325 Perth Avenue Toronto, sold $210,000 overasking. Why?
I’m sure you’ve heard of the house that sold for $210,000 over asking this past week (January 24, 2014) – 325 Perth Ave in The Junction sold over asking for $848,625 and was listed at $639,900. If you haven’t heard of it, here’s what The Star had to say and here is the article from BlogTO which shows the specs and pictures of the home. Basically, a pretty average looking semi in The Junction, right? Let’s talk about why it sold for so much more than asking price.
10 years ago, when there was a bidding war it usually never included 32 offers and it happened when an exceptionally good home came on the market. Now it seems this is happening left, right, and centre but the craziness this bidding war created is really something else for the Toronto real estate market.
The property in question was very obviously underpriced. I’m not a Junction area expert, but you really don’t have to be to know that $639,900 for a fully renovated and upgraded semi is from a distant past. The entire reason for this pricing was, of course, to create a bidding war (Duh). However, it seems that everyone was taken aback by the $210,000 over asking. Does underpricing work? Yes, it does, but it is risky and can backfire. The reason this particular strategy worked overwhelmingly in the seller’s favour is because a lot of circumstances aligned. Continue reading to find out what those were
Hot Toronto neighbourhood
The Junction has really taken on a whole new identity in the last few years. This is a very, very hot neighbourhood, extremely popular with new families and people getting into the market with their first house (notice, I didn’t say first property – first house). This fact alone, ensures an overabundance of demand for the area and when there is a lot of demand and not enough supply, guess what, prices sky rocket. New stores, new restaurants, families with babies make this a very welcoming and desired neighbourhood. Furthermore, while this area transformed it saw zero condo development and stayed, at its core, a low-rise community of houses. This factor also draws in a lot of new families that are looking for back and front yards where the kids can play and you can build a neighbourhood by connecting with your like-minded and similarly aged neighbours. Do you see a fight coming on for the idyllic lifestyle that is so popular in Toronto with the young, employed, married and growing a family?
Lack of inventory
It’s not a secret that currently, and in January of 2014 in particular, we are very low on housing inventory but we’re very full with buyer demand. This year, no buyers are waiting for the traditionally active spring market; they started looking for property as soon as 2014 began. This shortage of homes for sale created something similar to a piranha feeding frenzy around this reno’d home – finally, a real gem to look at and a great opportunity. The timing of the sale undoubtedly worked in the seller’s advantage as there is a very small number of viable options to look at in Toronto especially when a house in a popular and family oriented neighbourhood comes along.
This is another big contributor to the incredible $210,000 over asking selling price. A lot of homes in Toronto are old and outdated and in need of repair and upgrading. Moreover, I (and my colleagues) consistently meet buyers who want a turnkey ready home, so what does that indicate, again? Supply and demand are not aligned once more. We have a low supply of fixed and ready homes and A LOT of demand for renovated properties. Here’s the thing. Buying a home that needs some work (I’m not talking about a gut-job, I actually mean some work) is a much better financial choice than buying a spanking new one, BUT, a lot of people don’t think that way and even if they do realize it, they’d much rather pay for the comfort of moving in right away instead of keeping those extra tens of thousands of dollars in the bank account. The full renovation, upgraded finishes, stainless steel appliances, basement “nanny suite” with a separate entrance, three bedrooms, big backyard, sunroom studio, tasteful design, are all a God send to those looking for renovated properties.
What conclusion can we draw from this sale? The people who bought it knew what they were doing and when all factors line up in your favour, you’re a very lucky seller. Don’t take this sale as “the new rule” of Toronto real estate this is more of an anomaly than anything else. This is not to say that $150,000 over asking is super rare.
At the end of the day, if someone paid that much over asking for a house – they made that choice willingly (hopefully no one forced them) and a house is only worth as much as a buyer is willing to pay for it. This saying works for all types of real estate markets.