Arguing With Myself

Raise your hand if after reading the subject line, your mind immediately went to Billy Idol, and “Dancing With Myself.”  That’s where my mind went…

Today, I want to try something interesting: I want to provide two stories, both which result in implied arguments, and note that both stories contradict each other.

Both stories involve pricing houses, trying to determine fair market value, and cast a light on a buyer-agent’s responsibility to his or her buyer-client.

Afterwards, you’ll either agree with one of the arguments, or agree that both are valid, and every situation in real estate is different…

ArguingWithMyself

“On the floor of Tokyo
Or down in London town to go, go
With the record selection
And the mirror’s reflection
I’m dancing with myself”

It’s sheer genius, I tell ya.

And despite having the single greatest song ever recorded by mankind, Billy Idol was also able to produce “Mony Mony,” “White Wedding,” and of course, “Rebel Yell.”

But enough about God.

Today, let’s talk about pricing.

If you want to end the argument before we even start it, and simply say, “Who really knows what anything is worth in Toronto these days; the market is nuts,” then I suppose we’d be hard pressed to argue with that.

But in lieu of a fatalist attitude, let’s try to come up with an answer to the question: “Is a property really worth what somebody is willing to pay for it?”

Let me tell you two stories…

Story #1:

Last week, I showed a very small “junior one-bedroom” condo to a client, who was an investor looking to rent the unit out, and hold it long-term.

The unit was in an A+ location, in an A- building, but the unit was somewhat unspectacular itself.  I mean, how can a 450 square foot unit really impress you?

Perhaps that’s not fair; for what the unit was, it was pretty good.  The finishes were upgraded, it was well laid-out, and there would be absolutely nothing for the owner/investor/landlord to do.

The unit was listed at $279,900, but we knew that was high.  Really high, in fact.

There was an identical unit that was sold conditionally on MLS, so we didn’t know the price, but the unit was listed at $269,000.

When I say “identical,” I mean that unit 105 is the same as unit 205, which is the same as unit 305, and so on.

A few days after we looked at the $279K unit, the same unit came onto MLS for $269,000, and sold that very same day.  Literally six hours on the market, and gone!

The next day, the conditional sale firmed up and the price was released: $263,500.

It didn’t take a genius to see what this unit was “worth,” or rather the ballpark in which you could play with the price.

We drafted an offer of $268,000 for the unit priced at $279,900, and sent it in.

Wouldn’t you believe that a competing offer came in the very same day?

The listing agent called me and said, “I told my client to take your offer – $268,000, that’s what it’s worth.  We knew this based on the other two sales.  But before I could even send him the offer, this other agent registers his!”

I told the listing agent, “No worries, but we’re out.  Take the other offer.”

He said, “Nah, come on, there’s no guarantees here man, yours could still be good.  Or if you want to come up a bit, who knows.”

I told him, “I know.  I just know that the other offer is going to be from some genius fresh out of the institute of higher learning known as ‘OREA College’ and they’ll figure, ‘Well, we’re in competition, so we’d better go above asking.’  I just know it.”

The listing agent laughed and said, “Well I certainly hope so for my client’s sake, but I won’t hold my breath!”

A few hours later, he called me and said, “Wow.  I mean, wow.  The other offer is way, way higher.”

$285,000.

Some genius bid over asking to “win” the property, when the list price was so goddam high to begin with.

The same units – SAME identical units, had just sold for $263,500 and $269,000 within the previous ten days, and somebody goes and pays $285,000.

Congratulations?  With a question mark(?)

Story #2:

Bosley Real Estate is one of the industry leaders when it comes to training new agents, and “Bosley University” is the 10-week training program that new agents are put through like boot-camp.

From time-to-time, I’m asked by the Bosley brass to come and help out with the rookies, and in recent years, they enjoy having me come into their role-playing sessions when dealing with multiple offers, and act out the role of the listing agent.

We were role-playing a $2,300,000 listing, with 14 offers.

The rookies all presented their fake offers – according to notes the managers had given them, and then I took over in terms of “what happens next.”

