September 22nd, 2019 | Bidding Wars
Buyers Beware: List Price Is Not Market Value
Today’s we are sharing an article Aleks wrote for HerCity Lifestyle, discussing the real market value of Toronto’s homes. This is evergreen content answering the Million-Dollar question every buyer asks:
Is this the right home for me and how much is it worth?
So, if you are in the process of buying your dream home and are wondering how the real estate market actually works, you may want to keep reading!
In the Toronto real estate market, it is not uncommon for a home to be listed with a “fake” price in order to entice a bidding war. This is especially prevalent in hot neighbourhoods where inventory continuously remains low and the demand is high!
Although it’s a strategy that most realtors use, it can give false hopes to some potential buyers. Buyers get excited when they see a new listing come up with a low purchase price that’s at the top end of their budget. Sometimes, they don’t realize these homes are under-priced, and will sell anywhere from $50,000-$250,000 over the asking price.
In order for buyers to save their time and emotions before going into a bidding war they are sure to loose, here are some factors to consider when determining true market value.
Comparables
Have your realtor pull the recent sold homes in the neighbourhood and do an apples to apples comparison. Make sure the comparables are the same type of property (detached, semi-, or row townhome) with similar lot size, number of bedrooms, and bathrooms, parking, and state of basement, as the subject property to understand the true value. If there isn’t a direct comparable, an experienced realtor should be able to “plus or minus” certain features that exist or don’t exist in the subject property to come up with a numerical value.
Features
Does the subject home have certain “wow” features that hold value, whether subjective or not to certain buyers? Those things could be a recently renovated kitchen or bathroom, a finished basement with an apartment for potential income, a hot tub, a workshop in the backyard, among many others. While some of these things may not be on your wish list, they could be on others, meaning buyers are willing to pay more for them.
Desirable Neighbourhood
The neighbourhood is key as we all know real estate is about location, location, location. But go further and check if the neighbourhood has recently been named one of the best neighbourhoods in Toronto, or has been recently featured in the news. This will cause a spotlight on the neighbourhood and bring in extra potential buyers that weren’t initially considering this neighbourhood. Don’t forget about the school zones either. You may not be at that stage in your life, but others are. If the subject property is in either the best or one of the top school zones in Toronto, that could be a subjective value that buyers are willing to pay almost anything for.
Listing Agent
Have a look at which realtor has listed the subject property. Maybe yourself or your realtor know the listing agent and realize they have a tendency to list all their client’s homes $50,000-$250,000 below market value. You can also have your realtor ask the listing agent if there is a particular sold comparable the seller’s are comparing their home too. Therefore, based on all these factors, you can slowly get a sense for what this home will sell for and if it’s in your budget to begin with.
Although it seems like this is a tough market for buyers to navigate, hiring an experienced professional and being truly aware of what’s happening in the market will make the experience more enjoyable and successful.
As a buyer, if you’re losing bidding war after bidding war, something is not right and you should start over with these tips to help you establish true market value on the next property you are bidding for. You should also revaluate the advice you’re receiving from your realtor.
Good Luck!
Meanwhile, if you’ve got any Real Estate questions, get in touch with us, we’ll be happy to help!
