Contrary to popular belief, when selling your London Ontario home, value is determined by one thing and one thing only – what a qualified buyer is willing to pay for it. No more and no less.
Sure, many sellers will argue that their house or condo has an insurance replacement value, or an appraised value, or a tax assessed value, but unless your insurance agent, your banker, or your tax assessor is willing to write you a cheque, guess what? It means diddly squat!
A home without a buyer has no value in the market place. Sure it might have a benefit to you the seller, and it might have a value to your banker and your insurance agent and your appraiser. But none of them are buyers.
So here is the ingredient to pricing your home to sell – It’s not what you think it is worth that matters, it’s what a reasonable buyer will think it is worth that will ultimately determine what price your home will sell for.
Now you may be thinking, “Hey, wait, if I left it up to a buyer, they would pay me as little as possible”! True, they would. But in the real world, every buyer knows that you, the seller, have no obligation to sell your home at any price. To purchase your home, the buyer will have to make you an offer you can’t or won’t refuse.
One that will motivate you to pack up all that ‘stuff’ you haven’t used in years, hire a local mover, and wave good-bye to a home full of memories.
But here in lies the trap that many sellers fall into (I did once), which is the mistaken idea that we can hold out for an inflated price and eventually, the market will come to us.
Buyers are under no obligation to buy any particular home, and no amount of marketing, open houses, websites, praying or signage will motivate a buyer to purchase an overpriced home.
Because they can buy somewhere else for less or wait! This reveals one of the essential considerations in pricing your home – Price VS Time.
Understanding Price VS Time
The age-old dilemma that has faced buyers and sellers since the dawn of private property rights is a simple question: What is more important, price or time? Believe it or not, this puzzle underlies and controls every seller’s decision to sell, and every buyer needs to complete a purchase. For sellers, this boils down to the need to sell within a set time frame or instead to hold out for the best possible price, and as you might guess, for buyers it’s the need to buy within a set time frame or to purchase a home for the lowest possible price.
A seller who would like to sell for top dollar should be prepared to potentially wait longer for a buyer willing to pay a premium price. Like trying to sell ice during December, a seller might have to give the stuff away to get rid of it, but if they wait long enough, say until mid-August when temperatures crest over 100 degrees suddenly that same ice can have real value. On the flip side, a seller who needs to sell quickly, and doesn’t have time to wait, should expect to discount their price somewhat because of the limited time they have to expose their home to the market.
What’s the difference? Timing!
Buyers are in the same boat. A buyer who has the luxury of shopping for a home over a long period can probably wait to find a bargain, while another buyer who must buy a home in the next few weeks will probably be willing to pay a premium. Again it boils down to price vs. time. So you might ask yourself what is your highest priority – Selling quickly or selling for a higher price?
When I pose this question to my clients, they often smile coyly and then answer – I want both!
Most clients want their cake with the icing generously slathered on top. Because of this, many homeowners will attempt to put the responsibility of getting both top dollar and fast sale on the back of their hired gun, the real estate agent. The result can be summed up in one word – frustration. Why? Because no matter how much a seller yells, screams and kicks a real estate agent, they don’t do miracles.
This is why successful sellers understand that while a Realtor’s responsibility is to provide marketing, expert advice, and negotiating services, in the end, they don’t own the property. They don’t make the final decisions on pricing. The seller does, and ultimately the seller’s asking price will, in large part, determine how slowly or quickly the home will sell.
To frame this discussion differently, consider what you will do should you arrive luggage in hand at the end of your listing period, and the home has not yet sold. At that point, are you more likely to give it a little more time or adjust your price? I know – Neither, I’ll fire the agent! You know what? This is precisely what many sellers’ do; they fire their agents and reboot the marketing.
Does it work?
Sometimes it does, but often these sellers end up three months later in the same slow boat to nowhere. Successful sellers, on the other hand, take ownership of their pricing decisions by making a clear decision about which is more important to them, selling quickly or selling for top dollar.
Successful sellers have learned that to price their home accurately means they need to think like a buyer; they need to get inside a buyers skin and look at the world through the buyer’s eyes. For instance, imagine for a minute that you are moving to another area of the country, to a city that you are entirely unfamiliar with. If you were faced with buying a home in a strange town, what would be your first step?
If you were like most buyers, you would probably start online by viewing listings at websites to get a general feel for local home prices. Next, you might narrow your search down to a specific community or neighbourhood by comparing utility costs, school reports, and crime statistics with other online tools. Feeling good about your findings, you might then venture out into the real world to begin viewing homes in person.
As a typical web empowered real estate buyer, you will look at an average of nine to fourteen homes over eight weeks with the assistance of a real estate professional. By the end of your journey, like many buyers, you become so knowledgeable about the market that by the last showing you can guess, with reasonable accuracy, each home listing price before your Realtor can even tell you.
So what happened here? As a buyer, you went from a blank slate, with no impression of the market to having the ability to predict listing prices. A big leap, sure, but this description is exactly what most buyers’ experience. But this is only the build-up, the next step for buyers who have found their dream home is to review a Comparative Market Analysis.
A Comparative Market Analysis is a report that compares a specific home, often called the “subject home” with other homes within a particular neighbourhood. This analysis is then used to provide an anticipated sales price or price range for the subject property.
Although not formally called an appraisal, the report provides a similar function by giving home buyers and home sellers a clear understanding of the market data that might affect their opinion of value.
What is frustrating to me (and most real estate professionals) is that some buyers still feel they are Uncle Scrooge and that sellers are desperate, so they make low ball offers or very unreasonable conditions. Most of these buyers are getting advice from television shows, “How To Make a Zillion Dollars in Real Estate in 30 Days” books, no money down gurus or Joe at work that buys houses on the side and is making a fortune. (Why is Joe still working?)
To get to the point, our clients are educated on price, conditions and market shifts before they list with us and during a short time, the home is on the market.