What $2.6 billion taught me about pricing
There are three numbers in every luxury listing. Only one of them is the price.
Every seller I have ever met walks into the first meeting with a number. It is usually a good number. It is built from what the neighbour got, what the renovation cost, and what the family feels the home is worth after twenty years in it. None of that is wrong. It is just not a price.
A price is what a specific buyer, in a specific window, will pay for this home instead of the other three they are considering. That buyer does not care what the renovation cost. They care what it would cost them to replicate it, and whether they would rather spend the money somewhere else.
So in every listing I think about three numbers. The first is the land number: what a builder pays for the lot with nothing on it. On the Bridle Path that is $8 million to $12 million. In York Mills on a hundred foot frontage it is $3 million to $5 million. This is the floor, and it is real.
The second is the replacement number: what it would cost to build what is standing there today, at today's construction prices, plus the two years it takes. Buyers who want a finished home pay a premium over land for not having to wait. The size of that premium depends on how close the house is to what they would have built.
The third is the prestige number: the premium a buyer pays for the address, the street, the story. This one is real too, but it is the most volatile, and sellers consistently overestimate it. A home at 35 High Point Road carries a prestige premium. A home two streets over, however beautiful, carries less.
When I price a home I estimate all three, and then I ask which buyer is actually going to show up in the next ninety days. A builder pays the first number. A family pays the second. An international buyer or a collector pays the third. The listing strategy, the marketing, the private calls I make before launch, all follow from that answer.
The $2.6 billion in real estate I have sold and managed did not teach me a formula. It taught me to tell sellers the truth about which of the three numbers their home will actually trade on, and to tell them early, before the market does.
