Chasing the Market Down: Seasonally Over-priced Homes in Edmonton

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The phenomenon of seasonally over-priced homes helps to explain how some homes did not sell throughout the busiest real estate sales period in years, and are still on the market. (I want to say the busiest in decades but let’s be honest, I’ve only been doing this for seven or so years).

Generally what happens is that a seller lists too high, so then interested buyers view the home but quickly move on to a more valuable purchase. The overpriced home sits, and the longer it sits, the less it values, especially in this market. Months go by, and eventually the seller decides to come down in price. But the price still isn’t reflective of market value, and now there is a stigma surrounding the home. What is wrong with it? More time goes by, and the seller comes down in price again, but now it’s too late. The days on the market have added up, searchers online are tired of seeing the duplicate listing repeatedly, and more people are asking what is wrong with it.

That brings us to the fall and winter months of the Edmonton real estate market. This is when there are a lot of these listings. These homes are absolutely a mixed bag. We were in one where a new agent got the listing, and the price was reduced by 60K. That old, stale, overpriced listing is now desirable. We were in many more where the prices of the homes were still out of line with market value, and the owners and their agents were still hoping against hope that their price was now in line, and the right buyer was just around the corner.

We engaged one family, they had a harder-to-sell home. Here is how it looked:

  • Bungalow <1,000 sqft
  • Highly desirable south-central neighborhood
  • Corner lot with only a side yard, no backyard, kitchen window looked at the wall of the neighbor’s house
  • Partially renovated, only two bedrooms upstairs, and quirky basement. Purchased in the last decade in much the same condition it is today with a basement reno
  • They paid in the mid 300s, are now asking the high 400s

It was one of those listings where your client asks you to view it, and you die a little bit inside while saying yes, as you can see straight through the internet that this listing makes no sense. It had been on the market for 60 days, looked expensive, and lacked any features that would appeal to the area’s target market.However, when we went through it, the buyers actually loved it. They asked what I thought, and I agreed it was a lovely home, because at the end of the day, my clients’ preferences take priority, so if they like the house, then I liked the house. I also adored the buyers, so I was more than happy to start negotiations when they asked me to go ahead on their behalf.

The negotiation went something like this: “We love your home but feel like you are priced high; we are willing to pay X number of dollars. We are professionals who live locally, are pre-approved, and can provide a sizable deposit while we pay to have the home inspected.”

The agent’s response: “Based on the comps in the area, we are countering 10K under the list price.”

She (the agent) then provided what she believed to be comparable sold listings. There was a total of six listings: four that sold in the last six months in the area, and two that were for currently for sale. Our opinions varied largely so negotiations continued.

Our response: These three “comparable” homes you provided are over 20% larger, extensively renovated, have three bedrooms upstairs, and traditional backyards. They sold for $396, $401, and $374 per square foot. Your folks are asking $500 per square foot. We offered $459/sqft because the buyers love the home. X  listing isn’t comparable, and it’s been for sale for 208 days, among a lot of other things. Y  listing can’t sell either. Z  listing supports your price; a bigger and better lot, but worse garage and finishings.”

There was a bit of back and forth but we concluded that if renovated homes in the area are selling for +/-$400 per square foot, these homes also have popular floor plans, lot configurations, and sell quickly. $459 per square foot right before the snow flies with a three-week possession is a gift for everyone. Despite this, the sellers nor their agent would budge or even acknowledged that they may be out to lunch on price. One of the buyers commented that even when “low-balling” the sellers, the buyers were willing to pay too much. Negotiation dissolved.

I do not pretend to know everyone’s motivation for a price, agent selection, or whatever, but what I can say is, it is worth it to shop around an area to become familiar with what is for sale, what is selling, and for how much. A little research and experience can go a long way!

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