I headed around a few open houses on the North Shore on Sunday.
Fair amount of traffic, though less than two weeks when I last ventured out.
At one house I had an interesting conversation with the realtor. He informed me on entry that the house was now listed below the current market price.
"Well why hasn't it sold then?" I asked.
"It will. We have a lot of interest".
"Market price is what a buyer like me or another fool is willing to pay".
"Well, it is priced significantly below assessed value too."
I then gave my assessed value talk, which I have posted previously. Assessed prices have been frozen by the Provincial Government because prices are falling. The last thing they want is for the municipalities to be inundated with appeals as comparables drop in price. It just means the taxable amount would have to be raised or services cut.
So these assessed values are what the local government (hardly a wise judge of value as we can se from the Millenium Olympic debacle) guesstimates what the worth of a property was between 2007-2008 at the very tippy top of the market!
Since then we have had a financial crisis which has vaporized banks and trillions of dollars and has caused a tsunami of unemployment to spread across the world. How on earth can it be used as any yard-stick for measuring value?
The realtor agreed. It then became apparent that this was what the seller needed to get out at break-even since they had bought a few years ago and put quite a bit of money into renovations.
So that is how selling prices are decided..based on market value (lets guess what someone would pay for this), assessed value (which if the government hadn't frozen it, would be 10-15% less in any case) and what the seller 'needs' to get.
What I am trying to say, is if you still thinking of buying in this little spring bounce, at least judge for yourself what you think the property is worth (how about replacement cost) and what you can afford, and if your number is a lot lower than the list price. Go with yours!
This also illustrates how difficult it can be for realtors. Often it is the seller who is delusional and thinks their home is worth much more than it is and the unfortunate realtor is then left trying to defend the price to buyers.
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