We’ve had many buyers reach out over the last couple of months with some interesting and pressing questions about recent stories in the media. So we thought we’d tackle a few of the most common questions here today.
Q: There was a story in the paper about some buyers offering $400k over asking and still missing out on the house. What’s up with that?
A: First of all, if this is the story I think you’re talking about, that particular home was priced well below market value. I also spoke with the listing agent who told me that story was misrepresented. Obviously, there is a lot out there in the media, and it’s important to remember that what you read isn’t always the full story. To know the realty of the situation, speak with your realtor. A home could be listed for $300k, and then eventually sell for $800k. That doesn’t mean buyers overpaid. It means the home was listed way below all the comps.
Q: We keep hearing about houses selling for over asking in bidding wars. Why would we pay over asking price? A house is listed at a certain price. Isn’t that what we should pay?
A: Short answer, no. These days, listing price is a marketing tactic as opposed to an indicator of fair market value. Buyers will often say: a property isn’t worth that much. However, a property is worth whatever someone is willing to pay for it. Working closely with a realtor will help you wade through the particularities of buying.
Recently, there have been a few homes in Ottawa that were listed for $1. Obviously, those houses aren’t worth a loonie! This is all marketing. These tactics create buzz and draw more buyers to the house. My point is, don’t get stuck on the list price or the percentage over asking. In this market, you really need a buyer agent to help you navigate these waters otherwise you’ll keep submitting offers on houses you think you can afford and then losing out.
Q: I read a story in the paper about a guy who missed out on a house because he had a home inspection clause in his offer. Are you saying that we can’t do a home inspection before buying?
A: No, we encourage buyers to do home inspections; however, you need to plan this before submitting an offer. Having a qualified home inspector review the property in advance to submitting your offer is a prudent step. Sometimes, the seller will have an inspection done before marketing the property. Other times, buyers will have an inspection during the marketing period before the offers are accepted. Sometimes buyer will take the risk, but this isn’t something we advocate. Again, that article was misleading, because the buyer could have done a home inspection before submitting an offer. Obviously, if you pay for a home inspection, and then you lose the bidding war, then that’s money you’ve lost. That’s why a knowledgeable realtor is important. You want your offer to win the bidding war.
Q: This is pretty basic, but we keep hearing about bidding wars. What the heck is a bidding war, and why would a seller want to sell their house this way? A lot of stories are making it seem like bidding wars are the fault of realtors. Is that true?
A: No, it’s not our fault! A few years ago, we were in a buyers’ market, and we didn’t have bidding wars because there were so many homes to choose from. Now, the supply is so low and the demand is so high which causes multiple people to want the same property. In order to receive the highest amount for a client, a seller agent will hold a presentation date. This allows prospective buyers to view the home within a certain period (usually 5-7 days). During this time, prospective buyers can also perform their home inspection.
Not all sellers like this tactic; however, most prefer it because it allows their home to sell for the highest price. We do have clients who want to list their home at fair market value (or sometimes even over fair market value), but these are all strategies we can discuss with you.
All that to say, the demand is so high right now, and we (as realtors) don’t believe we’re to blame for driving up prices. We’re legally obligated to help our seller clients get the most for their properties, and buyers are so desperate for a home that they will throw as much money as they can just to win. Trust me, we’d like nothing more than to have a balanced market. The solution to the issue we’re having in Ottawa now is about inventory. There are individuals and organizations sitting on major parcels of land that remain under developed, and funding and building more housing will be key especially considering how our population is expected to grow in the near future, but that’s a conversation for another blog post!