Friday 7 September 2018

"How much did the seller pay when they bought?"

Sometimes, while working with buyer clients, they will ask what the seller paid for the property. I have access to this information and will happily look it up for them. But how important is it, really?

When I do look it up, I make sure the buyer understands that the information is fairly limited in its value. What is significantly more important is what the property is worth today, so working as a buyer’s agent, I will look at sales in the area to determine a proper current value range. Without even considering any improvements the seller may have made, whether they paid too much when they bought or got a great deal is not relevant to what the property is worth now.

To illustrate, using an example from an unrelated field, you certainly wouldn’t offer someone the original 1980 price they paid for a Wayne Gretzky rookie card – it is obvious that is not the current value in the marketplace. The card is worth what it is worth today.

So if what the seller paid doesn’t have any relation to current market value, how can it benefit you? Early on in my real estate career, I thought knowing what the seller paid or when they bought could help determine how much “wiggle room” there might be in negotiation. 

I learned pretty quickly, though, that just because someone has owned a property for 30 years or paid significantly less than they are selling for, that doesn’t mean it is mortgage-free or equity-rich. Property owners take out new and second mortgages to help kids, invest in business start-ups, and for a multitude of other reasons. You can only easily verify the likelihood of equity, not the existence of it.

So, again, I go back to my statement above that knowing current value is much more important than knowing what the seller paid. Feel free to include that data in your research, just don’t give it more weight than it deserves.

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