For more than 20 years, I have been selling Toronto condos and over the years I have seen many different market conditions in Toronto’s hot housing market. Although in the past two decades we have seen mostly a seller’s market, strategies for selling have not and should not always be the same.
When selling your condo, knowing what pricing strategy to use that will deliver the best results is important. Because the downtown Toronto Market has been high in demand and a really hot market for years, most agents and sellers are in favour of underpricing and then selling high in multiple offers. However this strategy has its limits and like we are also seeing in the cottage and housing market, it may be coming to a pause or an end.
Sellers often confuse a hot market in which they can set any asking price and always get a higher sale price. This is never the case as it is important to know that the market really determines the selling price and everything has a limit of what it will sell for. The biggest mistake is when a seller prices themselves out of the market.
In the past we have heard and witnessed that extremely underpricing a property draws more attention and attracts more offers, sometimes well in excess of 20 bids. In reality, of those 20 offers, there are really 2-3 offers that are close in price and are competing to buy the unit while the other 17 are hopeful buyers or uneducated buyers of the true market value. This strategy has had a negative effect on buyers and agents and causes something that I call “Buyer Fatigue”. When you have 20 offers, there is only one winner and the remaining 19 others have to continue their property search.
Buying real estate can be emotional and very exhausting. There is a lot of time invested into looking at properties and when a buyer likes a property, the uncertainty of actually being able to purchase the property is draining. A first time buyer can also find it especially difficult to understand the true market value of a unit when looking at undervalued listing prices.
After experiencing a few unsuccessful bids, buyers start to avoid multiple offers altogether as “Buyer Fatigue” sets in. This is something that I am seeing in the market today. Buyers and agents are shying away from low priced condo units as they do not want to waste time to go through the process of multiple offers, blind bidding and competition. In turn, condo units are not selling on offer dates because sellers are not getting the prices they expected and sellers are re-listing at higher prices that are more in line with market values. This then causes confusion for buyers as they cannot understand why the condo unit did not sell at the lower price and do not want to pay the re-listed higher price.
Even if a buyer finds themselves in a multiple offer situation, it is important to know that they do not have to pay more than asking to be able to purchase the property. This is where having an experienced, knowledgeable agent becomes key. Before ever making an offer, knowing the numbers of comparable sales, average price per square foot in the area and building will help to determine an approximate fair market value. This will ensure that a buyer does not overpay for any unit regardless of the number of offers there are on the table or asking price.
Just recently I represented buyers on a fabulous King West Condo where there were 3 offers registered. My buyers were successful in securing the condo unit and still paid $25,000 below the asking price. Again, knowing the fair market value, carefully reading the negotiation situation and factoring in strategies other than price like conditions to an offer, helped my buyers secure the unit of their dreams and not overpaying.
Having a front row seat and on both sides to more than 2000 real estate transactions, I can tell you the most favourable situation is where a buyer and a seller both feel like they have won by achieving a fair market price through a process of true negotiation. I always want to make sure to protect my buyers and sellers and advise the best strategy to use in order to be successful in downtown Toronto’s condo market regardless of what side of the transaction they are on.