I wanted to test out this one guy, so I signed back his offer of $2,450,000 at $2,600,000, even though I had 13 other fake offers.  I had a feeling I knew what he’d do, and he walked right into it.

He came back and sat down, and I said, “Do we have a deal?”  He then said, “Well folks, I’m here to negotiate tonight, and so, no, we didn’t take your sign-back of $2,600,000.  We signed it back to you at $2,500,000.”

I then held up two other fake offers of $2,700,000 and $2,750,000, and said, “Buddy, you screwed up tonight.”

It was a lesson learned by all.  All, except for that one guy.

He immediately started to say, “Well, that’s too much.  It’s too much for the property.”

Now keep in mind that this was all fake; they had done an appraisal one somebody’s property, but the whole multiple offer situation was fake, and anything could have happened.

But the theory behind what he was saying, and the conversation that ensued, was real.

He announced, “How can I have my clients pay $2,750,000 for that house?  It’s not worth it.  We signed back at $2,500,000 because that’s what we felt it’s worth.”

I told him, “But then what do you say to the person who offered $2,750,000?  Or the person who offered $2,700,000?  Are they wrong, and you’re right?”

He said, “Well, I wouldn’t put it exactly like that, but yeah.”

I told him that there were another four offers that were higher than his, and asked him to clarify his statement about the price being “too much.”

He went on about how it’s his job to get his clients “deals,” and how they need to “feel like they won something.”  They needed to “know that they didn’t over-pay.”

I asked him what market he was working in, because it sure wasn’t Toronto!

Look, I’d love to get all my clients “deals,” but in one of the hottest markets on planet earth!  We’re in a free market – a market where supply does not come even close to meeting demand, and where people pay what they need to in order to buy a house.

I told the rookie that if he was going to suggest that when SIX offers are higher than his, that somehow he’s right about the price that the house “should” sell for, then he’s doing his clients a disservice.  They’ll never be successful in this market, and the market will continue to appreciate around them as they continue to look for that “deal.”

How does a person “Know that they didn’t over-pay?”

His argument was circular, and contradictory.

He wants to ensure that his clients don’t over-pay when in multiple offers.  But when you buy a house in a multiple offer situation with fourteen offers, you beat out thirteen other buyers who had access to the same information that you did.  So didn’t you “over-pay,” theoretically?”

In the role-playing example, if the sign-back he provided to us at $2,500,000 was the highest, and the other six offers hadn’t beaten his, would he still feel like he “got a deal?”  Would he still suggest that his clients could “know that they didn’t over-pay?”

Pick A Side?

Is one of these arguments right?

Or are they both right?

Perhaps the second story was a bit more argumentative than the first, but that’s because I was the one playing Devil’s Advocate in the story!

I think I already know some of the critiques of these two stories, and if you’re going to suggest that these two cases are different, I’m sure you’ll note:

1) One property was a condo, the other was a house.
2) One property was the bottom-end of the market at $270K, the other was the higher-end at $2.6M.
3) One property was for an investor, the other was for an end-user.

These points are all true, but when it comes to value, does it matter what the property is being used for?

If you purchased an income fund or a REIT, would it have a different intrinsic value if it were in your RRSP, TFSA, or Investment Account?

Well, perhaps the tax on the dividends is the variable there, since the three accounts provide for deferred tax, no tax, and full tax respectively.

But does the value of the property differ if you’re an investor versus a user?

Is there such a thing as an “emotional premium” on a property, or an “intangible” that adds to the price, AND is justified in doing so?

How do you differentiate between these two situations?

In the first, I’m arguing that you CAN over-pay for a property, and that it’s often easy to see when somebody is doing so.

In the second, I’m arguing that the person who submitted an offer in the middle of the pack is naive for doing so, and foolish to think that the high-bidder over-paid.

Is there a middle of the road here?

A point I’m missing?

Or am I just arguing with myself?

49 Comments

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  1. Jim B says:

    I would urge you all to seek out the original version of “Dancing With Myself,” which is not the well-known (re-mixed) 1981 Billy Idol classic, but the 1980 version by Generation X (Idol’s former band, which was to break up early in 1981). Billy’s version is great, but the Gen X take is truly awesome!

