What makes house prices jump by $100,000?
Jar of coins labelled house fund


DEAR DAVID: I keep a close eye on house prices in my neighbourhood and have recently noticed a trend I am curious about. One home was listed at $650,000. Three weeks later, the price jumped to $750,000. My next-door neighbour listed at $699,900 and raised the price to $799,000 after two weeks (without making any improvements to raise the value). What is the thinking behind pricing a home low, then marking it up? – BAFFLED

DEAR BAFFLED: When a home has been sitting on the market, raising the list price by $100,000 does seem counter-intuitive and is bound to confuse consumers.

I suspect the sellers in your neighbourhood didn’t plan to raise their prices but may have done so after their initial selling strategy didn’t work out. In our region, many sellers start by holding offers, which means they purposely underprice their home in hopes of attracting buyers, starting a bidding war, and eventually driving the selling price to full market value or beyond.

A seller who doesn’t get an offer that meets their expectations may end up raising their list price to better reflect market value and align with what they hope to receive.

From a marketing perspective, the “price low, sell high” approach is popular, but tricky. If the gap between the low “holding offers” price and the market-value “buy it now” price is too small, buyers and their agents may struggle to figure out what the seller wants. Often, they end up avoiding any listings they feel are overpriced.

Our region is coming out of an extremely hot real estate market, which has left some sellers with expectations that are a bit beyond what the market is willing to pay. I don’t like to call it greed, but an inflated sense of value can make it harder for home sellers to be successful. Overpriced properties always sit no matter what the market is doing, and buyers will often hold back if they assume the seller is looking for more than they are willing to pay.

Sometimes the planets don’t align even when house prices are right on the money, which could mean the seller hasn’t found the perfect buyer for their home just yet.

PRO TIP: Currently, statistics show that about 80 percent of homes are still selling at or above their asking price and averaging about 112 percent of list price to sale price (June 2021). While our current market is strong, we’re not experiencing the same level of frenzy we did in the first quarter of the year. This small but distinct shift makes it critically important to fine tune your pricing strategy. If you get it wrong, you may find your house doesn’t sell. #AskDavid #Advice