Plan the Sale of Your Home

You’ve decided you want to sell your home, but before you start cleaning and preparing your home for listing, you need a plan. We don’t want you to spend money, time, and effort on things that won’t help you get more value for your home.

You can skip ahead to Prepare, Show, and Close.

Based on this persona, you can envision the décor and accents that would appeal to Brittany and Jacob. Pinterest is an excellent source of inspiration. We’ve looked on Pinterest and found the following photo albums that relate to urban apartment living:

• Urban Chic Style

• Small Apartment Chic

• Small Apartment Staging

If you are selling a home in the Suburbs, then you are likely trying to appeal to a different demographic and persona. If your area is popular with retirees, once again, your persona will look very different.

You will need to consider the target demographic and persona when you make decisions for repairs, decorative accents, and staging. As well, the listing online might highlight local restaurants and cultural events, or community centres and family-oriented amenities, or it could focus on local golf courses and lawn bowling clubs.

If you try to make your home appeal to everyone, then it is less likely to have a high impact on any one buyer. Everyone may ‘like’ your home, but few are prone to ‘fall head-over-heels.’

Ideally, you want to position your listing so that it won't ‘turn-off’ any buyers, but it’s irresistible to your target persona.

Pricing Strategy

Work with your Realtor to agree on a pricing strategy. There are three options here:

1. Price below the competition to generate interest and negotiate upward.

2. Price above your target price and negotiate down to the value you wanted all along.

3. List the home for its fair market value.

The asking price has a direct effect on the number of showings and offers you attract. List a price that is too high, and you may turn away many potential buyers. A large number of people at your open house will not necessarily result in a higher final price of you listed with a very low starting price to drive the high foot traffic.

The purpose of your pricing is to help you get the best value for your home. Driving traffic is a secondary objective that can help with that goal, but dropping your list price too much can be counterproductive.

Find a local real estate agent

There are three types of agents.

• FSBO (For Sale By Owner) agents who provide a minimum service. In essence, you are selling the home yourself but paying them a fee to work under their real estate license.

• 1% or 2% realtors are agent services for budget-conscious Canadians.

• Regular full-service real estate agents.

Since the buyer real estate agent get paid a share of the seller agent’s commission, we feel that the more cost-conscious commission options create complications.

Read this article ‘How is Real Estate Agent Compensation Calculated?’

Interview Agents

How do you select the essential partner in completing the sale of the most valuable investment you own? Since every real estate agent is a unique individual with different local knowledge, communication styles, sales philosophies, and values, you may not work very well with one recommended by a friend or family member. It would be best to find an agent who will work well with you and has a complementary working style.

Check out ‘Why a Successful Home Sale Hinges on the Agent's Expertise.’

Accept referrals, but take them with a grain of salt

Go ahead and ask your friends for a recommendation, but don't feel pressured into picking an agent purely because of a friend’s introduction.

First of all, recommendations are usually based on their experience with a single purchase-sale transaction. Some agents get recommended simply because they’re good networkers and stay top-of-mind.

Secondly, even though they work well with your friend’s communication and negotiation style, it doesn’t mean that they will work well with you.

Finally, real estate markets are local, and by extension, real estate agents should be too.

“You want an agent who is very familiar with your neighbourhood,” says Alaina Burnett, a Realtor specializing in the Brentwood neighbourhood of Burnaby, BC. The reason is simple: If they’ve specialized in the neighbourhood, they’ll be familiar with recent sales, how to strategically price your home, and they’ll be able to provide neighbourhood context for buyers visiting an open house.

Buyers are interested in the neighbourhood as much as the land and building, so an agent who can help them visualize themselves living in your community is more likely to lead a buyer to become emotionally connected to your home before the negotiations begin.

So, instead of asking your friends if they “Know any good real estate agents?" ask them, “Do you know a proven real estate agent who focuses on my neighbourhood?"

