The Importance of Timing

Wondering when to sell? Hoping to make the most profit possible? Afraid you'll be stuck with two houses if your first doesn't sell? Let's talk about the art of timing, and how your timing will make or break your success.

Timing is a critical factor in determining the amount of money you can expect to get for your home. It is important to note that we are discussing a free, “no labour required” way to add thousands to the price of your home. Before figuring out when you should sell, we need to understand the two primary factors that will determine how effectively you can maximize your return in regards to timing; supply and demand and motivation.

When it comes to getting the absolute best value for your home, timing is everything. You need to consider several factors when determining the best timing to sell, including your needs, market demand, seasonal factors, and competition levels.

YOUR NEEDS WHEN SELLING A HOME

Your own needs play a very strong factor in what your home sells for. When you need to sell, you leave yourself little room for negotiation and are prone to taking a lower offer—because you're desperate and therefore have to. People who need to sell, often due to relocation or divorce, are more likely to "compromise" and cut into profit margins to make it work.

When you don't need to sell, you won't be motivated to part with your property unless someone meets or exceeds your expectations. This puts you in a power position and lets you hold out for what you want. Even if your home never sells, you're no worse off and can enjoy another year of building equity. In a perfect world, people would only sell their homes when they don't need to.

MARKET DEMANDS

Certain laws in life are always right and never wrong. The principle of supply and demand is one of them. When there are more properties for sale than there are buyers (too much supply and not enough demand), then prices will decrease until the demand equals the supply and the market levels out. Conversely, if there are more buyers than homes (limited supply and high demand) then prices will rise until the demand begins to fade and level off. This law governs the entire real estate industry.

Market demand follows the same principles as general supply and demand: the rarer a resource, the more people are willing to pay for it. If there are more buyers than properties, those buyers will need to pay more money to beat out their competition—therefore allowing your home to sell at a higher price. However, if there are more properties than buyers, then the need to outbid will dwindle and houses will generally sell for less.

MOTIVATION TO SELL

This concept is very simple to understand. When your motivation to sell is high, you will be willing to accept a lower price to close a transaction more quickly. However, when your motivation is low, people will have to pay a premium to buy because you “don’t have to sell”.

For example: if you are about to be foreclosed on by a bank, then you will likely take less for your home, just to get yourself out of the debt.

Now that we understand these two factors, let’s discuss exactly when you should sell your home.

SEASONAL FACTORS

The time of year can also play a role in selling real estate, and seasons can have a direct impact on people's motivation to make big transitions. As a general rule, most people don't want to move in the fall or winter, because the weather is cold, the kids are in school, and holidays take a chunk out of financial budgets. Consequently, most people want to buy in the spring or summer; going back to the concept of market demand, you want to sell when buyers want to buy.

COMPETITION LEVELS

You share more than a fence with your neighbour—you also share real estate values! It's typical for homes within the same neighbourhood to be similar in size, shape and location, which means they're also similar in price. If your neighbour lists their home at a lower price than yours, they're going to get action from buyers. Would you rather pay $350k or $340k for a home? Even worse, you might drive extra traffic to only your neighbour's listing; people will think they've scored a great deal at the neighbour's and may never actually consider viewing your home. Pricing your home competitively can make or break your sale.

SHOULD I SELL FIRST OR BUY FIRST?

This question is classic and it has a very simple answer: sell first! You never want to get into a situation where you own two homes at once. Therefore, as a buyer, you would need a clause in your contract that allows you to get out of the deal if your own home doesn't sell. It makes your offer less attractive, and you could lose the deal on that alone.

If you do manage to negotiate that clause, it will come at a price. A smart seller will ask for a higher offer in exchange for their "generosity". But worse, you'll start to feel desperate to sell your own home. You'll suddenly need to sell, and fast, which gives the negotiating power to potential buyers. They'll be more likely to lowball you, and you'll be more likely to accept.

Here’s a scenario: You find a home that you would like to purchase, and you write the contract subject to selling your home in the next 30 days. The seller doesn’t like accepting this special clause in the offer but agrees to it if you pay $5,000 more. For the peace of mind of not being stuck with two homes, you agree. Now you are selling, however, you are two weeks into the listing and starting to get nervous. Finally, a lowball offer comes in and you negotiate the price, but settle for less than you wanted because you want the other house and have to sell your current home to pay for it (you are very motivated). On both sides of the transaction, you may have lost a total of $15,000 because of your motivation ($5,000 on the buying end & $10,000 on the selling end).

If you sell your home first, you will always be in a power position, as you don’t “have to” sell (less motivated). This way you can wait as long as you need for an offer to come in that is acceptable to you. In addition, when you decide to buy you can write an offer with fewer conditions, and have the ability to match possession dates for your convenience.

On the other hand, selling first gives you the upper hand. You won't have to sell immediately, and you also won't have to buy either. Once you receive a good price for your home, you can begin your hunt, with fewer clauses and much stronger negotiating power.