Now this is the $ 64,000 question, isn’t it? Your agent has brought you comparables; you’ve looked around the neighbourhood; you’ve seen what’s on the market, you’ve debated with your realtor, agonized over it, and you’ve finally decided on a price. But how do you know it’s the right one? After all, pricing a home isn’t a science; it’s an art. It’s not too often that resale homes are identical. Over time, people customize, renovate, add, remove, update. Comparables aren’t always exactly the same.
Well, here’s what I tell my clients.We’re always better to get the price wrong by under-pricing. If we over-price, not only will your property languish but it will help sell all the properties for sale around it. People will compare and decide they like the bargain up the road. But if we under-price it, we get interest. If we’re lucky, we might even get multiple offers. In a multiple offer situation, the market quickly decides what actual value is. We usually end up at or over list price, usually the latter, because the market rushes to what it perceives as value.
Okay, you say. But we’re on the market now and we have been for weeks. We haven’t got multiple offers; we’re not even getting any showings. How do we know if we priced it too high?
This is where having a realtor helps. A realtor has access to the back end of the MLS system (called MLX), and that gives us some valuable tools. We can check something called “prospecting activity.”
We can tell how many times someone found your listing by searching MLS directly. We can also determine how many auto-notifications have been sent out, that is, how many times your listing was automatically emailed to someone who had an agent set up a search. We can also tell how many people downloaded that auto-notification. This last part is crucial: a listing that is emailed to lots of people means nothing if they don’t actually read it.
And if they don’t, it’s usually because they’ve taken a quick look at the information in the summary and decided it’s priced too high for its condition/location etc. So if the downloads are very small relative to the number of auto-notifications, it can mean the price is too high.
Lots of downloads shows interest. But on-line searches aren’t enough. Not too many people buy a house based on the online listing, sight unseen. It’s the number of showings that really determine if a house is priced right.
If we are getting lots of downloads and no showings, then we’ve priced the property too high. The market (i.e those pesky buyers) doesn’t like the house at that price.
If we get lots of showings but no offers, at least we can ask the agents doing the showings for feedback. They may say their clients are looking for something with a bigger garage, or they want a back deck, or they want to be closer to a school. As long these reasons aren’t repeated too often, and as long as we’re getting regular showings, I don’t worry about price too much. It’s when people don’t come to see the house, or we’re only getting a few showings, that I start to think we’re priced too high.
That’s where the final tool, the fourth piece of useful information, needs to be looked at: Days on Market (DOM). In some areas like the Glebe and Old Ottawa South, well-presented homes are selling in a couple of weeks. If your house has been listed in one of those areas for a few weeks and you haven’t received an offer, it’s probably time to think about reducing the price. Your agent can tell you what average DOMs are in your area. But the average house in Ottawa sells within 45 days. If yours hasn’t, then price could be the problem.
Remember, everything sells at the right price. But even a well-presented house that is over-priced will languish on the market until it’s stale-dated. It gets harder to sell as time passes, leading to a course correction of price reductions that will make people wonder what’s wrong with it.
My advice? Don’t leave a price correction for too long. Trust the market. It’s never wrong. And trust your realtor. If you think your property is priced too low and you don’t get any offers, that means it isn’t. Most owners over-estimate what their property is worth; a realtor has tools you don’t: they can help take emotion out of the equation.