For home sellers and realtors alike, the most important thing about selling a house is the pricing. It’s not location. It’s not how much decluttering and painting has to be done to get it ready to sell. It’s not the improvements the current owners put into the house over the years. Home owners never get that money back, not all of it and not in the form of money. Home owners do get a lot of the money they spend back in the form of enjoyment. There is nothing better than knocking out a wall and remodelling a kitchen to bring future hours of enjoyment to the whole family.
Location and Price
In real estate we always say, location, location, location. Location sells houses. We should be saying price, price, pricing, because prices sell houses. The two are related, of course. The same style house in two neighbourhoods that are only a few kilometres apart can sell for ten of thousands of dollars differently. However, even an overpriced home in the most popular neighbourhood in Kitchener Waterloo (arguably Laurelwood) won’t sell. We have a saying in real estate:
Price solves all problems.
Pricing is the problem
When I first got into real estate, I loved price evaluations. One of the elective courses I had taken was “Comparative Market Valuation”. I learned to find comparable properties then add and subtract dollars for the features the target home did and didn’t have.
An unfinished basement, deduct $12,000.
A two car garage, add $15,000.
Add $5000 for the ensuite.
Deduct $7000 because the roof needs to be replaced.
All that jazz. I had the formula. Unfortunately it doesn’t work that way. It does sometimes, on a neighbourhood level, especially in a new neighbourhood where there are lots and lots of similar homes. But it doesn’t work well because it can’t take enough of the other factors into consideration. Factors like, busy streets, corner lots, crime, school, transportation, amenities… Some of those things affect the price. Some of those things affect the time to sell. Some of those things bother some people some of the time, some not.
Who is going to buy your house?
There is a good chance that the people who buy your house will be a lot like you were when you bought it. This is important not only for the marketing of your house, but for understanding the motivation of the buyer. When you bought the house, did you buy it because of price? Location? Lifestyle considerations? Were you under time pressure? Did you think you were going to use the community pool but then never did?
Those are all careful considerations, but especially if you were a first-time homebuyer, one of your most important considerations was price. It is always about price.
Not every house sells.
Not every house sells. In fact, a very very high percentage of houses don’t sell. Realtors and real estate boards don’t send out press releases, post cards and do blog posts on our failures. It’s not good business. We don’t like to fail. It hurts relationships. We also don’t get paid.
We have great statistics, but we (realtors and real estate boards and associations) only share the ones that make things look good. I’ve blogged many times about real estate reporting. The media will focus on the negative. Negative news sells newspapers. The real estate boards will focus on the positive. They can’t be putting out negative news. What will it’s member say?
Last year in Kitchener Waterloo (areas 1,2,3,4) through Kitchener Waterloo Association of Realtors MLS
2496 listings expired without selling
416 were cancelled before selling
4703 homes were sold
This is raw data. Some of them might have sold the second time round. Different neighbourhoods sell at different rates.
But put another way, a way that you’ll never likely read on a press release from the Kitchener Waterloo Association of Realtors, about 60% of the homes listed on MLS in Kitchener Waterloo sold and 40% didn’t.
Why do houses not sell?
Error. Motivation. Circumstances. Communication.
I got into real estate because I wanted to be in control of my own destiny. I wanted to help people accomplish their goals: Moving up, moving in, moving out…whatever they were. Clearly, I was naive. There are so many things that can go wrong. There are so many things that are out of a real estate agent’s control. When I first got into real estate I made the mistake that I often still make. I price houses too high. As a general rule, I’m optimistic. I over-value my ability to communicate, to market and to sell houses. I don’t want listings that don’t sell. I don’t get the listing then work on the sellers, working the price down. I’m just too confident.
Last year, I had two houses that did not sell.
In both cases the list price was too high.
In the first case, we had the price wrong. It was a country property, custom built and without a lot of comparables. We had a couple of offers that should have told us to lower our price but we held firm and eventually did not sell.
In the second case, we knew we had the wrong price but the buyer had bought a home from a builder and had eight months to sell. We “tried it out for a couple of months” and did not sell at a price $20,000 too high. I’m fond of saying that we are all working from the same information. Gone are the days that realtors were the gatekeepers to all information. Most buyers are working with realtors and most realtors will go to the comparables when advising their clients about what to offer.
HINT: The list price is often irrelevant to the market price.
There are a lot of other reasons why houses don’t sell. For example, some neighbourhoods can only support so many sales a year. Sometimes a good house keeps getting passed over for a better house, which is replaced in the marketplace with another better house. Sometimes realtors make it hard to show a house. Sometimes sellers make it hard to buy a house.
Call to action
If you are thinking about selling your house and you’d like to be successful, pricing is the most important thing to get right. It solves all your problems.
About the blog post title: How important is pricing the house to selling the home?
We price houses. We sell homes. Pricing houses is cold logic. It is what it is. Selling homes is about emotion. The people buy homes. When we do everything right, people will buy your home.