The Real Estate Podcast

Real Estate Market Strategies: How to Price Your Home in Today’s Market | The Real Estate Podcast EP314

In today’s episode, we dive into the art and science of pricing your home in a challenging real estate market. With fluctuating inventory and interest rates, we break down the three main strategies for home pricing: pricing below market value, pricing at market value, and overpricing to capitalize on potential demand. We share insights into when and why each strategy may work, what to consider as a seller, and the importance of market knowledge. Join us for a transparent, in-depth discussion to help you navigate your selling journey!

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0:12 – Intro

1:22 – Why Talk About Home Pricing? - Ontario’s Market Overview

4:17 – A Realtor’s Approach: Listing Conversation vs. Presentation

5:09 – The Three-Price Approach Explained

6:37 – Strategy #1: Pricing Below Market Value

7:23 – Pros and Cons of Underpricing

8:11 – Offer Nights and Buyer Interest

10:30 – Is Pricing Below Market Value Right in a Buyer’s Market?

12:30 – Situational Exceptions - When Underpricing Might Work

13:53 – Common Mistakes by Out-of-Town Agents

14:53 – Strategy #2: Pricing at Market Value

20:48 – Strategy #3: Pricing Above Market Value

28:22 – Outro/recap

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In 2011, Ariel Kormendy and Adrian Trott formed The Kormendy Trott Team, now often referred to as KT (thanks to our logo!). The foundation of KT is built on providing unmatched value and attention to detail in everything we do. From our ever-expanding, comprehensive list of exclusive services to our expertly trained team, you will receive the highest level of care throughout your entire real estate journey.

Originally a team of two in Milton, Ontario, the KT Team has grown into a large team of exceptional REALTORS®, a client-care department, and now includes KT media, KT Commercial and KT Property Management to provide our clients with a complete lineup of genuine, professional, and proven services across Halton Region, Peel Region and the surrounding Regions within the Greater Toronto Area.

