Should You Worry About Paying Over Asking?
Focusing on the list price can be a mistake in the Toronto real estate market.
So we're three weeks into the Fall market and things are as busy as expected. Inventory is up, which is a good thing but, as always, buyers have lined up their financing, gotten into "back to school" mode, and have started to hit the pavement for their house-hunts in full force. So if you're house or condo hunting and you're not quick, you might miss that "perfect" place.
I'm working with a handful of buyers right now at various price-points - "entry-level" buyers in the mid-$500k range looking for a decent downtown condo, mid-level condo buyers around the $650k mark who need some space for a future baby before they look for a proper house, and a couple different $1mill+ buyers looking for a decent house on the east-side. And they all say the same thing when I fire over a listing that I think is worth checking out:
"Adil, what will it actually sell for?"
Now they're not thinking that a $899k house in Leslieville can be scooped up for $875k. They actually mean "we know this will sell over asking but will it fall within our budget?" That's the expectation. And in a market like TO, whether you're looking at 1-bed condos in the core or 3-bed semis in Leslieville, the expectation is that things sell over asking. It's just where the market is, has been for a while, and at the risk of making predictions, will be for the foreseeable future.
Not everyone likes the game. Sellers even sometimes feel awkward about the process, oddly enough. But this is the market and you'd be doing yourself a financial disservice as a seller to leave money on the table.
As buyers, you either get used to it or...well, there really is no alternative if you want to be successful. That's not to say every condo or house will be listed with a "teaser price" with the expectation to sell over asking but if you see something that's "perfect" and for a great price...Well, if it looks too good to be true...
So should you fear paying over asking? I mean, nobody wants to say they paid over asking for anything. Would you pay over asking for a new car? Or a new computer? Hey, the dealer is asking $19,995 for that new car. Let's offer them $23,000 and hope we get it!
That would be nuts.
But if you went to a car auction where the bidding on the same car started at $9,995, most folks (at least folks who did some research to find out what cars similar to this would sell for) would say "That price will never happen. So what should we set our max bid at?"
Real estate in Toronto is the same.
I think the buyers who struggle with bidding wars are those who either haven't spent enough time educating themselves on where the market is, or buyers who just refuse to "play the game".
"I can't believe they paid $300k over asking!" is something that I wish people (and the media) would stop saying. If a house is listed $300k below what it's worth, then yes, all things being equal it should sell for $300k over asking. I don't see what the big deal is there. I actually cringe when I hear buyers act surprised or shocked when something sells for $X over asking, with the emphasis on "$X over asking". I'd much rather hear them say something like "hey, that house was probably worth around $1,250,000 and it sold for $1,300,000. I guess someone really wanted it." Who cares if it was listed at $999k?
From a seller's perspective, consider this - if buyers are expecting things to sell over asking, would it be a smart thing to buck the trend, be "fair" and just list for the price they want to see?
To sellers, this is the conversation being had:
1 - In a seller's market, you never really know what someone is willing to pay. If you think your place $1.1mill and someone out there is willing to pay $1.125mill, don't you want to know? So let's list at $999k and see what happens.
2 - Buyers who are active in the market in hot areas and price-points actually expect things to sell over asking, and in multiple offers. That's the game. So let those buyers tell us what market value really is. Why show our hand and potentially leave money on the table?
If you're a buyer out there, I know it can be frustrating. I know paying more than what someone is asking for feels wrong and you feel cheated or taken advantage of.
But rather than get emotional or hate the game (or worse, wait for things to "calm down"), try this - just assume every property with an offer date is listed for $1. Ie - The list price is irrelevant. Then we go house or condo hunting with the mindset of determining what the property is worth to us and forget about teaser list prices.
Take emotion out of it and don't focus on the fact that you're paying "over asking". Do your research and offer what you feel is market value. Just remember - the market moves too quickly and there is too much demand to try and "get a deal". If you truly and strongly believe a property is worth $X and should sell for $X, don't get cute and try to offer less than $X.
You have to be honest with yourself about what something might sell for and be willing to step up if you want to be successful.
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Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)