In today’s 2019 spring market, should you price your house for sale at the market price, or should you underprice it to stimulate multiple offers? That’s the question — and this story could give you the answer.
Early March. 2019. Two detached houses list in Markham’s Cornell community. Both of them are on The Meadows Avenue. Both of them are four bedroom homes. Both roughly the same square footage. Both had unfinished basements. One was on a lot roughly 29 feet by 105 feet. The other was on a 35 x 105.
They weren’t exactly identical homes. The interiors were different. The styling was different. The property taxes were only $200 apart.
But the biggest difference was the price.
One of the houses listed for $1,100,000. The other: $888,000.
Under any circumstances, this would have been nothing out of the ordinary. Property sellers have been underpricing their houses especially when the market really got heated it up in late 2016 up to early 2017. So underpricing isn’t really anything new.
Likewise, conservative sellers who expected to get what they wanted to get tended to price their houses at or near the market value.
But in this situation, both houses were listed on the exact same day, on the exact same street, and were pretty close to being comparable to each other.
Should you underprice your house in today’s market?
Well, it depends on the situation.
How many other houses are for sale in the market? What is their pricing strategy? Is your house superior, or inferior? Are you motivated to sell?
Underpricing a house does have its advantages.
For one, you’ll attract more buyers. A lot of them in fact.
You’ll create a buzz, draw attention, and hopefully get a lot of traffic through the door as excited buyers look through your house.
However, it also has its downside.
Are the buyers seeing your house the ones who know what its true value is, or do they genuinely think they can buy your house for significantly less than market value?
Is the attention you desire to get really beneficial, or will it add to the stress of having to constantly show houses to buyers who may not really understand what’s going on?
Back to the meadows.
The house that listed for $1,100,000 ended up selling after 13 days, at a price of $1,078,000.
The one that listed for $888,000 sold after 18 days, at a price of $1,100,000 — $122,000 more than the house listed at market value.
Was it a result of underpricing?
Or was it a much more attractive house?
Was it because more buyers came in, driving up interest and injecting a fear-of-missing-out amongst buyers?
Or did the buyers bid just the right amount, the perfect offer price to win in a multiple offer, based on the sold price information which just so happened to be released the afternoon of the offer presentation date?
It could have been a number of factors that contributed to the final selling price of the underpriced home beating out the house listed at market price and getting $22k less.
What should you do?
Whether you price at the market or underprice your house should ultimately depend on market conditions and the expertise of your real estate agent.
Know what’s happening in your neighbourhood. Intimately, not just based on real estate market reports. Make sure your agent has a pulse on the market.
Understand the circumstances and the consequences of each option. And navigate the market with realistic expectations.
Strong demand will push prices up. Limited houses for sale boosts prices. On the other hand, weak demand results in dropping prices. And having lots of competing houses listed on the market will also result in a lower price.
Ultimately, underpricing your property is a risk. Some offers may come in a lot lower than what you expect. And this is why may have seem some houses offered at a ridiculously low price, only to disappear from the market and then reappear at a much higher price.
What this tale of two meadows won’t show you is the myriad of factors contributing to a higher selling price. Proper staging, a clean and decluttered house, extensive marketing exposure — a lot of things you and your real estate agent are capable of controlling to affect a higher selling price.
After all, you should expect to get as much money for your house as possible… right?