How Do You Price A Property In A Slow Market?
Pricing your property correctly is super important in a slow market.
Do you still go trick-or-treating? As a 42 year-old with no kids, I'm pretty sure my days of getting free candy from my neighbours are over. The last time I went trick-or-treating was back in high school. My buddies and I made no attempt to actually wear costumes and just went around the neighbourhood asking for candy. We got our fair share of dirty looks from annoyed parents, let me tell you, but we did end up with a pretty decent score of candy that night. But sadly that was the last time for me. Nowadays if wifey surprises me with some candy or chocolate at home, I have to ask her to hide it from me otherwise I'll probably eat it all in a single sitting. I'm not joking. She has to physically hide candy from me.
Where was I going with this blog?
Oh right. We're effectively halfway through the fall market and this is definitely one of the slowest we've seen in a very, very long time. Sales are down. Listings are down (relative to what we're used to). Buyer activity is down. And while there are certainly bidding wars and multiple offers out there, that's just not the norm.
So what do you do if you're a seller in this market and you need/want to sell? Here's how my conversations with all my sellers over the past few months have gone:
1 - We're not going to set any records. I think it's important to make that clear right off the bat. We've become so accustomed to seeing record sales, year after year, that I find myself starting my listing conversations with some hard truths. We are not going to set a record with this sale. Period.
2 - The comps from earlier this year don't count. Remember when you could just look at the highest comparable sales from the past few months and say to yourself "that's what we're trying to hit"? Now the conversation goes a little more like "if we can get close to what we would have gotten a year ago, we should be pleased". Pretty much any sale from 2022 is irrelevant right now. That sale from Feb 2022? It's not even in the ballpark of what we can expect right now. That sale from May. Not likely. I've been looking at comparable sales from the fall and summer of 2021 to see where the price range for properties could be right now. But I mean, it's not all bad news. If you simply ignore the crazy run up in prices from Jan 2022 to April 2022, you'll probably feel like you're doing just fine.
3 - The objections are harder to overcome. In a hot market, buyers will say things like "the view isn't great, but that's ok. I'm on a lower floor and can use the stairs during rush hour!". In a slow market, that objection becomes "the view sucks. There's no natural light". In a hot market, we'll hear "the layout isn't perfect, but that means I can get creative with my furniture!" In a slow market, it's "I can't fit furniture in here". No parking in a hot market? "It's Toronto! I don't need a car." In a slow market? It's "Where am I supposed to park?" Buyers will make concessions in a hot market because, well, they have to. But in a slower market those objections quickly become deal-breakers. As a seller, you really need to own the negatives of your property and make meaningful price adjustments to account for them. Don't leave it to "well, if someone has a problem with that they can make a lower offer". If you don't make those adjustments to your potential list price for the impending objections before you hit the market , buyers won't come.
4 - Pricing your property is like playing with magnets. This is my favourite analogy and I think I should trademark it ;) Whenever I work with buyers and we're trying to come up with an aggressive but fair offer on a property, I tell my clients to think of their offer price like a magnet, and the list price as another. If you come close enough, the two magnets will snap towards each other and we'll get a deal done. But if you start too low, the magnets won't attract and neither side will budge. Then you have to ask yourself, as a seller, where you do realistically think your property could/should sell for and then ask yourself how far below that price do you think a buyer would realistically be able to make an offer without having these two magnets too far apart? If you price too high, nobody will make an offer because where they want to end up is probably too far below where you are listed. The magnets won't attract. So you have to price your property as close to that final destination as possible, while still leaving some room to negotiate because let's face it, in this market, everyone wants to negotiate. This is where the thoughtfulness of pricing a property really becomes important.
5 - You must be willing to negotiate. We're not in a market where you, as a seller, hold much leverage. I had a condo seller client recently who told me after three weeks on the market (and no offers) that "I will only accept full price or higher". I then had to have a very long conversation with her that those days are over and the list price that we came up with together was based on leaving at least some room for negotiations. Because everyone wants to feel like they got a win and in this market and if you're not willing to negotiate, you will lose buyers, they will call you unrealistic or greedy, and your property will sit.
6 - The only lever you really have is price. I have this conversation a lot with sellers before we hit the market. My sellers and I are going to do everything within our control to showcase the property as best we can. The place will look amazing. The staging will be on point. The photography will be perfect. The presentation will be perfect. The listing will not have a single mistake and will be catchy and accurate. The only thing left that will be within our control will be the list price. If we're not getting action, it won't be the way the listing is presented. It won't be the staging, or the pictures, or the marketing. It will be the price. And that piece we have complete control over.
7 - You have to pivot quickly. I hate using clichés and salesy language when speaking to clients so when I say things like "pivot" or "change strategies" I always catch myself and rephrase things bluntly: "We need to drop the price". I can totally appreciate that patience is a virtue and expecting properties to sell in a week or two in a slower market is not always realistic. But as a seller, you have to listen to the data. Have you had any showings? What was the feedback? Do you have any sense of hope from any of the showings that you could be seeing an offer imminently? The longer you wait, the faster your property goes to the bottom of the pile as new listings come to market and it's almost always better to rip the band aid off (yes another cliché), drop your price quickly, and stay relevant. Holding to your price and waiting for that "right buyer" to walk through usually comes back to haunt you. And if you are holding out to leave room to negotiate, think about my magnet theory above, drop your price, and breathe new life into your listing.
Do you think wifey will surprise me with leftover Halloween candy once everything goes on sale in November? I kinda hope she does but I would definitely bet better off if she didn't ;)
Have you checked out my previous blog posts?
Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)