Making an Offer on a Toronto Home – Part 2 of 3

Determining Your Offering Price for a Toronto Home

To determine your initial price range for the property use Offering Price Factor #1 – Understanding the Market. To establish a fair price use the remaining Offering Price Factors to help calculate any increase or decrease in value, if appropriate. Depending on the negotiation strategy and style you use you should be able to attain the property at this final price. Be sure to keep your fair price determination to yourself if your salesperson is a dual-agent or subagent as they are obligated to tell all parties if they know. If however they are a buyer agent then that information is safe to share.

Offering Price Factor
#1 Understanding the Market

Looking at similar and recent sales is the key. To gain some insight into what the Toronto real estate market is like take a look at some recent sales in your area. Feel free to look at past sales but keep in mind how much the market has fluctuated since then. The higher the degree of variance the less relevant the sale is to compare with. Look at similar markets too. If there have not been any recent sales in your Toronto neighborhood venture over to a comparative one nearby. Be sure to factor in any differences in time, neighborhood, and property conditions to help determine the true market value of the property you desire.

Offering Price Factor
#2 How is the Current Market?

Welcoming any offer, in the slow “buyer’s market” the vendor will be more giving during negotiations. Contrastingly in the hot “seller’s market” your offer needs to be generous to even be considered. If your offer is not attractive enough chances are another buyer will score the hot commodity. Toronto, however, is generally a “balanced market” where there is not a set advantage to bidding either your minimum or maximum up front. As it can be difficult to decide on your negotiation strategy in a balanced market allow other offering price factors to help you choose.

Although it is very difficult for anyone to accurately predict market changes, asking your Toronto real estate agent for their thoughts can help you determine if the market is “in transition.” Even during lengthy periods of balanced market spontaneous activity can occur causing times of instability or inactivity.

Offering Price Factor
#3 How Long has it Been Listed?

Generally the longer a property has been on the market, the more willing to negotiate the vendor becomes.

Offering Price Factor
#4 Why is it For Sale?

Price is not affected by the vendor’s motivation to sell. Willingness to negotiate however is greatly affected. If an owner needs to sell your chances at price negotiation are greater. By the same token, if an owner does not really need to sell then your chances of negotiation are minimal. When the motivation for selling is strictly profit you will find you need to pay a significant premium to obtain the property, as most Toronto homes can be bought if the right price is offered.

Offering Price Factor
#5 How Much Did it Cost the Owner?

Although the price the current owner purchased the house at does not affect the current market value it may affect your offering price.

Offering Price Factor
#6 Any Home Improvement Costs to Consider?

Money spent on major improvements to the house need to be considered. Your salesperson can help you account for things like new flooring, extra rooms, renovated kitchen, etc. by taking into account the cost the owner occurred and when the improvements were done.

Offering Price Factor
#7 Will Money Need to be Spent to Improve Property Conditions?

Evaluate the property condition. Your offering price should be affected by money that you will need to put in to make any improvements. To help assess the situation a home inspection should be done before you make your offer.

Offering Price Factor
#8 Costing Out Conditions

You will need to use a premium dollar to attract that vendor if your offer is conditional upon any contingencies.

Offering Price Factor
#9 Multiple Offer Bidding War – What To Do

In general the price you are willing to pay should not be affected by a bidding war, only your pricing strategy. Coming soon will be an article addressing this issue.

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