Buyer Beware: The Truth About Real Estate List Prices

Some realtors price below market value to spark bidding wars — especially on homes under $1 million — but house hunters can try to avoid these scenarios by following a few simple steps.

By Josh Sherman | 4 minute read

A home is worth what someone will pay, not necessarily anywhere near what it’s listed at.

When a young Greater Toronto Area couple saw a spacious four-bedroom detached home in Halton Hills listed for $999,999, they couldn’t wait to make an offer.

The stunning red-brick home was located in a desirable neighbourhood near a good school, had lots of upgrades including a new kitchen, and featured a finished basement. It was exactly what they were looking for. It was also around their budget, which they had learned didn’t go far enough for a detached home in the city of Toronto. Almost immediately, the couple told their REALTOR® to place a bid of $950,000 on the home, having heard that many homes were selling under-asking. They were excited to see how the seller would respond to what seemed like a good offer in a supposedly quiet market.

Their excitement soon turned to disappointment, though: in a massive bidding war, the listing ended up attracting more than 25 other offers. After just six days on the market, the house sold for $1,350,000—a whopping 30% over asking.

This scenario isn’t uncommon in the GTA’s real estate market. While recent Wahi analysis suggests the overall housing market is in underbidding territory, certain price points are seeing more buyer competition than others. In what’s become a common strategy, some Realtors are opting to list homes in the sub-$1 million range well below their true market value. Realtors use this pricing tactic to try and attract more bids — and sometimes it works. For example, in a situation similar to the one in Halton Hills, a detached home in Ajax ultimately sold for $275,000 over asking. It had been unrealistically listed at $600,000 and attracted 60-plus offers in the process.

Fortunately, there are a few ways for house hunters to avoid falling victim to lowball listings that aren’t actually within their budget. 

1. Try Wahi’s Free Home Value Estimator 

Wahi’s Free Home Value Estimator can save homebuyer hopefuls a lot of disappointment. The tool is based on Wahi’s proprietary home value estimation algorithm. Estimates appear alongside each listing, and the tool drills down into a variety of property characteristics for all housing types for a realistic valuation (here are the top six factors that affect a home’s value). According to Wahi’s estimator, the Halton Hills home that was listed for $999,999 but sold for $1.35 million had an estimated value of $1.26 million. While the tool isn’t perfect, in testing it’s proven to be the most accurate in Canada. It can quickly provide a reasonable estimate based on available listing information and should help manage expectations, although it provides too wide a range to use for actual bidding.

2. Look at Comparables 

Anyone with a Wahi account has access to a treasure trove of data, including previous sold prices. So if you’re looking for, say, a three-bedroom home in a particular neighbourhood, look at what similar properties in the area have sold for recently. For condos, Wahi has launched a new feature on its website and app that shows all units for sale (and that have been sold) in a given building for easy on-the-fly comparisons.

Of course, every home is unique and certain factors — such as a major renovation boosting the price or structural issues resulting in a discount — can mean two apparently alike homes have very different prices. But browsing comparables can help you ballpark the value.

3. Understand the Listing History for the Property 

In each of Wahi’s listings, you can see not only what a property sold for but each time it was listed, terminated, or relisted. A comprehensive and transparent listing history gives you a better sense of seller motivations and strategies. For example, in late January a four-bedroom semi-detached home in the North York neighbourhood of Humber Summit was listed for $1,149,000. Within three weeks, the listing was pulled from the market, only to reappear shortly after for $835,000. Wahi’s estimator pegs the home’s value at about $1 million, which is also what it last sold for in February 2021. Based on the listing activity, you could deduce that the seller still hopes to sell for over $1 million but is trying to attract more bids with a discounted sticker price.

4. Reach Out to Your Wahi Partner Realtor  

Unlike a traditional real estate brokerage, Wahi is a platform that puts homebuyers (and sellers) in the driver’s seat by empowering them with data. However, while home-value estimates and comparables are useful, the average homebuyer may sometimes need a little guidance. Ask your Wahi Partner Realtor to consult Wahi’s data team, who can provide additional insights to help with offer pricing.