Figure #1: Home Sold.
Recently, one of my client’s transaction was closed. It took almost half a year from the time that we started the work to get his property ready to be listed on the market to closing the sale. Looking back at this transaction, there were many noticeable events that are worth sharing and there were lessons to be learned. For sure, this deal was one of the lengthiest transactions that I’ve worked on in my real estate career to earn my commission, but a deal is a deal. Can’t complain. The most important outcomes of this transaction were: the property was sold at a reasonable price, provided the great flexibility that my client needed to make the transition from his current property to his new property and the deal was a firmed/unconditional deal right from the beginning. No offer presentations, no multiple offers, no midnight negotiations, just sold within 10 days of listing.
Figure #2: Client’s property.
The property was a fairly new three bedroom, detached, single garage, two-storey family home situated on a cul de sac in Toronto. Normally, when you see a property with such a description and it’s located in Toronto, you will most likely have to fork out a seven figure amount to pay for it according to the latest figures from the Toronto Real Estate Board. However, this property was not located in the greatest of an area in Toronto, it’s backing onto a rowdy apartment building and was part of a condo corporation that owns a private street. These were the challenging requirements that I couldn’t change and needed to overcome. On top of that, the property’s main floor’s layout was a bit odd. It had a small breakfast area rather than an actual dining room and the layout was a bit hard to stage (when the builder market this property, they didn’t even have any design layout to attract potential buyers). So my work was definitely cut out for me.
Figure #3: My Competition Research.
My Competition Research
Before listing my client’s property, I provided him with a list of recently sold homes of similar size comparing to his home. In addition, I’d set up an automated email alert for newly listed properties that were comparable to his property. The reason for this was to provide him with current market data of the price range for properties similar to his and to set his expectation on a listing price for his property. In addition, the email alert served two purposes. The first was to gauge the number of competitors in the neighborhood. The second was to scout the competition to see how comparable his property was when comparing to the current listings.
Figure #4: My Pre-Listing Review.
My Pre-Listing Review
Before listing any property for sale, I preferred to conduct a thorough walk-through of the property with my client to ensure that any noticeable deficiencies were documented (preferably fixed too) and to communicated any improvement opportunities either to show the property better or to increase the value of the property. After the walk through, we sat down to brainstorm ideas on how to tackle some of the deficiencies so that we can make a good first impression on potential buyers when they view the property. With a demanding job, two young kids and one more on the way, there was a limited amount of time for my client to work on the house, so we had to prioritize the to-do list that will give him the greatest returns for his efforts and investments. The result of brainstorming session resulted in the following decisions:
– De-clutter the home by moving most of his furniture and belongings to a rental storage. This would provide potential buyers with a blank canvas to envision their future property. It also made the property seemed larger than it’s actual size and more spacious
– Gave the property a new, neutral and warm coat of paint as every floor had a different color
– Paint the kitchen cabinets white (to make it timeless and modern) as his current cabinets had two colors and they were not giving potential buyers the wow factor that they can be proud of
– Added pot lights to the whole main floor. Currently, the main floor was a bit dark and there were not enough natural lights coming into the house
– Clean up the driveway, front yard, backyard, deck and patio as there were loose interlock stones lying on the patio, patio furniture were falling apart and weed growing in between the interlock stones. By cleaning these areas around the property, it would give potential buyers a good first impression and a more homey feel before they view the property
Figure #5: The Competing Property.
While we were preparing the property for listing, another property just a few houses down the street was listed for sale. This property had a few advantages over my client’s property. It had a more functional main floor with a larger and proper dining area, better kitchen and family room layout, all stainless steel appliances, a basement apartment with a complete kitchen and separate entrance, and it was not backing onto the rowdy apartment. My client started to feel a bit uneasy as the competition was so close and felt that the rowdy apartment behind his house would be detrimental to his property’s competitiveness. So my advice was to book a viewing appointment to scout that property and do what we could within our control to improve his property’s competitiveness. We took close to three and a half months to prepare the property and got it to a move-in ready state.
Figure #6: The Competitor’s List Strategy.
The Competitor’s Listing Strategy
When the neighboring property was first listed, it was listed at $850,000. A price point that I felt was too inflated (and we were happy that they listed at that price as it gave us an advantage) as it was priced at $50,000 more than a much larger two-storey double garage home on the same side of the street that was sold about a year ago. Normally, the double garage home in that area cost about $100,000 more than a single garage home. So I advised my client to concentrate on preparing his property and use the competitor’s listing information to give us an advantage. My logic was, “if that property were to be sold, we will have one less competitor and a very updated market reference to price his property with. Otherwise, that property will sit on the market for months, when we list his property, we’ll be listing at a much lower price and will compare very well to that property as I had a value pricing strategy in mind.” With three weeks left till our listing, the neighboring property decided to lower the price to $699,000 and set an offer date one week later after having the property sitting on the market for almost three months. I was furious as it seemed like they hacked into my computer and stole my plan. However, I kept my cool and soldier on with my philosophy to work on things that were within my control and concentrate on my listing. After 10 days, the property still did not sell and the price changed back to $779,000. A price I felt that was still too inflated. Just a few days before we list our property, the neighboring property sold for $760,000 with conditions.
