What’s It Worth?
After the moderate price correction we experienced in 2017, the real estate market is booming again in the GTA. Buyers (and their Realtors!) are bemoaning the frustrating cycle of offer dates and pre-emptive offers, and sellers are trying to navigate the best approach to market their property. Of course, if you’re a reader of sites like blogTO, you would think the sky is falling!
We’ve fielded questions about recent articles published on that blog we love to hate, which uses inflammatory language to hype up market conditions and provide misleading information. Let’s review some of the issues at hand, and take a look at what’s really going on out there!
Even though the Realtor clearly stated the listing was for land value/building purposes, it didn’t stop the sensationalized headlines, nor the furious public comments.
The garage sat on a lot measuring 20 x 100 ft which was severed from a much larger original property. There is of course no actual vacant land in the area for comparison purposes, however, research shows that an old bungalow on a similar lot recently sold for $910,000, and a renovated 2-storey house on a smaller lot recently sold for $1,180,000.
Even if you had paid the full asking price for this “garage” (which did not sell, by the way), you could potentially build a bungalow on the lot for around $250,000-$300,000, or a 2-storey home for around $350,000-$400,000, and end up with a fully detached house in central Toronto, with a yard and parking, for under a million dollars! Not such a crazy investment strategy.
Let’s move on to the issue of offer dates, and this other indignant blogTO post:
We will agree with their assessment that selling a property for $1.2 million over the asking price is a bit ridiculous, but the ridiculous part is the list price – not the sale price!
This massive 3-storey home sits on an extra-wide 37.5 x 110 ft lot in Playter Estates, one of the safest, most accessible, and most desirable neighbourhoods in the entire city. The house two doors down was listed in May by the same Realtor for $2,350,000, and fetched $3,100,000. It was only 2 storeys, and on a narrower lot, so there wasn’t much doubt that this newer listing would sell for an even higher price. When looking at the value, keep in mind that the lot is nearly twice the size of the “garage lot” above, in a more expensive area, with a stunning, updated home in place. Using this listing as an example of a housing bubble is just not accurate.
The funny thing is, while blogTO (and others) are flapping their arms in the air about housing bubbles and implying you’d be crazy to pay current prices, they also posted this:
Note that they are saying buyers would be “ill-advised to wait” when it comes to investing in real estate! So which is it?!
When it comes to offer dates, setting a lower asking price with an offer date is not necessarily a greedy move by money-hungry sellers. Sometimes it’s a deliberate marketing choice that can be made for a variety of reasons! Most frequently, it’s to encourage as many people as possible to actually see the property. Figuring out what the property should actually sell for is just one of the reasons to work with a professional Realtor!
We do our best to evaluate property values for our clients using a variety of different factors. With condos, even though there are average prices per square foot in buildings, factors like the view, what floor the unit is on, whether it’s a corner unit, and parking/locker impact the price, as well as variations in finishes such as flooring and counters. We have to try to attach a dollar figure value to those features and improvements by either comparing previous sales from similar units, if they exist, or gauging the approximate cost to actually add improvements where applicable.
With houses, assessments can be even more complex and subjective, because there are such a wide range of possible variables. Significant renovations are also more commonplace than with condos, however something the homeowner loves and values may not actually be an appealing feature to the general buying public. Again we do our best to research comparable properties, or assess the value of specific improvements/features when there are no comparables, and offer our opinion.
Additional factors like the time of year, the weather, and the number of similar properties currently available can seriously impact the sale price of a property. We might find a wild difference in what neighbouring properties have sold for due to a combination of considerations, so sometimes the best way to determine value is to let the buyer decide what they are willing to pay. However, some sellers don’t want the stress of an offer night, whether that means a frenzy of offers, or the disappointment of no offers. Depending on individual circumstance and timing, sometimes it makes more sense to assess a reasonable price, and just wait for your right buyer to come along.
If real estate investing were a sure thing that came with guarantees, we’d be writing this blog while sipping fruity drinks on our private island! It’s a difficult market to navigate, and it would be nearly impossible to succeed by only taking advice from flippant sources like blogTO.
So call your favourite Realtors with any of your real estate questions!