After a near-decade of price inflation in the Victoria real estate market, you could probably forgive sellers for the hard times they must be feeling these days as the weeks go by without a sale and the days without showings outnumber the days with showings by a wider margin. Many Victoria sellers likely believe this period will pass in short order and 'the norm' will return before they start to feel the consequences of their stubborn-ness.
Those of us who have followed this market for some time know this phenomena as "catching a falling knife."
I overheard a conversation between a seller and an agent recently* that I've re-created** here for your entertainment:
Seller: It's been 45 days since we put the house up for sale and we haven't seen an offer. Why?
Agent: The market is slow all over town right now. There's lots of houses on the market and there aren't very many buyers actively looking to make a purchase. You might want to think about dropping your asking price if you want to invite an offer.
Seller: We did that 15 days ago. You told me August was slow and things would pick up in September again so we dropped our asking price by $10,000 to attract some interest. We've had two open houses and a handful of agents walk through. And yet not even a hint of an interested buyer. Our house is worth more than we're asking for it. We've invested almost $10,000 getting it ready to sell and making it the nicest house in the neighbourhood, why no buyer interest?
Agent: The market has changed. There are far more homes for sale than buyers actively looking to make offers. Believe me, I'm hearing the same thing from my other clients and I'm hearing other agents telling me their clients are all saying the same things. You have to understand, it's not just about having a nice house anymore that people can move in and enjoy right away. I know that when you bought 7 years ago, you would have faced bidding wars on houses that needed work. That's not normal. That market was too hot to be sustainable. This market is what we call balanced. Which means you have to not only have the nicest house in your area, you also have to have the best price. Right now, we're talking about you finding the best price.
Seller: So what does that mean? Are you suggesting we drop the price again? We started at $499,000 now we're at $489,000 and there are less showings than when we were at $499,000. That doesn't tell me the price is wrong.
Agent: Do you recall when we first talked about your listing price? We looked at some comparables in the neighbourhood to determine what price your house should be offered for sale at. We had a discussion then about the condition of your house in comparison to your immediate competition. We agreed the money you'd spent on getting your home ready for sale made it nicer than the rest. We agreed this was a good thing and would likely mean that you were more likely to get more for your house than Mr and Mrs Jones the next block over.
Seller: We did. We should. Our house is nicer. It's worth more.
Agent: Have any of those houses sold yet? They haven't have they? Have they dropped their prices too? They have. You see what I mean? Your house is in nicer condition and you're asking a premium price based on that when you look at the comparables.
Seller: Of course we are. It's worth more.
Agent: I think we should price it the same as the Jone's house around the corner and see if we can invite more viewings that way and maybe entice an offer.
Seller: Are you suggesting we drop our price over $40,000 from the original? That's crazy, we may as well give it away.
Agent: If we price it the same, you'll have the best house at the same price. If you were shopping around for a new car, and saw a BMW for the same price as a Toyota, would you hesitate to look at the BMW and maybe even buy it?
Seller: We can buy a BMW with that $40,000 you're suggesting we just give away.
Agent: You're moving right? You've already made that commitment. What are your options? Can you afford to buy your new house if this one hasn't sold? Can you afford to wait to move until this house sells at the price you think it should sell for? I have to tell you, I don't see prices going up anytime soon. They haven't really been going up for a couple of years now. So if your price that you think your house should be at is already too high, when do you see the market bringing you that price?
Seller: You tell me, you're supposed to be the expert.
Agent: I'm telling you now. The market doesn't agree that you have a $500,000 home. The market might bear $460,000, but we won't know until we try.
Seller: If we drop the price $40,000 in only 45 days we'll be inviting low ball offers. We don't want a low ball offer.
Agent: Right now you're not getting any offers. A low ball offer is better than no offer and gives us a chance to counter. Once a buyer has made a decision to make an offer, we'll have an opportunity to negotiate. That's a lot better position than you're in today.
Seller: So we drop our price. What happens when the Jone's drop their's too, which they did already? What then? Drop our price all over again? That would be crazy. This is Victoria, people want to live here.***
Agent: That's competition and that's the way the market works. Hopefully you'll get a buyer soon. But you'll need to be prepared to adapt to the changing conditions in the market if you really want to sell your home .
* no I didn't
** by re-created I mean made-up
*** see what I did there?
