My wife and I have started looking to buy a little place of our own so that we can get out of the rental market. So far we've found two places that we thought were nice enough to buy, but the big city market has shown us some of its uglier sides.
In the first case we found a place that we liked and fit our price range. The comparable units in the same building indicated that the pricing was fair. Perhaps it was 3% over-valued because of the repairs it needed, but maybe it was 6% under-valued based on its location in the building. As with everything that is priced well in the City of Toronto, more than one person was interested in buying it. The selling agent, unfortunately, completely botched the process, but still managed to secure a ridiculous price on the place.* The number of interested bidders suggested that the property would go for 7.5% over the listed price, which was an additional 1.5% over the value indicated by the comparable units. In other words, just based on the number of interested people, the unit was going to establish a new price point for the building (assuming future sales followed the trend, rather than treating it as an anomaly). As it turns out, someone was interested enough to go 15% over asking price. Absolutely absurd! I guess, as a basement-renter, I'm just not picky enough about where I live to understand loving a property so much that you're willing to risk over-paying ... or maybe, as a basement-renter, I love saving money too much to understand the non-misers out there.
The second adventure is similar. A place we like has been listed for over a year. In Toronto, that's a sure sign that your property is over-priced, but it's not an indication of why it's over-priced. Is the seller greedy? Is there a neighbour problem? Is it a unit that only a basement-renter could love? In this case, the number indicates a greedy and unmotivated seller. The unit was first priced between 25 and 35% higher than the closest comparable units had previously sold for. The seller has since dropped the price twice so that it is now between 15% and 25% over-valued. When asked why they think this property, which needs a new kitchen and bathroom and also needs to have the floors refinished, is worth so much the selling agent (who happens to be related the seller) points to a different batch of comparable units. It turns out that in this family their 1 bedroom plus den is worth as much as the 2 bedroom plus den units in the building. If someone knows the secret of communicating to this seller that an extra bedroom in this building means an additional square footage of 35% and therefore an additional 35% in price, we would be happy to have you over as our first dinner guest! If you're really lucky, we might even ask you to help us move so that we can save some money :D
Our real estate adventure continues.
* It's unfortunate that there are enough agents out there to fit the stereotypes people have of agents and used car salespeople.
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