We just sold our house for more than we were expecting. We received five offers that spanned $100,000 from best to worst. How can there be such a variation in price? Shouldn’t the value of the house be pretty specific? – AMAZED
DEAR AMAZED: Congratulations on hitting a home run with your sale. These days, the crazy real estate stories start pouring out with every online article you read, and every socially distanced conversation with your neighbours. A common thread is the utterly unpredictable nature of the market in 2020.
To better understand what’s happening, let’s turn back the clock to a more balanced and predictable era. Pre-2016, when a property was prepared for sale and price correctly, the seller could reasonably expect to enjoy a two- or three-week window between when their home appeared on the MLS system and when the conditions of the sale were fulfilled.
Today, not so much.
We’re currently experiencing a heavily skewed seller’s market, which means there’s a shortage of listings, and more potential buyers than homes. Back when the market was balanced, multiple offers were the exception — and these days they’re more of a rule. Bully offers can come out of the woodwork and quickly turn into multiples. Listing and selling prices can be wildly out of whack. The majority of offers are firm, and closings can be short. It’s like the wild west out there.
In your case, you received five offers, which meant that four potential buyers were disappointed and left without a house. This unhappy scenario is repeating itself day in and day out, and as the pattern is normalized, things can get weird. In the past ten days alone, I’ve had two sales that illustrate the strange new extremes of our real estate world.
In the first case, my client received a handful of offers that varied by a shocking 25 percent from best to worst. The highest offer didn’t surprise me (although it surprised the sellers), and I assume the lowest one was due to someone misunderstanding the market.
In the second case, 23 offers were received — which meant that 22 buyers went home disappointed. When the competition is this steep, buyers can get desperate. Some folks eventually decide they’re tired of losing, and the numbers go a little crazy.
These scenarios are a far cry from what we saw prior to 2016. Back then, when we had a full inventory of listings, a buyer who made an offer close to the seller’s expectation had a pretty good chance of getting the home they wanted. If that was still true, there would have been 23 houses sold in the case last week, instead of one.
PRO TIP: A balanced market has an equal volume of buyers and sellers — and is a lot easier to navigate. Waterloo Region typically has two to three months’ worth of inventory available, as opposed to the two- or three-weeks’ worth we have now (and have had at many points in 2020). Even in this environment, our market remains stable and unphased by the pandemic, and those who plan on buying will likely have to get used to it. I don’t foresee any occasion in which our inventory is likely to triple. #AskDavid #Advice