Real Estate Talk: Perils of overpricing - Westmount Magazine (2024)

Asking too much may lead to getting less

By Joseph Marovitch

Updated November 29, 2023

I had a client who told me their house was special and required a special buyer. Since the house was special, it was worth more than all the other homes around it. They asked if I was a broker who understood and could sell it for them.

Over the past several years, as a real estate broker, I have heard this several times. Many brokers, starting out, will say they do understand how special the house is and are sure they can sell it at that higher price, ignoring the comparable sales that say differently.

The broker lists the house and starts off with ads and open houses. The first wave of buyers call and visit, but they also visit other homes with comparable square footage, bathrooms and bedrooms. The potential buyers find other homes that are different but just as nice and have the criteria they are searching for. The other homes have higher city evaluations with asking prices that are lower than the broker’s special house.

There are no special houses. There is the market that dictates the price.

The process, after a month, consists of telling the client the price is too high, and the client thinks the broker does not believe enough in the price the house should sell for.

The seller goes through one or two other brokers until, after losing money in carrying costs and the public thinking there is a problem with their house, the seller sells for less than they would have received at the beginning of the process.

There are no special houses. There is the market that dictates the price. There is a scale from the lowest price to the highest price the house can sell for based on comparable property and the condition of the property.

Finally, there are concepts to abide by such as:

1. We do not want the one special buyer. We want as many targeted and qualified buyers as possible.
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2. Expose the property to the market as much as possible to get the best price possible. The more potential buyers that view the house, the more likely the house will receive multiple offers, driving the price up.
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3. Price the house for the market. If you do not want to accept the price the market will bear, then do not sell the house. Better to wait than burn the property and assist in the sale of everyone else’s property.

Brokers will not usually tell clients, but whether a house is properly priced or overpriced, the broker still benefits. A properly priced house leads to a sale for the broker. An overpriced house brings the broker new buyers, and the broker can use the seller’s house to sell other homes to the potential buyer. This is done by telling the buyer what the seller’s house is asking and then showing a similar property with a lower asking price but a higher evaluation. In this case, the buyer is getting more for their money.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, clickhere.

Have a great week!

Next article: Mental preparation to sell your house

STATE OF THE MARKET

Canada Prime Rate today: 7.2%
Canada Inflation today: 3.8 %

According to a recent TD Economics report in BNN Bloomberg and RBC Economics report, housing prices are expected to drop by 10% over the next few months in Toronto and British Columbia due to high interest rates and inflation. Though it should be noted these provinces were overpriced, to begin with.

The opportunity lies in Quebec where prices were previously and still undervalued. The real estate road in Quebec has been rocky, due to many uncontrollable issues, like the rest of the world. However, before the pandemic, Quebec was catching up fast as the island of Montreal ran out of space and opportunities lay off-island. While property prices are dropping in other provinces, prices are rising in Quebec. Sales may have slowed down, but this will reverse as the wheels of our economy slowly speed up.

‘Quebec had potential for development and increased value as it was undervalued, to begin with. Opportunity in real estate is in Quebec, over the long term.’

Post-pandemic, pricey provinces like Ontario and BC, which were more expensive than Quebec to start with, would have a tougher road to recovery since they would end up in a correction. Quebec, on the other hand, had potential for development and increased value as it was undervalued, to begin with. Opportunity in real estate is in Quebec, over the long term.

Everything good always comes to the surface. All the bad tends to be drowned since people feel their way and we feel our way to what feels best, like a smooth economy, harmony as opposed to divisiveness, equal and fair pay, honest and fair government for the people and so on. Nothing further needs to be said.

Have a great week.

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Image: Andrew Burlone

Other articles by Joseph Marovitch