Changing The Offer Date

You can’t control what other properties come onto the open market when you’re planning to list your own home, and sometimes, you need to change course, or go with a plan-b.

The amount of inventory coming on to the market is unpredictable, and whereas sometimes, you can starve in a given area for weeks at a time with no listings, other times, you’re overwhelmed by the amount of new product.

Earlier this week, three similar houses, all in the same area, reviewed offers on the same night.

I thought it was a mistake, and that one or two of the properties should have changed offer dates, but they didn’t.  And the results were somewhat expected…

RedCalendar

“It’s not like it is on television.”

That’s what I tell my new buyers all the time, and that’s something I’ve probably mentioned in, oh, I dunno – about a dozen blog posts this year alone!

Buyers of single-family homes don’t usually have a lot of choice, since the inventory levels are so low, and we know how quickly the Toronto market moves.  A property comes out onto the market, an offer date is set, and the property sells 7-8 days later – usually in multiple offers.

But what if buyers did have choice?

What if inventory was higher?

Last week, in Riverdale, I saw more new listings in one week than I had through the first six weeks of the year combined.  There were ten new listings, for quality homes, all in similar price points.

Now as you know, I can’t release sale prices of properties that haven’t closed, due to TREB and CREA rules.  Even though you can find this information on Zoocasa, Realosophy, or TO Solds, I can’t write about these sales in an open forum.

So unfortunately, I’m going to have to refer to the properties in this blog as pseudonyms.  Let’s call them Property A, Property B, and Property C.

Property A was listed for $899,000.

Property B was listed for $899,000.

Property C was listed for $949,000.

All three of these properties directly competed with each other, as did about 5-6 other new listings in Riverdale.

But what was unique about these properties was that they all reviewed offers on the same night!

Last Saturday afternoon, I spent a good three hours with clients who wanted to see a whopping ten properties – at Yonge & Eglinton, and in Riverdale.  It was a long day, and equally as much coffee was ingested as was spilled onto the passenger seat of the car.  But in the end, we honed in on one property that we knew was “it.”

Standing inside Property A, about an hour after we had got there, my clients asked, “There’s so much to keep track of this week; can we make a list of when all these offer dates are?”

Good point.

Of the ten houses we saw, ALL ten houses had set offer dates, and it was important to know when each was reviewing offers.

I thumbed through the MLS listings, primarily looking at the three properties I mentioned above, and told my clients, “Let’s see here……Property A takes offers on……..Tuesday.  Property B takes offers on……..Tuesday.  And Property C…….let’s see here…….they take offers on……Tuesday.”

What were the odds?

Other properties in the area – ones that we weren’t really interested in, had offers on Monday, Wednesday, or Thursday.  But the three properties that could have worked for us, ALL took offers on the same night.

And if we figured that these properties could all work for us, then surely the rest of the buyer pool was looking at all of them together as well.

“I see opportunity,” I told my clients.

“Buyers are going to have to choose where to be on Tuesday night, and it means the property we like won’t get as many offers as it would if there weren’t other properties reviewing offers that night as well.”

It’s not out of the ordinary for a buyer to make an offer on Tuesday night, lose, and then offer on another property on Wednesday night.  Sometimes, you have several options in the same week, and if luck isn’t with you on one night, it could be the next.

In the case of Properties A, B, and C, I really felt that a buyer for one of those might be a buyer for another, or in some cases, the buyer could be for all three.

Now and again, you’ll see the listing agent of a property with a hold-back on offers end up changing the offer date.  Sometimes, it’s because the seller isn’t available, or the listing agent double-booked, or what have you.  But more often than not, it’s because the listing agent identified that a competing house has offers on the same night, and realizes that fewer buyers means a lower sale price.

I honestly assumed in the case of Properties A, B, and C, that on Monday morning, the MLS listings would be updated to show that somebody changed the offer date.

But no change took place, and as a result, I think two of the houses under-sold.

Property A received six offers, and listed at $899,000, it sold for $1,025,000.  This was the one my clients and I liked, and unfortunately, we had the second highest offer.

Property B received three offers, and listed at $899,000, it sold for $951,000.

Property C received zero offers, and did not sell.

This truly is a tale of three VERY different results, and I have to think that if these properties were more spread out, and offers were on different nights, each house would have sold for more.

Property B was one that some people (myself included) were banking on a sale price of $1M or more.  Sure, some other factors might have contributed to “only” selling for $951,000.  The house, which was a 3-storey, plus basement, was tenanted, and the tenants didn’t help with the listing.

The basement tenant was home during the open house and the showings, and I don’t think that buyers in today’s overly-judgmental society responded well to finding a 70-year-old who spoke little English crammed in a basement that was half the size most people expected.

