Are real estate asking prices for real or “fishing expeditions?”

By Lindsay Smith/Real Estate Columnist

If someone from the “sticks” decided to make a move to Oshawa the first thing they would notice about the local real estate market is that most of the homes that sell, sell for prices tens of thousands of dollars above the price they were asking. This way of doing business has me shaking my head, I can only imagine how someone from out of the area would think if they saw these activities. It is kind of crazy. Let’s dig in and see if we can unpack how to understand how to make buying homes a bit easier.

The two numbers that are important if you are considering buying a home in 2021 (detached home) are 1) in Oshawa, the average price over the past two weeks has been $860,000 and 2) the average asking price was $746,000. This means that homes are selling for approximately 17 per cent over the asking prices. This metric is very important. Recently we sold a home, having set the asking price 10 per cent below what the seller had hoped to sell for. We had very few showings and a few of the showing agents called asking, “What are the expectations of the seller?” Given how homes are selling for so much over asking, it is a valid question to determine what range the seller feels their home might fall into. In this case if you applied the average, 17 per cent over what we were asking, the home was not worth what the statistics indicate. What this strategy did was hamper showings, with the responses indicating the home was overpriced (bear in mind how crazy it sounds that a home is listed in this case, $80,000 under market value only to be viewed as overpriced.).

We changed strategy, took the home off market re-introducing it at 17 per cent under expectations. It sold in four days for exactly what the seller was expecting. Knowing the metrics that drive our current market is critical to becoming a new homeowner.

How does this info benefit a buyer? Let’s look at some winning strategies.

Over the last three days, I ended up having 11 offers in total come in on three homes I had for sale. Many of the offers were unconditional, however some had finance conditions, deposit issues and some had requests that made little sense. Here is some insight on how the sellers choose the winning bids. In one case the sellers accepted an offer with a very short finance condition. The competing offer was unconditional, however with a higher price and a very solid pre-approval from a bank, the sellers decided to work with that buyer. On another property, we had six offers, three of which were very close to each other in price and all firm. In this case it was price that won the bid. On the third property, we had two offers at almost the same price and the winning bid included a short finance condition which became the best offer, with the competing bid conditional upon financing.

What can be learned from this weekend snapshot, is that winning bids have some commonalities. Many are unconditional; however, if a buyer needs a finance condition, submitting a pre-approval along with the offer, will help the seller feel like the bid was qualified. Deposits are very important. In the above offers, the range of deposits on a final selling price was from a low of $5,000 to $50,000. Deposits really show that the buyer is certain to complete the transaction. Other areas that cause bids to be lost are requests that could have been asked for prior to submitting an offer. Requests such as requesting surveys, water tests, pre-home inspection reports, closing dates that were outside of what was requested on the listing and including personal possessions of the sellers. All of these could have been discussed prior to submitting an offer and left out of the offer once determined they did not exist or were not negotiable.

Winnable solid offers, drawn up by an experienced agent’s tend to follow patterns.  They have reasonable deposits, offer closing dates the sellers will find acceptable, are either unconditional or have supplying information that helps back conditions up and have prices that are in line with the current market conditions.

Not every home sells for 17 per cent over asking, however data shows that the average home does. When it comes to determining a realistic selling price, I have found that doing a market evaluation on the property of interest and coming to a selling price range, based on very recent sales will give the buyer some sense of value. In many cases the asking price is nothing more than a “teaser.” In Whitby recently, a home sold for $425,000 over the asking price. I totally understand how a buyer can feel discouraged. My advice is to follow the data, look at the asking prices as fishing expeditions and use a full-time local agent who understands our town.

If you have any questions on the above information, or if you can see a real estate emergency on the horizon, I can be reached at lindsay@buyselllove.ca.