When it comes to pricing a home, many agents will tell you that pricing is one of their biggest challenges. Listing too high can mean the property stays on the market longer than it needs to but the real danger is listing too low where a number of potential challenges come into play. More specifically, I am talking about multiple and pre-emptive offers. In theory, the agent’s job is to build excitement in a property. That can be accomplished through staging, pictures, video tours and more, but it also means pricing well. So the real question is: Is there an optimum number of offers that our pricing should attract?
History dictates that we only need one good offer to sell a home so, theoretically, we should price the home to attract that one buyer. Unfortunately (or fortunately) the cards are stacked in favour of the seller so even pricing fairly can lead to two or three or even four offers because there is just no sure way to predict how desperate a buyer might be.
But the question remains: Do we try to price to get one offer or do we under-price to attract multiple offers and hopefully push up the price for the buyer? And if so, by how much? If the choice is to under-price to create excitement then how low do you go and how many offers are you hoping to attract? In a straw poll I conducted with agents I work with the answers ranged from two to five offers.
There is a slippery slope to all this if you are a seller, and I have written in the past about a seller who only got one offer on her property on offer night and was totally annoyed with the agent despite getting full price. The fact remains that sometimes we price a home thinking we have determined perfect market value and then we are hit with multiple offers. Sometimes we list under market value and only get one offer, if at all. Then there are those cowboys who list hundreds of thousands under value and hope to generate 50 or 60 offers. While these stories make great headlines they only fuel the fires for other sellers.
But not getting an offer on offer night puts an agent on the defensive right away. The client is looking to you for answers. Where are all the offers? What’s wrong with my house? Why isn’t my house selling for over list price? Simply put, there are just too many variables to know for sure and it could be as simple as it’s raining or the buyers couldn’t get baby sitters.
So when it comes to the list price, know your competition and nail the market value. Aim to under-price just a little to create some interest but not a flood of buyers. Take the guesswork out of the listing and have the home inspection done well in advance.
In the end, everyone should know that it’s the Seller who determines the final list price but it is up to the agent to conduct an in-depth market evaluation and then determine the right strategy to get the Seller the most money.
Given the scarcity of listings in the Toronto market these days, it’s understandable that we touch on the topic of multiple offers from time to time. It’s probably because no two scenarios are ever the same.