing can easily mean thousands of dollars less in a seller’s pocket when the full costs are considered.
When we hear sellers say things like “I’m not in a rush, I know it will take a while to get the price I want”, we always discuss what they intend to do with their funds, but there is another critical aspect to that comment that needs to be addressed. The above statement has an assumption built in to it, that the market isn’t shifting and that the seller getting the price they want is simply a matter of waiting until the right buyer appears. Let’s talk about our final crucial question, as that assumption can be very wrong.
Where is the market going next?
The hard truth of real estate is that whether a price is fair, low, or high is a backwards looking exercise. Market value is simply what the market will pay, so when people argue about a buyer paying below (or above) what it’s “worth”, it is very much a subjective exercise.
As real estate agents who work every day with buyers and sellers, a critical part of our job is assessing value. Our buyer clients want to make sure they aren’t overpaying and our seller clients want to make sure they’re not undervaluing their home. We do hundreds of home valuations a year for seller clients and we do even more analyses of potential purchase options for our buyer clients. In all cases, we are very clear that the value we’re assigning to a property is for right now – and just right now.
Real estate markets do shift and when they do, they are often a very local shift. The market as a whole may be doing one thing, while a particular street, building or neighbourhood may be doing something quite different. In one Toronto neighbourhood, we saw a significant shift down in buyer activity over the past few months, and a corresponding drop in the prices home were receiving. A home that could have received $1.6M in the spring got offers of $1.45M in the summer. A seller who was waiting for the market to improve rather than accepting the current value of their home would not be able to move forward with their plans.
Consider the condo seller who wasn’t in a hurry to sell a year ago and didn’t like the offers being received. If they decided to wait until the market improved, they are now in a worse situation than a year ago. They cannot get the sale price they could have got a year ago and the natural question to ask is what will it look like a year from now?
While real estate prices in the GTA have gone up 7% a year on average over the past 45 years, that is simply an average.
In seven of those 45 years, the average price dropped and even in years in which it went up, there are always considerable fluctuations during the year. Take a look at the average price in Toronto in the last two years to see what we mean!
Whenever someone says “I’ll sell my home when it is worth X”, they can absolutely get the price they want – but it might take years. Real estate does go up over time, so a seller who needs a particular price can get it eventually.
At the same time as that is true, it is also true that waiting until the market shifts to bring you the price you want can put a seller into an untenable situation. A seller who says “I’m in no rush” can feel very different four months into the listing process, where the mortgage rate they locked in has expired, the commute to their new job has doubled, the line of credit rate has increased and so forth.
All of our seller clients receive updates from us on the state of their market. Not the market as a whole, not the average change, but what is specifically going on in their market, with their competition. We use the predictive stats to say what is coming next in terms of prices and work with our sellers to make choices on what will get the property sold. We believe that assumptions need to be validated before they’re relied upon – and if the market is dropping, waiting until it returns to the old price or goes above it is a dangerous game.
If you receive a lowball offer on your home, answering the above three questions can put you in a position to best decide what to do with it. By knowing your carrying costs, what your proceeds of sale could earn, and where the market is going next, you can assign a true value to the offer. If you are thinking of making a move, then you should work with agents who think about the best way to get you moving. Get in touch with us to start the ball rolling!