  2. preet says:

    I feel that the first story is the way the market should play out, especially for condos and mansions (because of the availability). As much as demand is an issue people overpaying for homes isn’t going to solve anything. Once one home or condo sells at a certain price that becomes the norm. People need to understand the market isn’t infinite. A 1900sqft home has a peak price maybe in toronto it is a million, but no miracle will it continue to rise and one day be 2 million. If that was the case then money would be infinite too, and one day a McDonalds worker will be making $40/hr.

    I have a huge dislike for listing agents, because they frequently call bidder asking for second, third round bids. What insurance is there that the offers are increasing. What insurance is there that the agent is presenting all offers to the client, and not showing the ones where the buyers agent is their friend will to give them a kick back?

    Ultimately the market has gotten to a point that will cause the Canadian government a lot of problems. The government should step in control the situation. jim flaherty was being proactive by creating minimum of 20% down and taking other precautions. The interest rates need to be controlled, and foreign investors need to be taxed heavily for investing in our markets. The government will look pretty dumb when first time home buyer cant afford to leave her, so they decide to leave the province. Its been happening with doctors and engineers for two decades now, let not have our mechanics, skilled trades leave too for a cheaper place to live.

  3. Jay says:

    The mistake we make when dealing with the Toronto real estate market is that I expect logic and there just isn’t any! For instance, I’d love to know what happened behind the scenes in a sale we were involved in a few years ago. The house was listed at around $2M. There were 2 offers, ours and one other. We offered asking and then walked away when asked to participate in a 2nd round. No 3rd party came to the table, yet the house sold for around $300,000 over asking – I still don’t understand how that happened!

    1. Cedric says:

      If there are 2 registered offers and the seller sends them both back to improve, does the seller have the obligation to tell the one buyer if the other buyer decides they don’t want to improve and walks away?

  4. George says:

    Can someone explain to me how the economics of a 270k condo as an investment make sense?

    Say 270k (unleveraged)
    $1,500/month rent
    $300/month maintenance
    $200/month property tax

    You are looking at (1500-300-200)*12 / 270000 = 4.4% taxable as pure income at the highest bracket.

    Only reasonable explanation is that the “investor” expects appreciation.

    1. Kyle says:

      Or more likely annual rent increases.

    2. Appraiser says:

      @ George: So “investors” in the stock market don’t expect appreciation?

    3. John says:

      You directly highlight how the economics are supposed to work when you note that the purchase price is unleveraged. I suspect the return profile improves if you buy the property with other people’s money.

      1. Appraiser says:

        Long Time Realtor:

        Long term real estate investors (like me) marvel at the unique ability to purchase an asset with others people’s money and have someone else (tenants) pay for it, such that at the end of the loan I still have the asset and the tenants just keeps on paying.

        Sure, you can borrow money to buy stocks, bonds or gold – but how do you get someone else to pay off the loan for you and still keep the asset? A fact that seems to be lost on a great many “analysts” out there.

        1. Cedric says:

          If you can find an investment that pays a high enough dividend, I suppose that would be equivalent to a renter paying rent? Similar to George’s calcs above, a $1000/month “dividend” on a $270,000 investment would be a 4.4% yield. Doesn’t seem unreasonable for even fairly conservative investments. This dividend can be used to pay of the loan.

          I suppose the issue becomes can you find loan terms even close to comparable to what you can get in a residential mortgage (25 or 30-year amortization, sub-3% interest) in order to fund the purchase?

  5. Jonathan says:

    David, you missed a key point – were there any comparables for the house in story #2 so that the bidding agents had an idea as to the alternatives to that house? We have no idea as to whether the agent was right or not to say that the bidding was too high. In story #1, you did the exact same thing as him EXCEPT you had the data to back you up. That’s the only difference.

  6. hoob says:

    When I sold my condo, my agent was preparing to formally accept one of the offers on the table. It wasn’t the only offer and wasn’t the highest, but for various reasons it was the one I’d decided to accepted.

