I’ve often said that a well-priced, well-presented home will sell regardless of the market. The key part of that equation, though, is price. And when a market is slumping, it’s hard to know what an appropriate price is because the comparables are so quickly out of date.
One factor we look at is days on market. That’s how long, on average, it takes a property to sell. When I started in this business, it took 21 days on average to sell a house in Westboro, where I live in Ottawa. We’re now over 80, almost double the days on market from a year ago.
And so when we go back and look at comparables, even those from only a few months ago are out of date, because the market has shifted. When we look at the history behind most recent sales, we can see a series of price decreases that correlate directly to how long the property was on the market.
The fact that price drives the train is frustrating to owners who look at recent comparables, and think their house should be worth as much or more. If they’ve made a price reduction and still haven’t sold, they’ll sometimes argue that why should they lower the price any further? “We didn’t get any increase in activity after the last price reduction,” they’ll often say. “We don’t want to give it away.”
But that’s the point: if there’s no activity, even after a price reduction, that means there’s no interest in this market at that price.
Pricing is not a science, as much as we’d like it to be. It’s more of an art. And it can be an uncertain art in an uncertain market.
As an author, I think of trying to get the price right as a little like querying, when you’re looking for a publisher or an agent. You send out your query letter, and see if it gets any positive responses. If it doesn’t, you revise it and make changes and try again. Same thing with a manuscript: you can’t just leave it as is after it’s been rejected a few times, and say, “well, there’s no point in changing it. After all, I didn’t get any interest after my last round of revisions.” If you want to get published, you pay attention to feedback, make changes, and try again until you get it right.
It’s the same thing with a house. If the feedback is about needed repairs, make them. If it’s that the house is too dark, add better lighting and lighter paint. But if you’ve done all of that, and you still don’t have an offer, the only tool you have left is price. It is not a good pricing strategy to sit back and wait for the “one buyer” who will love your house and pay more for it than anyone else in the market is willing to. That buyer may well be out there, but it can take years to find them. Meanwhile, you’re carrying the costs. And your property is getting harder and harder to sell.
Owners always worry they’re going to price a house too low, but if you’re priced below market, believe me, buyers will come forward. The market always rushes towards perceived value. Even in a down market, we can have multiple offers, which will drive the “too low” price back to market level.
And if buyers don’t appear within a few weeks of a price reduction, then guess what? Not only was your house not priced too low, it still isn’t priced low enough.