So you want to sell your Toronto home this fall…but the market is shifting. Demand is lower, supply is higher and prices have been declining. What else has changed? What do you need to know? Can you still sell your home for a good price? What should you expect?
This article is for you. It’s full of behind-the-scenes insider intel that we’ve gathered over the past few months, as we’ve successfully guided our home sellers through this changing market.
The Market Right Now
The good news: homes are still selling!
But ALL of the things that matter – price, strategy, timing, staging, photography, marketing, negotiation – now matter a whole lot more.
The buyers are more in control.
The Toronto real estate market has been in flux since March 2022, and the July 2022 market statistics show us how the balance of power has shifted. Higher interest rates, unprecedented inflation and overall squeamishness about the unknown have reduced the number of active homebuyers and their budgets. Properties are taking longer to sell, multiple offers are infrequent and there is a greater supply of homes for sale; Toronto homesellers are no longer calling all the shots.
But there are still plenty of buyers out there! We’re seeing a lot of first-timers who were shut out of the market, people moving to Toronto for school or jobs, upgraders moving to bigger homes, buyers undergoing lifestyle changes like marriage, divorce and babies and gutsy investors looking to take advantage of lower prices while betting on lower interest rates in the future.
Getting your asking price and pricing strategy right is critical.
Today’s buyers are nervous – and smart. They know that the balance of power has changed and after years of being at the mercy of the seller’s demands, they are looking for a more balanced negotiation. Their buying purchasing power has decreased: they’re qualifying for lower mortgage amounts and their monthly payments are higher too. Even with lower prices, the hikes in interest rates mean it’s actually less affordable to buy a home now than it was in the frenzied February 2022 market. You need to get your asking price right and strategy right if you want to get your home sold. Keep the following in mind:
- When prices are declining, you need to be priced below the last relevant sale. Today’s buyers aren’t interested in homes that are priced at March 2022 levels. Focus on the prices of homes sold in your neighbourhood during the last few weeks – and give just as much attention to the homes that aren’t selling.
- You’re likely still going to make a lot of money. In July 2022, the average home sold for 19% less than it would have in February. But if you bought your home 12+ months ago, you still stand to make a tidy profit. It’s easy to get caught up with how much your home was worth on paper earlier this year – but it’s not really your money until you sell. Think of it like the money you have in the stock market…you can’t sell your stocks at February prices in August either.
- Remember that buyers don’t care how much you ‘need’ to sell your home for. Your financial needs aren’t part of what buyers will consider when deciding how much your home is worth to them. They’ll be looking at the prices of similar homes that have recently sold, how your home compares to other properties currently on the market and their own needs.
- You probably won’t get a bidding war – so get your asking pricing strategy right. We’re seeing multiple offers only in exceptional cases, so the ‘underprice-and-set-a-bidding-war-date’ strategy isn’t likely your path to the top price. You’ll probably want to set your asking price in anticipation of some negotiation – but if you set it too high, your home will be overlooked and discarded by today’s savvy buyers. Your agent will be invaluable in guiding you when setting your asking price.
You might need to lower your price.
- If your home is for sale and you aren’t getting showings or offers, your problem is almost certainly pricing. With prices expected to decrease further before they stabilize, it’s wise to get ahead of the market instead of chasing it down. In a downward shifting market, your home is less valuable over time – letting it sit on the market won’t magically make it worth more – in fact it will be worth less. “I’ve got lots of time/I’m not in a hurry” is a common phrase that agents hear; this actually works against you right now. Talk to your REALTOR.
- If you need to adjust your price, that’s OK. We’re in the ‘price discovery’ phase of the market shift and responding to the market is important if you want to get your home sold. Even REALTORs who’ve sold hundreds of homes are learning about this new market every day.
- If you reduce your price, let the buyers know it! In addition to informing the potential buyers who’ve already toured your home, your agent should have a ‘new price’ marketing campaign to signal your motivation.
- Negotiation is new to homebuyers in the Toronto market and a lot of them aren’t yet comfortable with it. While it might be tempting to keep your overpriced home on the market and just plan on negotiating lower, you’ll find that most buyers won’t bother to make an offer. They assume that overpriced properties are listed by sellers with unrealistic and outdated price expectations or those who have no real motivation to sell – and they just move on to the next property.
- If you’re waiting for ‘feedback’ before lowering your price, remember: getting offers below your asking price or not getting offers at all IS feedback. In fact, it’s the most important feedback of all.
Staging & Home Preparation
Staging is critical right now.
It’s never been more important to showcase your home at its best, so make sure to take the time to declutter, deep clean and invest in professional staging (or hire a REALTOR who includes it in their commission). Staging helps your home look its best in photos and online (where potential buyers will see it for the first time) and it helps them connect emotionally with your home during a showing. Staging is an easy way to stand out in a cluttered market and it helps homes sell faster too – a study by the National Association of REALTORS found that staged homes sell 87% faster than non-staged homes.
On average, homes are selling in 30 days right now, so you’ll need to keep your home in tip-top shape every day. Make the beds. Do the dishes. Wash the floors. Clean the litter box. Do all the things.
Related: 30-Day Guide to Selling Your Home
Expect fewer, but more serious showings. While the number of buyers out there is less than a few months ago, there are still plenty of ready and motivated buyers. While you won’t likely get 50+ showings in a week, the people who are touring your home are likely to be serious and motivated vs just curiosity-seekers.