    During the time it took to file something, get coffee, or whatever my agent was doing after I had made the decision, the same buyer amended their offer to add $10K more, unsolicited. Ok, great, sure, we’ll accept THAT offer now instead, as you wish!

    Either way, I’d say it’s the most worth *I* have ever received for 10 minutes of time. By talking to my agent for an extra 10 minutes on the phone (mainly debating the merits of accepting the not-at-the-time-highest offer), I got an extra $10G for the property. Makes my day job hourly salary pale in comparison.

    So in that case was the condo “worth” the initial offer, of “worth” that offer plus 10G?

  7. A Grant says:

    David,
    I’m sorry, but I’m not clear with respect to scenario #2.

    I’m confused as to why the fictional agent would send back a counter offer of $2,600,000 with 13 offers already on the table. Wouldn’t the standard response to this type of multi-offer situation be either: accept the highest offer; send the closest offers back to improve; or send them all back to improve. From what I’ve read on your blog, the only time an agent counters at a price higher than the original offer are in cases where a house “priced for multi offers” fails to generate significant interest.

    1. @ A Grant

      It was role-playing, and I knew that the agent with three weeks’ experience, being very cocky, wouldn’t take the offer. So I signed it back to prove a point.

      In a real world situation, you would NEVER sign back an offer like that. Unless you signed it back at something absurd like $3,000,000.

      1. A Grant says:

        Gotcha – when I read it, I got the sense that the $2.45M was the highest of the 14 offers and the fictional agent countered at $2.6M in an effort to squeeze more money out of the potential (fictional) buyers.

        In which case, I could see why negotiating might be a reasonable approach to take.

  8. daniel says:

    two professors at MIT did an interesting study on real estate cycles and land prices. A brief summary is:
    – in typical markets with lots of buyers and sellers (i.e. most markets for most goods) prices are set by the market at or around the average expectation of value – meaning, the typical buyer or seller is determining the price.
    – in bull real estate markets the number of buyers of land increases as expectations about the ability to successfully develop improve
    – concurrently, an increasing numbers of sellers ‘hoard’ their real estate (i.e. do not market their properties and will not sell them) because they observe increasing prices and want to wait to a later date to sell
    – as the number of available properties dwindles and the number of buyers increases, prices are increasingly set by ‘outlier’ buyers who have expectations of value that are highly divergent from the typical or average expectation
    – eventually the bull cycle in the underlying demand reverses and the ‘outlier’ buyers are caught out with land that is too pricey to redevelop in softer economic conditions and a protracted process of repossession occurs

    The study has, in my opinion, a pretty robust theoretical framework and pretty good data to back it up. Obviously the market for SFHs is different in many regards. That said, the fundamental conclusion that in a thinly traded asset situations arise where the marginal buyer (i.e. the buyer with most bullish sentiment) sets market prices that are much different from typical expectations certainly has some relevance to the market for homes.

    1. Paully says:

      Daniel, that makes a lot of sense. The same argument holds, perhaps even more so, on the way back down. It only takes one panicky person on a block to move the entire street’s valuation down. Maybe most sellers don’t have to sell and may be able to wait for “their price,” but someone who is sick or unemployed and facing imminent foreclosure if they do not sell is much more likely to use a bold price reduction to make the sale happen quickly. The same might hold for someone who bought before selling and needs to sell their old property. If the market turns in the interim, their sale price may get squeezed.

    2. Joe Q. says:

      Can you provide a link or citation for this study? I’d be interested in reading it.

      1. daniel says:

        @ Joe Q. i don’t have the link handy as i accessed it through a university library network i no longer have access to. Think the author was Nathanson. This paper by him is super interesting although not the one i was referencing above:

        http://www.usc.edu/schools/business/FBE/seminars/papers/RECR_2-28-14_NATHANSON.pdf

        Apologies, pretty busy these days and don’t have the hour to dig through the deep interwebs to track it down.

        @Paully, you’re very correct that in a downturn with very few buyers and many sellers that can occur. That said, i did some work on REO (bank repossessed RE) back in ’09-’10 and what we say was a lot of reluctance for most asset holders to unload at the very depressed prices. Yes, prices went down dramatically, and in some particular markets lots of houses changed hands, but in many markets very little of the RE, even the repo’ed RE, was liquidated at the market bottom. Put another way, a few marginal sellers can sink the trading price of the asset, however, it’s possible that very little of the housing stock will change hands at that price.

