Happy heatwave everyone! No wait, we mean Thursday, happy Thursday! Today we want to roll it back to the basics. It’s easy to get caught up with various “advanced” real estate sales/buying strategies. Feel free to swap the word ‘advanced’ above with silly, wrong, crazy, mind blowing, ridiculous and other similar words. That’s not to say all strategies fail, more so it’s a reflection of strategy based on ridiculous perceptions of the market, usually driven by our best friend - The Ego!
The truth in the matter is, whether buying or selling, people really start to overthink the right ‘strategy’, and it takes them away from performing the basics. That’s not to say all strategies work/fail, but the fundamentals need to be in place for the strategy to work.
For example, on the selling side. The Strategy of “Let’s up the price to show the market we are serious” sounds all well and good. But if nobody is coming to look at your property in the first place, there is nobody to show “you are serious” too. Seems basic, but unfortunately is all too common.
Take the buying side - “They’ve put their listing price at that amount so that’s what I’ll offer them! I don’t care if they’ve priced low to get multiple offers at a higher price. If you don’t want that amount, then don’t list it there”. The market does not care about your individual perception, it’s based on the collective, and the collective will pay more than the asking price.
Nope, it’s time to remember what the fundamentals of selling real estate are, and make sure you are sticking to them with your plans.
- ACTUAL comparables
Quite simply, pricing is based upon comparables. What has sold around you, then plus/minus certain amounts based on elements such as square footage, views, renovations etc. In a crazy market like we’ve seen recently, it’s easy to get carried away on this point. It’s good old fashioned comparables which will show what your market value is. After you have defined this, THEN you can discuss strategy. I.e. market value shows my house is worth $2.1M, so let’s list at $1.9M to drive attention and offers, hoping to get equal to, or above the $2.1M mark. NOT $2.1M is market value? Great let’s list at that amount and we’ll expect multiple offers in the $2.4-$2.5M range. Then shock, you cannot understand why it didn’t happen when offer day rolls around.The same applies for buyers. The comparables show a reflection of market value. In this type of market, you’re not in a position to negotiate $75,000 off the property just because you want a discount under market value. If you can’t afford it, shop in your actual price range.
Buyers, we’re now getting to a point where you can start including your desired subjects. Which is great. But on the off chance you’re in multiple offers, can you get the inspection done before offer day? Can you read through Strata Documents early? These are ways you can make your offer more enticing without just upping the price. It really works too, check out the example a bit further down to see.
As a seller, are you realistic with your closing dates? If you’re selling a lot to be developed, most of the time builders will require a later close. Are you willing to work with your target market, or are you going to work against them?
Buyers, if you can be flexible on your dates to close you have a huge advantage. Meeting a seller's preferred dates is a huge plus to them. Especially if they are moving out and otherwise would have to look at a rent back, renting elsewhere or trying to postpone their own closing dates. All of which are a hassle, as well as financially impactful.
This pains me to even state, but pre-approval should be your first step when purchasing real estate. It’s not IF you can get pre-approved, it’s HOW MUCH you can get pre-approved. It’s not simply a case of putting in your purchase price and mortgage amount on a bank's mortgage calculator. A pre approval takes into account many items. You don’t want to shop for a $1.7M home, only to realise you have a purchasing power of $600,000. That seems intense, but it happens ALL. THE. TIME.
Paul’s house sold down the road and yours is much better, so obviously you're worth a couple hundred thousand more than that house!! Well why is yours better? Paul has a full sized lot on a flat parcel of land, he also has a legal suite and his house was built in 1995. Your home is on a steep hill, is 100 years old and your rental space is unauthorized. These are all tangible elements that go into pricing a home. Once again, don’t let your ego price a home, let your Realtor do it.
We recently put an offer in on a home. The agent let us know we were in multiple offers, plus a few things the buyer had said they were looking for (dates, a few things they wanted to take with them etc.) We revised our offer and changed our price EXTREMELY MINIMALLY. We won that multiple offer and we were not even the highest offer. On top of that, we actually paid about $40,000 under the asking price… In multiples. We won that offer because we were flexible on things that mattered to the seller. So much so they accepted our offer over more money. A prime example of the above points.
With the same buyer, before this offer was put in, we submitted an offer on another property that had been on the market for 3 months. We looked at comparables, along with the other points mentioned above. Also taking into account how long it had been on the market. The seller was holding onto a price in their head due to the unit below them, with the exact same floor plan, selling for $50,000 more than he was listed at. The key difference, that unit below had a 300SqFt balcony and an additional parking space. We didn’t end up coming to an agreement because “The seller did not feel a 300SqFt balcony and additional parking space justified a $100,000 difference in price.”
Now that’s all well and good, but considering every other unit in that building had sold within a week of being on the market, and he had been on for 90 days and counting, with zero offers. He was not willing to be flexible. For that reason, he lost a real opportunity to negotiate to a reasonable number. When the market is telling you something as a seller, make sure you listen to it. Don’t hold onto your own figures, based on your own justifications and intentionally block out the real numbers in front of you.
It’s important to go back to the basics when on your real estate journey, without them it is the wild wild west out there, and you’re making decisions based on smoke and mirrors. Follow the basics and you’ll find your objective actually becomes much easier. This isn’t an extensive list of the basics of course, but just a selection of the key ones.