Market Update – How Much Should You Offer?
If Wiarton Willie predicted the real estate market, the famous ground hog would have called for an early spring market this year. Buyers were out in droves in February, creating spring-like conditions in the Quad Cities (Kitchener-Waterloo, Cambridge & Guelph). Most homes attracted multiple offers and virtually every property that hit the market sold well over asking price. You may have heard of the now famous semi-detached home in Kitchener that sold for $300,000 over asking price!
There were 958 sales for February in The Quad and the average selling price soared to an impressive $730,000. Let that sink in for a minute….. The average home in this area of South Western Ontario is now worth over $700K! The average time on market for February sales was 12 days and the sale to list price ratio was 116% which means that virtually every listing sold quickly and well over asking price.
A Key indicator as we move forward into March is the number of active listings (611). Based on February’s sales volume that would represent less than a month’s worth of inventory so the extreme seller’s market will continue until either a bunch of new listings hit the market or the demand for homes starts to dissipate. I’m not going to hold my breathe on either but an injection of inventory would be nice!
What To Offer in Multiple Offer Situations
The number one question that I get from buyers is how much to offer in a multiple offer situation and without a crystal ball this is can be a challenging question to answer. There are several factors to consider. The asking price carries little relevance except for how many buyers will be attracted to the property. There is market value, which is difficult to estimate in a strong sellers’ market because it is rapidly changing. There is the price that you can pay based on your financial situation, and there is the price that you would like to pay.
Since you can’t pay more than you can afford, your offering price will fall somewhere between the last two numbers. Several factors will influence your decision: How badly do you want the property? Do you need a home, and do you believe that values will continue to rise? Only you can answer these questions and ultimately make an offer that you are comfortable with, win or lose. I would find it difficult to counsel a buyer to pay $300K over the asking price for any property, in any market but the value is truly in the eyes of the beholder.
How much to offer should be based on how many other offers you are competing with. You likely won’t know how many other offers there are until the last minute on the “offer day”. A rule of thumb that I find to be surprisingly accurate is $10,000 per offer. So, if there are 4 offers, the property will sell $40,000 over the asking price. Of course, in scenarios where there are 10, 20 or more offers, what the winning buyer is willing to pay, is anyone’s guess.
I think it’s important to remember that there will always be other homes so try to not get caught up in the craziness make the best offer that you are comfortable with and let the chips fall where they may.
Are you thinking of buying or selling this year? Call/text/email/DM me for a free market evaluation (in person or online). Put RE/MAX, the #1 brand in real estate and my 20+ years of experience to work for you!