The main tenant was also home during the open house, and she had no problem disclosing any issue (real or perceived) with the property to anybody that came through the door.  She was a regular Chatty Cathy, and actually started telling people which other areas were worth looking at, before this one.  I know this, of course, because I experienced this first-hand.  But I also heard this from a colleague, and a client who lives on the street – all of whom witnessed this as well.

As an aside, don’t ever, every sell your house or condo when it’s tenanted…

But what could Property B had sold for if buyers didn’t have to make a choice on Tuesday night between it, and Property A?  I have to think it would have sold for more than $951,000.

And what about Property C?

Not a single offer?

Well perhaps that’s because there were nine offers on Properties A & B together, and none of those buyers “chose” Property C.

I’d like to say that I could have predicted which property would sell for what, but I’d be lying if I said I knew in advance.

We had no way of knowing which houses buyers would target, and I’m honestly surprised that the listing agents took that chance.

I thought that Property A was the best of the bunch, but I would have figured the listing agents for Properties B & C would have seen everything in the area, figured out which houses were comparable and posed threats, and then moved their offer dates accordingly.

Had the listing agent for Property B moved the offer date back one day to Wednesday, perhaps anybody who submitted a bid on Property A, and lost, would have made an offer on Property B the next night.

Geez, all this “Property A” stuff is confusing!  I can’t wait until rules change and I can actually give an opinion on something for sale.  Like saying, “McDonalds fries are yummy.”  In my business, that might be considered unauthorized advertising…

In any event, there is a silver lining here.

This experience shows us that the reason prices are so high, and there are always multiple offers, and houses always sell for over-asking, is simply because of the lack of inventory.

I’m not complaining that these houses didn’t sell for more money; I have no personal stake in it.  I’m merely explaining the theory behind it.

I think that if inventory increased, and buyers had more choice, sellers would have less leverage as a result, and prices would level off, if not decrease.

So then the question has to be asked: what has to happen to see more inventory?

That’s a million-dollar question, indeed.

7 Comments

Post A Comment

Your email address will not be published. Required fields are marked *

  1. Kyle says:

    “what has to happen to see more inventory?”

    In prime neighbourhoods, I think the inventory situation is actually worse than it appears. If it weren’t for the TCHC unloading single family homes in Riverdale , Dufferin Grove, Leslieville, Cabbagetown, The Beaches, and other hot hoods, there would be even fewer houses hitting the market.

  2. Amelia says:

    Good article. What if any one of these sellers had listed in early January, when there was absolutely nothing else available for sale? Could that have generated an even higher sales price?

  3. joel says:

    One thing that could increase inventory, but I doubt will ever happen is if there was actual enforcement on illegal rentals. There is a very large portion of homes that have an illegal basement apartment to help pay down the mortgage and I think that there are probably a great number of home owners that would not be able to afford their mortgages if they were not able to rent these basements out.
    I don’t think it will happen, as there is really no gain for anyone to do so, except maybe a little tax money, but it would increase the inventory in many sub million dollar areas.

  4. Daniel says:

    IMHO, the primary potential trigger for a large increase in supply would be a sharp rise in unemployment. Many TO households are highly leveraged and can only sustain their current housing situation with decent dual incomes. A real recession that resulted in widespread job loss would put many of these people in a tight situation, thus pushing sellers onto the market.
    Interestingly, i don’t think a recession would necessarily wipe out demand as much as one might expect. To curb demand significantly a meaningful rise in interest rates, or the real fear of a market downtown would be required. If, however, demand slows but supply doesn’t increase (i.e. no recession) then you’ll see a stagnant market where buyers and sellers wait the other side out (see Vancouver circa 2012-13).

  5. johnny chase says:

    I don’t get it. You said you can’t be in two places at once and therefor can only submit one offer.

    If there were multiple properties taking bids the same night and I like more than one, why can you just put in an offer on both with a 30 min or 1 hour condition? If you lose one, you might have the other?

    1. @ Johnny chase

      In a perfect world, it would work like that.

      But in multiple offers, a condition won’t fly.

      And if both properties are reviewing offers at 7pm, giving them a 30-minute irrevocable would likely cause your offer to expire before they’ve even looked at the other offers.

      If you submit two offers, unconditional, with 11:59pm irrevocables, then you run the risk of buying two houses.

  6. Paully says:

    It’s interesting that a mere two extra properties caused one of the houses to not sell on offer night. That simple fact seems to suggest that the demand vs. supply imbalance is not as far off as some would have us think. Sure, one sale or not does not a market make, but it is interesting just the same.

TWEETS