If you’re a potential buyer right now or thinking of selling your home, we probably don’t have to tell you that real estate prices have been going through the roof. With low interest rates and pandemic-driven market changes, it’s creating intense competition never before seen in our region. Believe it or not, it’s actually becoming routine to see homes selling for as much as $200,000 over and above the listed price!
Seeing homes sell for so much over asking price may have you feeling a bit discouraged and confused about what a property is worth. How do you make sense of these kinds of numbers?
One important thing to keep in mind is that the listing price of a house does not necessarily reflect its actual market value. In a hot market like this, some sellers employ the strategy of underlisting their home to spur competition and possibly entice pre-emptive offers (what’s a pre-emptive offer?). A lower price will catch the attention of more buyers and get more people interested in seeing the home, theoretically increasing the number of offers competing for the sale. And, more competition means everyone needs to come to the table with their absolute best offer in hand if they want a chance of being selected.
While it’s an approach that has proven successful for many sellers in recent months, it may not be the most responsible strategy during a pandemic. More interest means more people inside the home for showings, and all within a very short span of time. A pandemic-induced lockdown may not be the appropriate time to have parades of strangers walking through your home. The real estate inventory squeeze and pandemic safety concerns can create a tug-of-war of priorities that can increase the stress on a potential buyer.
The best way to make sense of it all is to step back and take an objective view of the market. Essentially, when you see homes sell for $100,000 over asking price, it speaks more to the marketing approach the seller chose than it does to market unpredictability. If you’re a buyer, it’s better to pay attention to what properties in your desired area have actually sold for, as opposed to their listed prices. Ultimately, listing prices are arbitrary; if you really want to know what the market is doing, the sale prices will give you the true insight. This is not necessarily something you will be able to see on your own, so working with a realtor who knows your desired area is key. Diving into the actual sale prices will provide a true perspective of the market and help guide you in your search.
If you’d like to discuss how the real estate market is looking in your neighbourhood, we are always happy to talk!