Figure #7: My Listing Strategy.
My Listing Strategy
After knowing that the neighboring property was sold, we felt quite relieved and a huge boulder had been lifted off our shoulders as we had a great reference point to compare our property with. Still, we did not change our original strategy to list the property at $699,000 with an offer date of 10 days after the listing date. We wanted to show the property for at least two weekends and attract as many potential buyers as we can. Even though the recent market condition was a seller’s market and we knew the market price was higher, my strategy was to maximize the number of potential buyers viewing the property and use the buyers’ psychology and emotion to help us maximize the value of the property. I strongly believe that when people see a property on sale (listing at a lower price than the market price), they’re more likely to put in an offer and maybe they’ll get lucky. If the offer is rejected, no big deal, they will try again if they want the property or go for another property. So there can be more than one of these offers, sometimes, some buyers will get emotionally attached to the property and are willing to get into a bidding war to buy it. The bottom line is, we only need to have one of these buyers and use the other buyers as leverage.
Figure #8: Preaching Patience
After showing the property for a weekend, there were a few interested buyers and their agents calling me trying to gather info and test me if we were willing to entertain any preemptive offers (this just mean that they want to jump the line and make an offer to the seller at an earlier date than the offer date). They would also ask what price were we willing to entertain. I had my all answers rehearsed and ready to put on an Oscar worthy performance. Anyone calling me to inquire, I’d provide the following answers, “If there are offers communicated to me, I’ll definitely present it to my client as it’s my duty to present any interests to him if any. Secondly, I cannot review a price point that my client is willing to entertain. However, there is a comparable neighboring property that was sold only a week ago and it can serve as a great reference. In addition, if it’s a preemptive offer and for my client to accept, it’s gotta be an offer that’s enticing enough that my client can’t refuse. Otherwise, we’ll wait for your offers at the offer date.”
Figure #9: The Big Decision.
The Big Decision
A week had passed since we listed the property. There were numerous inquiries and verbal offers, but nothing in writing. Of course, any info that I got, I relayed it to my client. This was actually a double edge sword. On one side, he was happy that I communicated all these good news and interests to him. However, on the other side, it made him jittery and worrisome as all the offers were only verbal offers. At one point, he even asked me to go back to one of the agents and try to get that agent to send a written conditional offer over as that offer (at $730,000) was at a price that he had in mind and was willing to compromise and accept. With all the emotions and a lot of money at stake, his judgment can easily be clouded and make irrational decisions that can cost him thousands of dollars. I could have easily said yes to his request, work to complete the sale and make my commission. But that would go against my motto of being the money saver real estate agent that I am. I advised against the decision of going back to that buyer to work on an inferior deal as I knew that there were strong interests in the property and we can get better value if we controlled our emotions, be patience and stick to our original strategy. Besides, we set an offer date and we should stick to our guns as this is a seller’s market. In addition, if we accepted the conditional offer before the offer date, it can put us at a disadvantage as the deal can fall through, we will lose credibility and end up putting the property back on the market again (something that I dread). This is an emotional decision with huge risks and we lose any advantage of being able to host an offer presentation at the offer date. A few short days later, before the offer date, our strategy paid off and we got a firmed written offer with no conditions at $755,000. It was an offer that my client couldn’t refuse so he accepted it. The result of being patience for a few extra days saved him $30,000 ($25,000 from the higher sale price and $5,000 from my seller’s saving incentive program).
My two cents
When working with clients, I strive to provide them with factual data, objective and professional advice that will allow them to make the right decision. Decisions that increase their chances to maximize the financial benefits on their most expensive asset and minimize their risk of unnecessary financial loss. While I am in the business to make money (and to help my client save money), I am not in it to make a quick buck or two. I believe in education, knowledge, integrity, professionalism and building a lasting working relationship with my clients. Too often, there are just a few bad apples in the industry with shady practices and they ruin the whole industry’s reputation. Though I don’t have any grand plans to try and change the real estate industry, I have plans to help one customer at a time.
If you have any real estate related questions, feel free to use the comment section below to ask. Or you can send me a private email using my contact page if you are shy.