In a hot Toronto market, should I price my house high or low?
Question: I'm planning to sell my house soon. From what I've seen in the news, the summer market was unexpectedly strong - should I be "aggressive" in pricing my home?
Answer: The summer market in Toronto was indeed unexpectedly strong – the number of resale homes and condos sold in July 2013 was up 16.4 per cent over the same period last year. Many experts are predicting this momentum will continue into the fall market despite steadily rising interest rates.
In terms of pricing your home “aggressively,” that could mean aggressively low or aggressively high. The decision to go with a higher list price versus a lower one (the latter is usually intended to create a bidding war) depends on several factors. One of the biggest, as is usually the case in real estate, is location.
Last fall, homes in high-demand areas like the Beaches, Riverdale, East York, High Park and Leaside had sale price to list price ratios of 100 to 102 per cent. That means they sold for asking or more than asking in the majority of cases.
In contrast, some areas located in the outskirts of the GTA like Durham, York and Peel had a slightly lower ratio for sale price to list price. That said, the percentages were only slightly lower, ranging from 95 to 98 per cent of asking. In real dollars, that could equate anywhere from a few to several thousand less than the list price, depending on the price point of the home.
When advising my clients about how to price their own homes, I always emphasize the importance of not overpricing. Overpricing your home can discourage prospective buyers from even visiting, limiting the exposure that you really need. The more people viewing your home the better!
If you are worried about underpricing and leaving money on the table… don’t worry. In my experience, the market itself always works in dictating fair market value. If you’re in a hot area, a fair and even lower than expected price may even drive a bidding war to your benefit.
It’s the basic principle of supply and demand. If supply is low in your area and demand is high, then it will drive the price up. The opposite holds true as well.
Much depends on timing, and you have to get granular with your timing strategy within your community. Weekly changes to available inventory will have a significant impact on your outcome in an active market.
For example, if there are three houses listed for sale on your street at the same time, you may want to wait and see what happens with them. If you list alongside them, you’ll be competing with all those homes, and odds are that will affect the value others put on your home – usually negatively unless you have a truly star property.
Conversely, if there are no homes listed on your street, but the last home that sold went over asking, it’s a good indication of pent-up demand in your area. With that demand and no or minimal competition, it’s the optimal time to list.
While there are no guarantees in real estate, diligent planning and research can give you an accurate picture of historic trends in your neighbourhood, and an edge in determining your own strategy.
One final piece of advice on pricing: Always take a big step back from the personal attachment you have to your home when determining price. It’s human nature to put more value on your home than may be realistic because of all of the work, money and memories you have vested in it. But prospective buyers and real estate professionals don’t see it that way – they’re looking at it with an objective frame of mind. Any subjectivity they factor in to the perceived value applies to their wants and needs, not yours.
When you’re pricing your home, think like a buyer. Be realistic, do your research and be ready to list at the right time.