Try the Match Finder App by Mortgage Sandbox

Mortgage Sandbox developed the Match Finder app to match Canadians with local, pre-screened real estate agents and mortgage brokers based on shared interests and complementary working styles. We believe these aligned values lead to better working relationships and a more successful home selling experience. Our algorithm finds values-aligned agents who specialize in your neighbourhood. Using our app introduces you to agents predisposed to work well with you, who can better understand your priorities, and who are also well-acquainted with your neighbourhood and local market conditions.

As a rule of thumb, we recommend that you interview at least three agents before selecting one.

iBuyers

Several companies have recently become ‘iBuyers.’ Essentially, instead of finding an agent, listing your home, open hosting open houses. The iBuyer company buys the home from you, and then they will turn around and sell it after you have moved out.

iBuyers are fast and convenient, but they are expensive. The fee can range from 6 to 15%, and you won’t get a very high price because they need to be assured, they can resell it for more than what they pay for it. In Canada, the better-known iBuyers are Properly and Sweetly.

Develop a Sales Strategy

Now that you have an agent, you’ll want to develop a strategy. You only get one chance to make a first impression on buying agents. Even if new buyers decide to get in the market after you’ve reduced your price or made improvements, you can turn off buyers' agents if you list prematurely or with the wrong strategy. In practice, they act as gatekeepers. They view properties before they bring their clients to see them. If they saw an unimpressive first listing, they may not take the time to visit your home when you re-list.

Research the best time to sell in your area

Is this the Best Season for Selling?

The real estate market has seasonal activity fluctuations. Spring and early summer favour sellers because fewer homes are listed for sale than there typically are in late summer and fall. Many buyers shop in this timeframe because the weather is beautiful, and families want to time their move over the summer holidays.

In late summer and fall, there are typically more sellers and fewer buyers. Also, sellers face a decision between offering price concessions or waiting until the next Spring to re-list. In a balanced market, prices soften in during this time of year.

Every market is different, so you should discuss the annual real estate cycle with your agent to see if it applies to your market.

Learn about the two types of Canadian real estate cycles.

What are Current Market Conditions?

Understanding the state of your local real estate market — including whether you’re in a buyers market, balanced market, or seller's market — can help you identify the best time to sell. If you have flexibility in your timing, you might consider waiting for a seller's market.

• Buyer’s market: A buyer's market refers to a situation where there are 9 homes for sale for every home purchased in the prior month. In other words, there are nine months or more worth of supply for sale. In a buyer’s market, buyers have an advantage in negotiations. They can usually get price concessions, ask you to leave behind major appliances, or require that you make minor repairs before closing.

• Seller’s Market: A seller’s market is a market where there are fewer than 5 homes for sale for every home bought in the previous month. In a seller’s market, sellers can orchestrate bidding wars and ultimately create an environment where FOMO (fear of missing out) pushes buyers to spend their entire budget, and sometimes more.

• Balanced Market: A balanced market applies to any market with between 5 and 9 months of supply.

Interpreting market conditions is not as simple as looking at whether you’re in a Seller’s, Buyer’s, or Balanced market. Metro Toronto was in a Seller’s Market for the four consecutive years between 2016 and 2020. However, in 2017 supply rose from 1 month of inventory to 4 months of inventory and even though, as a ‘rule-of-thumb’ there was still a seller negotiating advantage, over 9 months, the Benchmark Metro Toronto house price dropped $150,000, and the median house price dropped $200,000. So a market correction can still occur in conditions with tight supply. The key is to also look at changes in levels of supply.

Learn about Current Local Real Estate Market Conditions.

Marketing Strategy

For your marketing strategy, you want to identify your ideal buyer so that you can make everything about your home appealing to that type of person.

Target buyer ‘personas’ refer to a fictional representation of your ideal home buyers. Personas help us make the concept of our perfect home buyer more tangible. Who are we trying to attract to our home, and how can we relate to them as human beings with needs, fears, and passions.

Having a deep understanding of your buyer persona is critical to making decisions on pricing, repairs, staging, and advertising.