        Perhaps i’ve taken this too nerdy for this thread…

  9. Libertarian says:

    The debate of market value vs. what somebody is willing to pay is always interesting and could be debated forever.

    But didn’t David raise a point in story #1 – the agent fresh out of OREA College? Would today’s activity be less volatile if every agent was as qualified as David as opposed to having inexperienced agents bidding $285,000 for a place that should sell in the $260,000s?

    David told a story the other week when he and another agent submitted the exact same bid twice. I found that situation ended reasonably, as opposed to story #1.

  10. Ed says:

    In situation #2. Did the successful buyer’s agent do his fiduciary duty in representing his client?

    1. Kyle says:

      Bingo! What is missing from these stories is what the clients are willing to pay.

    2. @ Ed

      People hire us for our expertise.

      If a buyer-agent gets emotionally involved and says, “This property ‘shouldn’t sell for this price,” even while there are six higher offers, then personally I think he’s doing a poor job.

      Maybe ONE person can be wrong, but SIX?

      The job of a Realtor is not just to be an order-taker. If your client says, “I want to make my offer conditional on four different things,” isn’t it our job to say, “Your offer has a 0.00% chance of being accepted?”

  11. Appraiser says:

    In appraisal theory we study a concept known as the Principle of Substitution: Which states that the maximum value of a property tends to be set by the cost of acquiring an equally desirable substitute property.

    In relation to Story # 1 above it would seem that this principle has been violated, at least at first blush. However, it must be remembered that in order for an item to be substituted for, there must be equivalent items available for sale from which to choose. It appears as though that is not the case here. Since there is no guarantee that similar condo units will be coming to the market in the near future at similar list prices to those that have already sold, does the principle apply?

    1. Ed says:

      Excellent point. And if one was to imagine that the buyer was a end user, not an investor, who HAD to be in that location and HAD to have that floor plan. Did he overpay?

      1. Clifford says:

        Had to be in a 450 sq ft condo that there is an over supply of? Give me a break. Majority of purchasers of these tiny micro units are investors. They are made for investors. Stop kidding yourself.

  12. Ed says:

    It seems to me that in both situation 1 and 2 the ultimate goal for the successful buyer’s agent is to be the winning bid and the ultimate prize of the 2.5 %commission. Then they have to do the hand holding so that their clients don’t get the feeling of buyer’s remorse. At the end of the day everybody’s happy.

  13. Paully says:

    I think that both situations indicate a market that has become completely decoupled from rational thought and analysis. Things are worth what someone will pay. Period. Competition and emotion are firmly in the driver’s seat. The traditional metrics don’t apply here. Average rents don’t support the current price levels. Average incomes don’t support current price levels. Yet somehow, lots of people desperately wanting to buy into the market support the current and rising price levels.

    Travel out of the sphere of 416 influence, and you can buy a whole detached house for less than just the amounts that some people in the 416 are bidding over list.

    1. Kyle says:

      Similar to my sentiments to Clifford, you seem to suggest that the entire market is irrational, and instead your expectations (based solely on two metrics that have been completely unreliable in Toronto and every other large city in the world for that matter) are rational. Sorry but i find that illogical.

      1. jeff316 says:

        Agreed. It’s like the people who spout things as being “common sense” without realizing that they’re assuming it is their “sense” that is common. It’s bananas.

    2. Appraiser says:

      @ Paully: Traditional metrics are not in play because they are inaccurate. What I fail to comprehend is why most of the bears cling to them as though they were divined by Moses himself. What I further fail to understand is why the bears don’t ever seem to question why their metrics don’t work. Price to income and price to rent ratios leave out one crucial variable – interest rates.

      Debt service is a far more accurate measure of affordability. The Bank of Canada does not take in to consideration such outdated metrics as price to income and price to rent ratios in their Housing Affordability Index. Ever wonder why?

      http://credit.bankofcanada.ca/financialconditions#hai

      1. George says:

        Funny thing look at what happened in 1990 to home prices when affordability went up to 0.50 from 0.30 in 1985.

