Pricing a house is a combination of art and science. There are many factors affecting the price of your house. You can choose to hire a Toronto Real Estate Agent to assess the value and give you a list or you can do it by yourself.
If you decide to do it yourself, you should be aware of pricing strategies and avoid making common mistakes. If you price it very high, it may reduce the number of potential buyers and eventually your house will stay on the market for a long time.
On the flip side, if you price it very low, the buyers may think that there’s something wrong with your house. So some unwanted questions may be raised about the true value of the house.
The most important strategies you must consider include checking the market type and history, comparable sales, special improvements you made, and don’t forget the supply and demand ratio.
Some sellers think they can offer a pie-in-the-sky price for their house, so they can negotiate later. But it doesn’t work this way in Toronto real estate market. You must know pricing is completely dependent on the market.
Even when you examine and compare the listings, considering the current type of real estate market in your neighborhood would be the most important factor.
Different types of real estate market
You can choose your strategy, future approaches and negotiations based on the type of the market. There are three types of real estate markets in your local neighborhood: a buyer’s market, a seller’s market, and a balanced market.
In the buyer’s market, the number of properties for sale is more than the number of buyers. In other words, buyers can enjoy the many choices and have the upper hand. So they have more negotiating power. It is recommended to price lower to serve the interest of buyers in a buyer’s market.
In the seller’s market, there are fewer listings than there are buyers. It means the buyers may encounter stiff competition or their house search might take longer. In such a market with little inventory and many buyers, you can add approximately 5% to the last comparable price and you may safely get it.
In a balanced market, the number of buyers and sellers are even and neither side has an upper hand. The number of houses for sale is equal to the level of demand.
It is better to have a comprehensive perception of the real estate market in your neighborhood. After finding the type of the real estate market, the next step is checking the listing history of a house. You should compare the primary original asking price with the final price. Pay attention to the period of time the house was on the market until it sold.
What is the role of comps in pricing?
Comps is the short term for housing “comparables”. You can figure out what your house is worth based on the recent sales prices using the comps in the same Toronto neighborhood. Sellers can use comps to come up with their asking price; on the other side, buyers use comps to come up with how much to offer.
This process involves comparing similar properties, in the same area, and tracking market movements over the last six months. The vicinity of comparing houses should be limited to those within ¼ to ½ of a mile from yours. Try to be fair, compare similar ages and sizes. Compare apples to apples.
For determining the possible price reductions, you should compare the original list prices of the houses to the final sales prices. And for determining the ratio, you can compare the final list prices to actual sold prices. At least three properties that sold at market value in your neighborhood would be the ideal number for the best comparison.
Therefore, it is not important how much you paid for the house or no matter what your personal opinions are. The important point is to price your house as closely as possible to current market value.
Different types of listings
A savvy home seller applies a comparative market analysis before listing with a real estate agent or putting the house on the market. For better listing preparation or perfect market comparison, you need to know the different types of listings. There are 5 types of real estate listings including:
- Active Listings: the houses which are currently for sale.
- Pending Listings: shows the formerly active listings. Those listings which are under contract and still not closed.
- Sold Listings: include the closed houses within the past three months which can be your comparable sales. An appraiser uses sold listings for appraising your home for the buyer.
- Expired Listings: indicates the highest median sales price. These cases did not sell because they probably had unreasonable prices.
- Canceled/ Off-Market Listings: include the properties which were removed from the market, usually because of the seller’s remorse, staying too many days on market, repair requests, and very high price.
You can use cancelled and expired listings and look for patterns to find out why they didn’t sell, which brokerage had the listing?
Remember! There is no hard and fast way to slap a price tag on your house. It’s the market which dictates the price. The general points you may want to consider after all these important steps include:
- Try to see everything from the buyer’s point of view
- Go to similar open houses in the neighborhood, and do your own research. Compare those houses with yours in terms of location, size, amenities and condition.
- Learn about the transaction terms.
- Comparable homes must be in the same neighborhood, have similar size, number of bedrooms, bathrooms and upgrades or amenities.
- The best listing price would be the one between “too high” and “too low” based on the time of year and the local market.
- Consider value range marketing. In Value range marketing, you choose a listing price based on what you would sell for today. So instead of offering the listing at a specific price of $856,000 dollars, you offer a listing between $849,000 and $856,000.
- You can always use an experienced real estate agent who knows the local market and recently sold comparable houses. They know exactly how buyers respond and it comes in handy.
You can hire or get help from real estate agents to give you helpful suggestions on everything, from pricing to curb appeal.
Take a tour to active-listing houses to see what buyers will see when they visit a house. Then ask yourself why a buyer would prefer your home, and adjust your price correspondingly. Set a price which might allow some wiggle room for negotiation in a buyer’s market. On the other hand, it would be better to add 5% more to the last comparable sale in a seller’s market.
You should know that a single-family home on 4 acres of real estate will generally price more than the same size-real estate with a small-size lot. Or certainly a new home costs more. And also because of the higher labor costs and total construction costs, the larger houses will cost more.
Before you invite people for an open house, clean your home from top to bottom. First impressions are very important. Offer a warm welcoming and don’t put the buyers under a pressure or hurry. You don’t need to follow the buyers and explain upgrades, amenities, or features. Let them be comfortable.
Also during COVID19, check with your local health authorities if open houses are allowed in your area or not. And make sure to put in place all the safety and health measures. Or do a virtual open house in case that open houses are not allowed in your area.
Toronto Buyers are usually excited for the first few weeks about a new listing. Then, they usually forget it. So offer a reasonable listing depending on the real estate market trends and your target buyer.