The hallmark of Black Friday is a huge advertising blitz to increase the number of sales of discounted (well, in theory they’re discounted) products. In real estate, there is no direct equivalent. If, however, you’re looking for opportunities to buy at a discounted price, then there are ways to identify sellers who might be willing to give you a bargain.
Here are three factors that should greatly impact a seller’s motivation – and allow you to get a bargain as a result.
Days on Market
The length of time a house has been on the market is one of the biggest factors in how flexible a seller will be with the price. If a house just came on the market and you want to buy it, be prepared to pay quite close to the asking price.
An offer shortly after a property is listed gives the seller the impression this is going to be a hot property. Time and again, I’ve seen sellers react to an early offer by saying something like this. “If someone wants it after a day or two, I bet we will see dozens of offers and sell for loads of money. Let’s wait and see who else wants to buy it.”
Any offer that comes in early must be reasonably close to the asking price, but not too close to it. Yes, you heard that right. In my experience, buyers have a better chance of successfully purchasing a property that was just listed if they still negotiate a bit. After all, how do you feel when you ask for a certain price for something you’re selling and they say “Sure.”? In all likelihood, you immediately suspect you should have been asking for more.
For properties that are sitting on the market, certain dates are milestones that will likely impact their willingness to accept a lower price. Look for properties that have crossed over into an additional month on the market, or even properties that came on early in the month and haven’t sold as we move to a new calendar month. For a seller who listed in early November, and expected to sell in November, seeing that calendar flip to December can be a great motivator to accept a lower price.
Note that within the Toronto Real Estate Board, we can terminate a listing and immediately relist it with a new MLS number, resetting the days on market to zero. Agents can see it was previously listed and add that length of listing onto the current listing days on market, but it is not immediately visible when reviewing listings. As such, we always need to dig deeper to see if the days on market is accurate.
Nothing more clearly shows a seller’s willingness to accept a lower price than asking for a lower price.
There are 1,994 freehold properties (so, not condos) for sale in Toronto today. 340 of them have changed their price from the original list price.
From a psychological standpoint, sellers who have done a price drop are already accustomed to knowing they won’t get what they had hoped they would for the property. Their confidence in their agent and the value of their home has likely lowered as well. Someone who says “We were wrong about how much we thought it was worth.” is more likely to say it again than someone who is stubbornly insisting on maintaining their list price.
Our favourite time to submit an offer on a property with a price change is about a week after the price change. When the price is lowered, the seller and their agent are hopeful this will make the difference. Suddenly, more showings will be booked, agents will be calling and offers will be submitted. If a week passes and the house still isn’t sold, we know that the seller is shaking their head and starting to see that this new lowered price might still not be enough.
By timing an offer properly, you can find a seller with the motivation to accept a lower price. The risk with this approach is that someone else will come in before you and buy the property at close to the lower price. For buyers who are still wanting a greater discount than the price drop that just took place, it’s a risk that they have to take.
The final factor that absolutely impacts a seller’s motivation is when they had a sale fall through. When you go through the emotional roller coaster of selling your property, the idea of having to start all over again is very unappealing.
Within the Refined team, we always advise our listing clients to be cautiously optimistic when a property is sold conditional and to even hold back a little bit on their happy dance when it is sold firm. Until they have the money for the sale in their bank account, deals can fall through. The legal obligation to close does not mean all deals close. Buyers lose jobs, they get divorces, sometimes they even die.
A good listing agent works hard to make sure that the buyers are solid and dependable so their client doesn’t have any surprises on closing day.
On the buying side, most agents don’t realize that we can search the MLS for deals that have fallen through. It’s a special field that doesn’t show up on the listings we see, but we can modify our search to see deals that have fallen through.
Let that sink in for a moment. We can see properties that were sold, where the sellers thought they were done. They may have bought another property now that their home was sold. They may have decided on their family vacation when it closed and they had the money. They were done.
As of today, there are 31 freehold properties for sale in Toronto that were sold in November, and have fallen through. There are three townhouses, 4 semi-detached houses and 20 detached homes for sale right now, where it was sold and then it fell through.
We can even refine the search further and look for properties that are vacant and are asking for immediate possession. This means that the owners have moved out, possibly into their next home. Rather than having a sold property, they have two properties, with two sets of utility bills, two premiums for insurance and two mortgages. If you ask us, those people are pretty motivated to sell and would be willing to look at almost any offer as long as it closed quickly.
As of right now, there is one property that fits these criteria. It is vacant, want to close immediately and their previous conditional sale fell through.
It’s a detached two-storey home in east Toronto, near Kingston Road and Meadowvale Road. 4 bedrooms upstairs, a den in the basement, two and a half washrooms and is less than five years old.
It was listed September 29, 2020 for $849,900, holding back offers in the hopes of receiving multiple offers. That didn’t happen and on October 28, 2020 they upped the price to $949,900, accepting offers anytime. On November 16, 2020 it was sold conditional. Two days ago it came back on the market at $949,900.
Something went wrong with one (or more) of the conditions and as of today, it’s for sale again and has now been on the market for just under two months – 59 days.
Do you think an offer well below the current $949K would be considered on Tuesday, December 1st as the seller looks to another month on the market starting, with the holidays only weeks away? We would almost certainly classify the seller as motivated and willing to give on the sale price if they can get a firm deal done that closes soon.