We’re only two weeks in, and already, I have more stories than I can possibly ever tell.
I knew this fall market was going to be crazy, and yet I feel like I was unprepared for what we’ve been experiencing thus far.
This week, I’ll tell you three stories, that underscore just how busy the Toronto real estate market is, and I expect these stories to make the “bears versus bulls” look like the Sharks versus the Jets, as both opinions will be out in full force…
If you’re a bull, then these stories will help you justify why the Toronto real estate market is a fantastic place to put capital, and why it will continue to rise.
If you’re a bear, you’ll use these stories to point out how panic, fear of missing out, and lack of logical decision-making is what is pushing our market into an inflated state.
I simply sit back, and work in the market I find myself in.
I have no vested interest in this market going up or down.
I don’t want to be labelled a real estate cheerleader; I’m just telling you what’s going on in the market.
As an aside – now is a good time to tell you all, once again, that when I tell stories on TRB, I will change the location, time, date, dollar, name, gender, and anything and everything else, ever-so-slightly, to protect the anonymity of those involved. A while back, an agent emailed me and told me I was full of you-know-what, and that I make up my stories, because he couldn’t find the east-side, $499,900 loft I mentioned in a blog post. I emailed him the west-end, $488,800 loft that I had written about, and he never responded…
Earlier this summer, a client of mine reached out to say he would be selling his condo to move out-of-Province with his girlfriend, and asked me to come in to take a look.
I sold him the unit five years ago, and I was shocked at how quickly time flies. Blink in this industry, and your single-woman client calls you for an evaluation, and you find now she’s married with two kids.
I told my client that he had to wait until the busy September market, and that any agent who came in and sat down in his living room, in late July, and said, “Now is a great time to list,” would be selling a bale of hay.
The September market, I explained, was going to be absolutely bonkers, and if he put a little bit of work into the property, then we would do really well.
We spent August getting the unit ready for sale, and we were ready for the September market right after Labour Day.
My client and I disagreed on the price, however, as he seemed to want close to $500,000 for the unit, and I told him honestly that it was worth $475,000.
The same model had sold for $415,000 about 14-15 months earlier, and $475,000 would represent a 14.5% gain in that time!
I know that the “average home price” shows gains of 16-17% in August, but that’s an average, and that includes freehold properties. I figured that the condo market had gone up maybe 8-9% in this building, but that at $475,000, we might be capitalizing on a very busy September.
My client was insistent that the condo was worth $500,000, so I told him that the only way to achieve anything close to that price was to list at $449,900, and hold back offers.
Now, you all know I don’t like this strategy, so feel free to call me a hypocrite.
But I work for my sellers, and I know with 100% certainty, this is the best way to maximize the sale price.
And it’s not just the “under-pricing” that’s the strategy here, but rather it’s the “holding back” that’s important. In this market, you want to make sure there’s enough time for every interested buyer to gain access to the property.
$449,900 is not “stupidly under-listed,” when I think the condo is worth $475,000. This isn’t the $1.2 Million house being listed at $799,900.
But I needed to “hold back” offers in order to ensure we got people through the unit.
Besides that, I predicted in an August blog post that most condos would have offer dates this fall, and that’s proven to be true. You can hear me patting myself on the back, as I lose in competition with just about every buyer I work with… 🙁
But as I’ll explain in subsequent blog posts this week, the hold-back on offers for condos is here to stay.
So we put the property on the market, and I had 16 showings booked on the very first day.
My expectation, fyi, was probably about 8-10. As with everything else in this market, my expectations were blown away.
My client and I had discussed the possibility of a bully offer, but we agreed that unless it absolutely blew us away, we would wait through the week to make sure we got as many people through the unit as possible!
On the first day of the listing, another agent called me and said she would be bringing out the same unit a month later – and that her client expected over $500,000 for hers.
I told her she needed to temper her client’s expectations.
I felt this unit was “worth” about $475,000. I could see it getting $485,000 or maybe even $490,000, but that’s a lot of money for 740 square feet in this building.
But I also received two calls from agents who had shown the property, asking “Would your client accept a bully offer?”
The answer is always, “Sure, but it would have to blow us away.”
Little did I know, on the second day of the listing, I would put that theory to the test.
Interestingly enough, it wasn’t one of the two agents I had spoken to the night previous that brought the bully offer, but somebody I hadn’t even conversed with. The offer just came out of left field.
I got the email on my iPhone – it read, “David, here’s our pre-emptive offer for a price that we think is really good, based on recent comparable sales.”
Oh yeah. Sure.
I love when I get those emails; agents telling me that their offer is “really good” and “based on recent comparable sales.” It’s almost like firing a warning shot, saying, “We don’t like your price, and here’s what we think it’s worth.”
But as you might expect, given the title of this blog post, and the lead-in up to this point, the offer was unbelievable.
Was it the $475,000 I thought the property was worth?
Was it the $500,000 my client wanted, despite there being no basis for that pricing?
It was neither.
It was $530,000.
And suffice it to say, we accepted.
We did page, email, and fax every agent who had shown the property, to let them know there was a pre-emptive offer, irrevocable at 2:00pm that day (as we are required to do), but nobody wanted to compete.
And here we were, with an absolutely record-smashing, logic-defying price.
What a story!
And with that, you may now all discuss the market.
Would you believe that the day after we sold our unit for $530,000, the exact same model came out again?
$460,000 list price, with a hold-back on offers.
Only there was one major difference between this new listing, same model, comparable finishes, and ours: this unit had no parking space.
So for this model unit – which I thought was “worth” $475,000, which on a great day would fetch $500,000, which sold for $530,000 – what do you think it’s worth without parking?
Is that fair?
Parking is worth $30,000, so having just sold my unit for $530,000, should we expect this unit to sell for $500,000?
Or less, perhaps?
Maybe the sale of my unit was an anomaly?
Maybe somebody made a mistake? Maybe they overpaid?
No, it would seem.
Because despite all logic to the contrary, this unit – same model as mine, without parking, sold the day after my $530,000 sale…….for $531,000.
That buyer just paid $31,000 more than the same “product” that sold one day earlier.
And the “crazy buyer” who bought my unit for $530,000, is already up, on paper, $31,000.
That was the true “story” I wanted to tell today.
Sure, my sale – the bully offer for $80,000 over list, a modest 27.7% increase over the last sale 15 months ago, was impressive.
But the fact that somebody would obliterate that sale one day later is rather telling of how the fall market has started thus far.
I’ve made my arguments many times as to the state of the Toronto market, the short-term future, and why I think that the market, despite all logic, will continue to rise.
So use this example to make your argument – the market will rise, or the market will fall.
I’ll be back Wednesday and Friday with two more tales, just as crazy as this one…