For example, if you were selling a golf resort condo in Arizona, you are likely hoping to sell to retiring baby boomers, and you would not stage the home with a room for a baby. You also wouldn’t spend much money on Instagram ads.

Okay, to develop a persona, you need to identify your target demographic and then develop a persona for that demographic.

Identify your target demographic

The value of your home will somewhat determine your target demographic. It might help if you think of who you were when you bought your home, rather than thinking of the buyers being people like you are today. Let’s pretend you are selling your one-bedroom apartment in downtown Toronto because you’ve started a family. Your agent would likely tell you your target demographic is first-time home buyers rather than a family with children in this scenario.

71% percent of first-time buyers are couples and most of these couples have a household income between $60,000 and $105,000. In Toronto, we will assume they are at the higher end of this range so they are likely white-collar professionals who work downtown. They are millennials between the age of 25 and 34, and they have a college degree. We believe they have a combined income closer to $100,000, so they are likely older millennials. With this information in hand, we can start building the ‘persona’.

Develop a persona for that demographic

To make this realistic, we’ve looked up the most common millennial names, and we’ve decided our buyer personas are named Brittany and Jacob. Let’s pretend they met at U of T, and they are 29 and 32, respectively. We’ve created an illustrative full persona profile is shown below.

Adjust your list price to account for online price benchmarks. You want to price below the nearest filter price on real estate listing sites. When buyers filter search results on listing websites, the filter cut-offs may exclude your home if you’re $1 too high. The below table shows the maximum price filter values for several popular sites. Between $500,000 and $1 million, the filters work in $50,000 increments. We recommend that you list at a price slightly below the nearest filter value. For example, you should list for $699,000 rather than $701,000 because one of the filter cut-offs is at $700,000

Before we delve further into the three most common pricing strategies, we need to level-set some pricing terminology. Below we explain the difference between fair market value, target price, lowest acceptable price, and list price.

Estimated Market Value

To get a rough idea of the value of your home, you should research comparable homes, also known as ‘comps.’ Comparables are recent homes that have sold and their purchase price. It’s crucial that the comp homes you reference are within 1 kilometre of your home, and they are of a similar size and condition as yours. The closer the comps are to your home, the better.

Your real estate agent should be familiar with home values in your area, so they will be an excellent resource for finding comps and extrapolating where prices have shifted since those homes were purchased.

To get an even more accurate idea of the value of your home, hire an appraiser. They will analyze the comparable home sales and make adjustments for lot size, living space, the number of bedrooms, bathrooms, age of the roof, etcetera. A professional appraisal done on your home can cost between $300 and $700, but it is a small price to pay if it helps you sell your home quickly and for an appropriate value.

Homes are not a commodity like gold or gas. Pricing is subjective.

If you ask five appraisers to value a home, there are high odds that there will be a difference of a few thousand dollars between each appraised value.

Target Price

Target price is the value you and your Realtor reasonably agree should be achievable in the current market. It may be a bit of a stretch, but it should be

Lowest Acceptable Price

The lowest acceptable price is the value below which you will reject any offer. This price is top secret, and you shouldn’t feel the need to share this with your agent. There are theories that when an agent knows your lower boundary, they can subconsciously behave differently in a negotiation.

List Price

Although list pricing is an essential factor when marketing your home, it doesn’t need to be the home's actual value. Instead, for the seller, it is simply the advertised price or suggested price.

When car dealerships, appliance stores, and mattress stores advertise prices, they’re not reflective of the price at which they expect to sell the product. The advertised price or manufacturer recommended price is part of the product marketing. Invariably the salespeople negotiate and make special offers once you show an interest in the product.

List price, or sticker price, is one of the many facets of your marketing strategy.

Pricing Strategy 1: Price below the competition

Why would you negotiate against yourself? Sounds crazy, right? Everyone knows you’re trying to fetch the highest possible price for your home.

