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I’ve spoken to many frustrated home Sellers in the last month; the conversations were all very similar and kinda went like this:
“My home is currently listed for sale with (insert any brand) Brokerage and it isn’t selling. I NEED to sell my home and I’m not getting very many showings and have had no offers. I’m listed at $XXX and that’s my “bottom-line” price. I think I need to fire my REALTOR. I NEED to sell my home for $XXX. Can you help me?”
If this sounds like you, this blog’s for you.
First Up: Is it Really Your Agent’s Fault?
Well…maybe. But maybe not. It’s not unusual for Sellers to blame their agents when the market shifts. It shouldn’t come as a surprise….Toronto agents have been inflating the extent of their role and taking undue credit for the rapid rise in home prices for years:
That’s not to say that who you hire doesn’t impact your sale. The quality of your agent influences:
- How fast your home sells
- How much your home sells for within the range of its market value
- The experience you have while selling your home
- (And sometimes), whether your home sells at all
Let’s talk about market value.
Definition: Market value (for homes, gas, food or widgets) is the point at which how much a buyer is prepared to pay meets how much a seller is prepared to accept.
In real estate, market value is a range – it’s not a precise number. The market value (range) of a home is affected by what’s happening in the economy: interest rates, supply/demand, ease of financing, buyer confidence, etc.
For example, let’s pretend that:
- In September, the market value of your house was in the range of $1.3-1.4 million. That’s what comparable homes in your neighbourhood were selling for.
- Low interest rates, strong buyer demand and a low supply of homes for sale during the winter months led to rapidly increasing prices and bumped up the range of market value for your home to $1.4-1.5 million.
- And now, in June, after a few months of higher interest rates, inflation and buyer nervousness, the market has slowed, fewer homes are being sold and prices are down. The new range for the market value for your home is $1.3-1.4 million.
THE GOOD NEWS: Both you and your agent can influence how much your home sells for WITHIN the specific market value range for your home.
THE BAD NEWS: Neither of you controls how the range itself changes as a result of what’s happening in the greater economy.
When it comes to maximizing the sold price of your home within the range of what it’s worth, you can:
- Take the time to prepare it for sale [Related: 30 Days to Preparing Your House For Sale]
- Accommodate potential Buyer showings at times convenient to them
- Have your home in tip-top shape before showings
- Make smart decisions about pricing strategy and timing
- Respond to feedback and changing market conditions
- Negotiate in good faith while keeping your eye on the prize
Your agent can:
- Read and the interpret what’s happening in the market
- Recommend strategies to help you get ahead of or respond to shifting market conditions
- Help you define your goals and options
- Coach you on preparing your home
- Optimize the look and feel of the rooms in your home through staging
- Recommend pricing strategies that are aligned with current buyer expectations
- Ensure the right buyers see your home online with gorgeous photos, floor plans and targeted ad campaigns beyond the MLS
- Seek feedback from and build relationships with the REALTORS who show your home to their Buyers
- Help you avoid the many potential pitfalls of selling [Related: Speedbumps on the Road to Selling Your Home]
- Negotiate on your behalf
In a real estate market where prices are declining, the market value (range) of your home declines too. [Related: Understanding the May 2022 Real Estate Statistics]
No matter how good your agent is, they can’t influence:
- Interest rates and inflation [Related: Complete Analysis: May 2022]
- Changing consumer confidence
- Pandemics, wars and supply-chain issues
- Financing rules and regulations
- Immigration, employment and wages (Note: these are all positive influences on the real estate market right now)
- Supply and demand
And no matter what those Tiktok videos or tweets might lead you to believe, REALTORS can’t predict the future. We really can’t!
In summary: Your agent doesn’t control the market value (range) of your home – but they can help you re-think and adjust your strategy to respond to changing market conditions. And importantly, while the price range of your home may have fallen, you and your agent can still impact where you land within the new price range.
Remember: Market Value is Fluid
When an agent or appraiser estimates the value (range) of your home, that’s for a specific date. As the real estate market goes up or down, so too does the value (range) of your home.
A ‘Lil Story About the Stock Market
I’m a fairly conservative investor and over the past month, like most investors, the value of my stock portfolio has gone down. In fact, the TSX declined about 10% between April and June.
Normally, that wouldn’t phase me; I’m a long-term investor and I mostly ignore the ebbs and flows of the stock market. I rarely look at the current value of my portfolio – that’s just a number on paper. I only celebrate (or mourn) the increase (or decrease) in my stock portfolio when I sell, which I rarely do.
But this month, I had to sell some stocks to fund a condo investment.
They were worth less than they were in April.
I was disappointed.
But it didn’t even occur to me to call my stockbroker and say:
“Look, I know the value of XYZ stock is down to $15 a share, but I need you to sell them for $22 a share; the price they were trading at in April. I need you to find me a buyer at $22 a share – that’s my bottom price. But I need them sold by the end of next week. For my bottom price of $22 a share.”
I didn’t blame my broker for the declining market conditions. I didn’t call other investment planners, assuming they could find me a buyer at $22 a share. I accepted the market conditions and altered my plans accordingly.
So why is it different in real estate?
‘Bottom-line Prices’ When You NEED to Sell
Whether it’s real estate or stocks, “needing to sell” or having a “bottom line” price that isn’t in sync with the market is a strategy that’s guaranteed to fail. You (and your agent) can’t magically manifest a Buyer who’ll pay $1.3 million for your home if it’s now worth $1.1- 1.2 million. I couldn’t manifest someone to buy my stocks at $22 when they were trading for $15 either.
If you find yourself in this situation, it’s time to get serious:
- Have a frank conversation with your REALTOR about the real market value (range) of your home right now. (Note to agents: now is not the time to sugar-coat and tell your Sellers what you think they want to hear). Look at the other homes on the market for sale. Look at what has actually sold.
- How did you determine your ‘bottom’ price? Is it just psychological? Are you holding onto what you thought your home was worth in a different market? Or is there something else driving it?
- What’s your plan if you don’t get your ‘bottom’ price? Can you hold onto the home and rent it instead of selling it? Can you wait to sell it until the market conditions have improved (keeping in mind that you can’t predict the future either)? Does your mortgage broker have any other creative solutions for you?
- Adjust your price. Remember that in a declining market, successful Sellers price BELOW the last sale – not equal to or above it. That’s a huge mindset shift for Torontonians who’ve been enjoying massive price appreciation for years. But we aren’t going up the escalator right now – we’re stepping down.
So Should You Hire a Different Agent?
When the Toronto real estate market was on fire, selling a home was easy – the hard part was selling at the top of the market range for your home (that’s where an agent’s skills and experience, staging and marketing made a difference). When prices were increasing, even mediocre agents sold homes quickly – they just didn’t sell them for as much as they might have been able to.
But with tighter market conditions, everything matters more.
If you’ve accepted the new range of value for your home and don’t have confidence that your agent can get you to the top of the new range, it might be time to get a new agent. But avoid the temptation to blame them for what’s happening in the market…their job is a lot more complicated right now too.