        Even funnier, look at the affordability today: 0.31.

        But there will never be interest rate normalization in our lifetime, so it doesn’t matter, right.

        1. Appraiser says:

          @ George: Seems you missed the point completely. The issue was how to measure market affordability, not if one can predict the future. I leave predicting the future to the bears, because their so good at it.

          P.S. Ever notice how the “big correction” is always 2 years away from being 2 years away?

      2. Joe Q. says:

        Appraiser writes: “The Bank of Canada does not take in to consideration such outdated metrics as price to income and price to rent ratios in their Housing Affordability Index.”

        I think this is misleading, because based on the linked website, the Housing Affordability Index does explicitly include the price-to-income ratio in its calculation.

        You can find more details at http://credit.bankofcanada.ca/financialconditions/hai (which is linked to in Appraiser’s linked page). In the formula given there, the variable c (quarterly housing costs) is directly proportional to Mo (the total mortgage amount, fixed as 0.95 times the purchase price of the home) with an offset for utility costs. The proportionality constant of course includes terms for interest rate and repayment time.

        Household disposable income is the denominator in the calculation of the affordability index, so the ratio of Mo to disposable income (price-to-income ratio) is indeed there in the affordability index.

        The link I provided gives some other details of how the index is calculated (six-month moving average of Canada-wide MLS listings and Canada-wide disposable income, utility costs based on CPI-scaled data from 2011, etc.)

        1. Appraiser says:

          @Joe Q. Think again. Clearly you are the one being disingenuous and attempting to mislead. The price to income ratio is a stand alone calculation. The fact that the Bank of Canada utilizes income as part of it’s overall housing affordability formula, which is absolutely essential to its reliability, does not make it equivalent. Nice try.

          1. Joe Q. says:

            HI Appraiser,

            I hope I am not being disingenuous. Clearly the price-to-income ratio is a stand-alone calculation. I nowhere claim that it is identical or equivalent to the BoC’s affordability index. However, I do stand by my claim that the price-to-income ratio is incorporated into the BoC’s affordability index calculation.

            You can look at the link I provided, their description of the calculation, and see that the affordability index can be expressed as follows:

            affordability index = (k1)(price-to-income ratio) + k2

            where k1 incorporates interest rates and repayment schedule information, and k2 reflects the cost of utilities relative to income.

          2. Kyle says:

            @ Joe Q

            It’s obvious Affordability takes into consideration income and house prices, but it also takes into account interest rates. I think that’s the point being made. Bears love to talk about price to income. It’s a great ratio for those looking for something to delude themselves with, but because it doesn’t capture changes in interest rate it has become a useless measuring stick for where house prices are going. So what if prices have risen faster than incomes? What matters is has affordability eroded. And the graph shows that Affordability has been in a tight range in the .3’s for the last decade.

          3. Joe Q. says:

            Kyle — I’m not claiming that stand-alone ratios like price-to-income are Gospel, but that they are part of the calculation that determines affordability indices, contra those who would claim that they are not taken into consideration.

  14. Clifford says:

    The worst is having to compete with out of touch buyers who overbid for properties. I’ve been in several situations where I was the 1st and only offer (fair offer)..the agent drags their feet on it and miraculously another offer comes in. In all cases I never went above asking. I ended up getting the one where I still bid under asking knowing there was another offer.

    As for the 1st story. The buyer is an idiot. I’m sorry. How do you way overpay for a bloody 450 sqft condo when you have access to sold data? These are the kinds of buyers that are driving up the market.

    There are no more “deals” in real estate so reading the agent talking about getting a “deal” was a laugher.

    1. Kyle says:

      I think human nature is for one to put too much weight on their own estimates. If the buyers who outbid you are as out of touch as you say, then the market would have fallen back down to match the levels you bid at. But as you say, “These are the kinds of buyers that are driving up the market.” what this implies is that the market continues to rise beyond these “overbids” and therefore you think the whole market is crazy and you are the only sane one. To me this is illogical, i think what is more likely the case is the market has simply moved past your expectations and you failed to adjust your expectations, which actually means your bids have been out of touch on the low side.

