The phrase I always hear from people looking to buy real estate is,
I Want A Bargain!
When I first entered the real estate industry, a colleague of mine told me. “Gary, buying real estate is not like buying at The Bay”
I said, “What? What do you mean?”
He continued, “You know how you go to The Bay and you’re looking to buy a $100 shirt and because it’s Bay Day, you get 30% off. Then when you sign up for their Bay card, you get another 15% off, then there’s a scratch and save and you get an additional 25% off, and by the end of the day, you end buying the $100 shirt for $20?”
“Yah, it’s such a great deal eh?”, I replied.
“That DOES NOT happen in real estate.” He emphasized, “But people seem to think buying houses are like that, they want 30 – 50% or more off of the purchase price and it’s ridiculous.”
I learned something that day. The public doesn’t know how it works in the real estate industry. They think they know, but they don’t.
Then how do I know how much I can sell my home for?
For sellers, you talk to a Realtor who knows the market (balanced, buyer’s or seller’s market), knows the comps in the area and has a general forecast of where the market is heading in the short term. Realtors don’t have a crystal ball, but from all the news and economic forecasts they read and hear about, they have an idea of where the market is going.
What if I’m buying? If I can’t get 50% off, can I get 25% off?
Rarely, do Buyers get a large discount like that unless the home was overpriced to begin with. If a home is worth $1M and the seller decided to price it at $2M, then yah, a 50% discount may be possible, but more likely than not is the seller will reduce the price from $2M to $1.8M to $1.6M to $1.4M to $1.2M and then it’ll sell for $1M. Then, when it sells, the buyer will have received a 17% discount (from $1.2M to $1M).
Typically, when homes are priced well, they’ll receive showings, if the home is listed and it’s getting showings but no offers, then usually a 5% price reduction is what’s needed. When the home doesn’t even receive showing requests, then usually a 10% price reduction is what’s needed.
For more information about this topic, feel free to email or call me.