The list price can determine whether your home sells quickly and at full market value, or sits unsold week after week
Proper Pricing Matters
Sellers often think they can set a pie-in-the-sky price for their home because that will allow them some negotiating room later, but the Toronto real estate market doesn’t work that way. Homes that are overpriced compared to similar homes tend to attract fewer buyers, who don’t want to over-pay. Many qualified buyers might not even see your home in their daily MLS matches, because it’s priced out of their range and doesn’t even appear in their search parameters! Eventually, of course, you can lower your home’s list price, but it might already be too late; in today’s sensitive marketplace, your home may already have attracted the stigma of being The One That Won’t Sell. Though the market varies, 21 days on the market is usually the point at which buyer interest begins to wane.
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Under-pricing can be a valid strategy because it can create a lot of interest among excited, deal-seeking home buyers, but it’s a strategy that ought to be used with caution. Pricing very low may attract a lot of people, but they might have little financial flexibility to exceed their initial bids in a multiple offer situation. Homes that are priced well below market value can also arouse suspicion, as potential buyers wonder if you are hiding something. And again, if you price too low, you may miss some buyers’ target price range altogether.
It is important to price your home as closely as possible to current market value, no matter what your personal opinions may be – and no matter what you initially paid for the house. Jamie will recommend a fair market value for your home that will help ensure a timely sale.
Factors Affecting List Price
When the time comes to price your home for sale, you may want to do your own research to complement Jamie’s findings in the CMA; some sellers wish to take a more active role in the process than others, so this is a decision that is definitely up to you! If you do want to investigate, here are some factors to consider when determining what your home is worth:
- Consider the buyer’s point of view. When you were buying your house, did you really care what the sellers had originally paid for it? Probably not…so it is unreasonable to expect buyers to care how much you paid for the home, how much money you need for the down payment on your new home, or even how much time and money you've invested in your home's improvements (unless they love and are willing to pay a premium for your renovations).
- Do your own independent research. Go to open houses in your neighbourhood and try to make an impartial assessment of how those homes measure up to yours; if you were a buyer, how would these homes stack up to yours in terms of location, size, amenities and condition? Assuming all the asking prices were the same, would you buy your home or someone else's? When Jamie presents the CMA to you, you can further discuss the homes you have been to personally.
- What about transaction terms? Some buyers have needs that go beyond the asking price. Can you afford to make other concessions that will appear on the MLS listing for your home – such as a flexible closing date, or seller financing?
- When looking at comparable homes, pay attention to neighbourhood dividing lines and physical barriers such as major streets, highways or railroads, and do not compare inventory from one neighbourhood pocket to the next.
- Pricing is market dependent, so when examining the comps, it’s important to consider what type of real estate market Toronto is currently in. At the time of this writing, we are in a balanced market, which means you can reasonably set your price at the last comparable sale (i.e. if the identical home next door just sold for $500,000, you can ask the same). In a buyer’s market, you might have to price lower to capture the interest of buyers; in a seller’s market, where there is little inventory and many buyers, you can safely add up to 10% to the last comparable sale price and you will probably get it.