QUESTION. Can you explain why the Heck did my sister paid more than the advertised price for her house?
Congratulations to your sister - she apparently has emerged the victor in a "bidding war!"
I have been asked this question so many times that I have decided to write this blog post. It is likely the case of more than one buyers wanting the same property your sister wanted. This is not typical of most markets* but in recent years and especially in 2015 the demand has been very high across most GTA markets. Therefore it was not uncommon for many home buyers this year to actually "fight with their wallet" (like your sister did) to get the property they wanted.
I can safely bet that your sister would have preferred to negotiate for a less-than-list-price for her house but with the entry of other buyers wanting the same house, she was drawn into a battle.The true winners of a bidding war are the sellers and the listing agent. Bidding for a property is not a great situation to be in, in some instances egos collide but the deepest pockets usually prevail.
For the economists among us it's the law of Supply and Demand at play. You did not elaborate much so I am not sure which market* area your sister was competing in but the law of supply and demand works the same in every market, every time; if supply is low and demand is high then price will rise. The reverse is also true in the real estate market. In the past good ole days, when inventory of resale homes was high and the demand low, buyers then had the pick of the litter and thus could easily negotiate really good prices for their homes but this has not been the case in recent years.
The obvious cause of this bidding war is the shortage of desirable resale inventory.There are many buyers who were not able to enter the market this year due to the high demand which ultimately develops into a bidding war. There were also buyers who wanted a detached home but had to settle for a semi or town because the price was prohibitive for the dream home they wanted.
The market usually cools down over the colder months and picks up back in the spring but that is not the case so far -YET! At the time of writing (December 6) the resale inventory has not improved in the geo markets that I work in and there are STILL bidding wars raging.
My advice - practice patience don't get forced into a bidding war thus paying beyond what you can truly afford - you may win the battle but lose the war (home). You do not want to find yourself in a situation down the road where your mortgage payment becomes more than you can comfortably manage.
Need one-on-one consultation please click here to send me a text
*Markets is used loosely to mean the time of year (spring, summer, Fall Winter) that a buyer enters the market. It is also used to describe the actual geo-market the buyer is operating in
( i.e Durham Region, Toronto, York , Peel etc).
CENTURY 21 Percy Fulton Ltd., Brokerage*