Your questions, our answers | Fair value, purchase offers and bonus

In today’s real estate market, where there are more buyers than sellers, how are prices set and how are multiple purchase offers handled by brokers? Besides, why can’t we know their content? Finally, why should we improve our offer and when will the balance return?

Emmanuelle Mozayan-Verschaeve
special cooperation

How is the initial sale price established?

Basically, you should know that the market value of a property must be assessed by the real estate broker based on comparables (type of residence, city, district, etc.) sold in recent weeks. He then presents the results of his assessment to his selling client and advises him to determine the best marketing price for his property. “For example, if I appraise a house at $500,000, I give my seller options by telling him that the best price would be $495,000 because that is the market value, but he could sign up for $510,000 or $520,000 in an attempt to fetch more money. If he decides to list his home for $500,000, one buyer expresses interest for $505,000 and another for $515,000, and the purchase closes at $515,000, the value of the neighborhood will increase accordingly,” explains Mario Lamirande, Royal LePage Au Sommet certified real estate broker. It is what the buyer is willing to pay for a property that will determine the market value.

Confidentiality governed by law

When the asks outnumber the bids, market prices rise and big money and limited terms fights ensue. “You can’t live under a palm tree in Quebec, so unfortunately, because of the housing crisis, people are caught in the vicious circle of one-upmanship, which is a throw of the dice because all offers are confidential until ‘on the date agreed to open them,’ explains Mario Lamirande. Indeed, the law that applies to real estate brokerage states that the seller’s broker must notify all parties of the number of promises to purchase received, without revealing their content. The buyer’s broker is then required to inform his client each time there is a new offer, so that the latter can improve his proposal if he wishes. “You will want to offer the highest possible price with which you are comfortable and possibly review certain conditions, because the price is not necessarily the seller’s decision-making factor”, continues Mario Lamirande.

For example, five offers to purchase are made on a property listed for sale at $500,000. They are all open at the same time on the date and time agreed with the seller:

The first three offers will be eliminated automatically, but the seller risks hesitating between the last two and even leaning towards the lowest paying one since it does not include any conditions. The transaction could probably be done more quickly and above all without having to wait for the results of the inspection or the approval of the financing.

Crush, but cool head

Pressure and disappointment are unfortunately the lot of many potential buyers these days. However, it is important to take a step back in order to properly assess how far you want to go to acquire a property and to seek advice from your real estate broker. Significant sums are at stake, but also daily well-being or discomfort. “If you already own a property, have made a good deal selling it, and if you like the coveted residence, that it is located in a pleasant location close to services as well as to your work, do not hesitate to improve your promise to purchase, especially if you plan to stay in the house for at least 10 years, because it should not lose value, explains Mario Lamirande. You can also improve the conditions for the seller by offering to pay a deposit if you are able to do so, or even to take charge of certain works listed in the description of the seller. »

Seller-buyer: when is the balance?

Mr. Lamirande replied that no one has a crystal ball and that, apart from the increase in interest rates which could cause a slowdown in the rise in prices, nothing can be predicted. The pandemic has changed a lot of things. For example, grandparents have moved to be closer to their grandchildren, families have left the city to work remotely and live in the regions. It’s people’s lifestyle choices that always influence the real estate market, and that’s hard to predict.