There’s nothing to stop a home-owner from listing his or her house at $749,900, getting six offers, turning them all away, and then re-listing at $899,900 the next day.
The public hates it, and although many won’t admit it, Realtors are tired of it as well.
Is there a solution?
Or can we just accept the pricing chaos in Toronto’s real estate market that has simply been accepted as “the norm?”
“What are they – runnin’ some kinda scam here?”
That’s what a client’s father asked me the other day when I had to explain to him that the condo we were looking at, priced at $424,900, was re-listed at $450,000 after we had offered $424,900 on the “offer night.”
“That can’t be legal, can it?” he asked, somewhat afraid of the answer, I might assume.
I had the unfortunate task of telling him that it was legal, and that it happens all the time.
This was not an exceptionally unique condo either. It was a nice place, great location, but far from the kind of property you’d expect to see for sale with a “hold back” on offers. I’ll be the first to admit that it was probably worth more than the $424,900 we had offered, but if the sellers wanted $450,000, then why in God’s name didn’t they just list it there in the first place?
That’s the question that the public has been asking for years, as they’ve grown tired of seeing houses listed at $799,900, as the ensuing “guessing game” takes place.
“There should be some sorta rule where the seller has to accept the offer if their price is met,” my client’s father told me.
While I understand his frustration, two wrong’s don’t make a right.
You can’t eliminate a bad practice by instituting a second one. You simply can’t make rules that “force” a seller to accept an offer, and then when you consider that the price is just one facet of the offer, and that deposit amount, closing date, inclusions/exclusions, clauses, and conditions are a part of the deal, then how does a rule oversee all this and “force” a seller to accept a given price?
Unfortunately, the only solution is: if you don’t like the game, don’t play.
If you don’t want to be involved with an under-priced property, where offers are being “held back,” then don’t. Nobody is forcing you – the buyer, to partake.
However, when you consider that this is how most houses are sold, you really can’t opt out, or you’ll be left on the sidelines.
I think the bait-and-switch is part of the public’s frustration, but it’s also the idea that property sellers in today’s market aren’t really showing what their true “asking prices” are.
Last week, I made an offer on a house for my buyer clients, which was listed at $849,000, with a hold-back on offers.
For some reason, and I have no idea why, I just had this “feeling” that we would have the only offer on “offer night.” The house was probably worth about $950,000, but I just felt as though with the house only being on the market for five days, and being listed over Thanksgiving long weekend, there might not be enough buyers out there to result in multiple offers.
I prepared my clients will in advance for the situation that I knew was going to happen.
I told them, “The seller paid $650,000 for this house, and then paid land transfer tax, he’s paying Realtor fees on the sale, and there’s no way this renovation could have cost less than $150,000.”
“I honestly don’t expect them to accept an offer of list-price, if we have the only offer.”
It’s crazy, isn’t it?
Imagine a house listed at $849,000; you walk in there and give them $849,000, and they look at you like you’re insane.
But that’s exactly what happened…
I met the listing agent – a guy running his own one-man brokerage that I’d never heard of, along with the builder/seller, and his family.
I brought a $60,000 certified deposit cheque, and presented my offer of $849,000 – the asking price, which was unconditional, and had a closing date of only three weeks – attractive to the seller, since the house was vacant.
The listing agent started asking questions like a defence lawyer who was slowly building a case: “How many houses have your clients seen? What other houses have they seen? Are they first time buyers? Are they from Toronto? Do they know a lot about this neighbourhood?”
I knew exactly where he was going with this, but I let him continue as I wanted to be as polite as possible, and not set off the seller, who already had his arms folded across his chest.
The listing agent asked me to excuse myself from the room as they discussed, and when I returned, he gave me that phrase that I hate more than anything else in the real estate industry:
As you’re aware, this property was set up for multiple offers.
Goddam. I just shook my head as I typed that…
I leaned into the table and feigned, “I don’t understand. Do you have multiple offers?”
I wasn’t trying to be condescending, but I did want to get my point across.
“No, we don’t,” he said. “But the list price reflects the multiple offer strategy.”
Oh, that’s it!
It’s a STRATEGY!
And all along I thought that most Realtors just have no clue what a property is worth, and the sellers are afraid of leaving money on the table, so in the hottest bull-market in our country’s history, sellers just routinely under-price as it results in multiple offers!