      Stepping back and looking at your story and the ones David provided, i simply see this as a case of – each story has multiple sides. Those that get outbid, will consider the outbidders to be crazy on the high side, and those that don’t get outbid will consider all the losing bidders to be out of touch on the low side. And everyone seems to assume their own estimate is “where the market is”. When in reality, “where the market is”, is the price the sale actually closes at.

      At the end of the day i think winning and losing or an Agent’s competence or incompetence, should not be based on an ex post review of what bids were relative to each other. Hind sight makes us all feel like geniuses. To me the real criteria for winning/losing and competence /incompetence is whether the Agent was able to transact for his client in the range that the client wanted to transact and to avoid transacting outside of the .range his client was willing to transact at.

      1. Clifford says:

        If you subscribe to true value being determined by what someone is willing to pay then I guess you can’t be wrong, huh? I disagree with you. There were times where we were outbid and I had thought the winning bid was good value. Not often but it happens. And no, I’m not a genius by refusing to pay way above value just because there’s another offer. David even said it himself in the 1st story. The property asking orice was way above value and his client dropped out. The market is being propped up artificially and this scenario is a reason why. Over bidding on a shoebox condo? A generic unit? These units come up on the market all the time. We are not talking about a hidden gem that’s hard to find. A lot of out of touch buyers and agents helping them along the way. The investor just wanted to get in the game and was willing to pay anything. Sound familiar?

        I wish David could reveal the building. He can’t for obvious reasons but I’ll find out.

        1. Kyle says:

          You’re pretty much proving my point here, you’re basically saying again and again that the value you ascribe is sane/correct and the value the market is transacting at is insane/incorrect. If that isn’t over-confidence, then surely your baseless presumption that it was an investor that just wants to get in the game is. It doesn’t matter whether you think it is a shoebox, or if you think it is generic, if you don’t like the colour of the tiles, or the height of the ceiling. You are but one person in a dynamic market, where new participants enter every single day and only those participants that successfully transact set the market.

          And no i didn’t say, “true value being determined by what someone is willing to pay”, like i said if those sales were way off-market, then the next sales would fall back at the levels you ascribe. And those sales would show up outliers, but that isn’t the case they are showing up as a trend.

  15. Kyle says:

    If you never submitted an offer on the condo, then it wasn’t a multiple offer scenario. Doesn’t the listing agent have an obligation to inform the other buyer that he isn’t in competition?

    1. Kyle says:

      Oops never mind, just re-read story 1, and I missed the part where you did send in an offer first time I read it.

    2. Kyle says:

      OK, third time reading Story 1 and i’m not so crazy after all, it is confusing:

      “We drafted an offer of $268,000 for the unit priced at $279,900, and sent it in.

      “The listing agent called me and said, ‘I told my client to take your offer – $268,000, that’s what it’s worth. We knew this based on the other two sales. But before I could even send him the offer, this other agent registers his!'”

      Anyhow, it’s still unclear to me whether the listing agent broke the rules (i.e. did not tell the other buyer he was competing against himself), but it is clear the listing agent is incompetent if he advised his client to accept the 268K, without even looking at the other offer.

      1. @ Kyle

        Sorry to confuse!

        He was telling me how he would have advised his client to take the $268,000 offer, but subsequently a competing offer was registered.

        That competing offer was registered without the knowledge of our offer. Once the listing agent informed that buyer agent that he was in competition, he produced an offer of $285,000.

        1. Kyle says:

          I get it now. In that case i take it back, the listing agent wasn’t slimy, but instead was probably pretty savvy and took advantage of some lucky timing. Even though he couldn’t get you to improve, he certainly used the fact that you already had an offer registered (that hadn’t expired yet) as leverage to make the other buyer bid aggressively.

          1. @ Kyle

            Exactly.

            He could have even said to the other agent, “You’re in competition now, you’d better bring me something good! Gotta be well over asking!”

            It’s the buyer-agent’s fault if he chose to listen to it.

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