What drives housing prices? Public perception often points the finger at the real estate industry, but industry insiders know there are many other factors at play. Record-low housing inventory, stiff competition, rising prices and COVID-19 have left a disproportionate number of Canadian housing markets in strong seller’s territory, with real estate agents reporting multiple offers driving selling prices well over asking. Those wishing to attract even more attention and competition are doing so by listing properties well below market value.
Under different circumstances, sellers would have happily welcomed the steady stream of prospective homebuyers that followed. The problem with this strategy is that, while most of these house-hunters would have qualified to purchase the home at list price, the vast majority will fall short of its actual market value. This practice results in woefully misplaced homebuying hopes, wasted efforts and an artificially inflated list price to sale price ratio. Most importantly, it increases risk to public health and safety due to COVID-19.
Last but not least, deliberately underpriced listings reflect poorly on the real estate industry.
Pent-up demand has enabled a variety of listing strategies in the market. As professionals in the real estate industry, our duty to serve our clients and meet their objectives in a responsible manner is paramount. This is even more critical when transacting during a pandemic. The onus is on agents to inform their clients of their options and the potential impacts, then stand by the strategies they choose to employ.
From a selling perspective, your clients may be tempted to underprice their home in order to generate interest, but more showings and offers does not always deliver a better outcome. And given the current pandemic, are they even willing to host the dozens of homebuyers who must see this too-good-to-be-true listing in person?
On the buying side of the transaction, agents need to educate their clients about market comparables, to ensure they have realistic expectations and eliminate false hopes and dashed “dream home” dreams.
When dealing with clients, think “SUITE”:
- Safety: Always prioritize safe buying and selling practices. Don’t risk your health or anyone else’s.
- Understanding: Thoroughly understand your clients’ desired outcome – financial and otherwise. Time spent defining “success” leads to a more satisfying and efficient experience for you and your clients.
- Information: Ensure your clients understand the market, their options and the consequences associated with their choices.
- Technology: Even before the pandemic, Re/Max agents were already leveraging digital tools to help their clients buy and sell homes.
- Expertise: Embrace your role as the expert and back it up with data.
As Realtors, you have a hand in influencing the buying and selling strategies you employ with your clients. Inform and advise them based on your professional experience, market knowledge, industry best practices and of course, common sense. Remember that most home sellers have not transacted in the real estate market in the last year, and as we all know, things have dramatically changed. Be your clients’ voice of reason in this challenging environment.