If you haven’t heard about this yet, I’m actually quite surprised.
It was on Facebook all last week, every Realtor, buyer, seller, and likely even their mothers were talking about it.
A house in Toronto was listed at $699,000, received 72 offers, and sold for $1,365,888. That was 195% of the asking price, and the house was priced at only 51% of the eventual sale price.
Let’s examine exactly what happened here…
RECO rules prohibit me from providing sale information for properties that have not closed, as well as disparaging a competitor and/or a competitor’s property, and unauthorized advertising of a competitor’s property without permission.
Because of this, I will simply refer to the subject property of this blog as “the property,” and tell you that it sold somewhere on Planet Earth.
I’m sure you can figure out where it is, and I’m sure half of you already know, but even though www.tosolds.com and Zoocasa are breaking RECO rules and getting away with it, I’m still going to err on the side of caution.
I would see a tremendous amount of irony for me getting in trouble with RECO for writing this blog, when the protagonist in the story is getting crucified by the public and complaints are being launched by the dozens and yet there will be no repercussions.
Anyways, here goes…
Last week, a house (on Planet Earth….) was listed for $699,000, and it immediately raised eyebrows.
It was a builder-lot if I’ve ever seen one, and essentially it was land value only.
I figured it was worth about $1.1M, but I asked my colleagues who actively farm the area what they thought. Here’s what one colleague said:
“The land is worth at least 1mil. (NAME) and I tried to bully it for 750K this morning:) The agent said he’s already had 27 showings booked in less than 2 hrs on MLS and 2 offers (sight unseen). He’s gonna waste so many people’s time.”
I got a few emails from blog readers asking about the property as well, and even people not in the market figured this house was worth over $1M.
The $699,000 list price, according to most people, was just stupid.
But before I go any further, I want to make three very important points about the listing, the strategy taken, and the listing agent who is coming under fire:
1) There is nothing illegal about the list price.
2) There is nothing unethical about the list price, nor did it break any rules.
3) The listing agent did an absolutely fantastic job for his client – the seller, in getting potentially $150,000 (subject to opinion) more than fair market value for the property.
Disagree if you want, but those are the facts.
You can complain all you want, but the listing agent did nothing wrong, and worked within the rules as they are set out.
Having said that, the public is pissed, and I know that as I write this (Monday at 12:20pm), both the Toronto Star and the Globe & Mail are writing stories about the sale of this house, which will probably beat me to the punch as I get this up for Tuesday.
This is a story, and it’s a big one.
I don’t believe I’ve ever seen a house sell for almost 200% of the asking price, nor have I seen a house with 72 offers.
So what happened here?
The way I see it, there are multiple parties to “blame,” if you want to take that stance:
1) The Seller
2) The Listing Agent
3) The Buyers
4) The Buyer Agents
5) Anybody Else
Let’s go through these one at a time.
1) The Seller.
In today’s market, a seller is free to set the price as he or she sees fit.
If the seller wanted to list at $699,000, there’s no problem with that.
If the seller wanted to list at $1, there’s no problem with that either.
If the seller wanted to say “no” to all seventy-two offers, then re-list the next day, he or she could have done that as well.
There’s nothing wrong or illegal with the actions taken by the seller, whether you want to blame the seller for this mess or not. As I’m going to suggest when we look at points #3-5, I think other people are more to blame.
But it’s certainly unsettling to see a seller fully willing to waste this many people’s time, and make such a ridiculous farce of the offer process.
2) The Listing Agent
The listing agent acted on behalf of his client – the seller, and did a fantastic job.
You could argue that this property was “worth” $1,200,000, and in the end, it sold for $1,365,000.
As for the process, sure, it could have been handled differently, and yes, this could certainly represent a new low point for organized real estate, and it makes all of us Realtors look bad.
But if this house was listed at $1,299,000, I don’t think it would have sold.
If it was listed at $999,000, would it still have sold for $1,365,000? I guess we’ll never know.
