The myth of "the steal" in real estate...

Real Estate Agent with RE/MAX Condos Plus Corporation, Brokerage

The condo market in Toronto is very active comparatively speaking, and yet there are buyers looking for a ‘steal’. I am not sure whether it is their culture, their personality or something ingrained in them.

Original content by Jerry Murphy, CRS, SRES AZ RE Lic. #SA560004000

Since the beginning of the down turn in the real estate market real estate agents have been innundated with buyers who are looking for "a steal".  Well, here's reality folks.  It doesn't exist.

You see, unlike securities whose value are based on future earnings, or collectibles, whose value is based on the scarcity of the item, real estate's value is based on other like kind products or in real estate parlance, comparable homes.

The fallacy of "the steal" is that the buyer is going to find that one property that no one else in the market sees is undervalued.  They're going to buy it and a price well below the market and then turn around and sell it for a huge profit.  Well, as I like to say to my buyers, "if I see it's a great value, and you see it's a great value, a thousand other eyes also see that it is a great value."  And more than likely the price will be bid up.

The other scenario involves buyers who think they are going to submit low ball offers and get "the steal".

Let me explain what really happens, based on the value basis of real estate that I noted above.

Let's say you, as the buyer, WERE able to land that "steal".  What you just did was set the floor for all the other homes, including yours, in the area.  Because WE as realtors base our seller's sale prices on the comparable properties in the area.  So your attempt to then turn around and sell it at an inflated price in a depressed market is going to backfire on you.

This is what has caused the downward spiral in prices in most areas of the country.

My best advice when shopping for a home in this market is to realize that prices are severely depressed as they are.  Now, there's nothing wrong with trying to negotiate A LITTLE off the price, but don't expect to come in with an offer 25, 30, or 40% below the list price and have it accepted.  This is a buy and hold market.  Not a flippers market.  If you come into this market with the expectation that you'll be holding on to this home for five to ten years, you will probably make a good return on your investment.

We need to get out of that get rich quick mentality as a country.  Which is EXACTLY what got us into this mess in the first place.

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Real Estate Agent serving clients for the Toronto Downtown and Toronto Waterfront Area.

Residential and Investment Properties.

Rosalind Nicholas, ACCA,SRS,REALTOR®

e-mail:     Tel: 416 918 1972

RE/MAX Condos Plus Corporation, Brokerage, Toronto, ON, Canada.



Comments (2)

Daniel H. Fisher (704) 617-3544 - Charlotte, NC
MCRP - Charlotte Real Estate, NC or SC

There are steals out there that are so low that they do not affect the overall micromarket. I personally know a guy who buys homes at 30% of list price and appraised value.  But he has a relentless system and it is a full time job. Appraisers will use other comps to value future sales when there is an abnormal sale like this.

Oct 14, 2011 03:37 PM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Rosalind - Thank you for sharing quality information on the myth of "The steal" in real estate.

Oct 14, 2011 05:27 PM