February is over and many home buyers will be happy about that. It was a very unusual February in Kitchener Waterloo and in our local real estate market. Below is a recap.
As you may know, I have a spreadsheet, several actually. Since late last year, I’ve been keeping track of properties that my clients are interested in. The idea for me is to be able to better predict what the selling price of homes we visit and I research will sell for. If I can get good at this, I will be able to advise my clients what they should bid to win and thus win more homes.
February was nuts, especially at the end of February. I think the warm weather brought the buyers out and with our extreme lack of inventory, prices rose significantly. There was lunacy in Laurelwood, bedlam in the freehold townhouse market and pandemonium in the under $400,000 market. And if you were in had a freehold townhouse in Laurelwood for sale for less than $400,000, you could just sit back and enjoy the spectacle.
In Laurelwood many homes that we looked at went more than 30% over asking price. There were two that went for more than 40% over asking price which is doubly confusing because by my estimates, one place was only priced 16% too low. The other was priced $100,000 less than an almost identical home nearby.
(More on that below)
Open houses in February were like cocktail parties, but without the cocktails or the party. Actually they were more like university house parties, just after the police arrive and haul away the kegs.
So lets look back and see if we learned anything.
The February Report
I looked at 53 houses with 12 clients in February.
A few houses I showed to more than one client. That is something that rarely happens in a balanced market – showing the same house two or three times to different buyers.
In February, I put together seven offers for five clients and was successful twice. One client was successful on their second offer attempt and one on her first. One client gave up after two unsuccessful offers and after three months of looking, and two previous offers. Reality with that client was a long and bumpy ride along the learning curve.
Most other clients are just getting started.
Of the 53 homes my buyer clients and I looked at in February:
- If you had of bid 8% over list price you would have been successful 20 times
- If you had of bid between 8%-14% over list price you would have been successful 9 times
- If you had of bid between 14%-20% over list price you would have been successful 7 times
- If you had of bid more than 20% over list price you would have been successful 17 times
I could break these down further and show you the spread, but I think you get the idea. There were a couple of homes that sold near list price, but those were the exceptions, not the rule. The point I suppose that I am making is that you can pretty much forget about list price, at least you could if you were one of my clients in February.
On average, the sale price to list price ratio for my homes that my clients were interested in was 14.45% over listing price. The average list price that my clients were interested in was $471,000 and the average sale price was $538,000, which is just about the average recent sale price for our local real estate. Most of the houses I showed were in Waterloo, but some were in Kitchener. One was in Breslau and one was in Cambridge.
For 17 of those 53 homes my clients were interested enough that they asked me what I thought a successful offer would look like.
Estimated offer price
I estimate offer price based on:
- best historical comparable
- most recent comparable
- what is happening in the neighbourhood and with similar properties in the similar areas
What I found was that I estimated too low 12 out of 17 times. On average, my estimated successful offer price was 7% lower than the final sold price. However, when 30% of homes go for more than 20% over asking price I think that skews the data.
What did we learn In February?
Five things that the data indicates:
- When bully offers are accepted, the seller receives less money than he otherwise would have.
- Private sellers (who list on MLS) receive less than those who listed with a realtor. Of course, some of the losses are made up with commissions saved.
- If you are interested in buying a home in Laurelwood, give up on rationality or logic when deciding on your offer price.
- If you set the list price unreasonably low, you will receive less than if you set had set the listing price as only somewhat low.
- If you are not sure you really want the house, you’re not getting it.