Dear David,

These days, asking prices are intentionally being kept well below a property’s market value. What happens if the highest offer a seller receives matches this “undervalued” asking price? Is there a penalty if the seller rejects the offer? I don’t want to get burned. – PRICING PROBLEMS

DEAR PRICING: Thanks for a great question. I’ll start by bringing everyone up to speed on what’s happening with the market, then address a common misconception about what a seller is obligated to accept.

When today’s buyers and sellers dip their toes in the market, they get an abrupt lesson in the unique nature of local real estate prices. If a consumer wants to buy a pair of shoes, an airline ticket or a lawn sprinkler, they expect to pay the amount they see listed on the price tag. This is not currently the case when it comes to buying a home.

Since about 2016, property prices in Waterloo Region have not typically reflected what a buyer can expect to pay. Rather than being an indicator of market value, the listing price is more of a “marketing price”, designed to attract attention. As you point out, this price is often far below what the home should bring if exposed to the open market.

The pricing discrepancy is meant to build momentum. When a new listing pops up on the MLS system, there may be dozens of people who legitimately want to buy it. To capitalize on this interest, the agent will probably schedule a specific time to review offers, often a few days out, so that buyers have enough time to view the home and do their own analysis of what they would be prepared to pay for it.

Depending on the property’s list price/marketing price and how many buyers it attracts, one of several things could happen on offer day: the seller might receive a single offer, a dozen offers, or no offers at all. In consultation with their agent, the seller may choose to accept an offer that meets their expectations, reject the offer(s) outright, or to negotiate with one buyer by making changes to the offer and sending it back to them.

At any point up until a seller accepts an offer and sends it back to the buyer, the seller is free to decide not to sell their home. A seller’s position is much like that of a bride walking down the aisle: she can change her mind and reject the marriage proposal without obligation or penalty, up until the vows are exchanged. But once she says, “I do”, she is committed. Likewise, if a seller formally accepts a buyer’s offer by signing it and sending it back to them, the agreement becomes firm and binding.

PRO TIP: In a multiple offer situation, the highest offer isn’t necessarily the one that wins. Many factors weigh into a seller’s decision to accept an offer, including things like conditions and closing dates. #Advice #AskDavid #TheNegotiator

David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Moving? Get it right. Ask David today! Call or text 519-577-1212.