I Passed Economics 101 And It Still Serves Me Today.
By Juliana Webster
There was the Micro Economics course and then there was the Macro course. But it was the Intro to Economics course that taught the most lasting lesson… Market Demand. It was all about the price of sugar and coffee… but let’s make it all about houses and the housing market.
The Law of Supply and Demand dictates that
– decreased supply increases prices
– and increased supply decreases prices.
– decreased demand decreases prices
– increased demand increases prices.
When the buyer and seller agree on a price, be it for sugar, coffee beans or a house, they have set the market value, the price at which the buyer and seller meet.*
You don’t need to know more than that. Just understand and accept it. You may very well find yourself frustrated by market value but there is just nothing you can do about it… nor can your agent.
You’ve probably figured out that we are in a market where we have a low supply of houses so the prices have increased – greatly
And we have increased demand for the few listings that are out there,… sending the prices up higher still. We also have a very large city just down the road from us where home ownership and market value are out of reach for so many… so they are flooding our little kingdom of Hamilton and driving up the prices by increasing the number of buyers.
We are obliged to present any offer that our clients have us prepare but often advise that just because you don’t feel it’s worth the amount it will probably sell for has got NOTHING TO DO WITH ANYTHING. We see homes sell for 50% more than asking…. all the time. So if you want it you have to weigh the imporatance of your own opinion that it’s not worth the price it will probably win, and the fact that it’s selling price will just serve to raise the asking price of the next listings to come out in the area. Being obstinate and a know-it-all will get you zilch with a capital Z.
It’s so hot in Hamilton, that property values increase daily and often property values increase substantially before the house has even closed. So even if it’s more of a stretch than you wanted to go for, bear in mind that all the buyers who will follow your lead will drive up prices further and further making your property worth considerably more in even a year from now… (of course, this is if all of this just tracks along at the same pace and there are no huge hiccups in the economy).
It’s our job to be honest with you. If you want the house you will be advised how to get it. Putting in bland offers time and time again will not serve you nor us, as you could also draw to the wrong conclusion that we can’t negotiate… We can! But the current and sad reality for buyers is that there is very little negotiation going on presently… It’s the number on the offer that decides who will be buying that house.
* Of course there are instances of “extenuating circumstances” that can end in a price that does not reflect a true market value… situations like a gun to one’s head!Or the fact that mom lives across the street from subject property and she is going to provide free child care for buyers’ children… this can have an effect on the buyers outlook as they are buying MORE than the house… but that is not what anyone else is buying or seeing or feeling. That is why professional appraisers throw out the highest and lowest prices when doing an appraisal.