Although everybody seems to have an opinion on what any particular home should be worth, market value is defined as the amount a buyer is willing to pay within a reasonable amount of time. Market value is not what a seller feels they should get for their home, or even necessarily, the final sale price for a property should a successful deal be negotiated. And being that sellers have the liberty of pricing their home at any price they want, it’s safe to say that many houses sit for months on the open market without a single bite, all because they are severely overpriced.
Not that I want to give away all my little secrets, but I thought I’d share some insight with my readers (again, my psychology background coming out) on strategically pricing a home for sale in today’s market, to get the best possible price in the least amount of time.
If you read the newspaper, you’d probably be lead to believe that every buyer in Toronto is loosing out on fantastic homes in heated and emotional bidding wars. While this is true for some properties in high-demand areas of the city, the fact is that no two homes are exactly the same, and bidding wars, although a hot topic for discussion in real estate, are not really the norm. Some bidding wars that you hear about come naturally… a fantastic house hits the market in a very desirable neighbourhood, and within days there are dozens of showings, multiple offers and even, in some cases, bully bids. And then there’s the seller’s who believe their home is worth a certain amount (usually much higher than market value), and price it below that figure, hoping to attract a bidding war… in many cases this backfires, as the ‘below market value’ price the seller thinks they are listing at is actually what the home is worth. As the seller’s opinion of value is severely overinflated in the first place, the chance of attracting multiple offers is probably slim to none.
Here’s an example: I recently sold a fixer-upper property in an up-and-coming Toronto pocket where the sellers, although feeling a crunch to offload their home, wanted to list at around the $430K mark. I knew the property needed work, and that based on the neighbourhood we were in, our listing was likely going to attract potential builders, renovators, and first time buyers/ end users. While, sure, my clients might have been realistic about the real value, in that particular market, listing at that price wasn’t going to attract the offers that they were looking for. We needed to LIST the home at a much lower price!
After showing them the comparables and discussing in great details all the possible scenarios, we decided to list the property MUCH lower than they ever expected… They thought I was crazy when I first suggested a list price of $349,900 with offers held off for a one week period… just enough time to get as many possible people through the house and work up a bit of a frenzy. My phone started ringing with interested buyers and Realtors before the property even hit the MLS (as soon as the sign went up). The open houses turned into mad houses…dozens of people through, many of which were evidently starting to feel the pressure; trying to determine what the mood was, and just how much to offer. When it was all said and done, the home sold for $432K, 123% of the list price, in fact, with only 9 days on the market. My clients were thrilled and so was I. Due to their courage and trusting me, as a team we were able to get the best possible price (Kudos to them!) BRAGGING ALERT: The extra money earned my commissions and more for them too! All we had to do well and picked a realistic value, then went under that amount…in fact, so far under that it was ridiculous….but not too far under that it made us want to throw up. It paid off beautifully! I want to point out that this was the right plan for this particular house. I'm not suggesting that this will work for every house.
Again, it all comes down to working with a Realtor who knows the market and the neighbourhood; what’s in demand, what buyers are willing to pay, and what will get them through the door in the first place to actually view the property.
And not that I’m looking for a pat on the back, but to all those folks out there who think that the property sold itself, let me tell you I worked hard! Yes, the property might have only been on the market for a few days, but the work that took place in the weeks leading up to listing it were intense… Intense, but very rewarding!
In school they teach us real estate salespeople to show our clients 3 comparable sales when listing their property, as not to confuse them. My strategy has always been a little different. I’ll show you ALL the comparables for the past year, exactly the information that I see, ask you which you feel are most comparable to your home (I've already chosen three and nine times out of ten you will choose the same ones), and then show you the three that I chose when coming to a listing price, as well as the reasons why. I don’t want to dictate to you, I want to educate you, and then decide together… that way we can come up with a realistic and strategic price point for your home to ensure it does well when it hits the market.
I have to say that sometimes all the planning preparation i the world cannot account for a change in the market. We need to be on our toes all the time sniffing the wind. If you come out at a certain price and the market shifts, you have to be able to react quickly. Holding firm on your price when the market is slipping will leave you standing with your ice cream melting down your hand.
I will never tell you that your home is worth more than it is just to get your listing, nor will I ever tell you your home is worth less than it is to satisfy a guarantee to sell it. I will treat you and your sale like I would my own family or friend. I will work hard, smart, and strategically to ensure the best possible results! Now all that you need to do is trust…trust, be willing to take a little bit of risk, and leave the rest to me!
– Trish Mutch