As a seller, choosing the right list price (also referred to as your pricing strategy) is probably the single most important factor in determining how much your home will sell for and how quickly it will sell. But your list price might be even more important for buyers than it is for you. Why? Because when bidding wars are common buyers try to figure out your expectations based on the list price you choose. They think knowing your expectations can give them an edge in a bidding war that might make the difference between winning and losing.

That’s why, when I’m the listing agent, buyers’ agents often ask me “What do the sellers expect?” or “How much is it going to sell for?”. I would never divulge what the sellers expect because they shared that information with me in confidence. And I never know what a property is going to sell for because I don’t know what every buyer is going to offer.

But I certainly don’t blame buyers’ agents for looking for guidance. Pricing strategies can be downright confusing these days. Sometimes I wonder if there’s even a strategy at all or if certain sellers are switching strategies every week until one works out.

To try to understand what’s happening in the market, let’s start by looking at a few of the different pricing strategies you’re most likely to encounter:

• The ‘intentionally low’ list price: This is when the list price is set very low on purpose in the hope that the low price will attract multiple offers which will drive the price up. This is a very common strategy these days in central Toronto (but not at the higher price ranges). It works best when your home will appeal to a large number of buyers based on its style, location and price.
• The ‘bang on’ list price: “This is what we think our home is worth and we’re very reasonable people so if you pay us this price we’ll sell you our home.”
• The ‘play it safe’ list price: This is when you list a little bit above the fair market value of your home because, even though you have a pretty good idea of how much your home is worth, you want to leave some room to negotiate or hope a buyer might want your home badly enough to pay you slightly more than its value.
• The ‘intentionally high’ list price: If your home is somewhat unique so it’s difficult to estimate its market value and you won’t be insulted if someone makes you an offer that’s substantially less than your list price, you might decide to set a high initial list price, well above what you “think” its fair market value might be, to make sure you don’t undersell it.

You’re most likely to encounter the “intentionally low list price” strategy these days. Most buyers know the sellers expect more than their list price. The question is – how much more? And that’s where the mayhem starts.

I’ve heard of sellers who set an intentionally low list price, get three offers all higher than list price on offer night, and decide they weren’t high enough so they didn’t accept any of them. I’ve heard of sellers who then increase their list price to a price they’d accept and not get any offers at all so they lower it again. I’ve also heard of sellers who don’t sell on offer night, leave their list price at the initial low level, receive an offer for full list price two weeks later and tell those buyers “We want more than list price even though there’s no bidding war.” How in the world is a buyer supposed to figure out what to do? I’ll tell you.

Ignore list prices. They’re almost irrelevant. They don’t matter. A seller can choose any list price they want. It shouldn’t affect you. There are only two things that matter to you: 1. What’s the fair market value of this home? 2. How much more or less than fair market value are you willing to pay for it?

You’re in control of your money. Don’t let the seller’s expectations set the rules of the game. They can ask for whatever they want. They can be realistic or unrealistic.  All that should matter to you is how much the home is worth to you. If it’s listed low, figure out its fair market value and decide if you want to pay more to get it in a bidding war or if it’s not worth a premium to you. If it’s listed high, follow the same process: figure out its fair market value and decide how much you’re prepared to pay for it. In a bidding war, there’s often at least one buyer willing to pay a premium to get the home. You just have to decide if you’re willing to be that buyer for that home.

Hopefully this will help you navigate the confusion created by the various pricing strategies you’re likely to encounter if you’re buying a home.

But the big, all-important question still remains: how do you estimate fair market value? You can try to do it yourself or you can ask someone like me to help you. I’m betting my thirty years experience of seeing homes in central Toronto will give me an edge. After all, I haven’t just been looking at homes out of curiosity. I’ve been analyzing what makes some homes sell for more than others. I keep adding to my internal database and improving my ability to estimate the fair market value of the homes I’m seeing. Experience like this is difficult to replicate.

So there you have it – how to navigate today’s list price mayhem in a nutshell. I’d be happy to talk to you about your options if you’re thinking of selling in the near future. Also, 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.