THE STORY OF THE OVER-PRICED HOME
The following is based on a true story. The names and property address are purely fictitious so if this sounds familiar, rest assured that you’re not alone.
The Homeowners: Don and Marg are getting their home ready for sale. Their google search has suggested they should talk to at least 3 different Realtors, which of course, they have done.
The Home: 12 Crescent Road in Anytown, Ontario is in an area that is always popular. Built in the 1960s and 1970s, the area is usually active with listings and sales happening regardless of the market.
The Market: The market is not doing great. While prices have been hanging in there, sales are well below the norm with homes taking 50 – 60 days on average to sell. There are more than enough homes currently on the market so they will have competition once they hit the market.
Pricing: there are currently 24 homes in their area in the $700 – 800,000 range. In the past month there were 4 sales meaning in these current market conditions, only 1 in 6 homes will sell per month. Or in other words, 83% will not sell. All signs indicate their home should be listed in the $725,000 range.
The Realtors visits are done, and the verdicts are in…
Realtor 1 suggests a list price of $719 – 729,900. The research was extensive and based on fact.
Realtor 2 suggests a list price of $735 – 744,900. The research was extensive and based on a mix of fact and ample optimism.
Realtor 3 suggests anything in the mid $700s but is also ok with higher. “Hey…we can always try!”
Don and Marg have talked to their neighbours about their plans. As well, they talked to their kids who are in their 50s as well as their siblings who live in various parts of the province.
Neighbour 1 is sure they should be priced at $799,900. “This is a great area!”
Son 1 suggests trying high $700s. “You can always come down, but you can’t go up!”
Sister 1 watches Realtor.ca and is sure their home is worth whatever the highest estimate is. The fact that she lives 180 km away is not considered.
It’s decision time…
After talking with friends, family, neighbours, financial advisor and Don’s golf buddies, they have decided to “give it a shot” and list with Realtor 3 for $799,900. Afterall, if it doesn’t work, they’ll reduce their price in a month or so.
Here is what will likely happen next.
The lockbox goes on, the shiny new sign goes in the yard and just like that, the home is on the market! Don and Marg hop onto Realtor.ca to see their home. Officially up and running, they feel pretty good. “Let’s do this!”
Day 2 they get their first showing request. Then 2 more for day 3!
Feedback comes in. The buyers liked it but are going to keep looking. Afterall, there are 10 other homes on their short list to see.
Day 4 no calls but we’re still in touch with agents from earlier in the week.
Days 5 through 8 things start to get quiet.
Day 9. “Hey. How are things going? Any calls?”
Day 10. A showing! They are in and out in 12 minutes. The Realtor is unsuccessful in their attempt to get feedback.
Fast forward, and we’re moving into the 3rd week on the market and things are quiet.
“Should we do an open house?”
There were 2 sales in the area last week. One sold for $718,000 while the other got $732,000.
“Should we reduce our price?”
“What should we do?”
Let's reduce the price...
The price is lowered to $769,900.
Activity online improves so let’s hope that leads to some showings booked! A new appointment is booked for tomorrow so a glimpse of hope returns.
The neighbours ask. “How are things going?” “Any offers?” “Geez, we thought it would be sold by now for sure!”
Another showing is booked for Wednesday! Don wants the agent to let the buyer’s agent know that they’re motivated and looking for offers. Patience is being replaced by unsettled and antsy. The showings go through but again, the buyers are going to keep looking. They like it but…
Now into the second month on the market, Marg and Don are feeling down. Their friends and family mean well, but it’s becoming difficult answering the same questions about how things are going.
They want to meet with their Realtor. “What should we do?”
Their home looks great, and the photos and video are high quality. It’s time to talk pricing yet again.
“Geez Marg…maybe those other Realtors were right…”
Let's reduce the price...again...
As much as they don’t want to, they also want this over with. They reduce again to $744,900.
“Ok. Bring us an offer!”
Here’s the thing. At $744,900, they’re still statistically, higher than what the other Realtors suggested and higher than what the current market indicates. But as far as Marg and Don are concerned, they’ve come down in price by $55,000 so they’ve already negotiated thank-you very much!
Update. Two showings are booked for tomorrow and one of the first buyers are coming through again. Progress is palpable!
It’s now week six and the day has finally arrived. One of the Realtors from the showings yesterday has said they’re bringing an offer to us!
The slightest feeling of relief arrives. Relief mixed with anxiety and anticipation and dread and joy and…. The offer is coming in this evening so it’s time for deep breaths.
Sidebar. The sales over the last 30 days sold for an average of 95.2% of asking. So, with an asking price of $744,900, that is a selling price of $709,000. Keep that in mind.
The offer comes in. Great news! It is not conditional on the buyer selling their home which in this market, is a gift in and of itself.
Less great news. The offer is only $700,000. Yikes. “That’s $100,000 below where we started!”
Calm is encouraged and negotiations begin. After 4 sign-backs, 3 days and 2 sleepless nights, they have an accepted offer of $722,500.
The conditions on inspection and finance are resolved and the home finally has a SOLD sign in the front yard. It took nearly 8 weeks, many sleepless nights and the biggest emotional roller coaster that they can recall, but their home is sold.
Here are a few questions for Marg & Don to ask:
- Could they have asked for more info and background on the prices that the Realtors suggested?
- What would have happened had they listed at $729,900 a few months ago?
- Did they get their info from the most appropriate source?
The truth is that this story and process is a very common occurrence in the real estate industry. Real estate is a spectator sport where most feel that they’re an active participant, or at least have an opinion on. And while the neighbour or Uncle or friend might mean well, they are quite possibly incorrect when it comes to specific information regarding a particular house.
The market moves continually with ebbs and flows in all directions. Those changes can happen in one town or one area and not another. Look no further than the difference between Fort Erie, St.Catharines and Niagara Falls. To use the entire market to summarize a particular home in any of those cities will not paint the most accurate of pictures.
When a market has record high inventory and record low sales, the accuracy of your asking price becomes more important than it ever has. So, make sure you’re asking the right questions and getting your advice from the correct source.
As always, thank-you for reading. :)