Duration:: 29m
Broadcast on:: 18 Nov 2024
Audio Format:: other

- If you walk into the home and it smells like dog shit, it doesn't matter if you're priced two percent below market value. - That's well. If it smells like and looks like dog shit, then you're not at market value, if that's how you're buying it, right? - Welcome to episode 314 of the Real Estate Podcast. Today we're talking about how to strategically price your home for sale. You won't want to miss this, let's go. (upbeat music) - Welcome to the Real Estate Podcast, your go-to source for raw, unfiltered stories and expert tips. Whether you're a buyer, seller, tenant, landlord, or realtor, join us as we dive into the world of real estate. (upbeat music) - Well, hello, sir, welcome back. - Well, thank you very much. - It's been a while. - Yeah, well, Adrian's on vacation and you are my go-to and he's away. - Cool. - Which I quite like, so let's get right into it. We're not going to talk a lot about Fluff today. We're going to get right to the topic because I think it's very relevant in the current real estate world, in our real estate world anyway. And that's about pricing your home. Why did I want to talk about this? - There are a crap ton of listings available for sale, right throughout the country, but specifically in the province of Ontario and even more specifically in the greater Toronto area. - In our target area, yeah. - Yeah, a lot of listings out there. And you see a lot of different reasons for those listings being on the market. You've got people that haven't purchased another property yet and they're just listing their home because they want to try and sell it. You've got people that have to sell because the mortgage rates are much higher than when they originally signed up. - Even with the reductions. - Even with the reductions, yeah. You've got people that want to downsize, you've got people that want to upsize, like there's a whole lot of mismatch of. And then you've got a hundred and something thousand realtors which we all know that saying 95% of the deals are done by the top 5% of realtors. But you've got realtors doing a terrible job on some of these listings and listings are sitting longer and longer and longer. - Yeah, so bang on, I had a conversation, I think it was with Steve a couple of weeks ago on how challenging it is right now. Something we do is comparative market analysis when you're pricing a home or when you're adding value to potential people, what's my home worth? It's so difficult right now for those reasons that you stated the same home could be underpriced, could be overpriced, like there's such a swing right now. Twofold, the reason why people are selling but also the realtors not understanding the market and how to price a home, because the variability right now, I think is huge, which makes it very difficult for those of us that are trying to do it non-subjectively. You know, it's really, really tough right now because there is that massive range as you talk about. - How many times have you heard me say that you have to have intimate knowledge of not only the home, but the market that you're selling that home in? - 100%. - So, lots, some of our insider knowledge here, giving you the key to the KT kind of script. - Open the kimono. - Open, open the kimono. When we sit down with a seller, it's a conversation. We call it a conversation. It's not a presentation. We're not listing conversation. It's a listing conversation. We're gonna talk about what's important to them, what their needs are, what do they want from the realture that they are hiring. Of course, we're gonna go over what we do to represent them and what we do to represent the property. In fact, we produced a great video which you can see on our Instagram, which we talk exactly about what we do and the process of what we do to list your home. But in that conversation, one of the most important things that gets discussed in that 60 minutes or so is the price, right? Every seller wants to know, "Okay, Steve, that's great, "but what is my house worth?" - What's my house worth? - Yeah. So, we're gonna talk today a little bit about our three price approach. And I think this is a great thing to talk about in the current market because it's very specific to, it can be specific to a few things. It can be specific to the seller. It can be specific to the property and it can be specific to the market that that property is in. And probably when we are having that discussion, a combination of all three comes into play when we decide which route we're gonna take when it comes to pricing. - Absolutely, and I think one of the most important parts of that conversation is the education component that we're providing along with the talk and along with the number in the particular price silo we're talking about because we see this all the time, people have a number in their head, okay? But it's not based on anything other than, well, that house sold for this six years ago and my house is much nicer. - Well, I think, and you and I chatted about this maybe a few days ago where we had a real big peak in the market in early 2022. And that was just two and a half years ago. And how many sellers are stuck on the fact that a home like theirs sold for 20% more at that time and now they're trying to catch up to that but the market is just not there. And if they're not stuck on that, it's always referenced. - Yes, sure. And what I remind them of is looking at today's valuation on their property, if you bought it five, six, seven, 10, whatever years ago, your rate of return on an annualized average is still pretty good. And all right, so let's get into the three different price strategies. So strategy number one is pricing it below market value. And I threw out this number the other day to you and you thought I might even be light if you were going to take this approach that it would be roughly 10% below its market value. So if you had a million dollar home, your price below market value would be about 900,000. Maybe it could be a 15% variance. So you're at 850. So let's say you're taking this home that has perceived market