When it comes to selling your Toronto home, the right pricing strategy is critical. Your asking price is equivalent to naming the first number in a negotiation, so it’s important get it right. Price too high and you risk being on the market for a long time and getting less than you would have had you priced it at market value; price too low and you’re leaving money on the table. Here’s a look at three common pricing strategies:
Pricing Strategy #1: Price Below Market and Hope for a Bidding War
Pricing low and setting a ‘bidding war date’ can be an effective way to generate a lot of interest in your home in the hopes that multiple Buyers want to make an offer on your house at the same time (usually 5-7 days after it’s first listed), thus driving up the price of the house.
BUT…this strategy doesn’t always work. This strategy is primarily effective when there is an under-supply of your type of property on the market. Hot neighbourhoods, houses with character and houses in great school districts have generally succeeded with this pricing strategy.
For this strategy to work, a Seller needs to accept the fact that it’s possible that come ‘offer night’, no one may show up. Sellers also have to prepared to list lower than the true value of the house in order to attract attention, which can be risky if you don’t get multiple offers.
I can’t help but point out that under-listing a house by hundreds of thousands of dollars is not only risky, but in my personal opinion, I don’t think it’s fair to the Buyers. We’ve seen lots of Buyers get disillusioned with the real estate market, as they bid multiple times on houses they could never have afforded. They spent time, paid for home inspections and got emotionally attached to a house that was ALWAYS out of their price range, simply because the Seller listed it well below what it was worth. It’s not uncommon for a house with 15 offers on it to only have 3 or 4 Buyers that are actually bidding anywhere near what it’s really worth (and what the Seller is prepared to accept). I really wish more real estate agents would guide their Buyers to understand what a house is really worth rather than throwing offers at everything. But I digress.
The price-low-and-position yourself for a bidding war strategy can be effective, but Sellers really need to weigh the risks and benefits of going this route with a real estate agent who truly understands the Toronto market and neighbourhood.
Pricing Strategy #2: Price Above Market and Pray (negotiate)
We see houses and condos priced above market value all the time, and sometimes it’s a conscious strategy, and sometimes it’s just overly ambitious Sellers.
There are 3 important things to keep in mind about this strategy:
1-A lot of Canadians (Buyers and their agents) don’t like to negotiate and are more likely to walk away from a home than risk insulting a Seller by putting in a low offer. Whether or not you agree or disagree with that thinking, the reality is that a high price may alienate some Buyers. I guess Canadians can be too nice.
2- Toronto Buyers are usually only excited about a new listing for the first few weeks, and then usually discard it. There’s ample evidence out there that proves that properties that sit on the market because they are priced too high usually end up getting a lower price than they would have, had they priced at market value in the beginning.
3- Having your home sit on the market for an extended period of time can be really unpleasant if you’re living there. It means always making sure your home is clean and being ready to vacate it on short notice. Trust me, this gets old after a few weeks.
Pricing Strategy #3: Price At Market Value
This is often the safest strategy to get a good price and sell quickly. For it to work, it does depend on the Seller getting guidance from a Toronto agent who truly understands how to value a home and of course, all the other factors that affect a sale (staging, marketing, etc.) need to be in place.
When it comes to determining the market value of your home, your REALTOR will look at:
- recent sales on your street and in your neighbourhood;
- properties that are currently on the market;
- the current market conditions; and
- the pluses and minuses of your home.
Remember: the price of your home is a moving target and the best pricing strategy will depend on who your target Buyer is, the time of year you decide to sell and what else is happening in the market.
Want to know more? If you’re thinking of selling your Toronto home, we’d be happy to give you an idea of how much your home is worth and discuss the various pricing strategies with you…you know how to find us.