Sold Over Asking
By Emily Southey | 9 minute read
If you’ve ever driven through a neighbourhood in the Greater Toronto Area (GTA) and spotted a “sold” sign, you may have noticed a specific phrase adorning it. “Sold over asking” is a phrase commonly seen on sold signs in Ontario. What does it mean? Simply put, “sold over asking” means the REALTOR® sold the home for a higher price than the asking price. In a hot seller’s market where there is lots of demand but little supply, homes selling over asking isn’t uncommon. While frustrating for homebuyers as it drives prices up and leads to bidding wars, it can be hugely beneficial for sellers looking to earn top dollar for their properties. However, both sellers and buyers have reason to be wary of “sold over asking” signs or statements, as “sold over asking” can mean many different things. Basic Terminology
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To better understand what exactly sold over asking means, we first need to define a few key terms that relate to it. Namely, market value, listing price (or asking price), appraised value, offer amount, and selling price.
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Market Value
Market value is the current value of the property based on the sale prices of comparable homes in the area. Several factors can affect the market value of a home, from supply and demand to specific features of the home like the number of bedrooms and bathrooms, renovations, yard size, house age, and more. When determining market value, sellers and REALTORS® should carefully review comparable sales in the neighbourhood to determine what people will reasonably pay for their property.
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Appraised Value
The appraised value is the value assigned to a property by a professional real estate appraiser. Like market value, an appraised value is granted at a specific point in time. However, unlike market value, which is ultimately determined by buyers, the appraised value is determined by an appraiser. Appraisers provide their impartial and unbiased opinion as to the value of a property. Professional real estate appraisers may be hired by a seller, but they are typically hired by a mortgage lender and paid for by the borrower (the buyer). An appraisal is essentially a property valuation that, like market value, is determined based on several factors, including recent sale prices of homes in your neighbourhood.
“Both sellers and buyers have reason to be wary of ‘sold over asking’ signs or statements, as sold over asking can mean many different things.”
Listing Price/Asking Price
The listing price, otherwise known as the asking price, is the amount of money that a seller lists their property for. This price is typically decided in conjunction with a REALTOR® and reflects the seller’s goals, market demand, as well as the price of other sales in the area.
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Offer Amount
The offer amount is the amount of money a buyer has offered to pay for the seller’s property. The amount is written into the purchase agreement, which is sent to the seller, typically via their REALTOR®. However, the offer amount is subject to change. In fact, it can change many times throughout the course of negotiations. However, if the seller chooses to accept the initial offer, then the offer amount may not change.
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Selling Price/Sale Price
The selling price is the price the property is sold for. It may also be referred to as the sale price and is the amount the buyer ultimately paid for the home. The sale price may be higher, lower, or the same as the asking price, depending on what happens during the negotiation stage. When it is higher than the asking price, that’s when a home is considered sold over asking.
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Market Value vs. Listing Price
As seen above, the market value and the listing value of a home are not one and the same. While the market value is ultimately determined by buyers (specifically, what buyers have recently paid for similar homes in your neighbourhood), the listing price is ultimately determined by the seller. It is entirely up to sellers to decide what to list their homes for. They can research the market value and price it accordingly, or if they have reason to believe their property is worth more than market value they might list the asking price above market value. On the other hand, if their goal is to sell the property as quickly as possible, they might choose to list their home below market value. As you can see, market value and listing price are not synonymous terms, even if people are inclined to believe they are. The key difference is that the listing price may be what the seller wants for the property, whereas the market value denotes the property’s actual worth. Generally, REALTORS® advise their clients to list their homes for as close to market value as possible as this is the best metric to help sellers understand what buyers are willing to pay.
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The Caveats to Sold Over Asking
Understanding the real estate terminology above helps provide the necessary context to learn about the notion of selling over asking. Given that REALTORS® frequently use “sold over asking” as a phrase to market themselves, and sellers may be inclined to choose a REALTOR® based on this fact, sellers must understand the caveats to sold over asking.
