So you’re thinking about selling your house. Now what?
One of the first steps you’ll likely take is to speak with one or more Real Estate Professionals. During your conversation, aim to gather feedback on what your current home value is, as well as whether the Realtor’s method of marketing will include help with the sale of your home. The Realtor® or Realtors® you speak with will prepare a CMA, also known as a Comparable Market Evaluation, for you. This CMA will contain similar listings for sale in your area, as well as recently sold listings in your area. Important things to keep an eye on here are the number of days sold listings took to sell, as well as how long the active listings have been on the market. This will give you a sense of how long it might take to sell your home and come up with a pricing strategy.
Don’t let the highest local listing price dictate your pricing strategy!
Let’s say, for example, you see there are 12 active listings in your area that are similar to yours and the price points range from $1,050,000 up to $1,399,999. A common mistake is instantly wanting to list the price of your house at $1,399,999. It’s natural to want the get the maximum amount of money for your property, but with the drastically changing market we’re currently in – it is crucial to price sharp by staying ahead of the next price drop. Read the example below to understand what I mean with this pricing strategy:
You’re firm on wanting to list your house at $1,399,999. You may think to yourself “let’s start with that price and see what happens”. Unfortunately, 30 days go by and you’ve had zero showings. Meanwhile, other properties in the area that are listed at $1,199,999 have been getting showing requests and 1-2 have sold. Your Realtor® explains the lack of activity is due to your house price so you finally agree to drop the price to $1,199,999. The problem is you’ve now lost 30 days in a market where prices are decreasing monthly, so now comparable active and sold listings indicate prices have dropped to $1,099,999. Another 30 days go by with your house priced at $1,199,999 and again you get zero viewing requests. Now you agree to drop your listing price to $1,099,999, while other active and sold listings are still priced lower than yours.
Do you see the pattern here? By starting off high, you continuously price drop behind the ball. When you follow the pricing strategy above you risk your listing turning stale, which may end up costing you hundreds of thousands of dollars in the final sale price of your home. By listing at $1,199,999 from the very beginning, you’ll get more interest in and viewings of your home. Sure, $1,199,999 is $200,000 less than you believe your home is worth, but that’s better than losing $300,000 or more in the value of your home.
So how do you know which Realtor® to partner with?
Sometimes the truth hurts, but when it comes to selling one of your most valuable assets you need to select a Real Estate Professional that will break it down for you and be firm on what you need to be priced at. If an agent tells you something like: “Well, what would you like to price it at? We can start there” or “Your neighbour sold for this much 3 months ago when the market was hot, so let’s start around there”, be aware that this pricing strategy can severely damage the final sale price of your home. You need to select a local professional Realtor who knows the ins and outs of your exact area, is up to date with pricing strategies, and has a good marketing package to help you make your property as presentable as possible prior to photos and showings.
Current Trend in the BC Housing Market
It’s common in our current market for people to select the agent who suggests listing your home at what you want (typically higher priced). A lot of the time the Realtor is doing whatever it takes to get you to sign a listing contract with them, in the hopes they can rope you in and later convince you to lower your listing price after minimal viewing requests.
However, I’ve noticed a trend in the housing market, that began in the summer of 2022. At multiple recent listing presentations, I’ve explained to potential clients why I believe their property should be listed lower than they want. Many of those sellers chose Realtors who listed their property priced 10-30% higher than my suggestion. I carefully watched those listings to see if I made a market judgement error, and most of those listings got little or zero showing requests, followed by price drops every 30/40 days. Inevitably, those listings declined past the price point that I initially suggested due to the downturn in the market.
The Canadian Real Estate Association (CREA) July 2022 statistics show a 5.3% drop in the number of homes sold, especially in the Ontario and BC markets. CREA also shows residential sale prices peaked at an average of almost $850,000 in early 2022, and have been falling since.
The best pricing method in today’s housing market is to price slightly under fair market value. This may seem crazy but remember that by selling fast you avoid dropping the price of your home further. So be smart when selecting your Realtor, don’t get blinded by the hopes of an above-market value sale price, and remember: by wanting more you may end up with less.