The game has changed and sales volume is at its lowest in 30+ years. Potential buyers demand tomorrow’s predicted price drops while wannabe sellers are largely stuck in the past. And you must sell. You have two choices: you can hire the cheerleader or the coach. One will pump you up and cheer you on for the inevitably long and painful ride. The other will study the game, come up with creative strategies, and take you to victory. This week it’s just Adam & Matt as they continue their two-part series on how to prepare and price your home for sale in a falling market. Okay, huddle up, and together on three: Think like a buyer, set yourself apart from the pack, and get your home sold fast and for top dollar!
Vancouver Real Estate News, Market Updates, Insider Tips, Stats, & Analysis
About the episode:
This episode is a continuation of last week’s episode: Why is My Home Not Selling in Vancouver? Proven Ways to Course Correct. This week’s episode will deal solely with pricing your home to sell in a soft market with Five Pro-Tips to price your home correctly. The central problem for sellers in a soft market is that buyers want to place themselves in the future (want to get a deal – think market is going down and price should reflect this) and sellers want to place themselves in the past (want yesterday’s price – want price of previous market high since that is what homes were selling for before).
#1 – Don’t Buy the Dream When Selling Your Property
You need to think rationally. Focus on evidence, logic and reality-based information when pricing your home. A realtor is an advisor that should be consulting you and imparting their expertise in the market, not a ‘yes’ person who just tells you what you want to hear. Sellers who interview multiple agents before listing their property are tempted to go with the realtor that gives them the highest estimate of price and promises the ‘dream’. In a soft market, this higher price is likely unattainable and will cause you to lose money in the long run. Homes that are not priced correctly from the outset will sit on the market for an extended period and will not take advantage of the early interest from buyers. As the market declines, the seller will be ‘chasing the market’, reducing their price to get the home to sell. This will inevitably lead to the seller accepting a price that was lower than the actual market price at launch – effectively receiving less money for their home. A realtor should be able to give you a market price for your home that reflects knowledge of the current market and is grounded in the data. This is preferable over someone that sells you a dream that will never come true.
#2 – First Impressions Matter
The first 2 weeks of a listing are crucial for getting buyers interested in your listing. Your price will provide a first impression to buyers demonstrating that you are serious about selling your home or not that serious about selling your home. There are various ways to create urgency in different types of markets, but for a soft market, price is a great way to create urgency. A sharp price will get buyers motivated to see the property to scoop it up before it is gone. Price can be a gas pedal if done correctly or a break pedal if done incorrectly. If a home is not priced correctly from the outset, there is a risk that the property will sit on the market and become stigmatized in the minds of buyers – making it tough to sell.
#3 – Use Active Comparables, Not Sold Prices
Let’s use an example of a hot market like Vancouver 2 years ago. A 1-bedroom condo would be listed in a high-rise building for $599,000 and sell for $625,000 in multiple offers. A couple of weeks later, a similar unit in the same building would come on the market for $599,000 and sell for $660,000 in multiple offers. There was no current market data to suggest the 2nd unit was worth $660,000 at the time of sale (no similar sales data), but what was happening was that the market was rising and buyers were trying to get ahead of the market and offer higher amounts to ensure their offer was accepted. This same scenario plays out in a soft market, but reversed – buyers are offering less than the listing price trying to get ahead of a market that is declining.
When pricing your home, it is crucial that you are basing the price on other active market listings and not on past sold prices. Past sold prices will not tell you where the market is or where the market is headed – you need to focus on other current listings in your neighbourhood. Currently, there is a 10% sales ratio in many areas of Vancouver, meaning 1 out of 10 homes is selling. You need to be priced sharply to sell. If you price too high, the same scenario as above will play out in reverse where your home is sitting on the market as market prices decline.
#4 – Use Sales Ratios for Sub-Markets and Sub-Price Bands
Sales ratios are available from the Vancouver Real Estate Podcast monthly in our Live Wire updates. These documents are very important to determine the market price of a property. A sales ratio is the number of homes listed vs the number of homes selling in a given market. They are broken down by region and then sub-region. You can also get the ratios by price bands in each area. As you dive deeper into these stats, the picture of the market for your home might change quite dramatically.
This information can guide where sellers need to be when pricing their home to sell quickly. This information needs to factor into your pricing strategy – this is what is meant by data based analysis.
#5 – It’s a Race Against Time
This is something that all sellers do not want to hear. In a slow market with sales ratios of 10% (1 out of 10 homes selling), there is downward pressure on the market. We are currently in late April 2019 and the verdict is that the spring market really didn’t show up this year. March 2019 was the slowest March since 1986 in Vancouver. If you are trying to sell your home now and it is still on the market in August, it will be worth less money for 2 reasons: 1) August will be slower than April – this is the short-term forecast at this time and generally short term forecasts are pretty accurate in real estate 2) As you are on the market (your specific home), it loses value as people stop looking at it and wonder why it hasn’t sold. We are not talking small numbers – this could cost you thousands of dollars.
The problem with a market shift is that sellers do not realize the market has shifted until it is too late. By the time they realize their price is out of step with current valuations and update their price, they still miss the market. This continues to happen as they adjust their price down to chase the market missing the mark every time.
Important take aways:
You are in an important competition with the other homes in your neighbourhood. It is imperative that you price your home correctly to get it sold.
Sellers need to put themselves in buyer’s shoes and think like a buyer. Questions sellers should ask themselves: how are people going to look at my choices? How are buyers going to perceive value in this market? How does my own measure up?
Sellers are shooting themselves in the foot by looking backwards at the market and pricing based on current history.
Take emotion out of the equation and think rationally about your home and the current market to price correctly and get it sold!