“Michael, I just read What Market Are You In? and it was great. It has lots of helpful info and really helps me understand the big picture. I’m now able to impress my friends with my in depth knowledge, but I’m in the process of actually selling my house and buying a new one so I’d love some specific advice about what to expect and what I should do. Can you help?”

Of course. Ask and you shall receive. Your best bet would be to hire us here at Advocate Realty, but we know you may already have a relationship with another Realtor and we can’t be in all places at all times anyways so here’s some specific advice to help you navigate today’s markets:

The first thing you need to do whether you’re buying or selling is estimate the value of the home in question – either the home you want to buy or the home you’re selling. This is absolutely crucial because it’s the only way to make sure you don’t pay too much if you’re buying and don’t sell for too little if you’re selling.

In most cases in central Toronto, you won’t be able to pinpoint an exact value, but you’ll be able to figure out a range within which the home’s value will fall. That range could be as small as $50,000 or as large as $500,000 depending on factors such as the type of home, price range and neighbourhood. Let’s use a home that has an estimated fair market value range of $1.8m to $2m as an example and let’s look at a few different scenarios in the Fast Sale Market and Balanced Sale Market so you’ll know what to do under different circumstances. (These are the two markets described in What Market Are You In? Now might be a good time to review that post if don’t remember the differences between the two markets.)

You’re a Fast Buyer looking at a Fast Home in a Fast Sale Market

This is a relatively easy one. Chances are other buyers will want this home, too. Let’s assume the Fast Sellers know their home is worth between $1.8m and $2m and likely closer to $2m because it’s a highly desirable Fast Home. You’ll likely have to make an offer quickly and might find yourself in a multiple offer situation. It doesn’t matter if the home is listed at $1,695,000 or $1,995,000, you can pay up to $2m and still be paying fair market value for the home. If you decide to pay more than $2m because you’re in a bidding war and want to make sure you get the home, at least you’ll know you’re paying a premium for it and how large that premium is. But the key is to know what the home is worth before you make your offer.

You’re a Balanced Buyer looking at a Balanced Home in a Balanced Market

These Balanced Sellers aren’t expecting multiple offers, but still want to try to sell their home for top dollar, which in our example would be as close to $2m as possible. They might list their home at $1.995m or even $2.1m to leave themselves a little room to negotiate. Being a Balanced Buyer who isn’t in a hurry, you might want to try to buy this home for as low a price as possible, preferably below $1.8m because you want a deal (or a steal). Well, let me tell you right now there are very few homes selling for below the bottom end of their fair market value ranges these days. It happens now and then, but rarely. There’s just too much demand for homes and buyers and sellers are too educated. If a price is too low, the market self corrects – enough buyers will appear to bid the price up to a reasonable level. The best you’ll most likely be able to do is negotiate a price closer to the bottom of the range than the top. My advice would be to make an offer near the bottom of the range and rely on your Realtor’s negotiating skills to get you the best price possible. If you try to lowball the seller, you run the risk of them not taking you seriously and digging their heels in and you could end up with a worse price than if you had started with a higher offer. If the seller doesn’t want to accept a price close to the bottom of the range, don’t assume the seller is being unreasonable. The seller just wants a higher price than you’re willing to pay and probably thinks you’re being unreasonable, too. You both think the home is worth somewhere in its fair market value range, but you want the number to be at the bottom of the range and the seller wants the number to be near the top. Where you end up will depend on how motivated you are, how motivated the seller is and your Realtor’s negotiating skills.

You’re a Balanced Seller with a Balanced Home in a Balanced Market

Let’s continue with the last scenario and look at it from the seller’s perspective. As the seller, you think your home is worth $1.8m to $2m. You want to try to get as close to $2m as possible so you list it at $1,995,000 or $2.1m. (As an aside, human nature being what it is, I can’t recall too many sellers who remember me telling them their home is worth between $1.8m and $2m. They seem much more likely to remember me telling them their home is worth $2m.)

Your home doesn’t sell right away and is on the market for a few weeks or even a month or two. There’s nothing seriously wrong with your home, it’s just that the right buyer hasn’t come along yet. You get an offer for $1.6m. Do you accept it? Try to negotiate it? It depends on your timeline and your motivation. If you’re not in a rush and want to continue trying to get closer to $2m, then this probably isn’t the right offer. There’s a good chance you could get another offer for $1.6m quite easily if you reduced your list price enough so the risk of letting this offer go isn’t great. But if you need to sell by a certain date, you might want to try to negotiate this offer and see how high this buyer will go and then decide whether you want to sell to this buyer or not. When you’re deciding what to do, keep in mind that sometimes a buyer who starts off looking like a Balanced Buyer who isn’t in a hurry decides they really want a home and becomes willing to pay a lot more than it looked like they would pay at the beginning of the negotiations.

We recently helped Balanced Sellers sell their Balanced Home and they said no to more lowball offers than I can remember before finally selling their home for a price they wanted. There’s nothing wrong with waiting for fair market value as long as you’re realistic about what fair market value is and you have the time to wait.

You’re a Fast Seller with a Fast Home in a Fast Market

Once you estimate the fair market value range of your home, you need to pick a strategy that will get you to the top or above the top of the range. That could mean setting a low list price to hopefully create a bidding war or it could mean choosing a list price that’s slightly above the top of the range and hoping one buyer falls in love with your home and decides to pay you a high price.

The risk of a low list price strategy is that the price may not be bid up high enough in a bidding war. If you list at $1,595,000, get 6 offers and sell immediately for $1.8m, you really haven’t done very well. You’d have been better off listing for $2.1m and selling for $2m after being on the market for two weeks. Unfortunately, I can’t give you specific advice one way or the other on choosing your list price because every situation is so unique, but you might find some helpful info in What’s YOUR List Price Strategy? Or you can connect with us directly at Advocate Realty.

There are plenty other scenarios, too, but these are the ones you’re most likely to encounter and you can apply the advice from these scenarios to other scenarios, as well. The trick in every scenario is being able to recognize what market you’re in and what the other side is trying to do so you can use the appropriate counter strategy. Your Realtor should be able to help you with these things. Your Realtor should also be able to help you estimate the fair market value range and negotiate the best deal possible for you. These are the things we do for our clients and this is where a top Realtor adds a lot of value.

If you already have a relationship with a top Realtor, great! But if you don’t and you’d like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family, please free to connect with me. I’m always happy to help. Thanks for reading.