Having high standards in life is crucial especially when purchasing your home, after all it’s the biggest financial investment you’ll probably ever make. But how many buyers hand me a wish list that includes the earth, moon and the sky regardless of purchase price. Whether we’re buying at $500K or $1.5M so often I hear buyers say, “that’s all I get for a million bucks?” (or half a million or a million and a half….)
So much of my job entails educating clients about the market including what their purchasing dollars will actually afford them. Within the first meeting or first few property showings clients realize they need to reset their expectations because there is no such thing as the perfect property.
What comes out of this experience is an establishing of priorities and an understanding of what the client is willing to sacrifice. That usually means sacrificing certain aesthetics and/or size to get the best location and to stay within their budget. And sometimes, it means they have to increase their budget to get closer to their ideal place.
I recently presented to a potential client who needed to sell their home in a very desirable Toronto neighbourhood. This seller had been living in their home for over 25 years and had made no real significant improvements to their property. Upon my initial inspection of the home I saw all the objections any buyer would have to the property including having to renovate the kitchen and the bathrooms, removing old floors, replacing some windows, installing a new roof and the list goes on. Plus, the floor plan was not your typical layout for the area and the backyard was short – so neither the floor plan nor the yard was ideal for a family with young children which is the usual buyer for this neighbourhood. Don’t get me wrong, the house was in good shape and it was very clean but as a Realtor® we have to price the house accordingly to mitigate these buyer objections.
This seller thought they knew better. They had heard on the news how the real estate market was hot and how everything was going into bidding wars selling for thousands more than the ask price. They said to me, “I want a million dollars or more for my house!” However, comparable properties did not support this price level. This particular seller ignored the facts. They went to market with another agent at a million dollars – a price over market value by about 10%. To make matters worse, they held back offers with an offer date expecting a bidding war. A real risky strategy. No surprise, over a month later the house is still on the market with no price adjustment, just sitting there getting stale.
The right, qualified buyer for that home would have seen it the first week it went to market and has since then moved onto another property knowing full well their dollars will take them further elsewhere. In a hot spring market where properties are moving quickly, the overpriced home that sits makes new buyers that see it very suspicious. They wonder what is really wrong with it. In contrast, buyers get excited about those desirable houses that are new to the market and they forgo making offers on the stale ones. They do their research and they see a lot and I mean a lot of properties and they know what properties are actually selling for because their Realtor® shows them the comparable sales. Many have already been in a few multiple offers and have lost out before they secure their home so they have an understanding of the current market conditions and they know what they are willing to pay.
Every Realtor® has had a few sad stories like this one and all we can do is educate our clients and manage their expectations. This particular seller, who was not ‘testing’ the market and actually had to sell, will sadly have to sell at a loss below market value in order to get the deal done. The lesson for all sellers, the numbers don’t lie – let the comps guide you.
I have seen contrarian buyers who are qualified to purchase struggle with the decision whether they should rent or buy. With this particular buyer, the root of their struggle seems to be a matter of dollars and cents and whether they can time the market to make their purchase at a discounted price. Often these buyers try and strategize, believing that the market will pull back, cool off or crash and they anticipate that they’ll ‘pull the trigger’ in a down market. Whether it’s the buyer who just sold their home in multiple offers and made a tidy profit or the first time buyer who wanders through open houses year after year, more often than not these folks miss many great buying opportunities, which in the long run costs them money.
I have seen the first time buyer who rents a cool condo at $2,000 a month while waiting for the market to pull back and five years later has spent over $120K in rental payments….and is still waiting. I have seen the buyer who sold their house in multiple offers and rents while waiting for the market to cool off only to realize three years later that they have spent $62K in rental payments and their next purchase is going to cost them $80K more than if they had bought 3 years ago. It’s painful to think that those costs have eaten up much of the profit they made when they sold their home.
Strategy is essential when purchasing and yes, real estate markets fluctuate and yes, it’s better to be able to negotiate your purchase price than be battling it out with 7 other buyers in a competitive bid. But who has that magic crystal ball that can time the market perfectly? I recommend to my first time buyer clients that they purchase when they can afford to do so and to my seller clients to buy in the same market in which they sold. Afterall, you gotta live somewhere so you might as well own it.
1. Start Preparing Your Home For Market Early On. When getting your home ready to sell which means a great deal of decluttering and staging, start early so that you’re not still packing up odds and ends five minutes before the photographer arrives to take photos.
2. Turn Your Home Into A House. I know it may sound a bit counterintuitive, but the less “lived-in” and personalized your home looks the better. Buyers are looking for a clean canvas on which to draw their new lives, so to speak. They need to imagine themselves living in your home and be able to visualize where their furniture would go etc..and they can’t do that if they’re distracted by your personal belongings and clutter.
3. Price and Market Your Home Strategically. The right Realtor® will direct you to price your home properly and market your home effectively so that the right, qualified Buyer sees your home and purchases it.
4. Timing Your Sale Is Strategic. You’ll want to go to market when there is strong demand for your home. Spring is typically the time of year when the highest prices are most likely achieved when Buyer demand is the strongest.