A colleague of mine suggested today that we are in a “stupid market,” and while at first pass it may have seemed like a stupid comment in itself, my colleague and I discussed it and we concluded that he was right.

The market we are in right now quite often makes no sense.  There are some sales and some non-sales that boggle the mind.

Here is how I describe this stupid market through my experience with two properties in my own backyard…

“A house is only worth what somebody’s willing to pay.”

Really?

Does this ALWAYS hold true?

Are there instances when a property sells for more than what it’s worth?  Sure, I would say we can all agree that this happens.

But what about instances where a property sells for less than what it’s worth?  Can this be true?

If a property is “only worth what a buyer is willing to pay,” then how can we say that a property is worth $550,000 when buyers will only pay $500,000?

Well, in this stupid market we currently find ourselves in, crazy things are happening…or not happening, as it would seem.

Case in point – a recent purchase by a client of mine in The Distillery District that made no sense to me.

This condo on Mill Street came out on the market at $324,900 and right off the bat I knew it would attract substantial interest.  The unit was a massive 830 square foot, 1-bedroom condo, and developers aren’t making any more 830 square foot 1-bedrooms!  They’re starting to push the envelope by offering 2-bedrooms at as low as 600 square feet!

I told my client that this unit would fetch up to $350,000, which would still “only” put the unit at $422 per square foot (no parking).  I told him that there would be 1-2 offers, guaranteed, and that he’d be looking at $340,000 minimum.

We looked at a few other places, but I told him that “we’re in a crazy market (I don’t think “stupid” had entered my vocabulary yet) where crazy things are happening, and we should keep an eye on it.”

I always think “better safe than sorry,” and so I always keep an eye on a property on offer day even if we have no intention of putting anything down on paper.

As luck would have it, I called the listing agent for the Mill Street property on offer day and she had empty hands!  My client got the property for $320,000 even though all rational thought would have pegged this unit at $340,000 – $350,000.  For God’s sake – it’s 830 square feet!!  It’s an incredible layout and in one of the best areas in the city!

Well, you win some, and you….win some…

But this “stupid market” is best described by comparing two properties in the St. Lawrence Market neighborhood, both in a building on Richmond Street.

There was a 740 square foot, 1-bedroom-plus-den listed at $314,900 on Richmond Street two weeks ago that I projected would sell for $325,000 – $330,000.  I don’t just look at comparable sales in the building when trying to forecast a selling price or peg a “value,” but I also look at sales in the area and increase/decrease the value depending on which building is more sought after.

King Street is more sought after than Richmond Street, as would be Frederick Street and Adelaide.

But properties have been moving quickly on Richmond Street, and there is a serious lack of inventory in the St. Lawrence Market area.  So I figured this 740 square foot unit with parking would probably get $325,000 as I feel that is what the property is worth.

Low and behold, it sold for a whopping $351,000, and shocked all of us who were paying attention.

So where is my tragic point?

Well on Monday, a gorgeous 2-bedroom, 2-bathroom unit of 920 square feet came out in the same building at $379,900.

Let’s assume for the sake of argument that I’ve seen 100 condos per month for the last three months.  Of those 300 condos, this is by far the “best” property I’ve seen.

It had every conceivable upgrade: granite counters, stainless-steel appliances, eco-friendly hardwood flooring, slate flooring, crown-mouldings, expensive light fixtures, and even ToTo toilets and a reverse-osmosis water filtration system!

The layout was great; a split-bedroom plan with a huge master complete with walk-in closet and 4-piece ensuite bathroom, and there was a separate living room and dining room, unlike most condos where ONE space can be divided as the user sees fit.

I told my client that this property would likely sell for above $400,000, but when the other unit in the same building sold for $351,000, I told my client “sky’s the limit.”

Comparing apples to apples, the $474/sqft that the 1-bedroom-plus-den commanded would peg this beautiful 2-bedroom unit at $436,000.  That’s IF we were to use the same cost per square foot that a unit in the same building sold for only a week earlier.

Doesn’t that make sense?

Can’t we use the same numbers for a week-old sale?

I’m completely ignoring the fact that the 2-bedroom condo was far superior to the 740 square foot 1+den in every single way.  From the upgrades, to the layout, to the view – the second condo was far better.

And on offer day, guess what?

Not a single offer was registered!

How could this be?!

How could the market fall asleep on this one?

We are in a stupid market right now where anything can happen, and does!

One minute, units are selling for $468/sqft in Building-A, and the next minute, you can’t get $413/sqft for a better unit!

A market is a combination of buyers and sellers transacting to exchange goods and services and thus it is anything but perfect.

However, one would think that if a two hot-dog vendors had stands right next to eachother and were actually linked at the hip, if one vendor was screaming, “Polish Sausages – five bucks” and the other was screaming “Identical Polish Sausages – two bucks,” the first vendor might not fare quite as well!

Real estate has no fixed value, but neither do Polish Sausages.

They’re both only going to sell for what somebody is willing to pay, but surely you can base the value on what other people are willing to pay for the same product or on what other vendors are selling it for?

We’ve been seeing a few properties “slip through the cracks” here and there, and this never used to happen.

When the market was last this hot about 18 months ago, we were able to predict what properties would sell for with much greater efficiency.

There were fewer surprises, and you never saw a supposed-$350,000 condo receive no offers and sell for $320,000.

It’s getting tougher to transact in this real estate market, but I guess the upside is – so long as you pay perfect attention to the market and never take your eyes off it, there are deals to be had.

When the market was hot 18 months ago, there were no such things as “deals”…