The Montreal Real Estate Blog

You started out with a high listing price. It’s been a while since your property is for sale…and no offers.

What could be wrong?

The property is in a hot neighbourhood, so the location is not the problem.

The conditions are great; top-notch with lots of renovations. You even got complemented on the décor and how well maintained it was.

Then why are there no offers?

Could it be the price?

After giving it some thought, you realized that perhaps, the reason why those few visitors never made an offer is because your property might be over the market value.

And you should know what the market value is…

Before listing your property, you checked the MLS for the current listings in your area, compared to similar properties, called an agent to give you a free home evaluation (just to make sure) and got a sheet called the “Comparable Market Analysis” (CMA), then decided what the asking price should be - regardless of what that CMA thingy said about the suggested asking price. Did you not?

Ok.

Now your property is NOT selling. What do you do next?

You drop the price. But, by now it might be a little too late. Your property is old news.

(The Risks of) selling your home above market price.

Let’s say you finally get an accepted offer for your house, from an uninformed buyer.

Like most buyers out there, they will need a mortgage; in these situations the offer to purchase is conditional to mortgage approval. No mortgage, no deal.

When receiving the (signed and final) offer to purchase, the mortgage lender requires an appraisal of the property before they consent to the financing. If the current market conditions and the comparable sales for the last six months do not support your sales price, the banks won’t approve it.

The lender will give their own appraisal to the buyer, and the amount they are willing to lend based on that evaluation. If the buyer is putting 20% down payment, the bank will finance 80%. Not a penny more. Which means: the buyers have to get more money, so they can afford your property.

And your deal falls through.

If the buyer is still interested, you can try to re-negotiate the price or the terms. But if not, your property could go back on the market.

Remember:

The longer a home sits on the market, the harder it is to get a good offer.

Once the offer expires, your property is available for new visits, but by now any informed potential buyer who kept an eye on your property will know there were offers on the table, and if they don’t know they will ask. It is your responsibility (or your listing agent’s) to reveal the reasons why the deal didn’t go through, without disclosing the previous accepted price.

There’s nothing more frustrating than having all the ingredients for a successful sale, (pre-approved buyer, a good inspection report, etc.) and then having the bank refusing to lend the money because the property “Is not worth that amount”

New buyers interested in making an offer will think that since the property has been on the market so long; the owner might be desperate to sell by now, and making a low-ball offer will probably get accepted.

By starting out with a high listing price, you could end up selling for a much lower price.

Here are a few more reasons why you should not overprice your home

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A comparative market analysis (CMA) is an evaluation tool used by real estate agent’s, based on local listing and sales data, to determine the probable sale price of a property in the current market.

Who can use this information?

Both sellers and buyers alike.
Home sellers can use a CMA to help determine a list price. Buyers can use it to help them determine the offer price on a property they want to buy.

How accurate is this analysis?

Depending on the quality of the data; the listings used for comparison should ideally be located in the neighborhood, and they should be as similar as possible to the subject property.

Comparative elements:

• Property Type (condo, two storey houses, split level,etc);
• Numbers of rooms;
• Size of the living area and/or building size;
• Year built;
• Garage or parking spaces;
• Basement: finished, semi-finished or unfinished;
• Other similar features such as: fireplaces, inground pool, air conditioning, etc.

To determine the probable sale price of a property, the CMA will use the recent sales from the last 6 months. If the current market is changing rapidly, six months may be too long a time frame, in this case, 3 to 4 month sales records will be used as a reference.

The CMA should also include information about currently available comparable listings, as well as information about properties that did not sell during their listing period. These are called expired listings.

For sellers, active listings would be your competition once your home is on the market. How you price your property relative to the competition is critical to your home-selling success.

Thinking of selling your home?  Contact us for a free home estimate.

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Because of the constant changes in real estate market conditions, more sellers are competing for fewer buyers. And most buyers are not jumping at the first property they fall in love with.
“The initial asking price is NOT that important because it can always be lowered later.”

Wrong! The original asking price is very important. Specially when working with the new generation of buyers who are well informed on the market conditions. But many homeowners still believe over pricing a listing is the way to go. And they couldn’t be further from the truth. It is a myth. It’s a time wasting myth.

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