Why are so many Ottawa listings overpriced?

...it has been a long spring and summer for many Ottawa sellers: why is that?

Our Ottawa real estate market has been slowing for two years and we have been accumulating excess listing inventory steadily during that time to the level where we now have 41.6% more residential listings and 79% more condo listings than the 5 year average. (Board stats end July 2014)  We are seeing large gaps in average & original listing prices to average & actual selling prices, more price reductions on listings and listings are taking longer to sell. Average selling prices are flat for residential properties and in negative territory for condos.  In addition, the number of sales transactions is pretty flat (no increase from previous years), so there is little chance of selling through this excess listing inventory.

So how did we get here?  Why do we have so many sellers overpricing their listings in the face of a supply/demand ratio which so clearly seems to favour buyers?

1. Too many sellers base their own listing prices on the list price of current properties listed in their area. If those properties are not selling, then they are probably overpriced and the fact that they are “competition” is irrelevant.  “Following the herd” in pricing often means simply one more overpriced listing in the area.

2. Sellers can often establish their selling price expectation based on their own purchasing plan or other financial objectives and place these ahead of market realities.  Selling price expectations have a tendency to get “locked in” once established and many sellers will not adjust those expectations.

3. We have had a pretty good run in Ottawa real estate this millennium (making up some lost ground from the 1990’s) and many sellers have assumed that this would be continuing.  Because there has been no dramatic shift/drop (thank goodness!) in our overall market metrics, many consumers do not notice the gradual change that has been taking place over the last couple of years.

4. Many sellers believe that cost=market value but in many cases, sellers have either paid too much for a property originally or invested too much in builder upgrades or expensive renovations or landscaping that price the property out of contention in the current market.

5. Organized real estate generally over accentuates the positive in reporting real estate results and tends to overlook or minimize potential worrisome trends.  Instead of saying: “listing inventory is high” a comment such as: “there is good choice for buyers” will be stated.

6. Too many real estate professionals either tell sellers what they want to hear or go along with a high priced listing strategy in order to secure a listing. 

7. Sellers believe that “they can always come down” on their price and will almost always defer to the higher price when given a range.

8. Sellers fail to see the marketing limitations in their own property and are unable to view it as a product in a very competitive marketplace for available buyers.

9. Many sellers “do not need to sell” and therefore, unless they can get the selling price they want, they simply continue to list and relist the property over an extended period.

10. Sellers may tend to rely too much on a limited range of comparable properties that have sold.  Without knowing the motivation and circumstances of both buyers and sellers in other transactions, one cannot rely too much on a small sales sample for reference.

11. Not adjusting expectations and reacting to buyer/market feedback and changing dynamics.

12. Over anticipating the price people will pay to move in to a desirable area.  While certain areas are still very much in demand, there is a price limit range that most buyers will have for moving in to that area.

13.  Sellers can have a tendency to be influenced or confused by friends, colleagues, family, neighbours or trades people who are real estate experts and less so on market feedback or professional guidance from their REALTOR®.  The renovation, pool or landscaping sales person is not the one who will be tasked with getting your property sold when the time comes but many them are quick to tell you “how much market value you are adding”.   So work with a REALTOR® you trust and make sure you jointly assess the buyer response to your product in the marketplace and make appropriate listing plans and contingencies in an objective manner.

14.  Last but certainly not least is that most sellers take considerable pride in their properties and the emotional attachment can often cloud a seller’s objectivity.  Once it is listed it is no longer a seller’s “home” but a product to be sold and sellers will do well to adopt an objective decision making mindset and processes which they use in their own business.

For more information on the Ottawa real estate market and our services, please see our website at www.oasisrealtyottawa.com or follow us on social media.

Gord McCormick, Broker of Record

Dawn Davey, Broker

Oasis Realty Brokerage

613-435-4692

oasisrealty@rogers.com

@oasisrealtyOTT