The price of your home must attract enough attention among buyers and buyer Realtors to generate a “buzz” about your property. The hype and buzz created by a flurry of activity make your home that much more attractive to
Most people believe that your best guide on how much your home will sell for is a record of what the buying public has been willing to pay in the past few months for other similar properties in your neighborhood (also called a
comparative market analysis or CMA). While this is the correct starting point, most people, and unfortunately most Realtors leave out a very important part of the equation. You have to factor in the current state of the market in your specific neighbourhood and for your specific property type. Therefore, I will provide you with a detailed supply-demand analysis (also referred to as months of inventory or absorption rate) in addition to a CMA to make sure that the property is priced in line with current market conditions.
Isn’t it better to list the price higher and leave some room to negotiate? The price range I provide you includes a lower and higher end. is is all dependant on your goals, the presentation of your home, and market conditions. Many home owners want to list on the higher end of the range, and if you present a highly desirable product, it makes sense. If you get buyers to emotionally fall in love with your home, good things can happen. Just make note, listing little high should still fall within acceptable market range. If you stray as much as 5% out of market range, buyers are more likely to sit and wait for you to reduce your price. In some situations I am willing to list a property at whatever price you want within reason, but I will always be open and honest about what the sales data indicates and what the likely outcome is for each scenario.
What is an absorption rate or months of inventory?
The Absorption rate or months of inventory (MOI for short) is deemed as the most accurate way to pinpoint whether a market is in favour of sellers or buyers. Found by comparing home sales versus how many listings are currently on the market, MOI essentially asks the question: How long would it take for every single property to sell if no new homes were put up for sale? The basic rule of thumb around months of inventory is as follows:
- 0-2 months is a strong seller’s market with moderate to strong upward pressure on prices.
- 2-4 months is a slight seller’s market with slight upward pressure on prices.
- 4-6 months is a balanced market with little to no movement in prices.
- 6-8 months is a slight buyer’s market with slight downward pressure on prices.
- +8 months is an extreme buyer’s market with strong downward pressure on prices.
Another important factor to keep in mind is that you should only look at the MOI/absorption rate for properties that are the same property type as yours. same price range and the same location. As a detached house in North York and a condo in downtown Toronto will usually have vast differences in supply and demand.
A basic rule of thumb on how to price your property
Price slightly below recent comps and accept offers any time – If the MOI inventory is below 2.0 (preferably closer to 1 MOI than 2 MOI) for your area, property type, and price range.
Price slightly above recent comps and accept offers any time – If the MOI inventory is above 1.5 – 3 for your area, property type, and price range.
Price at market value and recent comps and accept offers any time If the MOI inventory is between 2 – 4 for your area, property type, and price range.
Price slightly below recent comps and accept offers any time If the MOI inventory is above 4 for your area, property type, and price range.
These are the general rules on how to price your property and there are other possible variables that could make a difference.