Are you wondering how it’s possible that condo prices just keep going up and up? Local agent Owen Bigland says it’s all to do with the huge demand and lack of inventory, leading to multiple-bid scenarios with offers over asking – and then agents using comparative pricing on the units that follow.
Speaking on the September 16 edition Real Estate Therapist show on Roundhouse Radio 98.3FM, Bigland explained that there’s an upward spiral effect on prices in a competitive market. He cites a real-life example of a series of condos in the same New Westminster building, each selling for higher than the last over just a few months.
“I call it the anatomy of price increases,” said Bigland. “There’s a 38-year-old wood-framed building in downtown New Westminster… an area where condo prices are going through the roof. Back in June this year, a one-bedroom unit was listed for $218,000 – a unit that one year previously would have sold at $160-165,000. It got multiple offers and sold for $261,000.
“The following month, in July, a unit in the building with the same square footage was listed at $248K – so you can see the listing agent looked at the $261K benchmark set the month prior. This one went to multiple offers and sold for $300,000.
“This brings us to last week. There was another one-bed in the building, it was listed 10 days previously, at the end of August, at $268K – so again, you can see how the list price goes up and up. This one had 15 offers on it this past Monday, and it sold for $316,000.
“That’s almost $100,000 more than the list price of the first of those three condos, in a 90-day period.”
Bigland added, “I don’t know if that’s going to be sustainable – it’s not – but prices are really going crazy.”
He offered some advice to buyers trying to secure a condo in this seemingly impossible market:
Subject-free offers: “I can’t think of the last unit I sold where the winning offer was not subject-free – unless you’re going to blow them away on price, and potentially over-pay, it has to be subject-free. But there are ways to minimize the risks of that.”
Read all the strata documents: “These days the listing agent will already have the strata documents available for buyers read before you put in your offer. So you can read through all those before offer night.”
If in doubt, do a home inspection: Bigland says it’s worth spending money on a home inspection before putting in your offer, if it makes you comfortable or you have any doubts. “As a listing agent I’ll also offer one or two days before offer night for buyers to do a pre-inspection.”
Have an emergency fund on the side: Without financing subjects, you’re taking a risk, says Bigland. “If you have to offer $40-50K over asking, the worst thing that can happen is that they accept offer, with no financing subjects, and you submit the paperwork to the bank, and the bank comes back and says ‘we did an appraisal, and we think you overpaid by, for example, $15,000 or $20,000 – we’re going to need you to kick in an extra $15,000… So you want to make sure you have a buffer there if it’s subject-free. And remember, coming in subject-free is worth at least $10,000 maybe $15,000 to your offer price, to avoid their risk of the subjects not being removed.”
Listen to the Real Estate Therapist show each Saturday morning, 9-10am, on Roundhouse Radio 98.3FM and streaming on roundhouseradio.com– and email your housing questions to firstname.lastname@example.org