Real estate can be one of the most confusing industries around, and anybody who tells you different is not telling you the truth. Real estate professionals, including a real estate broker and also agents, understand the rules of the industry, but what no one quite understands is what drives buyers and sellers. A good example of this was the real estate boom in the United States and in Canada which happened five years ago. Prices of real estate all over the country suddenly began to sky rocket, and no one could quite figure out why.
During this boom, the average price of London Ontario homes and others all over the country actually tripled in value. It was an increase the likes of which no one had seen before. Not only was everyone mystified as to why it was happening, no one could predict how long it would last for either. That question was answered in 2007, when the markets came crashing down on the heads of many recent buyers. Since then, housing prices have stabilized somewhat, but how they are determined is still a mystery to many home owners.
The best way to understand what happens in the real estate market, and how this affects the worth of your home, is to realize that the industry is largely driven by perception. If someone sees a home they want, and they have the money, it could conceivably go for any price at all. A good example of that is on Vancouver Island, where rich Albertans are offering big money for homes in small towns far exceeding their original market value. As a result, the prices of all nearby real estate go up as well, as owners try to make similar profits on the sale of their own home. This is what has happened in the market for Toronto condominiums for sale, and other real estate around the country.
That can help you understand why a home in another town might be worth more than your own home, which is similar in all other aspects, but not why the price changes from one neighbourhood to the next. It seems insane to many that a condo in the Markham MLS would be worth the same as a detached dwelling, but again that is the result of perception in the market place. Condos have been successfully advertised as the ultimate in modern living, and as a result owners and developers can get a much higher price for them.
You might also wonder why properties in distress seem to be worth more than your own. Why, for example, are Edmonton foreclosures listed higher than what you have heard your home is worth? The reason here has to do with who holds title. Banks own foreclosed property, and they are interested in getting their money back. They can afford to sit on the foreclosure until someone pays them the amount of the original loan, even if that takes a few years.
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