Many years ago, I remember listing a home on Douglas Avenue in North Toronto. It was so long ago that it was a buyers’ market. To select the right list price, which we all know is the most important component to a successful sale, we selected a list price that was in line with the recent sale prices of comparable homes.
The home went on the market and two days later we received an offer. It was a really low offer. Well below any recent sale price. In fact, it was unjustifiably low. When I asked the buyer’s agent how his client arrived at that price, he said to my client and I: “No one else is offering. This is the only offer so this is what it must be worth. You should take it because your first offer is always your best offer.” What stuck with me is the expression “Your first offer is always your best offer.” I’ve heard it numerous times since then and it’s almost always said by a buyer’s agent when trying to convince a seller to accept an extremely low offer. I didn’t believe it then and I don’t believe it now. Sometimes your first offer is your best offer and sometimes it isn’t.
I’m reminded of this expression now, not because I think we’re in a buyers’ market, because I don’t think that’s the case, but because there are buyers out there now who are trying to buy properties at extremely low prices. I don’t blame them, you never know how desperate a seller might be until you try an offer, but if you’re thinking of selling, this is something you should expect and be prepared to deal with.
If you list your home today, one of three things is likely to happen: 1. It might sell quickly for a very good price if it’s a great home with wide market appeal and listed at the right price; 2. It might take a few weeks or months to sell if it’s priced right, but doesn’t have broad market appeal; or 3. It might take a very long time to sell if it’s not priced right and doesn’t appeal to a lot of people.
The first scenario is easy to deal with. So’s the third – if you’re hardly getting any showings and not getting any offers, chances are you need to adjust your price. So let’s take a closer look at the second scenario because it seems to be happening quite frequently in central Toronto lately. This way, you’ll know what to expect and how to give yourself the best chance of achieving the best result possible if you find yourself in this situation.
As an example, let’s say Scott and Ali want to sell their home. They meet with their Realtor, look at the comparables and estimate their home to be worth somewhere in the $1.5m to $1.6m range, probably around $1.55m. The market is very hard to read so they decide to list it at $1.699m in case someone wants to pay them more than it’s worth and figuring they can always lower the price if they need to or someone can also make them a low offer if they want to.
They put their home on the market. There are very few showings the first few days, but they do receive an offer for $1.3m. They negotiate a little and the buyer goes up to $1.35m. If their first offer is their best offer, they’re in trouble. But they don’t panic and aren’t desperate, plus they’re aware of the comparable sales, so they refuse this offer and wait for the next.
After a week or two of very few showings, they decide there aren’t any buyers out there who want to pay them more than their home is worth so they reduce the price to $1.599m, which was probably the right list price to begin with. The new list price unleashes a storm of activity.
They receive a second offer for $1.25m with conditions. They’re still not desperate so they sign it back for $1.575m. They don’t hear back from this buyer. At all. Ever. Maybe their first offer was their best offer?
Two days later they receive an offer for $1.4m, also with conditions. They sign it back for $1.575m, the buyer counters with a final offer of $1.425m and that’s that. On to the next.
They don’t have to wait long. The next day they receive an offer for $1.5m. They’re getting closer. Except this offer is conditional and missing some pages. When the buyer’s Realtor is asked to send the missing pages, they don’t appear. Guess this buyer wasn’t all that serious or changed her mind.
Later that same day they receive a fifth offer, this time for $1.510m with two conditions. Now they’re getting really close.
But a few hours later this buyer withdraws his offer and submits a new offer for $1.490m with a condition. Scott and Ali accept it as it’s very close to the right price range, but the buyer can’t fulfill the condition so the deal falls through. They’re disappointed, but they can see that there are buyers out there who are interested in their home and are confident the right buyer will appear in the near future.
They don’t have to wait long. Offer number 7 arrives a few days later. It’s for $1.5m with no conditions and the closing date works. Scott and Ali accept it. It turns out their seventh offer was their best offer.
So what can you learn from their experience:
- Select a list price based on recent comparable sales.
- Make sure your expectations are reasonable.
- Don’t feel pressured to accept the first offer you receive. It may be the best, but it may not.
- Be prepared for buyers who want to try to buy your home for a really low price. Don’t let these offers cause you to panic. You don’t have to accept them unless you want to.
- Listen to the market. Scott and Ali thought their home was worth somewhere between $1.5m and $1.6m, but after being on the market for close to a month and receiving seven offers, the best of which were for $1.510m and $1.5m, they determined that the market had spoken and their home was worth around $1.5m and not $1.55m as they had hoped. Here’s another expression: “The market has spoken”. I tend to believe in this one. If you’re getting showings and offers and a number of offers are coming in around the same price, chances are that’s what your home is worth.
If you know anyone who is interested in learning how the market works and would like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family, please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And as always, don’t be shy if you have any questions or comments about this post! Thanks for reading.