Just recently, a listing priced at $259,900 was sold unconditionally for $295,000. That is $35,000 over list price or 115% of list price. I recently had clients competing for a listing, which is not unusual, but in this case they were competing to be a “back up” offer, which is an offer you can make to a seller that already has an accepted offer. Peterborough is in a sellers’ market and that means there are more buyers than there are sellers/listings and the advantage is with the sellers due to supply and demand. This trend seems to show no signs of slowing down and all the Realtors and brokerages advertising a “hot market” are not making this stuff up. The market for sellers is the best it has ever been in Peterborough, with multiple offers and over list sales prices which is great but it can also mean very different things to buyers, sellers and particularly those undertaking both.
Sellers can expect to sell quickly and fairly easily as long as there are no major issues with the property and the pricing is not out of range of reality. Pricing is, and always will be, paramount in determining the outcome of your listing. Sellers are opting to hold offers until a certain date, giving more buyers the opportunity to out-bid each other in competing offers. There are a few dangers in this approach. The first being that even in a hot market, there are no guarantees of competing offers… or any offers. Sellers can find themselves still on the market the day after the deadline for offers has come and gone. Then the price becomes subject to scrutiny from buyers and you are much less likely to get the asking price or above asking price.
The other danger is a “bully offer,” which is an offer that arrives before the date and time given and demands to be entertained. These offers can become very tricky for the seller. Some choose the traditional “first come first served” approach to listing, usually when they are uncertain of their value or the demand for their property. My best advice would be to consult a Realtor before listing and ask those questions.
Now for the buyers. There are some people who have (through no fault of their own) been unable to successfully purchase a property because each time they are losing out to better offers. They may have tried five or six times and are about to give up. Who can blame them? Some buyers have a budget and an affordability threshold they cannot cross or financing will not be available to them. In a competing situation, their hands are tied in terms of price they can afford. This applies to most first time buyers but also many second and third buyers if they are moving up in price range.
My best advice would be to know exactly what your finances are and to determine your absolute limit, prior to entering the market to purchase. As hard as it can be, knowing when to walk away is important. It is easy to get caught up in a bidding war when other people want the same property you do, but it is always prudent to remember your goals and your limits, even if it means passing and waiting for another property.
Buying and Selling
This brings us to the hard part: buying and selling in this market. The obvious benefit is that your property will likely sell when you want it to but now you may be one of the buyers competing for your dream home. Again, plan ahead and know your goals and limits. There are a few options that can make the buying and selling transaction a smooth one for you and your family.
The first rule is that no one will be homeless! Many people still think that can happen, and technically it could. But not many sellers would be willing to take that risk, nor do they.
Some are taking a risk by purchasing a property before even listing theirs. They try to negotiate a longer closing date that allows them to list their house and have it sold in time to avoid owning both properties. This can only be done with approval from a lender (unless you are able to financially afford both properties without involving a lender).
Another option is to have your listing on the market when you have found a property. Even that is difficult when listings are selling in a matter of days (or even hours like my last listing). Most people feel more comfortable listing their property with the condition that the buyer must give them 10-30 days, depending on negotiations, for the seller to find a home. This allows you time to find and purchase a property within that time frame and, if you cannot, your sale does not move forward. This can also lose buyers if they don’t have the luxury of time to wait for you to find a home.
The most common approach is to include the sale of your property in a condition of your purchase. Yet, in this market, more and more offers are not able to include that condition (or if they do the sellers pass on their offer), due to competing offers and many buyers willing to have unconditional (or cash) offers in order to out-bid others. This is a very tricky aspect of Realtors’ relationships with buyers. On the one hand we are attempting to serve their best interests by protecting them in an offer. On the other hand, if they tell us they absolutely do not want to lose this property and want to offer with no conditions, ultimately it is their decision to make. Allowing a client to submit an offer with no conditions is not the preferred route for anyone, as popular as it has become. The risks of not having the opportunity to check into financing, insurance and, most importantly, a home inspection are substantial. Realtors are not recommending this approach but buyers are tired of competing and losing and are directing us to make these types of offers.
All in all, there are different approaches to selling and buying in a sellers’ market. For the best results, consult a Realtor before you get into the market. It is what we do every day and good advice can save you time, money and most importantly…peace of mind.
June 7, 2016 Editorial for West End Neighbourhood Magazine