If you read the headlines of homes selling for more than $200,000 over the asking price, the first reaction is usually yes. But I disagree. If you do your homework and search the sold statistics for the street and neighbourhood, in most cases you’ll see that the buyers paid market value.
In today’s Toronto Star article (the link is at the end of this blog entry), there’s a home in Roncesvalles listed at $649,000 which is expected to sell for $800,000. It’s a detached 5 bedroom home that needs a total gut job. The article says the total cost to renovate will be about $400,000. That estimate is a bit high, but even it does cost that much, it will bring the value of the property up to $1.2 million.
MLS stats show that a totally renovated home on the same street, a detached 2.5 storey house on the same sized lot, sold for $1,450,000 within the last year. So $800,000 for the dilapidated house is about right.
We’ve also seen a couple of other homes in Riverdale sell for $200,000 over the asking price this week. Both are detached three-storey homes that need total renovations as well. Again, if these properties were to make headlines in the newspaper, people would be shocked. But the reality is, the houses sold for the right price.
Underpricing is just a marketing strategy, and in my humble opinion, works well with estate sales and homes that need total renovations. For the most part, regardless of the listing price, homes sell for what they’re worth.
Here’s today’s Star article on the Roncesvalles home. http://www.thestar.com/business/real_estate/2014/01/28/roncesvalles_house_is_among_the_best_and_worst_on_market.html