value 'cause that's all opinion. - Yep. - Proceed with what somebody's gonna pay for. - It's only worth as much as somebody's gonna pay for it. That's right. A million dollar home, it's listed for 850. Pros and cons of doing that. Why would you? - You're gonna drive a lot of people to the home, especially if they realize it's underpriced. - Opens up that audience. - Yep, yep. You get lots and lots of exposure. With that exposure, you get a lot of, as we've called them, tire kickers. - Sure. - Like a lot of people that are not overly serious, but you know, depending on the market, you could also potentially get multiple offers, okay? Which is a big part of that strategy, hopefully, to drive that number up if you could play offers off each other. - Ideally in that strategy, you probably have set a certain date and time to accept offers. And with that strategy, if you're listed at 850, you know the home's worth a million. You really don't care if you have offers that 850, 900, 950, your goal is to get multiple offers and hopefully somebody fell in love with the house enough to drive their price up. - For sure, and I mean, something we've also seen, you know, you set an offer night, but if a home is priced low enough or perceived low enough, you know, you get that interest very, very quickly that potentially drives offers before your offer night, okay? And you know, people coming in really, really quickly because they know it's a deal. And then you get multiples that way, which provides you even more leverage, you know, if it is that exciting of a property. - So where would you use this option right now in this market? - Right now in this market, I typically wouldn't. You know, thinking about my seller's situation, if this was a, we really have to sell, possibly I would, if there was a lot of inventory and, you know, your house is potentially viewed as a commodity, I might, just to get ahead or, you know, get exposure outside of where everybody else is being lumped. Or if you want a quick sale? - I think the biggest thing to realize with that strategy right now in this market would be asking the question, are there enough buyers out there to yield multiple offers? To yield a higher return? And with so many listings, so many options right now on the market, would you potentially get lost in the shuffle? - And that's a component, it's very good to bring up because it's been part of probably the last year listing conversations that I've had, activity. And you're not just looking at what's sold on MLS. You're looking at who's out showing houses? What kind of interest in houses? And I mean, that's one of the great things of being on a team, you know, at any given time, we have kind of multiple properties available. So we have our own internal gauge that we can see what's happening. - Well, every week. - But the debt is there as well. - Every week I analyze the showings to see the progress of our listings and where are the showings coming from? When are they coming in? How many are there? And it's pretty mind-blowing to relate the statistics from showings to the end result of the sale. And of course, that's the market we're in now where there's a higher amount of inventory available, fewer showings, hence the longer days on market. Which has been hovering around that 30-day mark, give or take. So all right, so that's option number one is price of below market value, 10 to 15% below its perceived market value. You're setting a date and time to review offers and you're hoping to get multiple interest but seller beware right now because you are in a buyer's market. It's sort of balanced but leaning towards buyer for sure. That might shift over the coming months but as of right now, unless you have a property that would appeal to a huge audience that's not available anywhere else. Like I'll give you an example. There's always a street or two and I won't mention any names 'cause you live on one of them. But a street or two in every town. In every neighborhood. In every neighborhood where there's not much turnover. People live there for years and years. All the neighbors love each other. They're all barbecuing together and blah, blah, blah, street parties. And then us as realtors when we're working with clients we always hear, oh yeah, we love that street. Oh yeah, we love that street. So there are those kind of exceptions where if there's no other homes on that street available nothing has been on the market for the whole year sometimes on those streets and then one pops up. All you need is three or four of those very interested buyers because you've got that hot commodity. But in typical current climate, just make sure you're doing your due diligence that that's the right approach. What I've seen is some out of town agents selling a property which they're not. They don't have their finger on the pulse of that market. They don't have that intimate knowledge and they just present this as an option. And they think it's a good option and they sell it as we're gonna get multiple offers on this to the seller and the seller has false expectations. It's funny you bring that up because initial conversations even before you're doing your listing conversation everybody wants to, multiple offers always comes up. It always comes up to the- Who doesn't want multiple offers? Who doesn't want to sell over asking? To the seller, but to your last point I think it is so important when you're providing these three price options to also put them in context. They don't operate independently. There has to be certain market forces. There has to be certain inventories at play for these to be effective strategies. For sure. Yeah. All right option number two. At market value. At market value with I say a one to two percent variance in either direction. So if you have a $1 million home it's pricing it at $9.90, $9.80 all the way to $1 million, $10,000, $1 million, $20,000. Give or take, right? Benefits of going down that route? It rides the market. Okay, so it's going to provide it's going to be on probably a little bit longer but you'll get people that are serious. You won't get the bottom feeders