If you’re planning to sell your home, the first thing your realtor might do is look at recent sales on your street for a price comparison. But what do you do if your neighbour decided to sell for well under their home’s value?
“It’s a matter of what the buyer of your home will agree to; they might say, ‘I’m not paying a penny more than what that other house sold for,’” Elise Stern, broker at Harvey Kalles Real Estate Brokerage, said.
That isn’t usually a problem if your neighbour sold the house under the usual circumstances. But in today’s market that has plenty of supply and not enough demand, sellers who need to sell might be motivated to sell under asking or list at a competitive price — which could make a dent in your home’s value.
An analysis of home sales in Toronto by real estate data platform Wahi found that, based on the last 30 days, every neighbourhood in the city is seeing a trend of underbidding — and some areas are experiencing more extreme bids under asking than others. In Forest Hill, the median bid is $495,000 under asking, while the median was at $300,000 for York Mills and even $113,000 for Thornhill. All three of these medians were based on just five sales that occurred within the past month in each neighbourhood — making it likely that it was just one or two sales that skewed the average lower. But what do you do if one of those under-asking bids was accepted by a neighbour on your street?
“The motivation is important,” Stern said. “I would call the listing agent of a home that sold under asking down the street and say, ‘Well, what happened there?’”
There are plenty of reasons why a home might have sold for lower than expected, and Stern said the more knowledge you have, the better. “It could be they were just desperate because they’re moving out in a week and closing on another house and needed to sell. It could be that they have a pink kitchen and blue toilets.”
Tim Syrianos, broker of record of Re/Max Ultimate Realty, said the neighbourhood you live in will also indicate whether that outlying home sale can have a real impact on your own home’s value or not.
“If the homes on your street are similar in style because they were built in the last 10, 15 years and there hasn’t really been any room for improvements or additions, it may affect value a lot more,” he said. “But in areas like Summerhill, established Toronto neighbourhoods where homes are 60, 70 years old, there’s been a lot of work done on these homes. There’s so much variation that it’s difficult to compare.”
It’s a sentiment that Stern echoed, also noting that, in a market that’s constantly changing, a sale made a month ago might not be an accurate measure of home values for a sale you’re trying to make today.
“You’re rarely comparing apples to apples in a Toronto neighbourhood, and there are always ebbs and flows in the market,” she said.
