When a homeowner decides to sell their home, they’ll often interview several listings agents to decide which one to hire. A common tactic some agents use is to promise to list the house at a higher price than other agents.
Most homeowners get so excited they’ll automatically choose the agent with the highest price. That’s a huge mistake.
Why? If the suggested listing price is substantially above market value, the home won’t sell.
“What About the Buffer?”
When I show my prospective clients the data and we arrive at a market value together, I’m always asked if it’s better to start with a higher price and come down if needed.
Sure, we can add a buffer, but it needs to be a realistic buffer. The difference between asking and what you hope to sell at should be relative to the overall value of the home. For example, $10,000 on top of market for a $300,000 home is acceptable. But $25,000 tacked on top of the anticipated sell price (based on market evaluation) will backfire.
If your asking price is too high, many people won’t even bother making an offer. Buyers are far more educated on market value than ever before. They believe that if they offer an amount that’s significantly less than your asking price, that you’ll likely reject it because:
- Sellers are often fixated on the suggested asking price (despite what market value may be).
- The seller will hold out for a better offer.
Most buyers and sellers expect some negotiation, but a prohibitively high asking price will not generate offers. People will not put an offer on paper until they think the property is within an acceptable range of what they are actually willing to pay.
Faster Sales Mean Higher Final Prices
You’d think that I would want to go with a higher listing price, because if it sells I’ll make more commission. But when I’m working for my clients I suggest a price that will get the property sold. We want to transact quickly and reduce your stress that comes naturally just from being on the market.
More importantly, every listing has good market momentum for only about 4 – 6 weeks. Then the traffic will start to slow (if it ever began). That can create some serious tension for property sellers.
Market Value Erosion
If your home stays listed for longer than that, people assume that there’s something seriously wrong with it. This is called “market value erosion”. Eventually, even new buyers coming into the market may not be interested in your property. They’ll ignore it knowing other buyers have viewed your listing and passed it by. They’ll assume that the defect is with your home is so huge that they shouldn’t waste their time seeing your property.
Either way, you won’t get a lot of showings and it’s likely you won’t get any offers. Situations like this always end up costing sellers money as their home sits on the market month after month. The value erosion sets in and the price buyers are willing to pay for a stagnant listing starts to drop.
Stale Listing Reduction Marathon
Over time, you’ll have to reduce the asking price just to get people to come an look at your home. Repeated reductions will net you some results but the stress of marathon price changes will be hard. The agent who confidently declared they could get you that dream price will have to deliver the news that you’re going to have to drop the price again.
I’ve seen homes that have been on the market for over 365 days. We call them “birthday” or “anniversary” properties as they remain on the market year after year. Sadly, the final price will often fall below the area’s market value. The vendor will net less than they could have gotten if the property had just been priced right in the first place.
I spend a lot of time learning the details of homes all over Ottawa, and I can tell you that nine times out of ten the main problem with a house that won’t sell is that the price is too high. Lack of marketing is a close second — we’ll talk about that below.
How Do We Find the Right Price
At Paul Rushforth Real Estate we believe in setting a price that will get your house sold. We also believe in setting a price that we can justify with real market data.
As a sales representative, I can access final selling prices from listings services like MLS. That data isn’t available to the public because of privacy laws.
The essentials that we consider when pricing a home include:
- The Home Price Index, an exceptional tool that’s only available to realtors. It has hard data accumulated from the sale of homes in defined areas throughout Ottawa (ie. Westboro, Kanata Lakes, Barrhaven East).
- How home selling prices are trending in Ottawa and in your specific neighbourhood, based on sales over a 12 month period of time.
- A review of the final selling prices for comparable homes in your neighbourhood. Notice that’s “comparable homes”. There’s no point in comparing your 2,000 square foot bungalow to the 2,7000 square foot two-storey down the street.
- Consideration is also given to economic factors that are likely to impact us here in Ottawa. For example, the effect of the drop in oil prices isn’t impacting us the way it is Calgary yet. But as the impact ripples through the marketplace, it will touch us to a greater or lesser degree. The only question is when and how much.
There are many things that can affect the price your home should list at. When I propose a listing price to my clients, I always explain why that number in as much detail as possible.
How Does Your Home Measure Up?
The price your neighbour is got for their home isn’t necessarily what you should list at. When it comes down to your individual home, we also look at things like:
- Square footage.
- Builder quality.
- Number of bedrooms, bathrooms, parking spaces/garage, finished or unfinished basement.
- Cosmetic finishings like flooring, cabinets, appliances, and countertops.
- Most importantly the big ticket items like age of roof, furnace/AC, windows.
The newer your home looks, the more you’ll be able to ask for it.
Marketing Counts Too
Pricing is critical when selling a home, but marketing is important too. I’m often amazed at how little some other realtors do for the homes they’re trying to sell.
If you’re talking to your realtor, ask how they will be marketing your home. Of course they’ll be listing your home on places like MLS. Look for answers to questions like:
- How many hits a month does their website get? How do they stimulate traffic to their online presence?
- What is their involvement in local communities that bolsters their market reach?
- Do they do media like TV or radio as part of their branding?
- Do they do print advertising and if so, where?
- Do they use professional photographers?
A quick rant about bad photos: dark, distorted or blurry iPhone pictures do not sell homes! We always invest in professional photography because how a home looks in the pictures is a huge part of the draw for buyers.
If Your Property Doesn’t Sell, No One Makes Money
When you’re interviewing listings agents, and they offer to list your home at a higher price without showing you the numbers they are not acting in your best interest. You deserve to know all the variables that will determine your home’s market value.
We want you to get the highest price possible for your home. But that means pricing it realistically. Most vendors can expect an increase in their market value year over year if the economy is positive. The market has no tolerance for greed, however, especially when there’s a surplus of inventory and fewer buyers than ever to absorb it.
At the end of the day, when you price against someone who has more to offer, you’re selling their home – not yours. If you are not competitive in an area that is saturated with sellers wanting to move their property, you will get left behind.
Selling Partner/Sales Representative
With her market experience and attention to detail, Tammy is one of our best listing agents. She has a special talent with helping people upgrade from their starter homes to their dream homes. A born organizer, when she’s not helping her clients she gives back to the community by being the head of the Ottawa Pride Committee and flipping burgers at the CHEO BBQ for the past 4 years and counting!