as I call them looking for a deal because it's been priced well. It's going to be consistent with what's out there. Now I will say it depends how you present your home. Oh, with how it's marketed. Yeah, yeah, yeah. I mean that goes without saying. If you walk into the home and it smells like dog shit it doesn't matter if you're priced two percent below market value. That's well. If it smells like it looks like dog shit then you're not at market value. If that's how you're pricing, right? The perception of market value. Yeah, again only as worth as much as a buyer's willing to pay. So if your curb appeal is crap you walk in and all you smell is cap piss and the car. Despite being the exact same model that sold for this price two weeks ago. Right. Yeah. Actually, that reminds me we did a podcast maybe a couple of years ago and we had Jen and Tiffany do you remember? Yeah, I do remember. That was a fun one actually. We talked about pets and what that does to the value. And how much it affected the value if it's smelled and had presence of pets in it and everybody's answer was different. Well, it was funny 'cause just like I did with lower than market value. I think I thought you were a little light there too 'cause you said it impacted it about five percent. Like Jen and I right away saying, Jen and I said right away, you know, oh more than that more than that. Yeah. And again, that's as much as a buyer's willing to pay. But it taps into that emotion, right? That we quite often talk about, you know, if something is good and makes them feel good, you know, you wall it opens up a little bit as opposed to the opposite. You know, we don't see it as much in our market because we deal a lot in urban areas. But as an example and you might know this from your course of owning a cottage, rural and cottage industry is very different in the sense that people overlook certain things to either get the location or get their hands on a property itself or whatever. So as an example, talking cottage 'cause I went through this with our cottage, if you love the lake front, you love the lake, there's nothing else for sale, you overlook the fact that you saw mold or rat shit or whatever. Well, it's funny you say that because when we earlier this year sold our cottage and one of the showings that we had was a person from a city, you know, looking to move out to the cottage and they clearly hadn't educated themselves on those intangible things like the smells and the differences. And I think at one point, there was something that was brought up by the cooperating agent and my agent just said, it's a fucking cottage, you know? So I mean, you are going to get a different smell. You are going, if you're in the middle of a forest, you know, you are going to get the odd ant or spider crawling through. - Right. - It doesn't matter if you don't like it. You're in, it's a cottage. So yeah, to your point, great point. - So my perception when we talk about or my definition, I should say, when we talk about that second option, pricing it to market with a one to two percent variance, that one to two percent variance, I talk about a lot with my sellers because, again, if the home is worth a million dollars and you price it at 980, you're making it super attractive. If a million dollars is fair value and you're priced at 980, you're really enforcing the fact that, hey, this is nice value for you and you encourage that showing maybe a little bit quicker. You encourage that offer maybe a little bit quicker. Maybe it does that to multiple interested buyers. So now you're encouraging potentially multiple offers without severely underpricing the home. And the other aspect of, or on the flip side, if you're one to two percent above its market value, in this case, you're talking 10, 20,000 dollars, it's not gonna price you out of the market. It's still gonna be considered pretty fair and typically a buyer interested will still go and see it, but they just might wait 'til the weekend versus going to see it on the Wednesday. - There's less urgency. - There's a little bit less in the current market in the current market, right? - When we're talking lots of inventory slightly leaning towards the buyer's market. But the key is it's a fair deal for the buyer and the seller. - Everybody feels good. - Everybody's selling it, everybody feels good. You're buying it for what it's worth. You're selling it for what it's worth. Everybody's happy. All right, my favorite one, Steve, the third approach. - Overpricing. - Overpricing, pricing it over the market value. What we used to call the needle in the haystack approach. - Mm-hmm. - As a percentage, how much above market value would you say would define that third strategy? - On a million? - 5%. - On a million just to keep the math simple, I'd say between five and seven. - Between five and seven. So if you're a million dollar valuation and you're priced at a million 59.9, you're overpriced. - Yes. - If you're priced at a million 99, you're definitely overpriced. - So let's talk about that. - Sure. - Because there are very strategic times where you might be using that option. When would you use it? - Couple times come to mind. Number one is if you have a house that is a showpiece okay, so it does stand out from the other houses in the neighborhood, finishes, updates, something that could very quickly create that emotion with someone who would be willing to maybe pay a little bit more than market value to get themselves into that term key home. Number one, number two, if there isn't urgency to sell the home and it's casting a line in the water. Okay, it's all right, and you see that sometimes with listings and some of the listings that do it, you wonder why, or they're priced a certain way for two weeks and then they adjust. Okay, and I think that's a testing the waters type thing. Is there that buyer for this house, this type of home? - I would say to elaborate on that, the only time I'm a fan of that strategy is when you have a unique offering where nobody, you could put 10 realtors in the room and try and evaluate that property and everybody might have a different