It’s a Strategy, but is it a Good One?

When homeowners want to sell their home, and want to sell it fast, they’ll take to some pretty creative strategies to help them do it. But one of those strategies, one that’s become extremely popular in the last year or so around Toronto, can prove to be just as detrimental as it first seems. That’s under-pricing the market value of your home.

Why would anyone ask for a lower price than fair market value on their home?

The concept behind it works like this. Sellers obviously want to draw as much attention and get as much interest in their home as they can, especially during those first few critical days on the market. Because of that they will do everything they can to make it appealing to buyers – even if that means pricing it well under value. Once buyers start to hear of this incredibly cheap home in Toronto, they’ll start to book showings and may even place an offer on it, coming close to or just under the seller’s asking price.

Those buyers won’t be the only buyers interested in the home though, especially considering that it’s priced so low. So another buyer will come along and will put in an offer, going slightly over what that first buyer offered. And the same thing will happen with the third potential buyer, and the fourth. Pretty soon, you’ll have a bidding war on your hands, and all because you were wise enough to under-price your home.

The trouble with this strategy is that it doesn’t work.

Simply put, buyers today – especially Toronto buyers today – are tired of bidding wars. It’s hard enough to get a mortgage and a home these days, that they simply don’t want to be fighting with other buyers for one property. And let’s face it, unless you’re selling a detached single-family home, there are plenty of other options on the market that buyers will look at before they caught up in someone else’s bidding war.

The solution? Place your home on the market at an asking price that you will accept should someone offer it. Of course, that doesn’t mean you have to. If you still have multiple parties interested in the home and they create their own bidding war, it will only benefit you. But the difference is that buyers won’t be turned off. They’re so smart today, and know so many real estate secrets, that they can often tell when a home is under-priced to induce a bidding war, and they’ll simply walk away. Instead, let them start an authentic bidding war themselves, and not hold any resentment towards you. Because resentment on the buyer’s part often just results in them walking away.