I wasn’t aware this was a “strategy.”
In any case, I told the listing agent, “It doesn’t seem as though this ‘strategy’ worked.”
That’s when the seller chimed in and said, “That may be true, but we have a different strategy – a plan-b. We can re-list this tomorrow at a new price, and take our time. We’re not in any hurry.”
And you know what?
He’s right.
There’s nothing to stop him from re-listing again tomorrow, and there’s nothing to stop any seller from trying “Strategy A,” and then moving on to “Strategy B.”
I levelled with the seller and the agent, and said, “There are four million people in the city of Toronto, and every single person who is interested in buying your house at $849,000, or less, is here, in this room, tonight. It’s just me, guys. Just me.”
“For now,” the seller said.
And again, he was right.
At the risk of wasting any more time, I turned to the seller, addressed him by name, and said, “John, what do you want for your house?”
It’s such a simple question, isn’t it?
If you were in a market in another country, and you picked up a little wooden figurine, you’d ask the vendor, “How much do you want for this?” That vendor would then tell you the price, and you’d either purchase the item, or not.
But alas, we live in a different world! The bizarre world of real estate in Toronto in 2014.
Before the seller could even open his mouth, the agent put his arm out to stop him, looked at me and said, “Why would we tell you that?”
WHY?
WHYYYYY????
Because you have a good for sale, and I’d like to know the sale price of said good!
Geez. I feel like I’m on crazy pills here.
“I will give you money, and you will give me the item for sale. Okay? How much money do I need to give you to get the good in return?”
What’s wrong with that logic?
The listing agent said, “We’re going to terminate this listing and re-list the property next week, as our strategy-b will commence. At that time, we’ll……..’remove the cover,’ and show the market what our true asking price is.”
I replied, “Or, because I’m sitting here, in front of you, with a sixty-thousand-dollar deposit cheque, representing a buyer interested in purchasing your home, you could tell me that price now.”
I thought that made perfect sense.
The listing agent just looked at me and said, “We’re not going to do that.”
I ignored him, looked at the seller, and said, “John, what do you want for this house?”
The listing agent popped in again and said, “We’ll do a sign-back. We can give you a sign-back. How about that?”
I said, “Or, you could just tell me the price that you’re going to sign back at, and we can save ten minutes, and some ink in that pen.”
“No,” he said. “We’ll do a sign back.”
Since this was the only way I was going to get their number, I said, “Sure, what the heck. I don’t mind,” and I was asked to leave the room again so they could whisper as a team.
I returned to find my offer of $849,000 signed back at $935,000.
I asked the seller, “John, do you think that my clients are going to bid against themselves to the tune of $85,000?”
Amazingly, he said, “No, probably not. But we have no reason not to sign back.”
I thanked them for their time, wished them luck, and we parted ways.
The property was re-listed – on Saturday, for some reason, at $949,000.
Don’t get me wrong – I think this house is worth the price they’re asking. Had they come out at $979,900 the first time around, perhaps they could have done even better after a week, or a month (it would also help to have “marketing” for the property, and not have it listed with a one-man-show, but I digress…)
This experience was like a long, drawn-out, slow-motion explanation of how crazy the pricing in Toronto’s housing market actually is.
Imagine asking somebody, “How much do you want for this house?” and having them refuse to answer. It simply defies everything we know about a market of buyers and sellers, exchanging goods and services for financial consideration.
But that’s our market, and that’s what we’ve got.
RECO, TREB, OREA, CREA, The Competition Bureau, The RCMP – there is no legislative body that can step in and somehow rule, “If you’re a seller, and you get offered the price that you have asked, then you must sell.”
It will never happen, and for good reason, even if the result is frustrating beyond belief.
As I said before, I feel as though many sellers and listing agents don’t know what their properties are worth, and fear is a reason why people under-list, and hold back offers; they’re afraid of losing out. They’re afraid of selling for more than they could have got, with a different “strategy,” and with nothing to stop them from re-listing, again, and again, and again, we see this as the result quite often.
As with rising real estate prices, shoddy construction in new condos, and a host of other issues that plague the industry, we simply have to accept listing/re-listing as an unavoidable norm.
Unless……of course…….somebody out there has a better idea?
original article: http://www.torontorealtyblog.com/archives/has-listingre-listing-gone-too-far/11648
