Back in 2014, I encountered a somewhat sobering story in the Toronto Star. It was about a young Toronto couple who had recently bought their dream home and who had made their purchase prior to selling their current home. Since their current home was located in a prime area of Toronto and since the housing market has been so strong, the couple assumed they would be able to sell their current home fairly quickly. Unfortunately, their assumptions were not correct. Much to the couple’s dismay, as well to their Realtor’s, while they watched many other homes in their neighborhood sell in a relatively shortly amount of time, theirs remained unsold and seemingly forgotten. As a result, the couple faced the burden of paying mortgages on two separate properties.
This story offers some important takeaways – for one thing, it reinforces the fickleness of all real estate markets, regardless of the location. I think it also provides fire to the idea that perhaps selling a property prior to buying a new one may be a safer, more preferred option. Finally, the story in my opinion raises the question of when the appropriate time is to consider lowering a home’s listing price, this latter topic being what I would like to explore in more detail in this month’s blog.
Clearly, when you the seller are considering lowering the listing price of your home, things are not going well. You’ve taken all the necessary steps. With the help of your agent, you put your home on the market. You successfully hosted several open houses and, indeed, you may have even had a tentative offer. But, that offer fell through, and as more days passed since you first put your home on the market, you have the sickening feeling that your home’s ‘honeymoon period’ has come and gone, and the momentum surrounding the hopeful sale of your property has slowed.
This is the common path that leads to a price reduction. And now, having reached this point in the selling process, your agent may be urging you to consider lowering your property’s listing price in order to attract a fresh round of interested buyers. But, of course, lowering your home’s price is not an easy thing to do – not only does it mean that your net proceeds from the sale of your home will be reduced, it’s also in some ways an admission of defeat and a blow to the ego.
But, putting aside one’s ego, there are certain points in the selling process where reducing the listing price of one’s home is strategically the most intelligent thing to do, and may be the only action that will help sell your property in a reasonable amount of time. Therefore, it’s important for you as the seller to know how to determine when that time has come. So, with that in mind, I thought I would offer a few tips on how you can evaluate whether or not it’s time for you to lower your home’s listing price.
As you may already know, performing a comparison of your home to similar homes in your local market is an essential part of selling a home. It’s an essential part of determining a proper initial listing price for a home; it’s essential in understanding who the potential buyers are of the home; and, in relation to this article’s topic, it’s critical in gaining an idea for the average “days on market” for properties in the area. An average days on the market number is basically the number of days it takes for a home in your local market to sell.
So, assuming either you or your agent has analyzed how long on average a similar home in your area takes to sell, you can compare this average to your current situation. An important point when analyzing “days on market” (DOM) statistics is to make sure you look at the complete listing history of comparable properties. Realtors will often “cancel” and “re-list” a property to bring it on the market as a new listing. This simple procedure re-starts the DOM clock! If the real total average length of time is more than the amount of time your house has been on the market, then breathe a sigh of relief – you still have some time to work with. However, if the opposite is true, then this is a strong indication that you will need an extra incentive – such as a price reduction – to successfully sell your home.
But, like many things in real estate, it’s never as simple as it seems – and in my opinion, other factors need to be considered before you and your Realtor finally decide on reducing your property’s price. For example, have you thoroughly cleaned and staged your home for prospective buyers? If you haven’t professionally staged your home, consider this as a possible first alternative to a price reduction. Similarly, have you re-evaluated your home’s marketing? Are there ample professional photos of your home on all major real estate sites? Do the existing photos illustrate your home in the most flattering way possible? Once again, this may be a point to re-evaluate before jumping to thoughts about a price change.
In the end, it would be a perfect world if every home sold the minute it entered the market. Unfortunately, that’s not reality – and that’s why, in the situation where a home is not selling, it’s so important for you the seller to have as much information at your disposal, as well as an experienced and dedicated Realtor who can guide you to a successful sale.