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“I’ll drop the price later”

Price reduction Real EstateSellers often ask if they should start with an aggressive price and wait to drop it after a month or two if their home doesn’t sell.  However, this is a very risky strategy.

Buyers are savvy!

They’ve done their research, they’ve looked (at least online) at all the other homes in your price range.  If you’re selling an updated, 1800 sqare foot, 3-bedroom, 2-1/2 bath home with a finished basement and nice yard in a good neighbourhood, and you’re priced $20,000 above all the other similar homes, the buyers are already on to you!

Buyers who can afford to pay your extra $20,000 will be comparing your home to similarly priced homes, which will be larger, more upgraded, or in an even more desirable location – you can’t compete!  Best to stack up against similar homes, or they’ll all be sold by the time you decide to drop your price.

The seller (you) becomes the buyer!

Chances are, if you’re selling your home you are also about to buy another!  When you find a home you like, you’ll be asking yourself two main questions about the price:

  1. Can I get a similar home for less money?
  2. Can I get more for the same price?

If the answer to either of these questions is yes, you will be unlikely to make an offer, no matter how much you love the home.

Most buyers will not make a low-ball offer

A quick internet search will reveal the main reason: they do not want to offend the seller.  They would rather keep on looking, or purchase a home that isn’t quite as good a fit, just to avoid offending you.

Probably the second biggest reason they don’t make an offer is they figure you’re out of touch with reality thinking that your home is worth more that comparable homes.  In short, they just don’t want to deal with you. Negotiations are very emotionally taxing, and buyers would rather avoid the additional stress of dealing with a difficult seller.  You aren’t difficult, but they don’t know that!

Time is of the essence

For the reasons we’ve outlined above, an overpriced home often experiences few showings and no offers…even if it’s only inflated by 2 or 3 percent!  If it takes too long to bring down the price, buyers will be wary and reject the property because they think something is wrong with it.  One of the most common questions we are asked by buyers: “How long has it been on the market?”

In a worst-case scenario, a seller runs out of time and has to drop the price below market value.  They would have been better off to list at market value and saved time, money and a lot of stress.

 

The downside of DIY

Kingston Real EstateThere are lots of stories online and in print touting the benefits of selling your home yourself, without using a real estate salesperson. Do-it-yourself property sales companies promise that you’ll save thousands of dollars in commissions.

What most home sellers on that path don’t know, however, can land them in major litigation and financial loss. DIY property sales companies will barely touch the subject or avoid it entirely.

Kim Rempel, investor, writer, and entrepreneur goes on to describe in this article the trouble that has befallen many sellers when they have tried to save money by listing their own home.

But it seems simple enough?

While the mechanics of listing a home may seem simple on the surface, what many people forget is that your Realtor® is covered by insurance.  This means that if something goes wrong, you have somebody to hold accountable, and through the professional insurance coverage, you can be compensated.  When you represent yourself, not only are you at a higher risk of unknowingly making a mistake, but you stand to lose much more money than you thought you were saving on commission.

It doesn’t save you money

On a $350,000 home, a commission in Kingston will run you about $14,000.  Remember, half of that goes to the agent who brings the buyer, so that will not be savings.  Even if a buyer comes to you privately, they are expecting a deal compared to homes that are marketed through a brokerage; they know you don’t have to pay a commission and they want to reap at least half of that benefit.

Of the remaining $7000, you will now have higher legal fees, because you will need to (and should!) run all offers and counter-offers by a professional to ensure you are covered.

It is a lot of work

Before she became a licensed Realtor®, Annalise didn’t think it took any work to list a home.  She and her military colleagues would remark how much money was paid to an agent by the Defense relocation program just for taking a few photos and sticking a sign in the front yard.  Luckily Annalise is a hard worker, or she would have been very disappointed about her second career!

Fielding phone calls, emails, and text messages from interested buyers and other agents takes time.  Putting a sign up takes time.  Advertising takes time.  No individual task is rocket science, but they all add up, especially when you do not have a lot of experience in setting up a system. Selling, buying and moving take up a lot of time over and above daily tasks at work and home, and you are best served by an agent whose full-time job is to actively market your home.

Offers are slow in coming

The other thing that takes longer when listing yourself is getting an offer.  When agents search the listing system in the Kingston area, your listing will not show up.  Many “For Sale By Owner” services will get you on the Multiple Listing Service (MLS® at realtor.ca), but you are not listed in the local board.  The services generally list from the Toronto Real Estate Board.  Agents prefer to search their own system because the search parameters are more customizable and details are more complete than what is available to the public. For buyers working with an agent (92%), your listing can easily be missed.

The other benefit of working with an agent is knowing exactly how much comparable homes have sold for. A private seller may have tracked active listings in the area, but homes do not sell at list price, they almost always sell $5-10,000 below on an average home in Kingston.  Without all the information, and experience in comparative market analysis, private sellers almost always list their homes to high.

(For more on the perils of listing too high, see our related article).

Finally, buyers find it very awkward to deal directly with sellers.  They don’t like going through a home with the owner present because they feel they are intruding.  Even if the home has been “depersonalized” and staged correctly (also uncommon in private sales), buyers often rush through a showing, and more of their attention is spent on avoiding the seller (or being overheard) than on the features of the home.  When people do not feel comfortable in a home, they will they they don’t want to buy it!

Is it theoretically possible to save a portion of the real estate commission by listing privately?  Perhaps.  Is it worth the risks?  The experts say no.