Remember how I mused a few weeks back that “taking your house off the market and re-listing at a higher price” was the new in-thing to do?
Well there’s a new trend right now, and unfortunately, it’s even worse.
It involves sellers that know best, and seller-agents that won’t stand up to their clients.
What is this new trend? Signing offers back at HIGHER than the listing price…
We are now approaching 40,000 Realtors in the GTA, and the average age of a Realtor (and by association – the average experience), is dropping rapidly.
Whether it’s playboys that want to drive around in the Mercedes that daddy bought for them, trying to channel their inner Josh Flagg or Fredrik Eklund while they try and justify not really working a real job, or whether it’s a newbie that’s all-in with his or her career, but doesn’t quite now how to act – inexperience is rampant in our industry.
And I see it every day.
I wrote a column last week called “Shut Your Mouth,” which is just a snapshot of how a Realtor’s inexperience can cost his or her client money, and the crazy thing about that blog post is – exactly what I predicted would happen, happened! See the “addendum” to that post…
And earlier this week, I encountered a situation which is becoming all to familiar in this market.
If there’s one phrase that bothers me more than anything in this industry, it’s “This property is priced for multiple offers.”
We all know that, theoretically, at least, a property is worth what somebody is willing to pay for it.
So as an extension of that theory, if a property doesn’t get any offers, then it clearly isn’t worth the asking price, let alone was it “priced for multiples.”
Try telling that to a seller, a listing agent, or both, who were expecting multiple offers, and they’ll throw your theory out the window. Things like “logic” and “evidence” have no bearing when feelings and expectations are at stake!
Earlier this week, I took a client of mine to see a condo townhouse in the west end, listed at $429,900.
The unit was fantastic. It was in the location we wanted, with a ton of supporting infrastructure, and the unit itself had a ton of square footage, albeit with an uncanny amount of stairs! But having seen my client’s current rental townhouse, the number of stairs was actually less in the new property!
The townhouse came onto the market with a “hold back” on offers, which I found a little strange, since it was a condo townhouse, and most condos don’t have offer dates. I mean, some do, but if a new listing came out in a condo building – not a townhouse, but a standard condo building – I think the presence of an offer date would actually push people away, rather than lure them in. So if you’re a Realtor reading this, and you listed a condo with hold-back on offers – give your head a shake…
Despite the hold-back on offers, my client and I went to the property, checked it out, and really liked it. This was by no means a “dream property,” but at $429,900, it was a great place to call home for the next five years.
I didn’t feel that this property was going to get multiple offers, despite being set-up for them with the offer date. I told my client, “I wouldn’t be surprised to see an offer, but I also wouldn’t be surprised to see zero as well.”
Sure enough, offer day came, and there were no offers on the property.
With offers scheduled to be reviewed at 7:00pm, I met with my client at 6:55pm, after calling the listing agent and hearing the words, “We don’t have anything registered,” and chatted things over with my buyer.
She was ready to offer the list price, but I figured that with no offers, their upside at this point was actually less than their asking price. Once tomorrow hits, and the MLS listing is updated to show that there is no longer an offer date, and that they date itself came and went with no sale, it sends a message to the buyer pool that this property’s price is negotiable.
If offer day comes and goes, with no sale, the seller loses any and all leverage they might have had.
My client and I decided to offer $420,000 even, which was still a great price for the seller, and was $10K less than my buyer might have paid otherwise.
The current seller paid $315,000 for the unit four years ago, so an 8% return per year was something they should take and RUN with!
I emailed the offer to the listing agent, and told her, “We like it – but don’t love it. We’re not paying the list price for it. But you know what? $105,000 profit in four years is insane, and your seller should bow down and thank the real estate Gods!”
She’d be insane not to take this offer.
I mean, the fact that she got this property for $315,000 four years ago makes no sense. I’d have bought five of these in 2009 if I knew I could get a 1,400 square foot townhouse for that price! But whether or not she got a steal back then, it doesn’t change the fact that she’s looking at 8% per year for four years, which is beyond the average pace for a property like this.
