If you’re considering selling your home, you have a choice between two commonly used approaches.
The first is old school. Decide on a price you would take, list it for sale at that price, and hope someone will pay pretty close to that price.
The second is a relatively recent development in the last couple of decades. While it happened on the rare occasion before then, it became increasingly common and even the predominant approach in a seller’s market. It involves listing for a price that is significantly lower than the home is worth or that the seller would accept, having a marketing period of a week or so, and then reviewing (hopefully multiple) offers on a specific offer date.
In the shifting market we’re experiencing in Toronto and the GTA these days, both approaches are being used and it is a real topic of conversation as to which one is appropriate. The answer varies depending on location, price point, housing type and other aspects, but we are definitely seeing a number of sellers that take the second approach and see if not work as planned.
What comes next is a function of how well they thought through their initial listing strategy and price. Let’s go through the three options that sellers and their agent have when the home doesn’t sell on the offer date.
Option #1 – Raise The Price
In our opinion, this is the best next step that a listing agent can take, but it relies on a few things have been doing correctly.
If the listing strategy was properly thought through, the listing price was below market value. A large part of the idea behind holding back on reviewing offers to a certain date is that you create a situation with multiple offers.
In order to receive multiple offers, you need lots of prospective buyers to view the property. If it is listed below market value, you have buyers who see the listing and say, “That looks like a great home for that price, let’s check it out.”
While a good purchasing agent will be able to guide expectations for their client, there are new or inexperienced agents who can’t help their client understand the likely sale price for the property. Such buyers end up putting in offers for the property that aren’t market value and won’t be accepted. They do, however, serve to put pressure on other buyers to raise their offer price, often resulting in a good sale price for the seller.
If the listing agent understands the protocol on how holding back reviewing offers is supposed to work, they have listed well below market price. Despite the property looking like a bargain, it failed to attract the price the seller was hoping for and now a change needs to take place.
They could lower the price even further and hold back reviewing offers until a later date, but that is quite risky. If the market didn’t give them the price they wanted with their initial, below market value price, then going even lower is not likely to get them anywhere close to their desired sale price.
By raising their price to their desired sale price and accepting offers at anytime, the listing agent is telling the market that they didn’t get any offers close to that amount before (otherwise they would have dealt with it and sold on the offer date) and that they want a sale price close to their new, higher list price.
In essence, it’s going back to the way all homes used to be sold because the other approach didn’t work out. There are, however, other options if their initial pricing strategy wasn’t thought through properly.
Option #2 – Keep The Price The Same
The second option is for the listing agent to remove the instructions to agents that they are holding back on reviewing offers until a certain date, say they will review offers anytime, yet keep the price the same.
This approach is an indication that the listing agent didn’t really think through their pricing strategy. If they are willing to sell the home at the same price as when they were holding back on reviewing offers, they clearly have given up on getting more than that initial price for the home.
In theory, this could appeal to buyers who thought the home was worth exactly the list price but were scared off by the idea of a multiple offer situation or thought (rightly!) that the seller was saying they wanted more than that price.
In practice, we find that this just indicates to the market that the seller and their agent didn’t have a good grasp of what the home was actually worth and after trying to see if anyone would buy it for more, they are now willing to take less.
This often creates the perception that the home has something wrong with it and that the price is too high. Regardless of whether either of these are true, the perception can certainly affect whether buyers are interested and at what price.
If the initial list price was actually what the seller was hoping to get, then the listing agent has made a mistake and has a tough road ahead.
Option #3 – Take The Property Off The Market
While keeping the price the same and getting a sale price the seller wants is challenging, it is definitely preferable to the third option for dealing with when a home doesn’t sell on the offer date.
While it isn’t common, we do occasionally see listings being terminated (and not coming back on the market) after the offer date.
This is the clearest indicator to us of a listing agent who managed to get the listing on the promise of a great, quick sale price. When the offer date came and no offer came in with the price the seller wanted, they fired the listing agent.
It’s a frustrating circumstance for buyers, as they saw a home they liked and wanted to buy. The agent they were working with had to rely on the listing agent doing their job well, which means informing their seller client of what a reasonable price would be for the home. The buyer and their agent undoubtedly went into the process with the hope of coming to a deal, yet if the seller isn’t well served by their agent, that is not likely to happen.
When we act as a purchasing agent for a client in situations like this, it’s somewhat of a powerless situation for our side. If the listing agent or their seller don’t have a grasp of the market and want an unreasonable amount, there is often nothing we can do to help our client get the property. All of the logic in the world won’t influence a seller who is unreasonable and only listed their home on the promise of a crazy sale price.
It’s pretty clear that of the three options sellers have when their home doesn’t sell on the offer date, the first option is the most likely to get the home sold. When the listing agent did their job properly, raising the price and accepting offers anytime is something they have prepared their client for and is likely to succeed.
When the listing agent didn’t do things properly, they are left with either continuing at the same price or having the listing terminated. If they continue at the same price, it often sits for a length of time before the price is dropped to what the market will now pay for this stale listing.
If you are considering buying or selling, make sure you work with a Realtor who understands how pricing strategy plays into getting a home sold. On the sale side, you want your agent to be clear about a path to getting you the price you want. On the buy side, you want your agent to understand what is going to happen with a property you want to buy. In either case, we’d love to help make your goals a realty and encourage you to get in touch with us to start the conversation.
