Selling Tactics

In Toronto’s housing market sellers find themselves in pretty good situations. Aside from a few individuals who bought in early 2017, everyone is able to sell their home for more than they bought it for, and for some it is two, three or even four as much. However, these big gains do not lessen expectations. Owners know what their neighbour’s home sold for and they want at least that amount if not more. This creates an interesting problem when profiting off one’s home is not as easy as hoped.

To analyze this, we looked at a subset of Toronto to do a case study, leveraging homes currently on the market in the Danforth area (specifically from Danforth to Cosburn and from the DVP to Woodbine). The focus was on homes on the market for more than one week, implying they failed to sell on their bid night. This review captured 41 homes for sale. From looking at this information, three clear strategies emerged to achieve the best price possible after the first week.

SellersSource: Six Housing Sense

Out of these 41 homes 11 homes raised their price, 15 maintained the same price and 15 more slowly lowered their asking price. This break down is interesting because it shows a fairly balanced approach for how sellers react when their home does not sell quickly between the three options.

To truly do a comparison, it is important to study the price each home listed at originally, as it seems two predominate tactics are used. The first is to list low in order to encourage a bidding war. Of the homes that remained on the market for more than one week, 11 properties attempted this strategy. The remaining 30 appeared to list their home at a fair market price. From this group, two sub-groups developed: those that kept their price where it was and those that began to drop their price.

Homes that failed to sell and then raised the price

Relisted at a price

9% higher

Changed their list price

2.5 times

Have been listed for

1 – 2 months

Looking first at the 11 properties hoping to prompt a bidding war, all 11 were identified accordingly because each one of them removed the initial listing only to post again at a higher price. A few have even changed prices for a third or fourth time trying to find the right bidder. These revised listings were for 9% more on average than the opening list price, and likely better reflect what the owner is hoping to receive for their home. It is worth mentioning this list low strategy can be a risky approach, as potential buyers can get pretty upset when they offer ask price or above only to learn the seller still wants more.

Homes on the market that have lowered their list price

Relisted at a price

9% lower

Changed their list price

3 times

Have been listed for

Over 4 ½ months

From reviewing the homes on the market that have lowered their listing price, we see these properties were likely over confident with their original asking price. On average, these 15 properties have lowered their prices by 9%, have changed their price twice and have remained on the market for more than four and a half months and counting. With the average Toronto property selling in just 17 days in April, these homes have clearly misjudged their value and seemingly refuse to accept the lower prices likely being offered by potential buyers.

Homes that remain on the market at their original list price

Have been listed for

1.5 months

For the 15 homes that remain at their original list price, the main factor seems to be time. These homes have only been on the market on average for one and a half months, meaning the owners are not yet panicking and lowering their prices. With a three-month time gap between these homes and homes that have lowered their prices, it will be interesting to watch these properties as more weeks and months go by.

Given that over 100 homes have sold in this area of the Danforth over the last three months, these 41 homes have clearly misjudged market interest. Some priced low, while other priced high; however, regardless of list price it seems the problem is with respect to what price these sellers will accept. No seller wants to be the house in the neighbourhood that got less than the others did; however, not all listings play out the same and not everyone can get top price.

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