Toronto is a hot market when it comes to real estate! Yes, there are many buyers out there and not as much supply. What's more, with everyone trying to own a piece of real estate these days, we are constantly seeing infamous bidding wars on almost every property.
We see the "Sold Over Asking" line on all the signs—but what does it really mean? Now, as a realtor myself, I understand that listings are not as simple as they can seem. They require a marketing plan with a strategy and one aspect of this can involve listing properties well under the market value of the property.
Consumers need to understand something very important in the real estate market: The listing price is not the market value of the property—at least not at all times. The listing price is simply a marketing tool. Sellers have 3 options when they list –list high, list at market value or list low.
When listing high, sellers need to know that they are going to need to bring down the price when negotiations take place. When listing at market value – they are being straightforward. When listing lower than market value, they want to attract a bidding war!
A bidding war definitely sounds like it can be great for the seller – but a closer look will tell you that houses are only being sold at market value or slightly higher depending on how the property shows and the number of interested buyers for that particular house.
So how come every sign shows "Sold Over Asking"? For example, if a property is valued at around $725,000 and the listing comes out at $599,000 and ends up getting $725,000 – is it really sold over asking? I mean did the seller really ask for $599,000 and did the agent really get them a significantly higher price? Absolutely not!
Listing low is a strategy used by agents in an effort to create a bidding war situation, but the outcomes are not always the same. The constant "Sold Over Asking" slogans, however, alludes to every property on the market being bought at prices that are higher than their value – which is incorrect.
Marketing campaigns used by agents don’t always paint the true picture of market conditions. This results in sellers thinking they are going to get more than the market value. In fact, I'm going to say some agents simply don't even know how to effectively evaluate a property in order to come up with its market value and simply list it a lot lower.
Listing low can sometimes negatively impact the sale of the property – especially if a property isn't sold as intended. For instance, when a house starts sitting on the market, buyers tend to wonder if there is something wrong with it.
Remember, when you interview a realtor (for those who actually do this), ask them how they plan to market your property and what their marketing plan is.
Want to learn more about strategically marketing your property? Let's chat!
Feature image source: The Toronto Star.