This pricing strategy makes sense in a buyer’s market, when there are more homes on the market than buyers out there making offers, a supply and demand imbalance that gives buyers the upper hand. Often in a buyer’s market with falling prices, sellers are chasing prices downward. You know this is the case if you’ve noticed homes in the area on the market for several months. A ‘price reduced’ sticker on the open house sign is a dead giveaway.

In that case, pricing even slightly below your competition can make your home stand out from other local listings, reduce your days on the market, and get you a better price than if you spend three to six months chasing the market.

Underpricing is also a smart move if your home is on the older side or doesn’t show well, and you don’t have the time or money to make the necessary upgrades and repairs.

In any case, listing your home at a lower asking price does not mean you need to accept an offer at that price. You still can veto any offer put forward by buyers.

In a seller’s market, listing a lower asking price can generate a bidding war and create a sense of urgency among buyers.

Multiple offers? Yup—you just started a bidding war!

One benefit of multiple offers is that you don’t end up negotiating with picky buyers asking you to make minor repairs and updates.

Pricing below market value will lead to the fastest home sale. However, it’s not guaranteed to produce the highest offers possible, even if you manage to orchestrate a bidding war.

Pricing Strategy 2: Price above your target price

With this pricing strategy, you are trying to take advantage of Anchoring Bias. The anchoring bias suggests that we favour the first price information that we learn. In other words, buyers will take your list price as the starting point for any negotiation.

In fact, the anchoring bias is most significant when homebuyers face a market with uncertain values (i.e., prices have been volatile recently, or there has been a considerable shock to the market and people are unsure where prices are headed) and with buyers who are less familiar with the neighbourhood.

Research has shown that anchoring bias leads buyers to spend more than the reasonable market value.

For example, when reviewing the listing below, you will likely immediately calculate whether the home is worth $525,000. If there were no anchoring bias, you would ignore their list price to look at the location, floor plan and description to calculate what you believe it is value.

A buyer may see the 525,000 list price and think it’s overpriced, but subconsciously they will anchor an offer to the list price so that even a low-ball offer may meet your target price.

Pricing above market value is the least favoured strategy among Realtors because it usually takes the longest to sell a home.

You always have the best information about the true market value of your home and your target price. The buyer won’t order an appraisal until after you’ve accepted their offer.

Anchoring bias is not unique to real estate. It is pervasive. Here are some examples.

• How old do you think kids should be before you allow them to date? Kids will argue that their peers are dating at 14, but if you were raised to believe that 16 is the ‘right’ dating age. The anchoring effect leads you to believe that 16 is the earliest age a kid today should be allowed to date.

• How long do you expect to live? If your parents were both very long-lived, you might automatically expect that you will also live a long life. Because of this anchoring point, you might ignore the fact that your parents lived a healthier, more active lifestyle that probably contributed to their longevity.

• How much should you pay for a new car? You read online that the manufacturer recommended price of a vehicle you are interested in is $27,000. When you visit the local car lot, the salesperson offers you the same vehicle for $26,000, and you quickly accept it because it's $1,000 less than what you were expecting to pay. Except, a week later, you learn that a car dealer across town is offering the same vehicle for just $24,000, a full $2,000 less than what you paid and $3,000 less than the average price you found online.

• Imagine that you are trying to negotiate a pay raise with your boss. You might hesitate to make an initial offer, but research suggests that being the first one to lay your cards down on the table might be the best way to go. One study even found that starting with an overly high salary request resulted in higher salary offers.

A listing above the target price can be a highly successful strategy in a balanced market or sellers' market. However, if you try this strategy and notice that not many buyers are booking and viewing your home, consider changing your approach. You may have priced too high, or the market may not be hot enough for this strategy.

A drawback of this strategy is that if it doesn’t work, and you have lowered your price, your listing history will show that the list price was reduced. This may be a signal to buyers that you may be willing to reduce your price even further.

