Real Estate Talk:
Managing client expectations
Multiple offers and sellers’ expectations in the current market
By Joseph Marovitch
February 10, 2022
This past week, my buyer and I had an enlightening experience. We found a property that met the buyer’s criteria and price. We had been searching for property in a specific area for a few months. We found one property for sale each week priced within the market range. However, with very few properties for sale in our preferred location and many buyers, the competition was fierce, causing properties to sell above the asking price.
The difference this time was that we found a property in a location further away, where the competition was not as fierce. We made a respectable offer on the property and waited 48 hours to see if other offers would come, which would have caused my buyer to decide whether to increase the offer price or not. No other offers were provided. Nonetheless, the seller would not accept a price at or less than the asking price in the listing. We were told the seller would not even counter our offer. We were asked to provide another offer, and it had to be higher than the price listed on the Centris system.
One of the obligations of the listing broker is to educate the seller in the various processes involved in selling and keep the seller informed as to the state of the market.
This seller had expectations based on the past year’s market. However, the market has changed. Interest rates have risen causing less competition. The pandemic appears to be winding down, causing more homes to be placed for sale. In other words, supply is increasing, and demand is decreasing as interest rates rise and restrictions are lifted.
As is extremely apparent from the past year’s market performance, price is not dictated by the individual buyer or seller, it is dictated by supply and demand. Our offer was refused and we are continuing our search for the right property at a fair price.
One of the obligations of the listing broker is to educate the seller in the various processes involved in selling and keep the seller informed as to the state of the market. It is also the obligation of the listing broker to price the property so it will sell and manage the seller’s expectations so they are realistic. As a note, the listing broker did do what they were supposed to.
If the seller does not want to accept the broker’s evaluation, the seller may find another broker, or, proceed with the current broker knowing full well that a professional evaluation has been provided and there is risk in that the seller may pass on good offers and possibly end up not selling.
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Next article: Investor speculation and its effects on the market
State of the market
Interest rates rose much quicker than the bank of Canada stated. In the past two days, rates on a five-year mortgage, amortized over 25 years, rose from 2.69% to between 2.89% and 3.04%, and appear to be rising daily. With the pandemic receding, we are starting to see more homes on the market.
Coincidentally, a recent article in the Financial Post dated February 7, 2022, and written by Erik Hertzberg, indicated that rising interest rates are not reducing investor expectations and, in fact, are actually fuelling the market prior to rate hikes. This may cause investors to have a sudden shock as they begin to realize rates are rising much faster than expected.
‘Competition will likely decrease as we approach a more normalized market. We should see a more interesting and balanced market moving forward.’
With higher interest rates, we are seeing fewer buyers. Money is no longer cheap. Borrowing is getting more expensive every day. Prices are not reducing and will continue to rise. Competition will likely decrease as we approach a more normalized market. We should see a more interesting and balanced market moving forward.
Have a great week and stay safe.
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Other articles by Joseph Marovitch
Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or email@example.com
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