The real estate market has settled into a new phase. It slowly worked itself up to a heightened frenzy from January until the Victoria Day long weekend, but since then, the air has ever so slowly been let out of the balloon.
The climate of multiple offers on properties has lessened and what remains is buyers and sellers that are not in sync. When the market fails to deliver multiple offers which sellers are accustomed to, they are left deeply disappointed. Sellers believe it's their right to sell their house above the list price - after all it happened to their friends and neighbours just last month.
Sellers fail to grasp that the real estate market can turn on a dime. All it takes is an uptick in available properties for sale and the pendulum shifts slightly.
The market is still very much a seller's market but it just isn't frenzied, multiple offers are not guaranteed and properties may take longer than a few days to sell. But there's no reason to panic. Properties that are priced to reflect market value will sell because demand is still there.
Unfortunately some sellers, who think they're entitled to a sale over the list price which doesn't materialize, resort to increasing the asking price to the price they wanted all along. This is happening all over the city, confusing buyers even more and turning them off.
As a seller when this market transition happens, it's even more critical you work with an experienced agent. Why? An experienced listing agent does not have to wait for the media to tell him or her that the market is going into a new phase. An active listing agent knows immediately that the market is shifting because the number of showings on each of their listings is lower than it was just the week before.
When you list regularly, as we do, we have the advantage to read the market in real time and make effective pricing and marketing recommendations to adjust with the most current market conditions.
What are some of the signs that the market is shifting gears from a frenzied seller's market to a calmer one?
- There are more houses to show buyers unlike the drought of properties for sale of the last few months.
- On offer night more buyer agents begin to tell the listing agent their buyer is refusing to compete. This is the time you know buyer fatigue has kicked in. It happens every year at some point. For months buyers are on auto pilot and are making offers left, right and centre. All of a sudden buyers wake up and collectively decide they're just not going to attend the seller's party on offer night any longer.
- List prices of properties are being increased because buyers did not attend the seller's dupe party. A dupe party is defined by a seller who lists a property at a price they are not prepared to accept. Instead they list it at a low price to attract many buyers. When buyers are a "no show" at their dupe party on offer night the seller increases the list price the next day.
- More properties are being taken off the market because the seller was testing the market and obviously did not get the price they had planted in their head.
Sellers have to quickly adjust to this new reality if you need to or want to sell. Different strategies have to be employed to ensure a sale at the absolute highest price possible. For example, many agents, in a frenzied sellers market, use the strategy to drastically under list a property by 10 even 15 % because they are quite certain the multiple offers will materialize and the property will sell well above its market value. But using this pricing strategy in a deflating sellers market will assuredly leave money on the table because the mega offers may not materialize. So work with an astute listing agent that lists properties regularly because an agent who doesn't list properties on a weekly basis does not have the experience to make the most timely pricing and marketing strategy recommendations and will assuredly leave money on the table.
This market presents opportunities for buyers. It's what I refer to as "periods of pause". This is the time that buyers can possibly procure a home at a much lower price than their friends did just a few weeks ago but be smart and strategic about it.
As a buyer don't chase a property which has only one offer registered by submitting the second offer, especially if it's conditional or low, which only serves to drive up the price. In a climate of increasing inventory, another property will likely come on the market that you will love just as much.
I will give you one example of how we advise our buyer clients. We are working with buyers who saw a property listed for $859,000. On offer night our clients told us they were prepared to pay only the list price. There was already one offer registered and we knew that if our clients also submitted an offer the other buyer would potentially increase the price they were going to offer. Because our clients were not in a position to truly compete for the property we strongly recommended they pass on the house even if it were to sell to the other buyer for the asking price. The property did in fact sell for the asking price to the other buyer. If our buyer had come forth with an offer the other buyer, most likely, would have offered tens of thousands of dollars more driving up prices in an area our buyers were interested in moving in to. In a market with increased inventory, buyers do not have to act out of desperation.
We work with sellers regularly and often we have just two offers on our listings with one offer being submitted at the asking price and the second for a much higher price than the competing offer. One of the most surprising was a property listed for $1,199,000 which procured one offer at the list price and the other for $180,000 higher than the list price. The buyer's agent and the buyer, in this case, were over zealous and cost the buyer a ton of money.
So buyers - keep your wits about you, read the market carefully and work with an astute agent who has their pulse on the market, who isn't overzealous and will advise you accordingly to help you procure a property at the lowest price possible. This includes advising you to pass on a house rather than making conditional or low ball offers on a multiple offer situation because this only serves to drive up prices.
But DO proceed to buy a house during this calmer time because the market can turn on a dime to a frenzied seller's market once again. Certainly we have seen this happen time and time again and, because you remained on the sideline, you missed an opportunity to buy a property for less than you would have just a few weeks before. Buying a property now could prove be a prudent move.
Please note that property prices in all the examples above have been changed to protect all parties.