We sent the offer in, and waited. My client went to see a movie, and I watched three hours of Rob Ford coverage on every single TV channel known to man.
At about 11:00pm, the listing agent called me back, and rather than saying, “We have a deal,” she started by saying, “Let me explain where we’re coming from here…”
I knew right away, what was about to happen.
“David, this property is priced for multiple offers,” she said.
Those represent my most hated words in all of real estate.
“The seller was expecting multiple offers – we all were. And to not get them is disappointing, but it’s also a miscalculation by the market.”
What does “BS” stand for, again?
I cut her off right there. I was fighting a cold, and I wanted to go to bed, so I just didn’t have time to placate her.
“I think I know where you’re going with this,” I said. “And if you’re giving me a sign-back, there’s no deal to be made.”
There was a pause.
“Tell me,” I said, “Please tell me that you’re not signing this back at asking”
“No, no,” she said. “We’re not going to take just asking. We’re signing it back over asking.”
Well, then! Since when do two wrongs make a right?
What happened next was right out of “Father of the Bride,” in the scene where Steve Martin is told what the per-head cost of each guest at the wedding would be.
She said, “We’re signing it back at four-(muffle)-thousand.”
I said, “What? Did you say four-forty thousand? Seriously?”
“No, no” she said. “Not four-forty thousand. Four-fifty thousand.”
I just about puked.
Here was a condo townhouse listed at $429,000, with ZERO offers.
And they had the audacity to sign it back at $450,000?
There was no logic. None, whatsoever.
I told the agent, “I appreciate your efforts, and I’m sorry for being short, but this is ridiculous. This was a giant waste of everybody’s time. This wasn’t really going anywhere, was it? Did your seller think – did she think for even a moment, that a buyer would pay $20K over asking, without any competition? She didn’t, did she? Did she?”
It was a bit of a rant, but it was warranted.
“There’s no logic here,” I said. “None. Why didn’t you stop her? Why didn’t you tell the seller she was dreaming and that she should just reject the offer we gave her rather than going down a road to nowhere?”
I just didn’t understand. Both parties were equally to blame: the seller for being clueless, and the listing agent for allowing it.
I want to get inside the mind of the seller. I want to understand why and how she thought a buyer would say, “Hmmm…..well, there’s no competing offers, and this property will be worth less tomorrow, but, what the heck, I’ll pay $20,000 over asking for this property!”
The listing agent said, “So what do you want me to do with this sign-back?” That’s usually a gage to see if my rant was authentic, or just a negotiating point, but I said, “Leave it with the seller. Let her dwell on it.”
And that was that.
There’s a saying in real estate, “Never let a deal die.” As an agent, you never want to be the one to kill a deal, and you always provide a sign-back, regardless of whether it’s the same number you offered before. We could have taken their $450,000 sign-back, and then signed it back at our original $420,000 offer price, but there was no point.
Some sellers just know best, and you can’t convince them otherwise.
The part that bothers me the most is that this seller, who clearly will NOT accept the $429,900 list price, will continue to offer the property at this price, which is blatant false advertising. If she has the property “priced for multiple offers,” and won’t take $429,900, the property shouldn’t be listed as such.
I guess it’s up to each successive buyer that views the property to learn this the hard way.
To the seller, I say, “Good luck.” Have fun leaving your property on the market until Christmas, then re-listing in the spring, with the transaction history present in the MLS archives, and chasing the ghost of a price you will never achieve.
To the agent, I wonder why she didn’t educate her client about exactly how a market works, and why you can’t sell a twenty-dollar-bill for $25, when you should be lucky to get $19.50 for it.
I wish I could say this was a “rare occurrence” in my industry. I wish I could say that this “seller knows best” mentality was demonstrated on a special day.
But unfortunately, the way things have gone this fall, I’d have to say it was simply “Tuesday“…