Pricing Strategy 3: List the home for its fair market value

If you don’t need to sell quickly or for a specific amount, we suggest pricing your home at market value. This will drive a good number of buyers to your home at the start of your listing without establishing a low anchor value in buyers’ minds. Having many viewings in the first few weeks will help ensure you sell in a reasonable timeframe and for the most amount of money.

A final word on pricing strategy

Your first strategy may not produce the desired outcome. When you develop a pricing strategy with your Realtor, you should decide for yourself on the best alternative to your initial approach. You may want to keep your plan B private because you want your agent to put all their effort into the first strategy.

Planning for your next pricing move before you know that you’ll need it will reduce the stress of executing your initial strategy and the anxiety surrounding the decision to pivot to a new plan. Decide in advance how long you will try your first strategy before thinking about a change.

Create a list of improvements needed

When preparing to put your home on sale, there are two primary fears:

1. How long will this take? I don’t like having to keep everything pristine and strangers touring my home!

2. Am I going the get the absolute best value for my home? I don’t want to get the most value for it possible!

To improve the likelihood of a speedy and top-value offer, you need to make your home as appealing as possible to your target buyer.

Selling a home with lots of little issues and small repair needs can be difficult. When buyers walk into an open house or go on a home tour, they want to fall in love with the house, not add a bunch of small repairs to their to-do list.

To impress buyers (and sell your house quickly), fix up your home before putting it on the market.

At the very minimum, repaint the walls, touch up any scuffs, and fix any broken hardware.

Repaint walls to neutral tones

Painting is considered the cheapest improvement you can make that will provide the highest rate of return. You may think your walls are clean, but everyone who has their walls painted is surprised how much newer and cleaner their home looks after a professional paint job.

Consider getting colour recommendations from a trained professional because paint colours can be tricky depending on lighting and other house features like cabinets and flooring.

You might love that cherry red accent wall, but if it’s your potential buyer’s least favourite colour, that could be a turnoff.

There’s a reason real estate developers build new condos with white or near-white walls. You’re pretty safe with a neutral colour because it's rare that someone hates it, plus a light colour makes it easier for a buyer to envision their furniture in your space and imagine where they will put their accent walls if that’s their style.

Fix Hardware

It's a small thing, sure, but you’d be surprised at the negative effect a loose door handle or a missing lightbulb can have on a buyer. Here is a list of things to inspect:

• Doors: Doorknobs and squeaky hinges.

• Cabinets: Hooks, knobs, and pulls.

• Light, power, and Heat: Light switch plates, socket plates, light bulbs, and heat register covers.

• Faucets: Sink and tub faucets, showerheads, and related hardware.

• Windows: handles, locks, sliders, and screens.

• Exterior: Numbers, knockers, lights, other features.

Touch up any scuff marks

Suppose some areas are not paintable, like appliances, doorknobs, or other hardware. Pay special attention to scrubbing or touching up with a little paint. We recommend Mr. Clean Magic Eraser for this task. It’s surprisingly effective.

With a fixed-up and move-in ready home, you will probably see more interest and may even see multiple offers.

Decide whether you will use a professional staging service

Staging means preparing a home to appeal to your target buyer demographic to receive offers at a higher price and shorten the time you need to be in selling mode. If you decide to stage your own home, ask your Realtor for advice on how to stage it.

You can also hire a professional home stager. When considering a professional stager, compare the stager's cost to the expected lift in the possible purchase price. If professional staging could raise your home's perceived value by $25,000, then paying for professional services has an excellent payback.

When buyers picture themselves living in your home and become emotionally attached to it, they will be more concerned about competing offers. As a result, they will make to make aggressive offers to beat out any competing buyers.

At this stage, you are deciding whether you will stage your home by yourself with your Realtor's advice, or you will hire a professional. Later in the home selling ‘Prepare’ stage, we will provide more information about how to stage your home.

What are your selling requirements?

