By Lindsay Smith/Real Estate Columnist
Last week’s column covered some helpful hints to help buyers navigate the current real estate market and become homeowners. I gave some solid advice to help make the readers who are looking for a home successful. Pre-approval, work with a full-time realtor and several other tidbits. Then I noticed an article in a Canadian national magazine that caused a bit of smoke to come out of my ears.
The article shared the story about a couple looking to buy a home in Oshawa. This couple, the article mentions, started their search for a home in the fall of 2020. It appears that they offered on several homes, at one point offering $80,000 over asking and were unsuccessful in their search. The article shared that one of the homes they attempted to purchase was listed for $400,000 and sold for $702,000. The couple offered $195,000 over asking and it sold to someone else.
Let’s revisit this home and the month it sold to see if we can create a strategy that might have been a winning one, one that might be used for homebuyers this summer.
The home that was mentioned in the article sold at the end of January 2021. The real estate board released the monthly statistics three days later, offering great insight that a sales representative and buyer could use to form strategy. The home in the magazine sold for $300,000 over asking! Shocking! Or was it? By focusing on a crazy number like $300K, the magazine used this to create drama to gather clicks and shares and “oh-my-goodness’s” from readers. When we dig in and start to ask a few questions we see a bit of a different story.
In the two weeks prior to this home selling, there were two other bungalows in the same area that sold. As a broker, I use the most recent sold properties to help determine what the eventual sale price of a property will be. I know this may cause some of my readers to doze off, but bear with me, the data will end up to be very interesting. One of the bungalows sold 10 days before this home and was listed for $600,000 and sold for $750,000. The home was similar to the one in the article, had three bedrooms and an extra bath. The second bungalow sold the same day as the magazine example, it was listed for $650,000 and sold for $808.000. This also had three bedrooms and an extra bath. One of the selling features of the magazine home was that it had an inground pool, which, in our COVID market, has become a selling feature.
One home sold for $150,000 over asking and the other $158,000 over. The main difference between the homes I mentioned and the magazine bungalow was that this home was listed $200 to 250,000 under what the other sold properties were asking. This is critical. It wouldn’t take a crime scene investigator to determine that the magazine example was listed dramatically under market value. And based on the two comparable sales it looks in hindsight that whoever the buyer was, scored a home more than $100,000 less than comparable sales.
The takeaway here is when a knowledgeable sales representative and a buyer who understands the market looks at home for sale, they base their strategy on what the home is worth – independent to what the seller is asking for the home.
Here is what I would add to last week’s list of helpful ideas to ensure success for a buyer:
- Prior to viewing a home, do a market evaluation on each property. Determine what the expected selling price should be, at least the range it should fall into and decide at that point if the home is worth a visit.
- When negotiating, be aware of how many bidders are involved in the bidding process.
- Get pre-approved. I mentioned this last week, however, this article spoke about how the buyer went back and was pre-approved for a higher amount. Get a pre-approval for the highest amount you can. You don’t need to borrow what a lender will commit to you, however, knowing what your top line is will help you make a decision. (Like, on a Saturday night at 11 p.m. when you are asked if you can offer a little more and the bankers are sipping a beer watching the game in their family rooms.)
- As you view homes, be aware of what they are selling for. This information is very valuable. When you view 10 or 15 homes and get to know what the asking prices are and what they end up selling for, you quickly come to understand what market value is today.
When I receive offers on a home that I have on the market it quickly becomes evident where the buyers bidding are in the “education cycle.” Sometimes a buyer is made aware of the market during an offer bid, and other times buyers with amazing sales representatives work together to fully understand how the market is playing out, before viewing their first home.
If you are looking for a home in our area, here are the numbers that may help you to demystify the market; Month of May 2021. Detached homes in Oshawa. Average home sold for 13 per cent over asking price. In Whitby the average was 12 per cent and Clarington 14 per cent over asking.