answer. It has to be something that isn't readily replaceable in the market, so as an example, my home, it's built by Mademy homes. Mademy probably built 200 of them in Milton. There's one for sale probably every week or two, very replaceable. Now, of course, depending on the finishes, if I have a beautiful pie-shaped lot, which I wish I did and a pool and all that, that might change the landscape of it, but you get the drift. If it's a replaceable home, it's not something unique. It's really tough to sell under that strategy. Some sellers are stubborn, some sellers want to-- - They have a number. - They have a number. How many times have we heard that, right? We got a number and-- - I'm not selling if I don't get this. - Right. So try it if you want, but you need to change that strategy in two to three weeks, otherwise you're dead and you will end up selling for less than you would have had you had priced it properly to begin with, because the longer you're on the market, you're gonna have a savvy buyer representative approach you with a lowball offer and beat you up on price and start negotiating. - And I've often said that during the listing conversation we were talking about, you have to be very careful. In particular with the overpriced strategy in a balance slanted towards buyer market, the longer you're sitting, the more negotiating power your buyer is gonna potentially have and the closer you're gonna get to that hard deadline where you have to sell. - Yeah. - So I get it, you got six months, but be mindful. Be very, very mindful 'cause nobody knows what's gonna happen down the road. - And again, if you are using that strategy, well it's really regardless what strategy you're using, the home's gotta show well. - Oh my goodness, yeah. - Yeah, for sure. - And when I meet with buyers and sellers right now and they're talking to me about all the listings that are on the market, I challenge them and I say yeah, but look at the listings, look at the inside of those homes, look at the outside of those homes, look at the photos, look at the price compared to what's been selling. I mean, there's a lot of trash out there, so I don't put a lot of weight into the number of listings that are out there 'cause a lot of them are just dreamers. - And it's, I've often wondered, I just went through this with a house I have on the market. Some of the pricing homes in the same street, comparable homes in the same neighborhood, I'd love to just sit with particular realtors and say, tell me your thought process here 'cause I don't get it, like I'm-- - Quite honestly, I think there's no thought process a lot of the time, it's whatever they do, you gotta do to get the deal. - I can be, yeah. - To get the listing. - Buying the listing. I can be as creative as the next guy, but sometimes you're just like, where the hell did that come from? - Yeah. - I ask that sometimes after showing a property and help me get to your number. - Yeah, can you help me understand what do you use in your market analysis that made you arrive at that number? And oftentimes, I would say 95 times out of 100, I will get the answer, well, that's what the seller is hoping to get, or that's what the seller wants. Well, that's what the seller wants, does it like, sure, the seller, I'd want $2 million for my home, but it's only worth 1.5, so, you know, anyway. - Yeah. - So those are the three options, below market value, at market value, and above market value, as simple as that sounds, it's very complex, very complex in how we arrive at that. There's a lot of thought that goes behind a number we suggest. - And you are often a resource to me, and vice versa, we use our team resources to chat this out sometimes, and get second eyes on things, get opinions. - And it's, I mean, that's such a valuable process that I speak to clients and potential clients about, because the range sometimes we see in properties, even amongst our team, can be $100, $150,000. And, you know, if you're talking about a 1.2, 1.3 million dollar home, that can be significant. So there's points that come up, discussion points among ourselves in a safe environment that is way better than when you go live. - Sure. - And you're trying to, you know, put out fires or justify things in a hostile environment. - Or you're pre-testing the market essentially. - Oh, look at it, yeah. - And the flip has happened to Steve, where we've sat around the, had that group chat about a specific property, and we've all come within like a very miniscule amount. Yeah, and then we know, okay, we're banged on. - We're good, yeah, for sure. - I agree. - Anyway, folks, a few are thinking of listing your property in a week, in a month, in a year, 10 years from now, whatever, and you want more insight as to how we might recommend pricing your property. We do offer free consultations on our team, free conversations, so having Steve or one of our other colleagues come to your home and let you know exactly what it's worth. There's no obligation. Leave us some comments. - We'll even bring coffee in treats. - Even bring something to sit there and have that chat with you. No coffee, tea, Steve. - Break bread, whatever. - Break bread together. - There you go, that's your turn. - All right, thanks. We'll see you next week. - Awesome. (beep) - As always, thank you very much for watching. Thank you for listening. If you've got a property and you're wondering what it might be worth or what strategy is best for you, leave us a comment or send us a DM. We'll reach out. Otherwise, we'll see you next week.

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0:12 – Intro

1:22 – Why Talk About Home Pricing? - Ontario’s Market Overview

4:17 – A Realtor’s Approach: Listing Conversation vs. Presentation

5:09 – The Three-Price Approach Explained

6:37 – Strategy #1: Pricing Below Market Value

7:23 – Pros and Cons of Underpricing

8:11 – Offer Nights and Buyer Interest

10:30 – Is Pricing Below Market Value Right in a Buyer’s Market?

12:30 – Situational Exceptions - When Underpricing Might Work

13:53 – Common Mistakes by Out-of-Town Agents

14:53 – Strategy #2: Pricing at Market Value