The housing market is HOT right now. Prices are high, interest rates are low, and houses are selling quickly. We’re also seeing a record number of properties still being sold well above their listing price. If you take a look around your neighbourhood you’ll probably notice that the recently sold house on the corner now has a ‘Sold Over Asking’ sticker right on its original For Sale sign!
How does this happen, and what does being sold over asking mean?
What does being Sold Over Asking mean?
Sold over asking is exactly what it sounds like – the property was sold for a value greater than the price it was listed at. This is the hot thing right now for sellers to aim for, so don’t let some of these advertising tricks fool you too much. A house listed at $475,000 that sells for $475,500 is technically considered sold over asking too.
However, in today’s real estate market, we are beginning to see houses sell for upwards of hundreds of thousands of dollars above the listing price for some time now. We’re also seeing record high resale levels right now. This means more people than ever are trying to capitalize on high sale prices and low interest rates.
Why does this happen?
There are a lot of different reasons why a property could sell for above its asking price, but a huge factor right now is that the demand for houses outweighs the supply. There are more buyers out there looking to purchase a property than there are properties to purchase. So when a new house hits the market, there’s already a lineup of hungry buyers waiting to bid!
Another reason we’re still seeing right now is that properties are being listed below their actual value. This one is a bit of a sales tactic that realtors use to create more interest in a property, based on current market trends. It makes the property appear much more attainable to more buyers, but if the house had been priced accordingly, it would be out of their price range and they wouldn’t have even looked at the listing. Now they see the property, think it’s a great deal, and will try their best to put in a competitive offer.
This is where we’re seeing a lot of frustration coming from potential buyers, when they put in an offer at the top end of their budget, well over the asking price, and are still losing out to other buyers. It can feel so frustrating when you’ve put in an amazing offer and still find yourself outbid, but the reality is the property sold for a lot closer to its appraised value.
Sellers often will hold off on receiving offers until all prospective buyers have had a chance to see the house and instead do an offer presentation on a set date, rather than just review and accept offers as they come in. This leads to what is called blind bidding.
It’s called blind bidding because you’re submitting your offer without knowing what any other potential buyers are bidding. With no way of knowing what other buyers are willing to spend, you have no choice but to go in with your best possible offer right away. This is another huge factor that’s driving up sale prices because there isn’t room to bargain or come back with a counteroffer.
For example, Sam and Sally find a house that’s listed for $500,000. They have been pre-approved for a mortgage of $650,000. Their realtor lets them know that 10 offers have already been registered on this house. It’s their dream home, so they are willing to risk it all and put in an offer for $650,000 and get the house. Because they are bidding blindly, they don’t know that the second-highest bid was only for $575,000. Had this information been disclosed to them, they could have still been the top bid, but not have had to go to the top of their budget.
This is also why you might be hearing a lot about properties with 20 – 30 offers registered. In reality, only a handful of them are competitive offers. The rest are buyers bidding blindly and registering an offer closer to or even below the listing price. The reality is that most of these offers are coming from buyers who cannot afford the property, but because they cannot see the top bids to know what the house will be selling for, they have no idea.
Bidding wars and blind bidding are so tough to deal with today and they often leave you feeling discouraged. Especially when you’re at a loss for how much to bid on a house. We understand the frustration, trust me! That’s why it’s so important to work with a realtor and our team, your mortgage brokers that you trust and will be able to guide you through this crazy market.
Call Gail Sylvester Mortgages. We’ll work on your pre-approval so you can know exactly what your budget is and what kind of competitive offers you can put. Have a property in mind already? Give us a call and we can work with our lenders to start crunching the numbers for your right away! Whether it’s above or below the asking price, we’re going to make sure we help you get into a home that you not only love, but you can afford as well!