It is a seller’s market. But not every house will sell. What is the best strategy for home sellers selling their home in a seller’s market?
So far this year, even on the coldest days of January and February, the Kitchener Waterloo real estate market has been hot. Hot, hot, hot. Hot for sellers, not for buyers. It is still a good time to buy if you subscribe, like I do, to the old maxim, “The best time to buy a house was last year. The next best time is right now.”
For buyers
House prices tend to go up. You can wait for them to go down. You can wait, or you can act. Waiting, in my opinion, will only lead to more waiting. Face it. You’re procrastinating. You’re not ready to buy if you’re waiting for prices to go down.
If you are looking to buy this year, if you want to be successful, now more than ever you have to be prepared to act quickly. You have to be fully engaged in the home buying process. With your agent, you have to see a lot of houses and revisit them (online) a week or ten days later and find out what they sold for. There is a good chance you’re going to have to compete and that you will have to pay a premium for the house you want. It is not fun, and you will lose out on a house, maybe two but then the right one will come along and you will be successful.
For sellers
A seller’s market is the best time to sell. There is a backlog of buyers building up, waiting for your house to come onto the market. If they are like some of my clients, they check the MLS everyday (a few times a day) for new listings. My clients have seen dozens of houses with me and/or my partner, maybe missed out on a half dozen that got sold before they had a chance to consider an offer or even see them. If most homebuyers are like my clients, they have a pretty good idea about prices, neighbourhoods, and the cost of updates and improvements. Simply said, the buyers out there that will be successful are educated about home values, pre-approved for a mortgage and ready to strike with absolutely certainty.
It should be easy to sell, right? Right. But not every house sells, not even in a seller’s market.
Although it is a seller’s market, seller’s have to be realistic. If you over-price your home, or if your home needs too much work updating or upgrading, or if there is something that makes your home undesirable, even in a seller’s market, it simply will not sell.
The best strategy for sellers
In Kitchener Waterloo, we play the real estate game pretty straight up. We are not normally the kind of market that prices a home $30,000 below potential market value, encouraging hundreds of showings and dozen’s of offers. Traditionally, we tend to price houses $5,000-$10,000 above their eventual selling price, based on recent comparable sales in the neighbourhood.
On average, homes in Kitchener Waterloo sell for 97-98% of their list price.
This year, the “right price strategy” in my opinion, is still the best one. It will lead to a fairly quick and painless sale, perhaps multiple offers and likely a better than average selling price and experience. When your house sells in three weeks, you shouldn’t be thinking, “I could have gotten more”. You should be thinking, “I got what I wanted.”
Regardless of market conditions, the best chance to sell your house is when it first comes on the market. Last year, I looked at sales and found that 40% of homes in Kitchener Waterloo sold in the first 20 days. Another 20% sold in the next 20 days. That means more than 60% of homes that sold, did so in the first 40 days on the market. Put another way, if your home has not sold in the first 40 days, you’ve done something wrong, you’re in the minority now. You’re in the long tail and it’s time to make a change.
That was last year. This year houses in KW are selling even faster as the number of home buyers seems to be up and the inventory of homes for sale is definitely down. Remember, as a home seller you’re coming late to the game. There are homebuyers who’ve been looking for months. They’ve seen everything else and will want to take a look at yours as soon as it comes onto the market. If your house is marketed correctly (including the right price) you can expect dozens of showings in the first few days.
Price high
It’s your money. Not mine. You may want to price high and try to maximize your profit. It is not a strategy most realtors would recommend because you will squander a great chance to offer up your home to its most motivated pool of potential buyers when it matters most – when your home first enters the market. However in a seller’s market you might actually get away with a higher than market price for two reasons.
One. There are a lot of frustrated buyers out there. They have been shopping for a long time, maybe getting out bid on multiple offer situations, maybe having a great home or two scooped up before they had a chance to see it or offer on it. Buyers want to stop shopping and start buying. They want the pain to end. They will buy even if they know the price is too high.
Two. Prices are creeping up. We have an unbalanced market. When you price your house too high, if it doesn’t sell in the first 90 days, the market prices might catch up to your overpriced home and the buyers will start to appear.
It is a risky strategy. In a seller’s market, houses that sit on the market for a long time get stigmatized. Buyers and their agents wonder why it hasn’t sold. They eliminate it from their search reasoning that “there must be something wrong with it”. A price reduction adds insult to injury, sending the message that you’ve reluctantly given up. Buyers expect tough negotiations will be needed to get you to the market price.
Not every house sells
Year to date, there have been exactly 1,300 homes listed on our local board – KWAR – the Kitchener Waterloo Association of Realtors that have expired without selling, were cancelled, withdrawn or suspended. During the same period, there have been 2234 homes successfully sold. That means 37% of homes listed for sales this year have not sold, a slight improvement over last year. It also means that clearly even in a seller’s market not every house sells.
