We’ve already established that the world of real estate is weird (see Weird Real Estate Stories if you don’t believe me). It’s also unpredictable as you’ll remember from It’s Not Over Til It’s Over and some of the things that happen are downright Unbelievable But True. But apart from the things that are weird, unpredictable and unbelievable, there are also plenty of things which seem to be completely inexplicable. The kinds of things that make you shake your head and say (to yourself) “How could that possibly happen?” Or “Why in the world would someone do that?”

Well, surprisingly, there may be reasons for some of these inexplicable things and although we may never find out the real reasons, we can always take our best guesses. So without further delay, here are a few of my guesses as to the reasons behind some seemingly inexplicable things I’ve seen happen in the past few months:

Renovated semis jump in price by almost $200k overnight

A short while ago we showed a totally renovated semi detached home in central Toronto to our clients. When they asked us how much we thought it would sell for, we sent them the comparables and told them we could see it selling for as much as $1.1m because a few of the comparables, which weren’t quite as nice, sold for just under $1.1m. It ended up selling for approximately $1.1m.

A week or two later another home that appeared similar at first glance sold for $1.3m. I wouldn’t have called this a comparable for semis because it was quite a bit larger and had features not found in other semis. In my opinion, it was more of an outlier, but other people might have considered it sufficiently similar to be considered a comparable.

Shortly after this outlier sold, another beautiful semi came on the market. It was a fairly typical semi except it had a private drive and wasn’t really similar to the outlier. We wondered if it would sell in the $1.1m range or if someone with deep pockets would consider the outlier to be the comparable which set the new bar and offer a big price. We can’t say for sure what the buyers were thinking, but we do know that this beautiful semi ended up selling for $1.3m. Could be the buyers were thinking something along these lines:

“We love this house. It’s perfect for us. We’ve been looking forever and haven’t seen anything this good yet. With that many offers someone may decide to pay a lot for it, but we don’t think they’ll offer as much as the outlier sold for so let’s offer $1.3m.” So they did. And they got it. And renovated semis have been selling in the neighbourhood of $1.3m since then because buyers are looking at these sales as comparables.

Just like that, the price of a renovated semi went from $1.1m to $1.3m.

Home doesn’t sell on offer night so list price is increased and then it sells for more than the increased list price

Here’s another seemingly inexplicable thing we see happen every now and then.

A home was listed on Wednesday for $1,500,000. Offer day was the following Tuesday. Everyone knew this list price was low based on the comparables, but no one knew how much the sellers really wanted or how much it would eventually sell for. Any buyers who liked it were left to figure out how much they thought they’d have to pay to get it and how much they were willing to pay for it. Then they had to decide if they liked it enough to make an offer.

Sometimes offer day comes and goes and the home doesn’t sell. It could be there were no offers or it could be the offers weren’t high enough. The day after offer day, we Realtors will see that the listing has been cancelled and the property has been relisted for a higher price. That’s what happened here – the home didn’t sell on offer day so the original listing was cancelled and the property was relisted for $1,600,000. Yes, that’s correct. It’s not a typo. It didn’t sell at $1,500,000 so the sellers increased the list price to $1,600,000 and said they’d look at offers anytime. At least now buyers had an idea of the price the sellers really wanted.

Magically, within a day or two, the property sold for $1,625,000. If someone was willing to pay $1,625,000 when it was listed at $1,600,000, you might be wondering why they weren’t willing to pay that much when it was listed at $1,500,000. Fair question. Every situation is different, but here’s one possible explanation of what the buyers were thinking:

“We loved it when it was listed at $1,500,000, but we thought it was massively underpriced and would sell for $1,700,000. We anticipated a bunch of offers and definitely weren’t willing to pay that much for it so we didn’t make an offer. When we saw that it didn’t sell and that the sellers upped their price to only $1,600,000, we figured we’d make an offer because we were comfortable paying that price for it. We had to pay slightly more than $1,600,000 because there ended up being 2 other offers, but we were comfortable doing that since we originally expected it to sell for $1,700,000. We almost feel like we got a deal.”

That’s one possible explanation. Another possible explanation is that 2 or more buyers who hadn’t noticed the home when it was listed at $1,500,000 saw it when it was relisted at $1,600,000 and got into a bidding war. It’s unlikely this would’ve happened because most buyers and their Realtors are too astute these days to not to have noticed the original listing and subsequent cancellation and relisting. Or there could be a third reason I can’t even think of.

Seller accepts a bully offer for only full list price

This is a very strange thing indeed, but we’ve seen it happen, too.

The very purpose of a bully offer is to make the sellers such a good offer they can’t refuse it. The price has to be so high the sellers are convinced they won’t see a higher price on their stated offer day even if they receive 20 offers.  So why would a seller accept a bully offer for only full list price and give up the chance of a bidding war on offer day?

I can think of two possible reasons, but I’m sure there are more. Let’s say the seller says “I think my house is worth about $2,000,000. Let’s list it at $2,500,000 and see what happens.” If they receive a bully offer for $2,500,000 which is only full list price, they’re pretty much in the same position they would have been in had they listed their home for $2,000,000, received multiple offers and sold it for $2,500,000. The optics are different, but either way, the seller’s home was worth $2,000,000 and they received the huge price of $2,500,000.

Another possibility is that the seller listed the home at what she considered a fair or slightly high price. The home was put on the market, but there were hardly any showings and no buyers were expressing interest in it. The seller was starting to get concerned there may be no offers on offer day and, if there happened to be an offer, it would be for less than list price. When someone came along and made a bully offer for full list price the seller thought “Based on what the market’s telling me, this is probably better than I’m going to do on offer day so I’d better accept it.”

There are plenty of other examples of seemingly inexplicable things happening in today’s real estate market in central Toronto, but this is a blog and not a book. If you have any questions about something which doesn’t make sense to you, please give me a shout and I’ll do my best to offer a possible explanation for it.

In the meantime, if you know anyone who’s interested in learning how the market works and who’d like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family, please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And as always, don’t be shy if you have any questions or comments about this post! Thanks for reading.