Over the last year, I’ve had heated discussions with other Realtors about two important topics.
The first is the question of photos on business cards and whether it is better to be smiling and happy or unsmiling and stern. If you’re smiling and happy do people think you can’t be a tough negotiator? If you’re all stern and serious, do people assume you’d be no fun to work with? It’s an eternal topic among Realtors and I don’t know if it will ever be solved. Throw in whether we should hold props like cellphones, or dogs, or shotguns and things get even more heated.
The second topic I often discussed is – not surprisingly – selling homes. Specifically though, I’ve had arguments with Realtors who say that any home would sell for a high price in the extreme seller’s market we had up until about May. In contrast, I’ve maintained that while homes with problems or missing certain attributes would sell, the sale price is still indicative of the these qualities of the home.
As hard as it may be to believe, even in the frenzy of the market earlier this year, some homes sat on the market and didn’t sell. In all of these cases, it boiled down to the price they wanted. Many Realtors had trouble pricing homes and defaulted to under-pricing a home and hoping someone would just offer a bunch of money.
We did see some homes sit unsold for far longer than most properties and it was because the price the seller wanted wasn’t in keeping with the attributes and appearance of the house. It led me to come up with something I’ll call my First Rule of Real Estate.
Regardless of the market, the attributes and appearance of the home determine the sale price.
Let’s unpack that statement a bit.
As I’ve explained in earlier articles, there are three types of markets. Here’s a recap with the latest definition.
- Seller’s market occurs at or below four months of inventory
- Balanced market falls between four and six months of inventory
- Buyer’s market is when the MOI is more than six months of inventory
According to the Canadian Real Estate Association (CREA), the Months of Inventory (MOI) indicates “how long it would take to completely liquidate current inventories at the current rate of sales activity.”
When I say “Regardless of the market…” I mean it. Whether it is a seller’s market, a balanced market or a buyer’s market, the attributes and appearance of the home do matter.
Lots of people confuse how much it matters with whether it matters at all.
In a Seller’s market, having the right attributes like number of bedrooms and washrooms, central air or a garage are still important to buyers. After all, if you’re wanting to buy a place but you need a minimum of four bedrooms for your family to live comfortably, that three bedroom home ain’t gonna cut it. The appearance of the home also still matters in a Seller’s market. Sure, buyers can update a dated kitchen, tear out carpet and install hardwood and do any number of cosmetic fixes. However, the more work a place needs to update the appearance, the lower the purchase price the buyer will feel comfortable offering. Some will walk away rather than bid at a price they think won’t be successful and fewer bids means a lower sale price.
In a balanced market, the right attributes and appearance becomes even more important. Buyers have more choices, which means less pressure to pay high prices for a home that isn’t ideal for their circumstances or one that needs work. Given enough time and effort on behalf of the listing agent, homes will sell – but the sale price will be lower for homes without the right mix of attributes and features.
In a Buyer’s market, having the right mix becomes even more important. When buyers have a number of choices of properties that fit their needs within their budget, they can be more demanding. A home with the right attributes but needing cosmetic updates sells for less than a similar style home with the updates already done.
So when I say “Regardless of the market, the attributes and appearance of the home determine the sale price” I believe it to be a fundamental truth. I saw many homes over the past year sell despite the flaws in the property and the lack of updates. Crucially though, they did not sell for the outrageous sums you saw for properties that covered off both the attributes and appearance sides. When a property had it all, it was one of the homes at the heart of all those news stories about 50 or 60 bids, selling for an insane premium over the asking price.
When you’re selling a property, it matters what type of home it is and what it looks like – it just does.
Whenever a market shifts, it takes some time for Realtors, buyers, sellers, landlords and tenants to adjust to the changing conditions.
The same agents who had difficulty pricing properties over the last year and who advised their seller clients to not bother fixing anything are going to have a very tough time of it over the next little while.
In most parts of the GTA, we are still in a Seller’s market. When we look at the months of inventory that is available we see that Simcoe slipped into a Buyer’s market in July, 2017 but became balanced in August, 2017. York has been balanced since June, 2017. All other parts of the GTA remain in a Seller’s real estate market.
While we may still be in a Seller’s market, we have seen a progression towards a balanced market in many places. There is more inventory now and the attributes and appearance of a home determine the sale price to a greater extent than they did earlier in the year. They still impacted the sale price then and will always impact it – and right now we’re seeing it’s more important than it has been for a while.
If you or someone you like is considering selling a home, please get in touch with me so I can advise you on what needs to be done to get you the best price in the least amount of time. If you need a Realtor who knows how to sell in any market, I’d love to be responsible for what comes next.
FRONT DOOR BENCH
People like to watch the street.
As far as design lessons go, this is a very simple one. It’s the reason why many people prefer houses with porches. The ability to be in a private place that allows you to see the goings-on in the public world is very appealing to many people, particularly older people.
Where you have space outside your front door, build a special bench or seating where people from inside can sit comfortably for hours on end and watch the world go by. Define the space by having a low wall, or planting or tree that makes the space feel half-private.