In some major Canadian markets, the hot real estate market has given rise to a practice that’s intended to stimulate interest in a listing and achieve the highest possible sale price in a short period of time. What is it? It’s under-pricing the listing. Intentionally listing properties at well below their market value and then holding off on showings or offers until a specified date can create a ‘bidding war’ scenario where multiple buyers eagerly scramble to get in on a ‘great deal’.
It’s a strategy that’s continuing despite what is now becoming a more balanced market across Canada. Even though the pace of sales in Canadian markets is falling behind last year’s record-breaking number of transactions, prices continue to rise. Now, a dramatic increase in the number of new listings in recent months has resulted in a more balanced market than we’ve seen in years. Nevertheless, homes in highly sought-after neighbourhoods will always be in demand, and these are the homes where the under-pricing strategy is most prevalent.
While the under-priced listing can sometimes deliver a good end result for the seller, it can also result in a great deal of wasted time dealing with prospective buyers who may be able to afford the undervalued list price, but who cannot afford what the house is actually expected to sell for. Frustrated buyers are dealing with mortgage lenders and sometimes even paying for home inspections on properties they ultimately will never be able to buy. Under-priced listings can become a waste of time for buyers and sellers alike.
So as a buyer, how can you be sure that you’re not wasting time, money or effort making an offer on a home you can't afford? Of course, you could simply avoid properties that seem obviously under-priced or are holding out for offers. That’s a scenario that no seller wants, and the risk of it happening is increasing as the market cools and there are more listings for buyers to choose from. But there’s a better way for buyers to know the expected sale price of a property – and that’s where I come in.
Before deciding to pursue an offer on a property, you should be reviewing a Comparitive Market Analysis (CMA). This report will show you recent sales for comparable properties in the area, as well as current listings and expired listings. Armed with this information and my advice, you can determine an estimated price range for a listing and choose to make a realistic offer or move on to another listing.
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