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You may have noticed this if you and your agent are doing your research on properties of interest. The agent checks the listing and finds that it was only purchased last year…AND they paid more for it than their current list price. Why might this happen?
There are a number of reasons. First of all, though, I’m going to repeat myself (again), and I’ll keep doing so. Asking price is a marketing strategy. It’s not a reliable indicator of what the seller expects to receive, or what buyers will be willing to pay for the property. In addition to data such as what similar properties are selling (and listing) for in the neighbourhood, listing price is also set to garner attention and to drive interest and showings. More showings typically equal more offers – and multiple offers tend to net a higher price.
So, having set this lower price, why SO low? First, the seller may have to sell. They might not have a choice. In the seller’s market we are experiencing, it’s a good time, and they may still hold for offers (looking for multiples), because one reason it’s a good method to net the highest price in the shortest time. Pricing the property low will gather a lot of interest in a choice neighbourhood – you can be sure that every buyer interested in living in Beautyville will be clamoring for an appointment to view, and hoping their bid will be enough. Reasons someone may have to sell also include family or health issues, relationship status, or work transfers or new jobs. And, of course, given rising interest rates and growing household debt, there’s always the chance that their costs have simply gotten ahead of them and they don’t feel they can afford it any longer. There’s also the possibility that they’ve discovered something wrong (especially in an older home) that they can’t fix, or can’t afford to. Normally that should be disclosed by the seller, but there’s a chance that it won’t be.
Your best guide is still to work with your REALTOR© to look at sales data for the street, condo building, or neighbourhood of interest. If something looks too good to be true, it probably is. Prices are on the rise, and that pattern is bound to continue for as long as demand is outstripping supply. In order to keep from being continually outbid, look at what other homes are selling for in the area, and aim within that range – unless there’s something obviously wrong that you need to allow for.
Often I hear the term “forever home”, especially from first-time buyers. It’s a myth. Even my grandparents didn’t always live in the same house for their whole lives. Many buyers will re-sell a home, whether by choice or by chance (like the above-mentioned life changes) within a five-year period. So make sure the home is going to serve you for five-to-ten. If you’re lucky enough to make it work for longer, good for you! At least by then you will know whether it is still working (or whether you can turn a tidy profit and move into something that suits you better). So when you see that house and wonder, why are they selling so soon – do your due diligence and find out whether it will work to your advantage. Just don’t expect any magical unicorns.