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Price Crunch: Over Pricing is Death to Home Sales

by Claire Franceschetti

Many sellers believe that if they price their home high initially, they can always  lower it later if they don't see any acceptable offers.

Often, when a home is priced too high, it experiences little activity. Gradually the price will come down to market value, but by that time the home has been for sale too long and some buyers will be wary and reject the property ie. "Something must be wrong with that house since it's been on the market for so long."

On occasion, the seller runs out of time or patience, and the price is dropped below the market value. As a result, the property finally sells for less than it is worth.

You may think that interested buyers "can always make an offer," However, in my experience, if the home is overpriced, potential buyers looking in a lower price range will never see it. Those who can afford a home at your asking price will soon recognize that they can get a better value elsewhere. After all, buyers are very well educated today, and know home values to within a few thousand dollars.

As soon as a home comes on the market, there is a flurry of activity surrounding it in the first 3 weeks. This is a crucial time when Real Estate Professionals and potential buyers sit up and take notice.

If the home is overpriced, it doesn't take long for interested parties to lose interest. By the time the price drops, the majority of buyers are lost or have already purchased another home.

Pricing your home must be based on current market activity, and recent sales. It is important not to look at current listings alone, since these properties have not sold yet, and their true market value is still to be determined by buyers.

There's a reason the Market Feels Hot...The Numbers Show that It Is!!! 

The number of sales and the average selling price reported by Greater Toronto REALTORS were both up during the first 14 days of June 2011. Sales through the first two weeks of June amounted to 4,787 – up 16 per cent over the same period in 2010. The average selling price for these transactions, at $477,853, was up nine per cent.

Why such a jump in price? The spring has always been the busiest time in the resale market, but the results for May and the first two weeks of June represented a marked improvement over last year. Low mortgage rates have kept affordability in check and buyers have felt confident in paying for a home over the long term. 

Further, the number of new listings on the Toronto MLS between June 1 and June 14th was down 8% compared to June 2010. That means that listings have been in short supply this year, while a lot of people have been looking to buy.

The result has been more competition between buyers, sometimes even creating multiple offer situations which creates upward pressure on prices. Jason Mercer, TREB’s Senior Manager of Market Analysis predicts strong price growth which will prompt more home owners to list as we move toward 2012.

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Contact Information

Photo of Claire Franceschetti Real Estate
Claire Franceschetti
Right At Home Realty Inc.
190 Marycroft Ave.
Vaughan ON L4L5Y2
Direct: 416-918-6325
Office: 416-391-3232
Fax: Fax: 416-987-8001