Nobody likes what the listing agent did here, including myself. But if you don’t like the game, then don’t play. Blame the seller and the listing agent if you want, but they wouldn’t have played the game if they didn’t have anybody to play with.
3) The Buyers
Here’s where the real blame lays, in my opinion.
The buyers who engaged in this fiasco should be ridiculed for doing so.
The buyers who offered $699,000, when the house is worth over $1.2M, should be dragged out into the street and shot.
If you’re a buyer, and you want to get involved with a house that has seventy-two offers, then give your head a shake. Ask yourself why you want to get involved in this melee, and you’ll likely come to one conclusion: “I just really hope I get it.”
“Hope” is the worst word in real estate. Because in this market, there is no hope. There is no luck. There is only reality.
And if you offered $900,000 on this house, don’t tell me, “I offered $200,000 over the asking price, so it had to count for something.”
If you did your homework, you would know that this was a $1.1M, or $1.2M, or $1.3M house. Your $900,000 offer was tantamount to offering $200,000 below the asking price, had this house been anything close to accurately priced.
Of the SEVENTY-TWO offers on this house, I’m willing to bet there were some folks at $710,000, or $750,000, or $770,000, or $800,000…..etc., etc.
These folks had no business submitting offers, but they did so anyways, either because they “hoped” they would win the lottery, or because….
4) The Buyer Agents
It’s one thing for a buyer to be clueless, inexperienced, and lacking the basic knowledge necessary to refrain from offering $850,000 on this house, but it’s another thing entirely for the buyer agents to get involved.
There are 40,000 Realtors working in Toronto, and much of the general public believes that they are all equal.
If a buyer agent advised his or her client to go ahead and offer $750,000 or $800,000 or basically anything below $1,000,000 on this house that sold for $1,365,888, then that agent should not be working in this industry.
That agent is worthless.
That agent has no value whatsoever, and that agent having clients is a real shocker to me.
So go ahead and work with some loser who offers you a rebate on his or her commission. Go ahead and work with an agent who puts in a solid 12-hour work week. Go ahead and work with your cousin from Ajax when you’re buying in midtown Toronto, or with your buddy who spent six years partying in Europe and has now been a licensed Realtor for three months.
Your agent sends you a listing for a house priced at $699,000, you offer $850,000, and you lose by a mere HALF-MILLION DOLLARS.
Inexperienced buyer agents are to blame for much of what is going on in Toronto right now. They’re driving up the prices by allowing their clients to be clueless (see Monday’s blog post….), and make offers that don’t have a hope in hell of being accepted.
5) Anybody Else
Your mortgage broker should have known.
Your mother should have known.
Your Starbucks barista should have known.
Anybody in their right mind should have known that this house, listed at $699,000, was going to sell for over $1,200,000.
And if anybody standing by and watching, held his or her tongue, then that person is to blame as well.
There’s part of this story that I left out, because it skews the fact that buyers and their agents are just as much to blame for this mess as the listing agent and the seller, but this story would be incomplete without pointing out the following:
i) The listing agent had five of his own offers.
ii) The listing agent “double-ended” the deal (provided the buyer for his own listing)
I’m not going to comment on these two points, because I’m sure you can draw your own conclusions.
Statistically speaking, each offer had a 1/72, or a 1.4% chance of being accepted.
So as I said – draw your own conclusions. But I’m not going to comment.
I said it at the onset, and I’ll say it again: The listing agent did a fantastic job for his/her client by getting $1,365,888 for this property.
That isn’t a point to debate.
If you don’t like the process, fine.
If you don’t like the outcome, fine.
But there’s nothing in the “rules” to prohibit anything like this from happening again tomorrow.
So perhaps we should add a sixth party to our list:
6) Organized Real Estate
Surely with more regulations in the industry, things like this wouldn’t happen, or would happen with less frequency.
Maybe dual agency (multiple representation) shouldn’t be allowed.
Maybe there should be a stringent set of rules for reviewing multiple offers.
Maybe there’s a way to punish under-pricing homes in Toronto.
But so long as there aren’t any rules to prohibit the actions we outlined above, I honestly don’t see anything changing…