Because the market is moving at a slower pace, buyers will likely spend more time touring your home and will take longer to make a decision. They’ll likely come back a couple of times to see it and their REALTOR will have time to ask questions. This is GOOD news for you – it means the buyers have more time to fall in love with your home and you’ll encounter fewer surprises at closing. The 15-minute showings of early 2022 weren’t really good for anyone.
It’s more important than ever to be flexible in allowing potential buyers to tour your home when it’s convenient for them. Selling a home is never convenient for the seller, but in a slower market, any conveniences you want will come at a price. Resist the urge to restrict showing times and know that most showings will happen in the evenings and on the weekends when you probably just want to sit on your couch and chill.
Conditions! With less competition and time on their side, it’s normal to receive offers that are conditional on the buyer obtaining financing, performing a home inspection (for houses) and reviewing the status certificate (for condos). Conditions are usually 3-5 business days, so don’t celebrate your sale until all the conditions have been waived.
We’ve heard of a few homes recently being purchased conditionally on the buyer’s current home selling, though it isn’t common. Click here to read more about the Sale of Property Condition and how you can make it work for you as a seller. (If your REALTOR isn’t familiar with this condition, you may want to send them our article. It’s really not something we’ve seen in the GTA market for many years).
Be patient when negotiating – and don’t be surprised by a multi-day negotiation. The further apart you and the buyer are on price, the longer it will take.
You won’t just be negotiating on price. In their offers, buyers may ask to include things in the sale price that you hadn’t planned on including – for example, the dining room chandelier, your BBQ or your big-screen TV – and they may be more steadfast in choosing their closing date. Focus on the big picture and expect both sides to get some wins, and feel some losses.
What you need to know about timing:
If you’re upgrading to a bigger or more expensive space, it’s actually a great time to be in the market. While you’ll get less for your current home than you would have a few months ago, you’ll benefit from the lower prices when you buy. If prices are down by 15% in your neighbourhood, you’ll get $150K less for your $1,000,000 house than you would have earlier this year, but you’ll also pay $225,000 less for your new $1,500,000 house. Remember: selling prices are forever; interest rates are just temporary.
We often talk about ‘the real estate market’ as though it’s one market, when in fact it’s actually a bunch of micro markets that shift and behave differently. During the pandemic, we saw the prices of detached homes rise dramatically more than condos or townhouses, and properties in the 905 regions increase disproportionately compared to properties in the 416 – so it stands to reason that as the market rebalances itself, detached homes and the 905 regions are seeing the biggest price decreases. If you’re moving from a condo to a house or from Toronto to the ‘burbs, bonus! If you’re selling a downtown condo and moving to a house in the ‘burbs, double bonus!
If you don’t need to sell in the next 12-24 months, consider waiting to see what happens before listing your home for sale. While nobody knows what the future holds, we do know that things are shifting fast right now. Make sure your goals and timelines are clearly defined and let them guide your decisions.
If you’re looking to sell your home in the next 6 months, sooner is probably better than later. Interest rates are expected to increase in the coming months, which will erode buying power and likely result in lower prices.
If you’re buying and selling at the same time, it’s most prudent to sell first, then buy. You’ll be working with real $$ amounts vs. guessing what your home will sell for and won’t have the stress/risk of carrying two mortgages if your home doesn’t sell in time. Talk to your REALTOR.
Choosing Your REALTOR
Choose your REALTOR wisely
In the frenzied market of the last few years, selling a home was relatively easy – even inexperienced agents who didn’t provide a lot of extra services were able to list a property on the MLS and it would sell – buyers showed up in droves, no matter the property. Those homes didn’t necessarily sell for the highest prices they could have fetched if they’d been professionally staged and marketed – but they still sold.
In this shifting market, it’s critical that you hire the right agent if you want to successfully sell your home. That’s not necessarily your mom’s friend who has her real estate license, or your work colleague who sells a few houses a year, and it’s not necessarily the person who helped you buy it. When choosing a REALTOR to list your home for sale in this shifting market, make sure they:
- …are active in the current market – they know how buyers are feeling and why some properties are selling, and others are not. If the last home they sold was in February, keep looking.
- …have successfully navigated this market with Sellers. Ask how many homes they’ve listed for sale since March 2022: How many of their listings sold? How many were terminated? How many are still on the market?
- …help with home preparation and professional staging. Make sure to ask about staging costs and whether or not it’s included in the commission (and what happens if your home doesn’t sell). Staging is critical right now – it’s never been more important to showcase a home at its best.
- …know how to market a home. Gone are the days when an agent could just list a home on the MLS and it would sell. Your agent needs to be savvy with digital marketing and should be able to show you how many potential buyers their listings reach via their website and social media. And of course, they need to hire fabulous photographers and invest in floor plans.
- …understand pricing in a down market, buyer psychology and strategy. Selling real estate in this market is both an art and a science. While it might be tempting to hire the agent who tells you your home is worth the most, that might just mean they don’t understand what’s happening to prices right now and your home will just languish on the market. Trust the REALTOR who tells you the truth, even if it’s not what you want to hear.
Remember that you get what you pay for and commission discounts come with tradeoffs. If you want an experienced agent who will dedicate their time and financial resources to getting your home sold in this uncertain market, you won’t likely get a discounted commission too.