If you’re trying to buy a home in central Toronto or if you’re just trying to figure out what’s happening in this market, you’ll want to read this. Not so much because it’ll enlighten you, but because it might provide you with some solace. You’re not alone.

Let’s look at this from the perspective of a Realtor on the assumption that if anyone’s perfectly positioned to see and understand what’s happening, it’s your local Realtor who specializes in your area. For the purposes of this article, I’ll volunteer to play the role of that Realtor.

When I wake up in the morning, one of the first things I do is check the new listings. I do this numerous times during each day because I want to be able to tell my clients about new listings as soon as possible. It’s also one of the last things I do every night before heading to bed. I sleep better knowing nothing’s slipped through the cracks.

I don’t like showing my clients homes they won’t like or which will sell for more than they’d like to spend. They’re busy people and I don’t want to waste their time. I’m often able to get a pretty good read if they might like a home just from the listing because I’m so familiar with my area. If I can’t get a read from the listing, I’ll make an appointment to go see the home in person as soon as possible so I can let them know if it’s worth it for them to dash out and see it.

A few weeks ago a new listing caught my eye. Let’s call this House A. I could tell right away it would appeal to my clients, but I could also tell it would sell for well above their top price even though the list price was well below their top price. I emailed them immediately and told them not to get too excited about House A because it was too expensive despite its low list price.

The next day I saw a new listing for House B which also caught my eye. It was on the same street as House A, but it had a large addition on the rear and was listed near the top of my clients’ price range.  Once again, I emailed them immediately. This time I didn’t have to tell them not to get excited about House B because they knew it would likely sell for more than their top price since it was already listed near their top price.

Here’s a basic description of theses homes for comparison purposes (the facts have been modified slightly for privacy purposes):

House A was a detached home on a 30’ x 130’ lot with 3 bedrooms, 2 bathrooms and a private drive. It was listed for $1,300,000.

House B was a detached home on a 32’ x 130’ lot with 4 bedrooms, 4 bathrooms, a main floor family room and a private drive. It was listed for $1,600,000. Essentially, they were similar houses except that House B had a large 2 storey addition on the rear which justified the $300,000 price difference.

Offer day for House B, the one with the addition, came first. It sold for $1,900,000. This didn’t surprise me or my clients as this was the price we expected.

Offer day for House A came the next day. It sold for $2,150,000. Remember, this was the house without the addition that was listed at $1,300,000.

If you’re scratching or shaking your head and feeling like you missed something, you didn’t. House A, the house without the addition, sold for $250,000 more than House B, the house with the addition. Does this make sense? No, not at all. Is there a reason for it? Not a logical one, at least not one I can think of. When I saw the second sale price, I emailed Corinne and asked her “Can you explain this?” She replied “Not even Stephen Hawking can explain this.”

And she’s right. At least as far as I know because Stephen and I haven’t spoken lately. There’s just so much happening in this market now that makes no logical sense at all.

But that doesn’t mean there aren’t illogical or emotional reasons behind what’s happening. We looked at a few in Making Sense of the Market. Last week another Realtor shared his explanation of what’s been happening with me. I asked him how he’d justify a certain sale price based on the comparable sales. He looked at me with surprise and said “Comparables?! Comparables don’t matter anymore. Last week’s comparables are already out of date and irrelevant. I don’t even bother looking at the comparables. All that matters right now is how much a seller wants because if your buyer won’t pay it some other buyer will.” Basically, he was saying prices are determined solely by how much a particular buyer is willing to pay for a particular home and some buyers are willing to pay extraordinary prices to get the homes they want.

I don’t necessarily agree with this explanation because there are still plenty of homes not selling right away or selling for less than list price. As a seller, you can’t just ask for any old price and expect to get it. Your price still needs to be within touching distance of reality. But some sellers are getting really lucky and receiving prices that are well beyond reality and these are inexplicable. At least to me. And maybe to Stephen Hawking, too.

As always, 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.