Could your relationship with the asking price be getting between you and your perfect home?
The Ottawa real estate market is in a strange, almost stagnant cycle right now.
Buyers have very little inventory to choose from and most homes receive multiple offers.
In turn, sellers are afraid to sell because they fear not finding a place to live once they sell their current home.
The result: Few homes for sale and continued bidding frenzies on homes that do hit the market.
This is happening for good rental properties too. Last week I was involved in offers on two rental homes that ultimately rented for more than the landlord advertised.
If you are trying to find a home in Ottawa right now, whether to buy or to rent, you may be (really) frustrated. One of the main causes of frustration I see from my clients is the relationship between the asking price and the sale price – and their preconceptions about what these represent.
Seth Godin posted this on his blog in January – and it couldn’t be more timely.
The asking price is just a starting point. That’s the most important thing to understand. In a balanced market, it will usually act more like a ceiling. Buyers will offer lower and the buyer and seller will come to some sort of acceptable middle ground.
In a buyer’s market, that asking price may drop several times before buyers even show interest.
Today, in a seller’s market, the asking price is used to attract attention. It does not represent the value of the property or the price at which the seller is willing to actually sell. It is the starting bid in an auction. But you don’t get to hear or see the other bids.
If you have ever taken part in a charity auction, you know the starting bid is arbitrary – sometimes they start low and sometimes higher – but always, an item will get way more bids and interest if it has a lower starting bid price. And sometimes people will invest enough time and emotion into bidding on an Ottawa Senators jersey or a gift certificate for a night at the Chateau Laurier that they will bid more than they had planned because they got caught up in the excitement – but the item still has the same value, whether it started at a low asking price or a higher one.
That’s what we are seeing in the real estate market today.
How do our preconceptions about asking price from our experience in buyer’s markets or balanced markets impact us? Let’s look at a recent conversation I had with my client Vesna.
This one is cheaper
After several failed offers made at close to asking price (with another agent), Vesna now understands that she must look at comparable properties that have sold in the last month or two to get a real sense of where to offer.
Yet, in a recent conversation where we were comparing two very similar properties, she said to me, “This house is cheaper”. In fact, the house in question, though priced lower, is far more up-to-date and will almost certainly sell for more than the other.
When I reminded Vesna that it’s not cheaper but simply priced lower, she laughed at herself, reflecting on the way her biases crept into her decision-making process.
The lower asking price is still playing into Vesna’s preconceptions about the relationship between asking price, sale price, and value. Vesna will offer at the top of her budget on the “cheaper” property but I’m not sure that will be enough, even though she will offer 25% over the asking price.
I am almost certain the more “expensive” one will have a lower selling price. I will update this blog post when I know the outcome!
If I can be a resource navigating these interesting times, please send me an email at Liisa@LiisaVexler.com. I’d love to chat.
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