I received numerous comments after my post last month titled “How to Sell in a Buyer’s Market.” Several of you asked for more details on determining a listing price when selling, so I thought this would be an appropriate time to speak more specifically to pricing in today’s market. I think it’s important to first understand that as the market has clearly shifted, the viewpoint of both Buyer and Seller are at opposite ends of the spectrum. Bridging this gap is the secret to selling today.
Buyers want to purchase in the future. They’re extremely cautious about overpaying, as prices continue to stay flat or trend downward across almost all neighborhoods and property types. They want to get their new property at a price that will be insulated should the market drop a little bit more.
Sellers want to sell in the past. It can be very challenging to accept the fact that your home may be worth less than it was a year ago. Your next-door neighbor may have sold last summer for 10% more than your agent recommends you list at. You might have a 2018 Notice of Assessment that values your home at 10%-20% higher than today’s suggested sale price. The more objective you can be at accepting the shift in the market, the better chance you have in pricing appropriately.
1) Interview Several Agents: I always encourage potential Buyers to interview at least 3 Realtors when planning to sell their home. Not only will this provide some different perspectives and personalities, more importantly it should give range of suggested selling prices. Some agents use the strategy of promising a high sale price in order to get the listing. Then weeks and months go by where the price is reduced over and over until a sale occurs. This can be an incredibly risky approach in today’s market, where you could find yourself selling for much less in 3 months than you could today.
2) Analyze Sales Ratios: Ask your agent how many of your home type (detached, townhome or condo) are selling vs. how many are listed. Lower Mainland real estate has become very type-specific and regionalized, with some parts of the city greatly outperforming others. Detached homes are selling much differently than townhomes and condos. As a rule of thumb, areas where we see a month in which total sales are less than 12% of the number active listings is a sure sign there’s downward pressure on prices. Conversely, when this number is at 20% or higher, prices typically are on the rise. In North Vancouver alone there are some neighborhoods performing as high as 22% and others as low as 7%! Each neighborhood will require a different pricing strategy. If prices are decreasing, using sold comparables from more than a month ago isn’t an accurate representation of where the market is today.
3) Analyze Active Comparables: It’s often common practice to focus only on what’s recently sold in your area when determining a listing price. In this market however, it’s equally important to look at what’s currently available. This is your direct competition. With the help of your agent, evaluate each of these listings in comparison to your home, and pay close attention to how long they’ve been on the market. Ask yourself why homes on the market longer than 20 days haven’t sold – likely it’s a sign they’re mispriced.
4) First Impression: How you initially price your home shows buyers just how serious you are about selling. In this market your price must be low enough to do two things; generate interest and create urgency. If buyers can immediately assess that your home appears to be good value, you will drive more traffic to open houses, and motivate people to act swiftly or risk missing out.
5) Act Quick: The first 15 days your property is on market is more than enough time to evaluate your progress. If you haven’t seen strong traffic to your open houses, requests for private viewings, and groups returning for second and third looks, it’s likely you’re priced too high. React quickly, especially if you’re in an area that has a poor sales to actives ratio, as you could likely be chasing the market down.
I understand how difficult it can be to sell your home for less than you think it’s worth, however it’s more than likely you will make it up on the purchase of your next property, especially if you’re moving into something more expensive or larger, or into a neighborhood that’s less active than where you’re currently selling.
I view the market today as a good opportunity to buy, and am confident this period of correction will end as we get closer to 2020. With the number of total transactions greatly reduced over previous years, a significant growth in pent up demand builds. People still need to move, however many are waiting to see what happens. As more of these people begin to take inevitable action, activity and eventually prices are sure to trend up. This is compounded by a slow-down in new home starts by developers, which will put added pressure on supply.
As always please don’t hesitate to contact me with any questions or comments!