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Below, we explore some of the reasons that “sold over asking” is not always what it’s cracked up to be. While it can certainly be advantageous for both the seller and the listing agent, it’s important to understand the context of the sale. To determine just how impressive selling a home over asking is, ask yourself the following questions:
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How much over asking was the house sold for?
Sold over asking, as the name suggests, is a phrase given to any property where the selling price is above the listing or asking price. By this definition, sold over asking could mean that the home sold for $1 over asking or $50,000 over asking. Sold over asking alone is not enough information to judge the reputation of a REALTOR® or market. Instead, you should be asking how much over asking the property sold for. If the property sold for a tiny, incidental, almost insignificant amount over asking, then it’s probably not worth gloating about (or choosing a REALTOR® based on this).
Is everything in the area selling over asking?
A second question to ask yourself when determining whether a home being sold over asking is an impressive feat or not, is “Are other homes in the area selling over asking?” To find the answer to this question, do some quick research in your local housing market. You should easily be able to pull up the details of recently sold homes in your area, including their listing prices and their selling prices. If the majority of homes sold in your neighbourhood sold over asking, this is a better indication of the market than it is of the REALTOR®’s abilities. When the market is hot, selling a property over asking is common, which means it may not be worth celebrating (again, unless the amount it sold over is above average). Alternatively, in a cool buyer’s market, selling a home above asking may be a huge accomplishment.
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Was the house priced low or high?
One final question to consider about the legitimacy of sold over asking is the price of the house. Ask yourself, “Was the house priced high or low?” To help determine if the selling price was a triumph, try to find out whether the original listing price for the property was low or high. You should be able to find this out by researching recent home sales in your area. Sometimes, sellers or REALTORS® will list the price low to garner interest and perhaps prompt a bidding war. If the seller intentionally sets the price low, then selling above asking is nothing worth bragging about. However, if the price of the home was set high and it still sold over asking, this could be a positive indication of the REALTOR®’s marketing and negotiation skills. Ultimately, since the listing price of a home is up to the seller, it’s easy for sellers to price their properties below market value, receive an offer above asking, and then claim it as a victory because they sold over asking. But this isn’t particularly impressive or indicative of the REALTOR® or seller’s real estate prowess. Instead, only when a home is priced at or above market value and sells for over asking is it cause for celebration.
Frequently Asked Questions
What does sold under power of sale mean?
A home sold under power of sale is when a homeowner defaults on their mortgage, and the mortgage lender steps in and sells their property to recoup the money owed. In Ontario, lenders can sell a mortgaged property after the homeowner defaults on their mortgage payments for a minimum of three months. Therefore, if you are a homeowner who has defaulted on at least three mortgage payments, you may be at risk of power of sale. Should this occur, you will receive a Notice of Sale from your mortgage lender, who will then evict you and sell the property. This whole process can take several months. Though homebuyers might expect homes sold under power of sale to be cheaper, lenders are required to sell the home at true market value, which is determined by two appraisals of the property. Therefore, buying a home under power of sale may not be any less expensive than purchasing any other property, depending on the local housing market.
How much over asking should I offer in Ontario?
The answer to this question depends on several factors. First, is the market hot? If so, and there are likely to be multiple offers on the home, then offering an amount above asking is recommended. If you’re preparing for a bidding war, experts generally recommend offering between 1% and 3% above the listing price. However, if the market is ultra-hot, you may end up having to offer more than this. If budget is a major concern, consider searching for properties at a lower price point knowing that you will have to offer above asking. Beyond the market, how much you choose to offer above asking may also be dependent on how badly you want the house. If it’s your dream home, then you may be more willing to pay a higher price. However, if you’re in love with the property, you may choose to offer only a small amount over asking, knowing that you’ll be fine if you don’t get the house.
Emily Southey
Wahi Writer