Most people think that only buyers have requirements, but sellers can have needs too. For example, if they are leaving the country, they may want to close on the sale before a specific date. If someone is an avid chef and has recently invested in a professional-grade stove and oven, they may be adamant that those appliances are not for sale.

Some people have fond memories of raising their family in the home and would like to sell to another family who will create their own memories. As a seller, you can stipulate that the home can’t be redeveloped for a predefined timeframe in the sales agreement.

A seller may also insist on limiting the number of visits a seller or their representatives can make to the property after an offer is accepted.

The more conditions and requirements a seller puts on the sales agreement, the more complicated and potentially less attractive the deal can appear to be for the buyer.

Divide your list into needs and wants and make these clear to your Realtor in writing.

As a seller, you can’t assume that because you mentioned something to the Realtor (e.g., the date of your flight departing the country), that they will infer a specific need or requirement from the information.

Contact your current mortgage provider

Contacting your current lender is critical because your current or next mortgage could change your decision to sell. You want to know how much it will cost you to pay off your mortgage, and you also want to confirm you can qualify for the mortgage you believe you will need when you buy your next home. Mortgage rules have changed several times in the past ten years and, today, you may not qualify for as large a mortgage as you could get in the past.

Check your mortgage balance

Most homeowners have a mortgage on the home they are selling. That’s rarely a challenge, but it can be a problem if the home’s current market value is less than the amount owing on the mortgage.

Before you pull the trigger and list your home, you need to get a solid sense of your current financial picture and how much equity you have in your home.

Find out if there are any early repayment penalties or fees

You may have thousands of dollars of equity in your home, but the penalties for early repayment of a mortgage can vapourize your investment gains.

CBC News June 2020: “TD Bank charges $30,000 mortgage penalty to woman forced to sell home due to pandemic”

Most people are aware that there is a penalty for paying off a mortgage early, but few know how large that fee can be.

Unfortunately, there is no standard industry fee, and the calculation is complicated, so you have to ask your lender what the penalty will be. The fee is calculated comparing current to past rates, so if the current rate changes, the cost can change overnight too.

Ask about ‘mortgage portability’ and ‘mortgage assumptions.’ If your lender allows these, they can reduce your fees and penalties.

Ask about a home secured line of credit to pay for up-front selling costs

Some light renovations, professional painting, and staging may be part of your plan to prepare your home for sale. Rather than cashing in your investments, it may make more sense to pay for those expenses using a line of credit. You can pay off the line of credit when the home finally sells.

Get pre-approved for your next mortgage

This is critical because you may qualify for a much smaller mortgage today than you could get five years ago.

In 2018, the bank regulator (OSFI) required lenders to apply a stress test that reduced how much people can borrow by 20%.

More recently, the mortgage and housing agency lowered the amount of debt it will allow for a given income level. That new rule reduces borrowing power by 10%.

These rules don’t apply to all buyers, and lower interest rates partly offset these new rules, but your situation may be different. Imagine the horror of learning, after you’ve sold a home with a mortgage balance of $400,000, that you only qualify for a $320,000 mortgage for the purchase of your next home.

Often mortgage brokers can find lenders who can approve you for a larger mortgage.

Talk to your financial advisor

A home is your single most substantial investment, and there can be tax implications when you sell a home. To be safe, you should always check in with your investment advisor, who is not your Realtor.

It would be best if you had the advice of someone who does not have a vested interest (e.g., earns a commission) in your house-selling decision.

This will likely be a quick meeting, but if you haven’t lived in your home for the prerequisite timeframe, you’re selling a rental property, or earn rental income on your property, the taxes owed should be factored into your selling decision.

There are other situations where you may owe taxes so, consult a professional.

Pre-inspection

While it’s likely that your buyer will order a home inspection as part of the purchase process, sellers often opt to do their own pre-inspection. A pre-inspection can help you avoid surprises down the road and gives you a chance to fix the items that an inspector would flag for a buyer.

If there is anything unclear in the explanations above. Please let us know so we can improve our advice for the next reader.