If you haven’t heard, Hamilton’s Real Estate market is on FIRE! There is a strategy of under pricing properties to create an even more frantic bidding war. What are the pitfalls of under-pricing your property in a market like Hamilton is experiencing now?
Properties are selling for over asking price even if they are priced “bang on” or at least what we perceive to be “bang on”. So if the property is under-priced as well, there is a strong possibility that the difference between asking and selling price will be quite large. At what point does this trigger red flags and an appraisal from the lender or the insurer? That is the million dollar question. It depends on the location and the perceived risk that the area poses to the lender or insurer. I’m sure there is a formula so that when the details are input into the lender’s system, it can either go through without a hitch or trigger that appraisal.
So what if an appraisal is called and the property does not appraise at the value it sold for? If there is a condition on financing the buyer could walk away from the transaction. In this case at least you would know within the time allowed for that condition. Usually 3-7 days. What if the buyer came in without a finance condition because they were in competition and “really wanted the house”? Here is where is gets tricky. The Buyer needs to understand that if the property does not appraise at the sold value, they will have to come up with their down-payment as well as bridge the difference between the appraised price and the sold price. This can be quite significant.
There may be a temptation to accept offers without a financing condition but I would want to be assured that the Buyer is of course pre-qualified, can come up with extra cash if there is a shortfall with the appraisal and has been advised that this is a possibility. Some times it is better to deal with a short finance condition and make sure you know what to expect as opposed to getting a surprise down the road when you find out the Buyers have been unable to procure financing. Make sure you and/or your agent ask the questions that need to be answered to protect you.
In my opinion, do not under-price your property to create a crazy bidding war. Price it right, with a good chance of still creating that bidding war. Without sending up RED FLAGS to the lender because you have a sale price that is way higher than the asking price.
If you have any questions about this or want other Real Estate and Hamilton area information, contact me at 905-574-4600 or email firstname.lastname@example.org
As promised here is some advice on buying a home in Hamilton during this incredible booming market.
First find a Realtor® you trust and feel comfortable with and sign a Buyer Representation Agreement. Make sure someone is actively searching for you and is “on it”. If you attempt to search yourself, you will always be a step behind. It’s tough for us and we get the information the instant it is uploaded to our Association.
Second, set your search up slightly below where you qualify in this market. Normally we would search just above where you qualify knowing that the homes will sell slightly below asking. However, in this market in Hamilton it has become “normal” to sell over asking so this gives you some wiggle room to offer over asking if you are not looking at your max.
Third, don’t be afraid of competition. Look at the comparable sold properties with your agent and decide what you feel the house is worth. There are some who strategically under price their listings so don’t get too caught up on the listing price. What is the value? More importantly, what is the value to you? Does it meet your needs? What are your short and long-term goals related to real estate? What about the area. Are there any external factors that affect the value beyond the regular increase in the market? What is happening there?
What is the magic number in competition? That is always changing and is different in every scenario. A question I would ask you after looking at the comparable properties that are similar and have recently sold is; What is the number that you will be okay with if you lose by a little and if you win, you won’t feel you overpaid? That is the magic number because it’s the one you will be comfortable with win or lose.
I know it is extremely frustrating but this is happening because you are in the hottest market in Canadaand there is no sign of that changing. Hamilton is an excellent place to buy and a great investment.
Lastly, don’t let you emotions get the best of you. Find a Realtor® you trust and have faith. It is a difficult process but a worthwhile one and the rewards can be fantastic!
Initial reaction, awesome! Not so if you are a prospective buyer trying to purchase Real Estate in Hamilton. Hamilton’s market is booming due to affordability. We’re just trying to catch up. We are seeing a huge influx of buyers from the GTA. Then of course there is our diversification, growing grassroots arts and music community, loads of green space, trails and waterfalls, improved commuting options and just the fact that we are getting on the map. The best kept secret is no more, the word is out. A strong commitment by city and developers to urban revitalization. Hamilton is a fabulous place to live, work, learn and play and a great place to raise a family. A great place to invest with no sign of slowing down. Continue reading Hamilton, Ontario | Hottest Real Estate Market in Canada
My clients will ask “what is the right price to offer in competition or when competing with multiple offers in Real Estate?” I tell them the right price is the one where you say
Scenario One: I come back and say “you lost” and you say “that’s Okay because that’s what I was willing to pay” and or I say “you got it” and you are thrilled.
Scenario Two: I come back and say “you lost” and you say “I would have paid a little more” or I say “you won” and you think, “oh no, I paid too much”.
Having said that you must consider that in competition you will likely pay at the top end or over the current perceived market “value”.
By the way market value is defined as “what a willing educated buyer will pay without undue pressure“. Is competing in multiple offers undue pressure ? Not if you keep your head on straight and make calm educated decisions.
Does this house meets and exceed my needs and maybe even my wants?
Is what I’m looking for hard to find?
Is time on my side?
Are you in an area that will likely continue to go up in price at a fast pace?
Is your plan to stay in the house for a reasonable amount of time? Say over 3 or 4 years.
If it’s the perfect or near perfect house and time is of the essence then you just might just have to bite the bullet and pay more than you think the house is “worth” (remember the definition of value).
You will get the house you want and need and over time your perceived over-payment will be absorbed.
You have to adjust your behaviour in competition based on your own situation after answering the questions above.
One thing to remember is you have complete control over what you are willing to offer on a house you are interested in. As long as you are willing to put your best foot forward, there is no harm in trying. If you don’t put an offer in on a multiple offer situation, you know you definitely won’t get that house. So take your best shot and rely on the advice of your local trusted Real Estate professional.