AND WHAT TO DO ABOUT IT
Most of us already know how quickly the listing inventory is being absorbed by buyers. In February the Metro Vancouver sales-to-listings ratio jumped from 17% to 25.7%, the highest ratio since March 2011. Having said this, we are only viewing a one month indicator and a couple more months of similar absorption rates would need to occur to truly call this a seller's market, however, many of us believe this "seller's market" will continue through the Spring with interest rates being as low as they are today.
As an agent we know that listings are king in this market and a strong lead generation campaign is required to find listings.
So how do you advise your clients in this hot market and what is the best strategy for sellers?
Lucky you! If you are a seller you have chosen a great time to sell. A seller's market is the best time to list with lots of buyers eagerly waiting for a new listing to hit the market. These buyers are driving around your neighbourhood, checking the new listings online throughout the day and anxiously waiting for that perfect home to become available. These buyers already have a great sense of price, neighbourhood fit and exactly what they are looking for in the property because they've had time to research and check out all of those sales that they just missed!
These buyers may have also had some experiences where they were not fast enough to write an offer or they may have written some offers but were unable to secure the home due to the competition.
The bottom line: Buyers in the market are well educated, motivated and often pre-approved for a mortgage and will move quickly and decisively when the right listing hits the market.
While this sounds like a seller's dream it does not guarantee a sale. Price, condition, location and other undesirable influences still play a hand in the sale process.
So what is the best pricing strategy for a Seller?
Overprice, underprice or price it right!
A seller can choose to overprice their home with a desire to get an exceptionally strong price however the old "risk versus reward" comes into play. There is considerable risk that the seller could lose out on a large group of very motivated buyers that choose not to even look at the home as they think it is beyond their price range. The largest attention will be focused upon the listing when it first hits the market and the seller should not lose this opportunity. A slightly overpriced listing in a hot market may still get an offer well above market due to multiple offers and that same group of frustrated buyers may be inclined to write a higher offer, as they have the fear that next month the price will be even higher! However, once you move above this point in your pricing you will scare this group of buyers away and lose that group of buyers with pent up demand who we hope to capture in the first two weeks of a listing.
Some agents may encourage this type of pricing, provided their seller's have the time to wait, as the market may well catch up with the listing price. This strategy needs to take into consideration the seller's timeline. Why? A home which takes too long to sell will not benefit the seller if they need a quick sale. There is further risk that the listing will become "stale" and "overlooked" as the listing time lengthens. Extended days on market cause buyers to presume the property has some serious deficiencies, wondering to themselves, "Why hasn't someone else already purchased it?" This does not help the seller's position or the eventual sale price and buyers who do write offers will want to enter into some hard bargaining around the listing price.
There are some agents and sellers who deliberately underprice the home. This method encourages a large group of buyers to go through the showing process (many of these buyers being unqualified for the eventual sale price) and numerous offers being written (many of which are much lower than the market price). The end result is that there are many disappointed buyers who could never truly afford the house but were effectively encouraged to see the home and write offers because of the "low" price. So the end result is that there were a lot of very frustrated people and the seller still ended up with a price that was at market value, or perhaps slightly above, while their home has been subjected to the inconvenience of numerous unqualified people viewing their home and writing offers – many of which were unacceptable. While some believe that an underpriced listing will move the sale price considerably above market value, the same price would most likely have been achieved had the listing been priced right, while avoiding the associated aggravations and risks of underpricing the property.
Pricing it right
Pricing your home correctly, based on market conditions, is the best option. It will result in a great experience, a better than average sale price and very possibly a multiple offer situation, depending on competing inventory availability. There are numerous components that affect pricing that must be taken into consideration and require a real estate agent's help and advice.
It is key that a seller take advantage of the first two weeks of the sale process as the largest percentage of homes will sell in this period in a hot market. Pricing the home at market value or slightly above market value will ensure you still attract this large group of buyers.
Find the right agent:
Finding the right price requires the help of a great Sutton West Coast agent who can study the statistics, competing inventory levels, absorption rates and buyer levels and ensure that the seller gets the best possible price in the market place.