Why are list prices and sold prices so different? Notes from the chat widget…

notes from the chat widget
When I’m at my desk, I often keep my chat widget open. It seems funny, but I actually like the interruptions.

Interruptions to chat

When I’m at my desk, I often keep my chat widget open. It seems funny, but I actually like the interruptions. 

It used to be, when I worked in an office, my day was a series of interruptions of people stopping by my desk and phone calls. Those are two things are hard to ignore. It is also hard to ignore texts (chats) and to some degree email, though email is the easiest.   

When you are on my website, I encourage you to say ‘hi’, even if you don’t have a question. I like the connection. I like the interruption. And if you do have a question, do not hesitate to ask. All questions are welcome. 

For example, last week someone popped up and asked what exactly a Bully Offer is. My initial thought was, “Really? You don’t know that?” But then I remembered that if you were just getting started in your search for a new home, there would be a lot to learn. You have to learn the fundamentals first.  

The other thing is, just like your teacher used to say, “If you have a question, chances are someone else has the same one too.”

With that in mind, I had the following exchange just now and I thought I could share…

Are agents intentionally pricing below market value?

[15:07]Visitor: Hello: Why is there a large disconnect between listing price and sold price? Is this because agent are underpricing below market value?

[15:08]Keith: Yes. Our current pricing practice is to price below market value, and hold off at looking at offers for about a week.
[15:09]Visitor: By how much: 5%, 10%, 20%? What is the norm these days
[15:10]Keith: The average considering all local real estate is currently about 10.5%. But it tend to be higher for lower priced properties and lower for condo apartments.
[15:11]Visitor: For $800,000+?
[15:12]Keith: Earlier in the year, properties in this price range was lower than 10%.
[15:13]Visitor: Does it mean that some houses end up selling at just market value despite the bidding wars?
[15:16]Keith: Yes. Some even sell 2% or 3% below list price. For example I’ve noticed that if the listing agent is from outside our market, like GTA or Guelph, they tend to price higher than local agents would. 
Also some local agents who list a lot of homes tend to price 20-30% below market value. All in all list price is a poor indication of market value.
[15:16]Keith: How long have you been in the market?
[15:17]Visitor: Isn’t this practice then counterintuitive or even counterproductive and only causes confusion and waste of time to agents, sellers and buyers?
[15:20]Keith: Most local agents and buyers and sellers who have been in (or watching) the market for a while understand that list price is often on average 10% too low. The problem, confusion, waste of time occurs when a home is priced 20-30% too low.
[15:22]Visitor: We’ve been on the lookout for five months but completely surprised at the practice. Even an agent friend of ours couldn’t advise better!
[15:25]Keith: It’s been a crazy year. However most agents believe that we will see slower price growth over the next six months. I have some advice. If you do not already have a spreadsheet with list price and sales prices of homes you are interested in, start one.
[15:27]Visitor: Thank you for the valuable input. We’re renting right now and may be so for sometime… Yes, we have been watching list versus sold prices and very often in awe as to the difference between the two…
[15:28]Keith: Have a great day.
[15:28]Keith has left the conversation

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