If a property has been on the market for longer than average, or if the vendors want to sell it more quickly, sometimes they’ll try reducing the price. That’s not the only option, of course: staging can help sell a house, as can increased marketing, but if you’ve tried all that and it hasn’t worked, often the only option is a price reduction.
As I often say to clients, pricing a property is an art, not a science. If a property sells in a couple of days, it’s usually a sign that the property was priced too low. Right now it takes on average 49 days for a home to sell in Ottawa, so if a property has been on the market longer than that, it usually means the price is too high.
Reducing the price is easy enough; the hard part is deciding by how much. Generally, you want to avoid a situation where you have to reduce the price more than once, or potential buyers may hold off, waiting for an even lower price.
The paperwork involved is pretty simple.The owners (or the person with signing authority under a certificate of appointment or Power of Attorney) sign a form that sets out the original listing price and the new one. The realtor then inputs the new list price into MLX. And that’s it — it’s done.
Sometimes you’ll see list prices that have gone down, and then up again, as the owners change their minds. But that’s a pretty hard sell. Once the price has come down, the original price shows up on the MLX listing so anyone looking at it will know what the vendors were prepared to accept. I can’t imagine anyone knowingly offering more.
There’s one common situation in which a property can be deliberately under-priced relative to market and that’s when the realtor is inviting multiple offers.
By pricing the property around 5-10 per cent below its fair value, and then setting a specified time for receipt of offers, the hope is that it will flush out buyers. In a hot market, it’s a great strategy; in a slow one, not so much.
But usually, if you see remarks on a listing that offers are to be presented at X time on Y date, and not before, that’s what’s up — it’s an attempt to provoke multiple offers. You’ll often see a reference to Form 244. Not receiving offers in advance of that date has to be agreed to by the owners and that’s the form they have to sign.
In the Ottawa market, there have been some multiple offers recently even though the market is slowing down. But more often, we’re seeing price reductions across the board.
Does that mean properties were over-priced to begin with? No, not at all.
At the time the properties were listed, the prices were probably in line with comparables, but the market is changing rapidly, thanks to layoffs and economic uncertainties as well as the new mortgage rules. And remember, after 49 days, the market has pretty much spoken, and the market is never wrong.