January 19, 2017
What’s the Best Strategy for Pricing Your Home?
In a city where demand far outstrips housing stock supply, those selling a property appear to be holding all the cards. That doesn’t mean selling a home requires little effort, however. Rather, getting the highest possible price requires strategy and attention to detail.
There is no shortage of buyers in the GTA presently – that is obvious. Any listing that goes on the market will likely have plenty of interested parties. From a sellers’ perspective, maximizing the sale price of your home is the priority – after all, in all likelihood you will be on the buying end of the spectrum soon enough.
Related Read: 2017 Kicks Off With Record Real Estate Prices
The Art of Underpricing
Zoocasa agent Carlos Moniz reveals how listing a home below its true market value is a tactic he regularly uses, but it is an approach that can receive some pushback from the property’s owners.
“Some sellers that don’t really understand the market sometimes have an issue with listing their property below what it is worth,” he says. “So we have to explain how pricing strategy works in a sellers’ market.”
Base Price on Facts
When setting a listing price for a house, townhouse or condo, an agent will have to do their homework regarding the local area. Coming up with that magic number requires some trial and error, but looking at nearby homes is always a good starting point, as Moniz explains.
“We go through comparable sales in a neighbourhood for properties that would be similar, what is called a comparable market analysis,” he says. “Ideally that is comparing sales within the last six months – the sooner the better because the market here has been appreciating in double digits year-over-year.”
Manage Expectations – and Egos
Double digits in this case means 17.3% as the average selling price of homes in Toronto increased to $729,922 in 2016. Such growth tends to attract a lot of media attention, which can make the job of a sales agent more difficult.
“Everyone thinks their house is the best on the block, so you certainly need to manage expectations,” says Moniz. “That’s why we go through a pretty thorough market analysis. You need to be able to justify your selling price. If you have a massive addition like a double garage or a separate guest house – that might justify a much higher price.”
While some sellers may balk at the suggestion of listing below market value, setting your price too high can be even more damaging to your hopes of getting the best possible sale.
“If it is relatively the same house as the rest of the street, then it won’t be good for the seller to overprice the property,” he says. “You will end up with no offers, and then people will wonder why it hasn’t sold after being listed for 30-40 days. The property will become stigmatized. That’s the biggest concern with overpricing.”
Appeal to Buyers’ Affordability
The better option, one that Moniz advocates, is placing your property on the market for a price lower than what you envisioned. There is sound reasoning behind this strategy, as he elaborates.
“If a buyer is pre-approved for $800,000, often they won’t want to have all of their disposable income tied up in their home, so they will look for something that is $600,000-700,000,” says Moniz. “Houses that are listed 10-15% below market value mean that some of those buyers will come to see a property that is actually worth a lot more. When the price rises, often people talk themselves into spending more.”
In a market as voracious as Toronto real estate, demand feeds demand. That means a property listed for $750,000 will usually sell for considerably more once a bidding war ensues. Such an outcome is obviously best for the seller, so any agent tasked with selling your home will try to manufacture one. The best way to achieve that is by giving a property the appearance of a bargain. If something looks too good to be true, it usually is, and certainly that is case when it comes to property in Canada’s hottest market.
“You can pull some of the people in that are a bit more conservative with their budget. In this marketplace, supply is limited, so our goal as a real estate company is to drive as much traffic to a house as possible,” says Moniz. “The more people we have seeing a house means the more offers you get; the more offers you get the higher the price will go. That’s ideally what a seller is hoping for.”